XML 88 R17.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Note 10 - Derivative Instruments
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
10.
     
Derivative Instruments:
 
Metals swaps
 
During
2019,
2018
and
2017,
the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with
third
-party brokers. The nickel swaps are treated as derivatives for accounting purposes and are included in “Other accrued liabilities” and “Prepaid expenses and other” on the Consolidated Balance Sheets at
December 31, 2019
and
2018.
The Company entered into the swaps to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps have
one
to
two
months remaining as of
December 31, 2019.
The swaps are settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps is contractually passed through to the customer. The primary risk associated with the metals swaps is the ability of customers or
third
-party brokers to honor their agreements with the Company related to derivative instruments. If the customer or
third
-party brokers are unable to honor their agreements, the Company’s risk of loss is the fair value of the metals swaps.
 
While these derivatives are intended to help the Company manage risk, they have
not
been designated as hedging instruments. The periodic changes in fair value of the metals and embedded customer derivative instruments are included in “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The Company recognizes derivative positions with both the customer and the
third
party for the derivatives and classifies cash settlement amounts associated with them as part of “Cost of materials sold” in the Consolidated Statements of Comprehensive Income. The cumulative change in fair value of the metals swaps that had
not
yet settled as of
December 31, 2019
and
2018
were included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts Receivable, net” on the Consolidated Balance Sheets.
 
Fixed rate interest rate hedge
 
On
January 10, 2019,
the Company entered into a
five
-year forward starting fixed rate interest rate hedge in order to eliminate the variability of cash interest payments on
$75
million of the outstanding LIBOR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at
2.57%.
The interest rate hedge is included in “Other long-term liabilities” on the Consolidated Balance Sheets as of
December 31, 2019
and had a fair value of
$3.0
million. The mark-to-market adjustment of the fair value of the hedge is recorded to “Accumulated other comprehensive loss” on the Company’s Consolidate Balance Sheets. Although the Company is exposed to credit loss in the event of nonperformance by the other party to the interest rate hedge agreement, the Company anticipates performance by the counterparty.
 
Interest rate swap
 
CTI entered into an interest rate swap to reduce the impact of changes in interest rates on its IRB. The swap agreement matured in
April 2018.
The periodic changes in fair value of the interest rate swap and cash settlement amounts associated with the interest rate swap were included in “Interest and other expense on debt” in the Consolidated Statements of Comprehensive Income.
 
There was
no
net impact from the nickel swaps or embedded customer derivative agreements to the Company’s Consolidated Statements of Comprehensive Income for the years ended
December 31, 2019,
2018
and
2017.
The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income through “Net income (loss)” of the derivatives for the years ended
December 31, 2019,
2018
and
2017.
 
   
Net Gain (Loss) Recognized
 
(in thousands)
 
2019
   
2018
   
2017
 
Fixed interest rate hedge
  $
(227
)   $
-
    $
-
 
Interest rate swap (CTI)
   
-
     
(5
)    
(31
)
Metals swaps
   
291
     
(79
)    
475
 
Embedded customer derivatives
   
(291
)    
79
     
(475
)
Total loss
  $
(227
)   $
(5
)   $
(31
)