8.	Derivative Instruments :

Metals

swaps

and embedded customer derivatives

During

2020

and

2019,

the Company entered into nickel swaps indexed to the London Metal Exchange (LME) price of nickel with

third

-party brokers. The nickel swaps are accounted for as derivatives for accounting purposes. The Company entered into them to mitigate its customers’ risk of volatility in the price of metals. The outstanding nickel swaps mature in

2020.

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.

These derivatives 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

March 31, 2020

and

December 31, 2019

are included in “Other accrued liabilities”, and the embedded customer derivatives are included in “Accounts Receivable, net” on the Consolidated Balance Sheets as of

March 31, 2020

and

December 31, 2019.

Fixed rate interest rate hedge

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

March 31, 2020.

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.

The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income through net income of the derivatives for the

three

months ended

March 31, 2020

and

2019,

respectively.

	Net Gain (Loss) Recognized
	For the Three Months Ended March 31,
(in thousands)	2020			2019
Fixed interest rate hedge	$	(202	)	$	(9	)
Metals swaps		(112	)		130
Embedded customer derivatives		112			(130	)
Total loss	$	(202	)	$	(9	)