Note 11 - Derivative Instruments

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

11. Derivative Instruments:

Metals swaps

During 2023, 2022 and 2021, 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 were included in “Other accrued liabilities” and “Prepaid expenses and other” on the Consolidated Balance Sheets at December 31, 2023. There were $5.2 million of outstanding metals swaps at December 31, 2023. There were no outstanding metal swaps at December 31, 2022. The Company entered into the swaps to mitigate its customers’ risk of volatility in the price of metals. 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, 2023 were included in “Accounts Receivable, net” and the embedded customer derivatives are included in “Other accrued liabilities” 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 SOFR based borrowings under the ABL Credit Facility. The interest rate hedge fixed the rate at 2.42%. On January 3, 2023, the Company amended the interest rate hedge agreement to use SOFR as the reference rate. The interest rate hedge is included in “Prepaid expenses and other” on the Consolidated Balance Sheets as of December 31, 2023 and in “Other long-term assets” on the Consolidated Balance Sheets as of  December 31, 2022 and had a fair value of $54.8 thousand and $1.7 million, respectively. The mark-to-market adjustment of the fair value of the hedge is recorded to “Accumulated other comprehensive income” on the Company’s Consolidated 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. The interest rate swap expired on January 10, 2024.

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, 2023, 2022 and 2021. The table below shows the total impact to the Company’s Consolidated Statements of Comprehensive Income through “Net income” of the derivatives for the years ended December 31, 2023, 2022 and 2021.

	Net Gain (Loss) Recognized
(in thousands)	2023			2022			2021
Fixed interest rate hedge	$	1,906		$	(664	)	$	(1,880	)
Metals swaps		(1,903	)		633			418
Embedded customer derivatives		1,903			(633	)		(418	)
Total income (loss)	$	1,906		$	(664	)	$	(1,880	)