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Derivative Financial Instruments | 3 Months Ended
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Mar. 31, 2023
Derivative Financial Instruments |
Derivative Financial Instruments | Note 5. Derivative Financial Instruments The company is exposed to certain risks relating to its ongoing business operations. The company utilizes derivative instruments to mitigate commodity margin risk, and occasionally to mitigate foreign currency exchange rate risk, and have in the past to mitigate interest rate fluctuation risk. The company routinely enters into forward exchange traded futures and option contracts to manage the price risk associated with nonferrous metals inventory as well as purchases and sales of nonferrous metals (primarily aluminum and copper) and ferrous metals. The company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under master netting agreements. Commodity Futures Contracts. If the company is “long” on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is “short” on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company’s significant futures contract commitments as of March 31, 2023: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Commodity Futures | ​ | Long/Short | ​ | Metric Tons | ​
​ | Aluminum | ​ | Long | ​ | 8,625 | ​
​ | Aluminum | ​ | Short | ​ | 15,750 | ​
​ | Copper | ​ | Long | ​ | 14,297 | ​
​ | Copper | ​ | Short | ​ | 33,348 | ​
​ ​ The following summarizes the location and amounts of the fair values reported on the company’s consolidated balance sheets as of March 31, 2023, and December 31, 2022, and gains and losses related to derivatives included in the company’s statement of income for the three-month periods ended March 31, 2023 and 2022 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Asset Derivatives | ​ | Liability Derivatives
​ | Balance sheet | ​ | Fair Value | ​ | Fair Value
​ | location | ​ | March 31, 2023 | ​ | December 31, 2022 | ​ | March 31, 2023 | ​ | December 31, 2022
Derivative instruments designated as hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity futures | Other current assets | ​ | $ | 3,055 | ​ | $ | 2,169 | ​ | $ | 1,958 | ​ | $ | 2,119
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative instruments not designated as hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity futures | Other current assets | ​ | ​ | 3,104 | ​ | ​ | 2,102 | ​ | ​ | 3,234 | ​ | ​ | 5,269
Total derivative instruments | ​ | ​ | $ | 6,159 | ​ | $ | 4,271 | ​ | $ | 5,192 | ​ | $ | 7,388
​ Note 5. Derivative Financial Instruments (Continued) The fair value of the above derivative instruments along with required margin deposit amounts with the same counterparty under master netting arrangements totaled $18.7 million at March 31, 2023, and $23.5 million at December 31, 2022, and are reflected in other current assets in the consolidated balance sheets. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Amount of gain (loss) | ​ | ​ | ​ | ​ | Amount of gain (loss)
​ | ​ | ​ | recognized in income | ​ | ​ | ​ | Location of gain | recognized in income
​ | ​ | Location of gain | on derivatives for the | ​ | ​ | ​ | (loss) recognized | on derivatives for the
​ | ​ | (loss) recognized | three-month periods | ​ | Hedged items in | ​ | in income on | three-month periods
​ | ​ | in income on | ended March 31, | ​ | fair value hedge | ​ | related hedged | ended March 31,
​ | ​ | derivatives | 2023 | ​ | 2022 | ​ | relationships | ​ | items | 2023 | ​ | 2022
Derivatives in fair value hedging relationships | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity futures | ​ | Costs of goods sold | $ | (155) | ​ | $ | 1,326 | ​ | Firm commitments | ​ | Costs of goods sold | $ | 377 | ​ | $ | (1,192)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Inventory | ​ | Costs of goods sold | ​ | 239 | ​ | ​ | (384)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 616 | ​ | $ | (1,576)
Derivatives not designated as hedging instruments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity futures | ​ | Costs of goods sold | $ | (11,390) | ​ | $ | (11,221) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ Derivatives accounted for as fair value hedges had ineffectiveness resulting in losses of $301,000 and gains of $285,000 during the three-month periods ended March 31, 2023 and 2022, respectively. Gains excluded from hedge effectiveness testing of $763,000 decreased cost of goods sold during the three-month period ended March 31, 2023, and losses excluded from hedge effectiveness testing of $536,000 increased cost of goods sold during the three-month period ended March 31, 2022. Derivatives accounted for as cash flow hedges resulted in net gains of $2.0 million and $18.1 million recognized in other comprehensive income for the three-month periods ended March 31, 2023 and 2022, respectively. Net gains of $786,000 and $3.2 million were reclassified from accumulated other comprehensive income for the three-month periods ended March 31, 2023 and 2022, respectively. At March 31, 2023, the company expects to reclassify all $2.4 million of net gains on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months due to the settlement of futures contracts. The maximum term over which the company is hedging its exposure to the variability of future cash flows for forecasted transactions is less than 12 months.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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