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Note 5 - Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
5.
Derivative Financial Instruments

The Company enters into various fixed rate commodity swap contracts in an effort to manage its exposure to price volatility of diesel fuel.  Historically, fuel prices have been volatile because of supply and demand factors, worldwide political factors and general economic conditions.  The objective of the Company in executing the hedge is to mitigate the fuel price volatility that could adversely affect forecasted cash flows and earnings related to construction contracts.  Swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for off-road ultra-low sulfur diesel (“ULSD”).  The Company has designated its commodity derivative contracts as cash flow hedges designed to achieve more predictable cash flows, as well as to reduce its exposure to price volatility.  While the use of derivative instruments limits the downside risk of adverse price movements, they also limit future benefits from reductions in costs as a result of favorable market price movements.

All of the Company’s outstanding derivative financial instruments are recognized on the balance sheet at their fair values.  The Company has a master netting arrangement with the counterparty; however, the gross amounts are recorded on the balance sheet.  All changes in the fair value of outstanding derivatives, except any ineffective portion, are included in accumulated other comprehensive income until earnings are impacted by the hedged transaction.  Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items affect earnings or the anticipated transactions are no longer probable.  All items included in accumulated other comprehensive income are at the corporate level, and no portion is attributable to noncontrolling interests.

At June 30, 2014, accumulated other comprehensive income included unrecognized gains of $58,000, representing the unrealized change in fair value of the effective portion of the Company’s commodity contracts, designated as cash flow hedges, as of the balance sheet date.  For the six months ended June 30, 2014, the Company recognized a pre-tax net realized cash settlement gain on commodity contracts of $30,000.

At June 30, 2014, the Company had hedged its exposure to the variability in future cash flows from forecasted diesel fuel purchases totaling 0.6 million gallons.  The swap monthly volumes hedged range from 10,000 gallons to 50,000 gallons over the period from July 2014 to August 2015 at fixed prices per gallon ranging from $2.75 to $2.88.

The derivative instruments are included on the condensed consolidated balance sheet at fair value as follows (amounts in thousands):

Balance Sheet Location
 
June 30,
2014
   
December 31,
2013
 
Derivative assets:
           
Other current assets
  $ 44     $ 109  
Other assets, net
    14       8  
    $ 58     $ 117  

The following table summarizes the effects of commodity derivative instruments on the condensed consolidated statements of operations and comprehensive income for the six months ended June 30, 2014 and 2013 (amounts in thousands):

 
June 30,
2014
   
June 30,
2013
 
Decrease in fair value of derivatives included in other comprehensive income - effective portion
  $ (59 )     $ (138 )
Realized gain included in cost of revenues - effective portion
    30         3  
Increase (decrease) in fair value of derivatives included in cost of revenues - ineffective portion
    -         -  

The Company’s derivative instruments contain certain credit-risk-related contingent features which apply both to the Company and to the counterparties.  The counterparty to the Company’s derivative contracts is a high credit quality financial institution.

Fair Value

The Company’s swaps are valued based on a discounted future cash flow model.  The primary input for the model is the forecasted prices for ULSD.  The Company’s model is validated by the counterparty’s mark-to-market statements.  The swaps are designated as Level 2 within the valuation hierarchy.  Refer to Note 1 for a description of the inputs used to value the information shown above.

At June 30, 2014 and December 31, 2013, the Company did not have any derivative assets or liabilities measured at fair value on a recurring basis that meet the definition of Level 1 or Level 3.