The Company measures and records financial instruments at fair value. A hierarchy is used for those instruments measured at fair value that distinguishes between assumptions based upon market data (observable inputs) and the Company's assumptions (unobservable inputs). The hierarchy consists of three levels:


			Fair Value Measurements
(Thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
December 31, 2022
Financial Assets
Deferred compensation investments	$	3,001	$	3,001	$	—	$	—
Foreign currency forward contracts	1,291		—		1,291		—
Interest rate swap	7,863				7,863
Precious metal swaps	118		—		118		—
Total	$	12,273	$	3,001	$	9,272	$	—
Financial Liabilities
Deferred compensation liability	$	3,001	$	3,001	$	—	$	—
Foreign currency forward contracts	1,757		—		1,757		—
Interest rate swap	—				—
Precious metal swaps	411		—		411		—
Total	$	5,169	$	3,001	$	2,168	$	—
December 31, 2021
Financial Assets
Deferred compensation investments	$	4,246	$	4,246	$	—	$	—
Foreign currency forward contracts	3,368		—		3,368		—
Precious metal swaps	116		—		116		—
Total	$	7,730	$	4,246	$	3,484	$	—
Financial Liabilities
Deferred compensation liability	$	4,246	$	4,246	$	—	$	—
Foreign currency forward contracts	136		—		136		—
Precious metal swaps	24		—		24		—
Total	$	4,406	$	4,246	$	160	$	—

The Company uses a market approach to value the assets and liabilities for financial instruments in the table above. Outstanding contracts are valued through models that utilize market observable inputs, including both spot and forward prices, for the same underlying currencies and metals. The Company's deferred compensation investments and liabilities are based on the fair value of the investments corresponding to the employees’ investment selections, primarily in mutual funds, based on quoted prices in active markets for identical assets. Deferred compensation investments are primarily presented in Other assets. Deferred compensation liabilities are primarily presented in Other long-term liabilities.

Due to the nature of fair value calculations for variable-rate debt, the carrying value of the Company's long-term variable-rate debt is a reasonable estimate of its fair value. As noted in Note R, the Company entered into a $100.0 million interest rate swap to hedge the interest rate risk on the fixed rate portion of the Credit Agreement. The fair value of the interest rate swap asset was $7.9 million as of December 31, 2022, and was determined using level 2 inputs. The total of the outstanding amount on the fixed rate debt and the fair value of the interest rate swap approximates the total fair value of the fixed rate debt as of December 31, 2022.

The Company uses derivative contracts to hedge portions of its foreign currency exposures and may also use derivatives to hedge a portion of its precious metal and interest expense fluctuations. The objectives and strategies for using derivatives in these areas are as follows:

Interest Rate. On March 4, 2022, the Company entered into a $100.0 million interest rate swap to hedge the interest rate risk on the Credit Agreement described in Note P. The swap hedges the change in 1-month LIBOR from March 4, 2022 to November 2, 2026. In February 2023 we amended the terms of the interest rate swap to hedge the change in 1-month

Foreign Currency. The Company sells a portion of its products to overseas customers in their local currencies, primarily in euro and yen. The Company secures foreign currency derivatives, mainly forward contracts and options, to hedge these anticipated sales transactions. The purpose of the hedge program is to protect against the reduction in the dollar value of foreign currency sales from adverse exchange rate movements. Should the dollar strengthen significantly, the decrease in the translated value of the foreign currency sales should be partially offset by gains on the hedge contracts. Depending upon the methods used, the hedge contracts may limit the benefits from a weakening U.S. dollar.

The use of forward contracts locks in a firm rate and eliminates any downside risk from an adverse rate movement as well as any benefit from a favorable rate movement. The Company may from time to time choose to hedge with options or a tandem of options known as a collar. These hedging techniques can limit or eliminate the downside risk but can allow for some or all of the benefit from a favorable rate movement to be realized. Unlike a forward contract, a premium is paid for an option; collars, which are a combination of a put and call option, may have a net premium but can be structured to be cash neutral. The Company will primarily hedge with forward contracts due to the relationship between the cash outlay and the level of risk.

Precious Metals. The Company maintains the majority of its precious metal production requirements on consignment in order to reduce its working capital investment and the exposure to metal price movements. When a product containing precious metal is fabricated and delivered to the customer, the metal content is purchased out of consignment based on the current market price. The price paid by the Company for the precious metal forms the basis for the price charged to the customer for the metal content in the product. This methodology allows for changes in either direction in the market prices of the precious metals used by the Company to be passed through to the customer and reduces the impact that changes in prices could have on the Company's margins and operating profit. The consigned metal is owned by precious metal consignors that charge the Company consignment fees based upon the value of the metal as it fluctuates while on consignment. Each precious metal consignor retains title to its consigned precious metal until it is purchased by the Company, and it is the Company’s typical practice to purchase metal out of consignment only after a product containing that metal has been purchased by one of our customers.

In certain instances, a customer may want to fix the price for the precious metal at the time the sales order is placed rather than at the time of shipment. Setting the sales price at a different date than when the material would be purchased out of consignment potentially creates an exposure to movements in the market price of the metal. Therefore, in these limited situations, the Company may elect to enter into a forward contract to purchase precious metal. The forward contract allows the Company to purchase metal at a fixed price on a specific future date. The price in the forward contract serves as the basis for the price to be charged to the customer. By doing so, the selling price and purchase price are matched, and the Company's price exposure is reduced.

The Company refines precious metal-containing materials for its customers and typically will purchase the refined metal from the customer at current market prices. In limited circumstances, the customer may want to fix the price to be paid at the time of the order as opposed to when the material is refined. The customer may also want to fix the price for a set period of time. The Company may then elect to enter into a hedge contract, either a forward contract or a swap, to fix the price for the estimated quantity of metal to be refined and purchased, thereby reducing the exposure to adverse movements in the price of the metal. The Company may also enter into hedges to mitigate the risk relating to the prices of the metals that we process or refine.

In certain circumstances, the Company also refines metal from the customer and may retain a portion of the refined metal as payment. The Company may elect to enter into a forward contract to sell precious metal to reduce the Company's price exposure in these instances.

The Company may from time to time elect to purchase precious metal and hold in inventory rather than on consignment due to potential consignment line limitations or other factors. These purchases are infrequent and, when made are typically held for a short duration. A forward contract will be secured at the time of the purchase to fix the price to be paid when the metal is transferred back to the consignment line, thereby limiting any price exposure during the time when the metal was owned by the Company.

Copper. The Company also uses copper in its production processes. When possible, fluctuations in the purchase price of copper are passed on to customers in the form of price adders or reductions. While over time the Company's price exposure to copper is generally in balance, there can be a lag between the change in the Company's cost and the pass-through to its customers, resulting in higher or lower margins in a given period. To mitigate this impact, the Company hedges a portion of this pricing risk.

A team consisting of senior financial managers reviews the estimated exposure levels, as defined by budgets, forecasts, and other internal data, and determines the timing, amounts, and instruments to use to hedge exposures. Management analyzes the effective hedged rates and the actual and projected gains and losses on the hedging transactions against the program objectives, targeted rates, and levels of risk assumed. Foreign currency contracts are typically layered in at different times for a specified exposure period in order to minimize the impact of market rate movements.

The use of derivatives is governed by policies adopted by the Audit and Risk Committee of the Board of Directors. The Company will only enter into a derivative contract if there is an underlying identified exposure. Contracts are typically held to maturity. The Company does not engage in derivative trading activities and does not use derivatives for speculative purposes. The Company only uses hedge contracts that are denominated in the same currency or metal as the underlying exposure.

All derivatives are recorded on the balance sheet at fair value. If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in OCI until the hedged item is recognized in earnings. The ineffective portion of a derivative’s fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through income. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The fair values will also be classified as short-term or long-term depending upon their maturity dates.

These outstanding foreign currency derivatives were related to balance sheet hedges and intercompany loans. Other-net included foreign currency gains related to these derivatives of $0.2 million in 2022, compared to $1.2 million of foreign currency gains in 2021.


	December 31, 2022
			Fair Value
(Thousands)	Notional Amount		Prepaid and other current assets		Other assets		Other liabilities and accrued items		Other long-term liabilities
Foreign currency forward contracts - yen	$	2,985	$	145	$	—	$	74	$	26
Foreign currency forward contracts - euro	25,712		355		—		472		137
Precious metal swaps	8,758		118		—		411		—
Interest rate swap	100,000		3,114		4,749		—		—
Total	$	137,455	$	3,732	$	4,749	$	957	$	163

	December 31, 2021
			Fair Value
	Notional Amount		Prepaid and other current assets		Other assets		Other liabilities and accrued items		Other long-term liabilities
Foreign currency forward contracts - yen	$	3,907	$	131	$	2	$	—	$	—
Foreign currency forward contracts - euro	28,412		1,102		—		—		8
Precious metal swaps	6,256		116		—		24
Total	$	38,575	$	1,349	$	2	$	24	$	8

The fair value of derivative contracts recorded in accumulated other comprehensive income (loss) totaled $7.4 million and $1.3 million as of December 31, 2022 and December 31, 2021, respectively. Deferred gains of $3.9 million at December 31, 2022 are expected to be reclassified to earnings within the next 18-month period.

The following table summarizes the pre-tax amounts reclassified from accumulated other comprehensive income relating to the hedging relationship of the Company’s outstanding derivatives designated as cash flow hedges and income statement classification for years ended December 31, 2022 and 2021:


(Thousands)		2022		2021
Hedging relationship	Line item
Foreign currency forward contracts	Net sales	$	(176)	$	123
Precious metal swaps	Cost of sales	(126)		(193)
Interest rate swap	Interest expense - net	(250)		—
Copper swaps	Cost of sales	—		(3,049)
Total		$	(552)	$	(3,119)