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Note 8 - Derivative Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Text Block]

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 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 nickel swaps matured in 2020. The swaps were settled with the brokers at maturity. The economic benefit or loss arising from the changes in fair value of the swaps was 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 (Loss). 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 (Loss). There were no outstanding metals swaps as of September 30, 2020. The cumulative change in fair value of the metals swaps that had not yet settled are included in “Other accrued liabilities” on the Consolidated Balance Sheet as of December 31, 2019. The embedded customer derivatives are included in “Accounts Receivable, net” on the Consolidated Balance Sheet as of December 31, 2019.

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 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 September 30, 2020 and December 31, 2019. 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 (Loss) through net income (loss) of the derivatives for the three and nine months ended September 30, 2020 and 2019, respectively.

	Net Gain (Loss) Recognized
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)	2020			2019			2020			2019
Fixed interest rate hedge	$	(459	)	$	(57	)	$	(1,055	)	$	(88	)
Metals swaps		82			177			55			310
Embedded customer derivatives		(82	)		(177	)		(55	)		(310	)
Total loss	$	(459	)	$	(57	)	$	(1,055	)	$	(88	)