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Note H - Derivative Financial Instruments | 3 Months Ended
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Jun. 30, 2023
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | NOTE H — DERIVATIVE FINANCIAL INSTRUMENTS From time to time, we expect to use derivative financial instruments to minimize our exposure to commodity price risk that is inherent in our business. At the time derivative contracts are entered into, we assess whether the nature of the instrument qualifies for hedge accounting treatment according to the requirements of ASC 815 – Derivatives and Hedging (“ASC 815”). By using derivatives, the Company is exposed to credit and market risk. The Company’s exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. The Company attempts to minimize its credit risk by entering into transactions with high quality counterparties and uses exchange-traded derivatives when available. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices. The Company manages market risk by continually monitoring exposure within its risk management strategy and portfolio. For those transactions designated as hedging instruments for accounting purposes, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. We also assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows or fair value of hedged items. From time to time, derivatives designated for hedge accounting may be closed prior to contract expiration. The accounting treatment of closed positions depends on whether the closure occurred due to the hedged transaction occurring early or if the hedged transaction is still expected to occur as originally forecasted. For hedged transactions that occur early, the closure results in the realized gain or loss from closure being recognized in the same period the accelerated hedged transaction affects earnings. For hedged transactions that are still expected to occur as originally forecasted, the closure results in the realized gain or loss being deferred until the hedged transaction affects earnings. If it is determined that hedged transactions associated with cash flow hedges are no longer probable of occurring, the gain or loss associated with the instrument is recognized immediately into earnings. From time to time, we may have derivative financial instruments for which we do not elect hedge accounting. The Company has forward physical purchase supply agreements in place with some of its suppliers for a portion of its monthly physical steel needs. These supply agreements are not subject to mark-to-market accounting due to the Company electing the normal purchase normal sale exclusion provided in ASC 815. At June 30, 2023 the Company did not have any hot-rolled coil futures contracts designated as hedging instruments and classified as cash flow hedges. At March 31, 2023, the Company held hot-rolled coil futures contracts which were designated as hedging instruments and classified as cash flow hedges, as hedges of variable sales prices. Accordingly, realized and unrealized gains and losses associated with the instruments were reported as a component of other comprehensive income and reclassified into earnings during the period in which the hedged transaction affects earnings. During the three month periods ended June 30, 2023 and 2022, the Company entered into hot-rolled coil futures contracts that were not designated as hedging instruments for accounting purposes. Accordingly, the change in fair value related to these instruments was immediately recognized in earnings for these periods. The following table summarizes the fair value of the Company’s derivative financial instruments and the respective line in which they were recorded in the Consolidated Balance Sheet as of June 30, 2023 (in thousands):
| Asset Derivatives |  | Liability Derivatives |
| Balance Sheet |  |  |  |  | Balance Sheet |  |  |  |
Derivatives not designated as hedging instruments: | Location |  | Fair Value |  | Location |  | Fair Value |
Hot-rolled coil steel contracts | Current portion of derivative assets |  | $ | 243 |  | Current portion of derivative liability |  | $ | 963 |
The following table summarizes the fair value of the Company’s derivative financial instruments and the respective line in which they were recorded in the Consolidated Balance Sheet as of March 31, 2023 (in thousands):
| Asset Derivatives |  | Liability Derivatives |
| Balance Sheet |  |  |  |  | Balance Sheet |  |  |  |
Derivatives not designated as hedging instruments: | Location |  | Fair Value |  | Location |  | Fair Value |
Hot-rolled coil steel contracts | Current portion of derivative assets |  | $ | 536 |  | Current portion of derivative liability |  | $ | 2,212 |
All derivatives are presented on a gross basis on the Consolidated Balance Sheets. At June 30, 2023 and March 31, 2023, the Company reported approximately $0.4 million and $1.6 million, respectively, in "Other current assets" on its Consolidated Balance Sheet related to futures contracts which were closed but were pending cash settlement. The following table summarizes the pre-tax gain recognized in other comprehensive income and the loss reclassified from accumulated other comprehensive loss into earnings for derivative financial instruments designated as cash flow hedges for the periods presented (in thousands):
|  |  |  |  | Location of Loss |  | Pre- Tax Loss |
|  | Pre-Tax Gain |  | Reclassified |  | Reclassified from |
|  | Recognized in OCI |  | from AOCI into Net Earnings |  | AOCI into Net Earnings |
For the three months ended June 30, 2023: |  |  |  |  |  |  |  |  |
Hot-rolled coil steel contracts |  | $ | — |  | Sales |  | $ | (418 | )
Total |  | $ | — |  |  |  | $ | (418 | )
For the three months ended June 30, 2022: |  |  |  |  |  |  |  |  |
Hot-rolled coil steel contracts |  | $ | 8,833 |  | Sales |  | $ | (626 | )
Total |  | $ | 8,833 |  |  |  | $ | (626 | )
The following table summarizes the gains recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2023 (in thousands):
|  |  | Gain Recognized in Earnings |
| Location of Gain |  | for the Three Months Ended |
| Recognized in Earnings |  | June 30, 2023 |
Hot-rolled coil steel contracts | Gain on economic hedges of risk |  | $ | 430 |
The following table summarizes the gains recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2022 (in thousands):
|  |  | Gain Recognized in Earnings |
| Location of Gain |  | for the Three Months Ended |
| Recognized in Earnings |  | June 30, 2022 |
Hot-rolled coil steel contracts | Gain on economic hedges of risk |  | $ | 2,754 |
The notional amount (quantity) of our derivative instruments not designated as hedging instruments at June 30, 2023 consisted of 22,180 tons of short positions with maturity dates ranging from July 2023 to December 2023. The following tables reflect the change in accumulated other comprehensive income (loss), net of tax, for the periods presented (in thousands):
|  | Gain (Loss) on |
|  | Derivatives |
Balance at March 31, 2023 |  | $ | (317 | )
Other comprehensive income, net of loss, before reclassification |  |  | — |
Total loss reclassified from AOCI (1) |  |  | 317 |
Net current period other comprehensive income |  |  | 317 |
Balance at June 30, 2023 |  | $ | — |
(1) The loss reclassified from AOCI is presented net of tax benefits of approximately $0.1 million which are included in the provision for (benefit from) income taxes on the Company's Consolidated Statement of Operations for the three months ended June 30, 2023.
|  | Gain (Loss) on |
|  | Derivatives |
Balance at March 31, 2022 |  | $ | (10,269 | )
Other comprehensive income, net of loss, before reclassification |  |  | 6,699 |
Total loss reclassified from AOCI (1) |  |  | 475 |
Net current period other comprehensive income |  |  | 7,174 |
Balance at June 30, 2022 |  | $ | (3,095 | )
(1) The loss reclassified from AOCI is presented net of tax benefits of approximately $0.2 million which are included in the provision for (benefit from) income taxes on the Company's Consolidated Statement of Operations for the three months ended June 30, 2022. At June 30, 2023 and March 31, 2023, cash of approximately $1.5 million and $2.4 million, respectively, was held by our clearing agent to collateralize our open derivative positions. These cash requirements are included in "Other current assets" on the Company's Consolidated Balance Sheets at June 30, 2023 and March 31, 2023.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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