FINANCIAL DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Commodity Pricing Risk

As of September 30, 2023, the Company was party to commodity swap contracts for specific commodities with notional amounts of approximately $38.1 million. The Company uses commodity swap contracts to mitigate the risks associated with fluctuations in commodity prices impacting its cash flows related to inventory purchases from suppliers. The Company does not hedge all commodity price risk.

At inception, the Company designated the commodity swap contracts as cash flow hedges. The contracts mature at specified monthly settlement dates and will be recognized into earnings through January 2024. The effective portion of the hedging transaction is recognized in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and transferred to earnings when the forecasted hedged transaction takes place or when the forecasted hedged transaction is no longer probable to occur.

Financial Statement Presentation

As of September 30, 2023 and December 31, 2022, the fair value carrying amount of the Company’s derivative instruments were recorded as follows (in thousands):


		Asset / (Liability) Derivatives
	Balance Sheet Caption	September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments
Commodity swap contracts	Prepaid expenses and other	$	423	$	2,674
Commodity swap contracts	Accounts payable and Other accrued liabilities	(2,256)		(1,653)
Total derivatives designated as hedging instruments		$	(1,833)	$	1,021

The following table summarizes the gain or loss recognized in AOCI as of September 30, 2023 and December 31, 2022 and the amounts reclassified from AOCI into earnings for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Amount of (Loss) Gain Recognized in AOCI on Derivatives (Effective Portion, net of tax)				Location of Gain (Loss) Reclassified from AOCI into Earnings (Effective Portion)	Amount of Gain (Loss) Reclassified from AOCI into Earnings

	September 30, 2023		December 31, 2022			Three Months Ended September 30,				Nine Months Ended September 30,
						2023		2022		2023		2022
Derivatives instruments
Commodity swap contracts	$	(867)	$	909	Cost of sales	$	(2,285)	$	(1,956)	$	(2,168)	$	10,607

Over the next 12 months, the Company expects to reclassify approximately $1.1 million of pretax deferred losses, related to the commodity swap contracts, from AOCI to cost of sales as inventory purchases are settled.