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Note 9 - Derivative Financial Instruments
 9 Months Ended
Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

9) Derivative Financial Instruments


Interest Rate Swaps


From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated its interest rate swap agreements, including those that are forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.


The Company’s effective swap agreements convert the base borrowing rate on $45 million of debt due under our revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of 2.40% at March 31, 2014. The fair value of the swaps recognized in accrued expenses and in other comprehensive income is as follows (in thousands, except percentages):


                      Fair Value  

Effective Date

 

Notional

Amount

   

Fixed Rate

 

Maturity

  March 31, 2014    

June 30,

2013

 

June 1, 2010

  $ 5,000       2.495 %

May 24, 2015

  $ (135 )   $ (205 )

June 1, 2010

    5,000       2.495 %

May 24, 2015

    (135 )     (205 )

June 8, 2010

    10,000       2.395 %

May 26, 2015

    (258 )     (389 )

June 9, 2010

    5,000       2.340 %

May 26, 2015

    (126 )     (190 )

June 18, 2010

    5,000       2.380 %

May 24, 2015

    (129 )     (194 )

September 21, 2011

    5,000       1.280 %

September 21, 2013

    -       (14 )

September 21, 2011

    5,000       1.595 %

September 22, 2014

    (37 )     (83 )

March 15, 2012

    10,000       2.745 %

March 15, 2016

    (465 )     (595 )
                      $ (1,285 )   $ (1,875 )

The Company reported no losses for the three and nine months ended March 31, 2014, as a result of hedge ineffectiveness. Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expense concurrent with the hedged exposure.


Foreign Exchange Contracts


Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as foreign sales, foreign purchases of materials, and loan payments to and from subsidiaries. The Company enters into such contracts for hedging purposes only. For hedges of intercompany loan payments, the Company has not elected hedge accounting due to the general short-term nature and predictability of the transactions, and records derivative gains and losses directly to the statement of operations. At March 31, 2014 and June 30, 2013, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized (losses) of ($1.9) million and ($1.4) million, respectively, which approximate the unrealized gains and losses on the related loans. The notional amounts of the Company’s forward contracts, by currency, are as follows (in thousands):


   

Notional Amount

 
   

(in native currency)

 

Currency

 

March 31, 2014

   

June 30, 2013

 

Euro

    43,094       48,349  

British Pound Sterling

    2,000       2,580  

Canadian Dollar

    3,600       3,600  

United States Dollar

    1,139       -  

The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet (in thousands):


 

Assets Derivatives

 
 

March 31, 2014

 

June 30, 2013

 

Derivative designated as

hedging instruments

Balance

Sheet

Line Item

 

Fair Value

 

Balance

Sheet

Line Item

 

Fair Value

 
                 

Foreign exchange contracts

Other Assets

  $ 782  

Other Assets

  $ 37  

 

Liability Derivatives

 
 

March 31, 2014

 

June 30, 2013

 

Derivative designated as

hedging instruments

Balance

Sheet

Line Item

 

Fair Value

 

Balance

Sheet

Line Item

 

Fair Value

 

Interest rate swaps

Accrued Liabilities

  $ 1,285  

Accrued Liabilities

  $ 1,875  

Foreign exchange contracts

Accrued Liabilities

    2,691  

Accrued Liabilities

    1,443  
      $ 3,976       $ 3,318  

The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):


   

Three Months Ended

   

Nine Months Ended

 
   

March 31,

   

March 31,

 
   

2014

   

2013

   

2014

   

2013

 

Interest rate swaps

  $ (47 )   $ (66 )   $ (167 )   $ (275 )

The table below presents the amount reclassified from accumulated other comprehensive income (loss) to Net Income for the periods ended (in thousands):


Details about Accumulated

                               

Affected line item

Other Comprehensive

 

Three Months Ended

   

Nine Months Ended

 

in the Statements

Income (Loss) Components

 

March 31,

   

March 31,

 

of Operations

   

2014

   

2013

   

2014

   

2013

   

Interest rate swaps

  $ 252     $ 261     $ 774     $ 786  

Interest expense