)

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

$100

million of debt due under our revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of

1.60%

September 30, 2017.

The fair value of the swaps recognized in accrued expenses and in other comprehensive income is as follows (in thousands, except percentages):

Effective Date	Notional Amount		Fixed Interest Rate		Maturity	September 30, 2017			June 30, 201 7
December 19, 2014		20,000		1.18%	December 19, 2017	$	4		$	8
December 19, 2014		5,000		1.20%	December 19, 2017		(1	)		1
December 18, 2015		15,000		1.46%	December 19, 2018		5			(1	)
December 19, 2015		10,000		2.01%	December 19, 2019		83			(106	)
May 24, 2017		25,000		1.88%	April 24, 2022		35			(60	)
May 24, 2017		25,000		1.67%	May 24, 2020		(13	)		(23	)
						$	113		$	(181	)

The Company reported

losses for the

three

months ended

September 30, 2017,

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

collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At

September 30, 2017

and

June 30, 2017,

the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized gain (losses) of $(

2.3

) million and $(

2.8

) million, respectively, which approximate the unrealized gains and losses on the related loans. The contracts have maturity dates ranging from

2018

2023,

which correspond to the related intercompany loans. The notional amounts of the Company’s forward contracts, by currency, are as follows:

Currency	September 3 0 , 201 7		June 30, 201 7
USD		69,000		73,000
Euro		21,323		21,335
Pound Sterling		6,750		6,962
Peso		54,000		54,000
Canadian		20,600		20,600

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

	Asset Derivatives
	September 3 0 , 201 7			June 30, 2 01 7
	Balance			Balance
Derivative designated as hedging instruments	Sheet Line Item	Fair Value		Sheet Line Item	Fair Value
Interest rate swaps	Other Assets	$	113	Other Assets	$	-
Foreign exchange contracts	Other Assets		1,436	Other Assets		-
		$	1,549		$	-

	Liability Derivatives
	September 3 0 , 201 7			June 30, 201 7
	Balance			Balance
Derivative designated as hedging instruments	Sheet Line Item	Fair Value		Sheet Line Item	Fair Value
Interest rate swaps	Accrued Liabilities	$	-	Accrued Liabilities	$	181
Foreign exchange contracts	Accrued Liabilities		3,729	Accrued Liabilities		2,833
		$	3,729		$	3,014

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
	September 30 ,
	201 7		201 7
Interest rate swaps	$	286	$	163
Foreign exchange contracts		488		(102	)
	$	774	$	61

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	Three Months Ended				Affected line item
Other Comprehensive	September 3 0 ,				in the Statements
Income (Loss) Components	201 7		201 6		of Operations
Interest rate swaps	$	151	$	119	Interest expense
Foreign exchange contracts		-		102	Cost of Sales
	$	151	$	221