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Note 11 - Derivative Financial Instruments

9 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Text Block]

11) Derivative Financial Instruments

The Company is exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency rates. We selectively use derivative financial instruments in order to manage these risks. Information about the Company’s derivative financial instruments is as follows:

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 $175 million of debt due under our revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of 1.43% at March 31, 2020. 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*	*March 31, 2020*			*June 30, 2019*
December 19, 2015		10,000		2.01	%	December 19, 2019	$	-		$	3
May 24, 2017		25,000		1.88	%	April 24, 2022		(848	)		(190	)
May 24, 2017		25,000		1.67	%	May 24, 2020		(35	)		49
August 6, 2018		25,000		2.83	%	August 6, 2023		(2,169	)		(1,242	)
March 23, 2020		100,000		0.91	%	March 23, 2025		(1,673	)		-
April 24, 2020		25,000		0.88	%	April 24, 2025		(377	)		-
May 24, 2020		25,000		0.91	%	March 24, 2025		(410	)		-
							$	(5,512	)	$	(1,380	)

The Company reported no losses for the three and nine months ended March 31, 2020, 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 March 31, 2020 and June 30, 2019, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized losses of $(1.9) million and $(3.1) million, respectively, which approximate the unrealized gains and losses on the related loans. The contracts have maturity dates ranging from 2020 to 2023, which correspond to the related intercompany loans.

The notional amounts of the Company’s forward contracts, by currency, are as follows:

Currency	*March 31, 2020*	*June 30, 2019*
USD	46,278	55,015
EUR	5,750	5,750
CAD	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*
	*March 31, 2020*			*June 30, 2019*
Derivative designated	*Balance*			*Balance*
as hedging instruments	*Sheet*			*Sheet*
	*Line Item*	*Fair Value*		*Line Item*	*Fair Value*
Interest rate swaps	Other Assets	$	-	Other Assets	$	52
Foreign exchange contracts	Other Assets		-	Other Assets		-
		$	-		$	52

	*Liability Derivatives*
	*March 31, 2020*			*June 30, 2019*
Derivative designated	*Balance*			*Balance*
as hedging instruments	*Sheet*			*Sheet*
	*Line Item*	*Fair Value*		*Line Item*	*Fair Value*
Interest rate swaps	Accrued Liabilities	$	5,512	Accrued Liabilities	$	1,432
Foreign exchange contracts	Accrued Liabilities		1,925	Accrued Liabilities		3,052
		$	7,437		$	4,484

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,*
	*2020*			*2019*			*2020*			*2019*
Interest rate swaps	$	(2,393	)	$	(693	)	$	(2,836	)	$	(1,365	)
Foreign exchange contracts		798			2,142			1,004			(861	)
	$	(1,595	)	$	1,449		$	(1,832	)	$	(2,226	)

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 Unaudited
Income (Loss) Components	March 31,						March 31,						Condensed Statements
	2020			2019			2020			2019			of Operations
Interest rate swaps	$	106		$	(84	)	$	135		$	(246	)	Interest expense
Foreign exchange contracts		(2,216	)		(422	)		(2,264	)		2,012		Interest expense
Net investment hedge		-			(435	)		-			(435	)
	$	(2,110	)	$	(941	)	$	(2,129	)	$	1,331