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Note 8. Derivative Instruments | 3 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities Disclosure | Derivative Instruments Foreign Exchange Contracts: We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of business. Our primary means of managing this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, we use derivative instruments with the objective of reducing the residual exposure to certain foreign currency rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies. As of September 30, 2021, we had outstanding foreign exchange contracts to hedge currencies against the U.S. dollar in the aggregate notional amount of $46.0 million and to hedge currencies against the Euro in the aggregate notional amount of 49.2 million Euro. The notional amounts are indicators of the volume of derivative activities but may not be indicators of the potential gain or loss on the derivatives. In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities. The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement. For derivative instruments that meet the criteria of hedging instruments under FASB guidance, the gain or loss on the derivative instrument is initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners’ Equity, and is subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is reported immediately in Non-operating income (expense), net on the Condensed Consolidated Statements of Income. Based on fair values as of September 30, 2021, we estimate that approximately $2.4 million of pre-tax derivative loss deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months. Losses on foreign exchange contracts are generally offset by gains in operating costs in the income statement when the underlying hedged transaction is recognized in earnings. Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk. The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both September 30, 2021 and June 30, 2021. See Note 7 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and Note 4 - Accumulated Other Comprehensive Income (Loss) of Notes to Condensed Consolidated Financial Statements for the changes in deferred derivative gains and losses. Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Income are presented below. Fair Value of Derivative Instruments on the Condensed Consolidated Balance Sheets
| Asset Derivatives |  | Liability Derivatives
|  |  | Fair Value As of |  |  |  | Fair Value As of
(Amounts in Thousands) | Balance Sheet Location |  | September 30, 2021 |  | June 30, 2021 |  | Balance Sheet Location |  | September 30, 2021 |  | June 30, 2021
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | Prepaid expenses and other current assets |  | $ | 504 |  |  | $ | 1,158 |  |  | Accrued expenses |  | $ | 2,660 |  |  | $ | 1,549 |
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts | Prepaid expenses and other current assets |  | 855 |  |  | 310 |  |  | Accrued expenses |  | 388 |  |  | 153 |
Total derivatives |  |  | $ | 1,359 |  |  | $ | 1,468 |  |  |  |  | $ | 3,048 |  |  | $ | 1,702 |
The Effect of Derivative Instruments on Other Comprehensive Income (Loss)
|  |  |  | Three Months Ended |  |
|  |  |  | September 30 |  |
(Amounts in Thousands) |  |  |  | 2021 |  | 2020 |  |  |  |
Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivatives: |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  | $ | (1,561) |  |  | $ | (625) |  |  |  |  |
The Effect of Derivative Instruments on Condensed Consolidated Statements of Income
|  |  |  | Three Months Ended |  |
(Amounts in Thousands) |  |  |  | September 30 |  |
Derivatives in Cash Flow Hedging Relationships |  | Location of Gain or (Loss) |  | 2021 |  | 2020 |  |  |  |
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income: |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Cost of Sales |  | $ | 101 |  |  | $ | (738) |  |  |  |  |
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |
Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivatives: |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Non-operating income (expense) |  | $ | 73 |  |  | $ | (921) |  |  |  |  |
Total Derivative Pre-Tax Gain (Loss) Recognized in Income |  | $ | 174 |  |  | $ | (1,659) |  |  |  |  |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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