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Note K - Derivatives and Hedging | 3 Months Ended
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Sep. 30, 2021
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | K. Derivatives and Hedging We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to forecasted product sales denominated in foreign currencies and to other transactions of NAIE, our foreign subsidiary. As part of our overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, we may use foreign exchange contracts in the form of forward contracts. To the extent we enter into such contracts, there can be no guarantee any such contracts will be effective hedges against our foreign currency exchange risk. As of September 30, 2021, we had forward contracts designated as cash flow hedges primarily to protect against the foreign exchange risks inherent in our forecasted sales of products at prices denominated in currencies other than the U.S. Dollar. These contracts are expected to be settled through August 2023. For derivative instruments that are designated and qualify as cash flow hedges, we record the effective portion of the gain or loss on the derivative in accumulated other comprehensive income (“OCI”) as a separate component of stockholders’ equity and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized in earnings. For foreign currency contracts designated as cash flow hedges, hedge effectiveness is measured using the spot rate. Changes in the spot-forward differential are excluded from the test of hedge effectiveness and are recorded currently in earnings as revenue. We measure effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item. No hedging relationships were terminated as a result of ineffective hedging for the three months ended September 30, 2021 and September 30, 2020. We monitor the probability of forecasted transactions as part of the hedge effectiveness testing on a quarterly basis. During the three months ended September 30, 2021 and September 30, 2020, we did not have any losses or gains related to the ineffective portion of our hedging instruments. As of September 30, 2021, the notional amounts of our foreign exchange contracts designated as cash flow hedges were approximately $67.2 million (EUR 56.3 million). As of September 30, 2021, a net gain of approximately $1.2 million, offset by $0.3 million of deferred taxes, related to derivative instruments designated as cash flow hedges was recorded in OCI. It is expected that $0.8 million will be reclassified into earnings in the next 12 months along with the earnings effects of the related forecasted transactions. As of September 30, 2021, $1.2 million of the fair value of our cash flow hedges was classified as a short term asset, and $0.5 million was classified as other noncurrent assets in our Consolidated Balance Sheets. During the three months ended September 30, 2021, we recognized $1.4 million of net gains in OCI, and reclassified $0.1 million of gains and forward point amortization from OCI to Sales. As of June 30, 2021, $0.6 million of the fair value of our cash flow hedges was classified as a current liability, and $4,000 was classified as a long-term liability in our Consolidated Balance Sheets. During the three months ended September 30, 2020, we recognized $2.1 million of net losses in OCI, reclassified $0.6 million of losses and forward point amortization from OCI to Sales. For foreign currency contracts not designated as cash flow hedges, changes in the fair value of the hedge are recorded directly to foreign exchange gain or loss in other income in an effort to offset the change in valuation of the underlying hedged item. During the three months ended September 30, 2021 we entered into forward contracts in order to hedge foreign exchange risk associated with our lease liability at NAIE, which is denominated in Swiss Francs (CHF). As of September 30, 2021, the notional amounts of our foreign exchange contracts not designated as cash flow hedges were approximately $5.8 million (CHF 5.3 million). As of September 30, 2021, $0.1 million of the fair value of our foreign exchange contracts not designated as cash flow hedges was classified as a current liability in our Consolidated Balance Sheets. We are exposed to interest rate fluctuations related to our $10 million Term Note with Wells Fargo, which carries a variable interest rate of 1.80% above the SOFR rolling 30-day average. To manage our exposure to this variable rate, on August 23, 2021, we entered into a floored interest rate swap that fixes our all-in rate on this loan to 2.4% for the first three years of the term loan. Fluctuations in the relation of our contractual swap rate to current market rates are recorded as an asset or liability with an offset to OCI at the end of each reporting period. Interest expense is adjusted for the difference between the actual SOFR spread and the swap contractual rate such that our effective interest expense for each period is equal to our hedged rate of 2.4%.

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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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