Derivative Instruments

6 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company uses derivative instruments to manage selected foreign currency and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes. All derivative instruments are recorded on the balance sheet at fair value. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded as accumulated other comprehensive gain (loss), or “AOCL,” and is reclassified to earnings when the underlying transaction has an impact on earnings. The ineffective portion of changes in the fair value of the derivative is reported in foreign currency exchange (gain) loss in the Company’s condensed consolidated statement of operations and retained earnings. For derivatives not classified as cash flow hedges, all changes in market value are recorded as a foreign currency exchange (gain) loss in the Company’s condensed consolidated statements of operations and retained earnings. The cash flow effects of derivatives are reported within net cash provided by operating activities.

The Company is exposed to credit losses in the event of non-performance by the counterparties on its financial instruments. All counterparties currently have investment grade credit ratings. The Company anticipates that these counterparties will be able to fully satisfy their obligations under the contracts. The Company has derivative contracts with three counterparties as of September 30, 2016.

The Company's agreements with its counterparties contain provisions pursuant to which the Company could be declared in default of its derivative obligations. As of September 30, 2016, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of September 30, 2016, it could have been required to settle its obligations under these agreements at amounts which approximate the September 30, 2016 fair values reflected in the table below. During the six months ended September 30, 2016, the Company was not in default of any of its derivative obligations.

As of September 30, 2016, the Company had no derivatives designated as net investments or fair value hedges in accordance with ASC Topic 815, “Derivatives and Hedging.”

The Company has foreign currency derivative agreements in place to offset changes in the value of intercompany loans to foreign subsidiaries, as well as forecasted cash flows of a contract, due to changes in foreign exchange rates. The notional amount of these derivatives is $2,318,000 and all of the contracts mature by March 31, 2018. These contracts are marked to market each balance sheet date and are not designated as hedges.

The Company has foreign currency forward agreements that are designated as cash flow hedges to hedge a portion of forecasted inventory purchases denominated in foreign currencies, as well as forecasted cash flows of a contract. The notional amount of those derivatives is $13,592,000 and all contracts mature within 12 months of September 30, 2016. From its September 30, 2016 balance of AOCL, the Company expects to reclassify approximately $108,000 out of AOCL during the next 12 months based on the underlying transactions of the sales of the goods purchased.

The Company's policy is to maintain a capital structure that is comprised of 50-70% of fixed rate long-term debt and 30-50% of variable rate long-term debt. The Company entered into two interest rate swap agreements in which the Company receives interest at a variable rate and pays interest at a fixed rate. These interest rate swap agreements are designated as cash flow hedges to hedge changes in interest expense due to changes in the variable interest rate of the senior secured term loan and the net borrowings outstanding under the revolving credit facility. The amortizing interest rate swaps mature on February 19, 2020 and have a total notional amount of $147,000,000 as of September 30, 2016. The effective portion of the changes in fair values of the interest rate swaps is reported in AOCL and will be reclassified to interest expense over the life of the swap agreements. The ineffective portion was not material and was recognized in the current period interest expense. From its September 30, 2016 balance of AOCL, the Company expects to reclassify approximately $471,000 out of AOCL, and into interest expense, during the next 12 months.

The following is the effect of derivative instruments on the condensed consolidated statements of operations for the three months ended September 30, 2016 and 2015 (in thousands):

Derivatives Designated as Cash Flow Hedges	Type of Instrument	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Reclassified from AOCL into Income (Effective Portion)
September 30, 2016	Foreign exchange contracts	$	(38	)	Cost of products sold	$	48
September 30, 2016	Interest rate swaps	262			Interest Expense	(332		)
September 30, 2015	Foreign exchange contracts	256			Cost of products sold	4
September 30, 2015	Interest rate swap	(1,223		)	Interest expense	(601		)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
September 30, 2016	Foreign currency exchange gain/loss	$	(9	)
September 30, 2015	Foreign currency exchange gain/loss	82

The following is the effect of derivative instruments on the condensed consolidated statements of operations and retained earnings for the six months ended September 30, 2016 and 2015 (in thousands):

Derivatives Designated as Cash Flow Hedges	Type of Instrument	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Reclassified from AOCL into Income (Effective Portion)
September 30, 2016	Foreign exchange contracts	$	97		Cost of products sold	$	107
September 30, 2016	Interest rate swaps	(233		)	Interest Expense	(675		)
September 30, 2015	Foreign exchange contracts	71			Cost of products sold	37
September 30, 2015	Interest rate swap	(887		)	Interest expense	(601		)

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
September 30, 2016	Foreign currency exchange gain/loss	$	(104	)
September 30, 2015	Foreign currency exchange gain/loss	45

The following is information relative to the Company’s derivative instruments in the condensed consolidated balance sheet as of September 30, 2016 and March 31, 2016 (in thousands):

		Fair Value of Asset (Liability)
Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2016			March 31, 2016
Foreign exchange contracts	Prepaid expenses and other	$	241		$	200
Foreign exchange contracts	Accrued Liabilities	(228		)	(420		)
Interest rate swap	Accrued Liabilities	(759		)	(1,129		)
Interest rate swap	Other non current liabilities	(715		)	(1,082		)
Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	September 30, 2016			March 31, 2016
Foreign exchange contracts	Prepaid expenses and other	$	21		$	96
Foreign exchange contracts	Accrued Liabilities	(35		)	(7		)