Derivative Instruments Derivative Instruments (Notes)

6 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

8.    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 must be recorded on the balance sheet at fair value. For derivatives designated as cash flow hedges, changes in the fair value of the derivative is recorded as accumulated other comprehensive loss, or “AOCL,” and is reclassified to earnings when the underlying transaction has an impact on earnings. For foreign currency derivatives not designated as cash flow hedges, all changes in market value are recorded as a foreign currency exchange loss (gain) in the Company’s Consolidated Statements of Operations. The cash flow effects of derivatives are reported within net cash (used for) provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

The Company is exposed to credit losses in the event of non-performance by the counterparties on its financial instruments. The counterparties have investment grade credit ratings. The Company anticipates that these counterparties will be able to fully satisfy their obligations under the contracts.

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, 2022, the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions as of September 30, 2022, it could have been required to settle its obligations under these agreements at amounts which approximate the September 30, 2022 fair values reflected in the table below. During the three and six months ended September 30, 2022, the Company was not in default of any of its derivative obligations.

As of September 30, 2022, the Company had no derivatives designated as net investments or fair value hedges in accordance with FASB ASC Topic 815, “Derivatives and Hedging.”

The Company has a cross currency swap agreement that is designated as a cash flow hedge to hedge changes in the value of an intercompany loan to a foreign subsidiary due to changes in foreign exchange rates. This intercompany loan is related to the acquisition of STAHL. As of September 30, 2022, the notional amount of this derivative is $118,138,000, and this contract matures on March 31, 2028. During fiscal 2022, the Company modified the cross currency swap by extending it to fiscal year 2028, matching the intercompany loan. The Company concluded that the transaction to modify the cross currency swap, as well as the modified swap, maintained hedge accounting. The modified cross currency swap is considered to have an other than insignificant financing element. As such, its cash flows are classified within financing activities in the Statement of Cash Flows. From its September 30, 2022 balance of AOCL, the Company expects to reclassify approximately $1,800,000 out of AOCL, and into foreign currency exchange loss (gain), during the next 12 months based on the contractual payments due under this intercompany loan.

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 of September 30, 2022, the notional amount of those derivatives was $5,350,000, and all contracts mature by June 30, 2023. From its September 30, 2022 balance of AOCL, the Company expects to reclassify approximately $150,000 out of AOCL during the next 12 months based on the expected 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 has three interest rate swap agreements in which the Company receives interest at a variable rate and pays interest at a fixed rate. The third interest rate swap agreement was entered into in fiscal year 2022 as a result of the additional debt from the Dorner and Garvey acquisitions. During fiscal 2022, the Company modified the LIBOR floor to match the new Term Loan B resulting from the Dorner related debt refinancing. The Company concluded that the modification maintained hedge accounting. The modified interest rate swap is considered to have an other than insignificant financing element as well as a more than an insignificant initial net investment. As such, its cash flows are classified as financing activities in the Statement of Cash Flows and the swap liability is considered a hybrid debt instrument. 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. The amortizing interest rate swaps mature by February 28, 2025 and had a total notional amount of $287,169,000 as of September 30, 2022. 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. As such, its cash flows are classified within financing activities in the Statement of Cash Flows. From its September 30, 2022 balance of

AOCL, the Company expects to reclassify approximately $4,753,000 of AOCL, and into interest and debt 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, 2022 and 2021 (in thousands):

Derivatives Designated as Cash Flow Hedges	Type of Instrument	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives		Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Reclassified from AOCL into Income
September 30, 2022	Foreign exchange contracts	$	56	Cost of products sold	$	(63)
September 30, 2022	Interest rate swaps	4,706		Interest expense	132
September 30, 2022	Cross currency swaps	5,855		Foreign currency exchange (gain) loss	5,862
September 30, 2021	Foreign exchange contracts	23		Cost of products sold	(33)
September 30, 2021	Interest rate swap	(758)		Interest expense	(459)
September 30, 2021	Cross currency swaps	590		Foreign currency exchange (gain) loss	3,342

The following is the effect of derivative instruments on the Condensed Consolidated Statements of Operations for the six months ended September 30, 2022 and 2021 (in thousands):

Derivatives Designated as Cash Flow Hedges	Type of Instrument	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives		Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Reclassified from AOCL into Income
September 30, 2022	Foreign exchange contracts	$	(48)	Cost of products sold	$	(89)
September 30, 2022	Interest rate swaps	6,405		Interest expense	(682)
September 30, 2022	Cross currency swaps	11,627		Foreign currency exchange (gain) loss	11,380
September 30, 2021	Foreign exchange contracts	(14)		Cost of products sold	(29)
September 30, 2021	Interest rate swap	(861)		Interest expense	(794)
September 30, 2021	Cross currency swaps	(490)		Foreign currency exchange (gain) loss	2,357

The following is information relative to the Company’s derivative instruments in the Condensed Consolidated Balance Sheets (in thousands):

		Fair Value of Asset (Liability)
Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2022		March 31, 2022
Foreign exchange contracts	Prepaid expenses and other	$	239	$	—
Foreign exchange contracts	Accrued liabilities	(355)		(217)
Interest rate swap	Prepaid expenses and other	6,990		859
Interest rate swap	Other assets	6,907		4,512
Interest rate swap	Accrued liabilities	(736)		(1,371)
Interest rate swap	Other non current liabilities	(101)		(387)
Cross currency swap	Prepaid expenses and other	2,426		—
Cross currency swap	Other assets	4,360		—
Cross currency swap	Accrued liabilities	—		(170)
Cross currency swap	Other non current liabilities	—		(8,543)