Investments in Securities and Derivative Instruments

9 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Investments in Securities and Derivative Instruments

As part of the Company’s interest rate risk management strategy, the Company, from time to time, uses derivative instruments to minimize significant unanticipated earnings fluctuations that may arise from rising variable interest rate costs associated with existing borrowings (Air T Term Note A and Term Note D). To meet these objectives, the Company entered into interest rate swaps with notional amounts consistent with the outstanding debt to provide a fixed rate of 4.56% and 5.09%, respectively, on Term Notes A and D. The swaps mature in January 2028. As of August 1, 2018, these swap contracts are designated as effective cash flow hedging instruments in accordance with ASC 815. The effective portion of changes in the fair value on these instruments is recorded in other comprehensive income and is reclassified into the condensed consolidated statement of income as interest expense in the same period in which the underlying hedged transaction affects earnings. The interest rate swaps are considered Level 2 fair value measurements. As of December 31, 2020 and March 31, 2020, the fair value of the interest-rate swap contracts was a liability of $0.8 million and $0.9 million, respectively, which is included within other non-current liabilities in the condensed consolidated balance sheets. During the three and nine months ended December 31, 2020, the Company recorded a gain of approximately $71.0 thousand and $0.1 million, net of tax, in the condensed consolidated statement of comprehensive income (loss) for changes in the fair value of the instruments.

The Company may, from time to time, employ trading strategies designed to profit from market anomalies and opportunities it identifies. Management uses derivative financial instruments to execute those strategies, which may include options, and futures contracts. These derivative instruments are priced using publicly quoted market prices and are considered Level 1 fair value measurements. During the three months ended December 31, 2020, related to these derivative instruments, the Company had a gross gain aggregating to $0.1 million and a gross loss aggregating to $1.6 thousand, respectively. During the nine months ended December 31, 2020, related to these derivative instruments, the Company had a gross gain aggregating to $0.8 million and a gross loss aggregating to $23.7 thousand, respectively.

The following table presents these derivative instruments at fair value in the condensed consolidated balance sheets as of December 31, 2020 and March 31, 2020 (in thousands):


(In thousands)	December 31, 2020		March 31, 2020
Assets:
Exchange-traded options & futures
Other current assets	$	76	$	6
Total assets	76		6
Liabilities:
Exchange-traded options & futures
Accrued Expenses and other	7		36
Total liabilities	$	7	$	36

The Company also invests in exchange-traded marketable securities and accounts for that activity in accordance with ASC 321, Investments- Equity Securities. Marketable equity securities are carried at fair value, with changes in fair market value included in the determination of net income. The fair market value of marketable equity securities is determined based on quoted market prices in active markets. During the three months ended December 31, 2020, the Company had a gross unrealized gain aggregating to $0.8 million and a gross unrealized loss aggregating to $0.3 million. During the nine months ended December 31, 2020, the Company had a gross unrealized gain aggregating to $1.6 million and a gross unrealized loss aggregating to $1.1 million. These unrealized gains and losses are included in Other Income (Loss) on the condensed consolidated Statement of Income.

The market value of the Company’s equity securities and cash held by the broker are periodically used as collateral against any outstanding margin account borrowings. As of December 31, 2020 and 2019, the Company had outstanding borrowings of $0.7 million and $0.4 million under its margin account, respectively, which is reflected in accrued expenses and other on the condensed consolidated balance sheets. As of December 31, 2020 and 2019, the Company had cash margin balances related to exchange-traded equity securities and securities sold short of $1.3 million and $0.3 million, respectively, which is reflected in other current assets on the condensed consolidated balance sheets. The interest rate on margin account borrowings was 9.5% as of December 31, 2020.