Derivative Financial Instruments

3 Months Ended

Sep. 30, 2015

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS

     The Company operates in several foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company's risk management policy is to enter into cash flow hedges to reduce a portion of the exposure of the Company's foreign subsidiaries' revenues to fluctuations in currency rates using foreign currency forward contracts. The Company also enters into cash flow hedges for a portion of its forecasted inventory purchases to reduce the exposure of its Canadian and Australian subsidiaries' cost of sales to such fluctuations, as well as cash flow hedges for a portion of its subsidiaries' forecasted Swiss franc operating costs. The principal currencies hedged are British pounds, Euros, Canadian dollars, Australian dollars and Swiss francs. The Company does not enter into derivative financial contracts for speculative or trading purposes.

     The Company's derivative financial instruments are recorded in the consolidated balance sheets at fair value determined using pricing models based on market prices or determined using valuation models that use as their basis readily observable market data that is actively quoted and can be validated through external sources, including independent pricing services, brokers and market transactions. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the consolidated statements of cash flows.

     Foreign currency contracts used to hedge forecasted revenues are designated as cash flow hedges. These contracts are used to hedge forecasted revenues generally over approximately 12 to 24 months. Changes to fair value of the foreign currency contracts are recorded as a component of accumulated other comprehensive (loss) income within shareholders' equity to the extent such contracts are effective, and are recognized in net sales in the period in which the forecasted transaction affects earnings or the transactions are no longer probable of occurring. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in the three months ended September 30, 2015 or in fiscal 2015 relating to foreign currency contracts used to hedge forecasted revenues resulting from hedge ineffectiveness.

     Foreign currency contracts used to hedge forecasted cost of sales or operating costs are designated as cash flow hedges. These contracts are used to hedge the forecasted cost of sales of the Company's Canadian and Australian subsidiaries or operating costs of the Company's Swiss subsidiaries generally over approximately 12 to 24 months. Changes to fair value of the foreign currency contracts are recorded as a component of accumulated other comprehensive (loss) income within shareholders' equity, to the extent such contracts are effective, and are recognized in cost of sales or selling, general and administrative expenses in the period in which the forecasted transaction affects earnings or the transactions are no longer probable of occurring. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in the three months ended September 30, 2015 or in fiscal 2015 relating to foreign currency contracts used to hedge forecasted cost of sales or forecasted operating costs resulting from hedge ineffectiveness.

     As of September 30, 2015, the Company had open foreign currency contracts that expire between October 31, 2015 and May 31, 2016, with notional amounts of (i) 8.5 million British pounds and 10.0 million Euros to reduce the exposure of foreign subsidiary revenues to fluctuations in currency rates, (ii) 12.1 million Canadian dollars and 3.5 million Australian dollars used to hedge forecasted cost of sales, and (ii) 9.6 million Swiss francs to hedge forecasted operating costs.

     When appropriate, the Company also enters into and settles foreign currency contracts for Euros, British pounds, Canadian dollars and Australian dollars to reduce exposure of the Company's foreign subsidiaries' balance sheets to fluctuations in foreign currency rates. These contracts are used to hedge balance sheet exposure generally over one month and are settled before the end of the month in which they are entered into. Changes to fair value of the forward contracts are recognized in selling, general and administrative expense in the period in which the contracts expire. For the three months ended September 30, 2015 and 2014, the Company recorded gains of $0.8 million and $1.2 million, respectively, in selling, general and administrative expenses related to these contracts. As of September 30, 2015, there were no such foreign currency contracts outstanding. There were no amounts recorded in the three months ended September 30, 2015 or in fiscal 2015 relating to foreign currency contracts to hedge subsidiary balance sheets resulting from hedge ineffectiveness.

     The following tables illustrate the fair value of outstanding foreign currency contracts and the gains (losses) associated with the settlement of these contracts:

		Fair Value of Derivative
		Instruments Designated as
(Amounts in thousands)		Effective Hedges
		September 30,		June 30,
Balance Sheet Location		2015		2015
Other assets	$	1,095	$	767
Other payables	$	207	$	757

     Gain (Loss) Reclassified from Accumulated Other Comprehensive (Loss) Income into (Loss) Income, Net of Tax (Effective Portion)

(Amounts in thousands)		Three Months Ended
		September 30,		September 30,
		2015		2014
Currency Contracts - Sales (1)	$	(71	)	$		(148	)
Currency Contracts - Cost of Sales (2)		166				(69	)
Currency Contracts - Selling, General and Administrative
Expenses (3)		34			-	-
Total (4)	$	129		$		(217	)

(1) Recorded in net sales on the consolidated statements of operations.

(2) Recorded in cost of sales on the consolidated statements of operations.

(3) Recorded in selling, general and administrative expenses on the consolidated statements of operations.

 (4) Net of expense of $65 for the three months ended September 30, 2015 and net of tax benefit of $20 for the three months ended September 30, 2014.

Net Gain Recognized in Other Comprehensive (Loss) Income on Derivatives, Net of Tax (Effective Portion)

(Amounts in thousands)		Three Months Ended
		September 30,		September 30,
		2015			2014
Currency Contracts - Sales	$	640		$	2,894
Currency Contracts - Cost of Sales		382			676
Currency Contracts - Selling, General and Administrative
Expenses		(534	)		(25	)
Total (1)	$	488		$	3,545

(1)Net of tax expense of $196 and $498 for the three months ended September 30, 2015 and 2014, respectively.