ERIVATIVE

FINANCIAL INSTRUMENTS

The Company reports all derivative instruments on its consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of transactions entered into for hedging purposes.

As a global organization, the Company faces exposure to market risks, such as fluctuations in foreign currency exchange rates, interest rates and commodity prices. To manage the volatility relating to these exposures, the Company enters into various derivative instruments from time to time under its risk management policies. The Company designates derivative instruments as hedges on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments offset in part or in whole corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its policy. The Company does

not

purchase, hold or sell derivative financial instruments for trading purposes. The Company's practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if it determines the underlying forecasted transaction is

longer probable of occurring.

Interest Rate Swaps

Designated as Cash Flow Hedges

The primary purpose of the Company's cash flow hedging activities is to manage the potential changes in value associated with interest payments on the Company's LIBOR-based indebtedness. The Company records gains and losses on interest rate swap contracts qualifying as cash flow hedges in accumulated other comprehensive loss to the extent that these hedges are effective and until the Company recognizes the underlying transactions in net earnings, at which time these gains and losses are recognized in interest expense on its consolidated statements of operations and comprehensive (loss) income. Cash flows from derivative financial instruments are classified as cash flows from financing activities on the consolidated statements of cash flows. These contracts generally have original maturities of greater than

twelve

months.

Net unrealized after-tax losses related to cash flow hedging activities that were included in accumulated other comprehensive loss were

$1,104

and

$509

for the years ended

June 30, 2020

and

2019,

respectively. The unrealized amounts in accumulated other comprehensive loss will fluctuate based on changes in the fair value of open contracts during each reporting period.

The Company estimates that

$392

of net unrealized losses related to cash flow hedging activities included in accumulated other comprehensive loss will be reclassified into earnings within the next

twelve

months.

Foreign Currency Forward Contracts

Not

Designated as Hedges

The Company primarily enters into forward exchange contracts to reduce the earnings and cash flow impact of non-functional currency denominated receivables and payables. These contracts are highly effective in hedging the cash flows attributable to changes in currency exchange rates. Gains and losses resulting from these contracts offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Gains and losses on these contracts are recorded in other expense, net in the consolidated statement of operations and comprehensive (loss) income as the changes in the fair value of the contracts are recognized and generally offset the gains and losses on the hedged items in the same period. The primary currency to which the Company was exposed in fiscal

2020

and

2019

was the euro. At

June 30, 2020,

one

of the Company's foreign subsidiaries had

one

outstanding forward exchange contract to purchase U.S. dollars in the notional value of

$1,247

with a weighted average maturity of

days. The fair value of the Company's contract was a loss of

June 30, 2020.

The Company had

outstanding forward exchange contracts at

June 30, 2019.

Other Derivative Instruments

The Company does

not

utilize commodity price hedges to manage commodity price risk exposure. Likewise, the Company does

not

hedge the translation exposure represented by the net assets of its foreign subsidiaries.

Fair Value of Derivative Instruments

The Company's interest rate swaps and foreign currency forward contracts are recorded at fair value on the consolidated balance sheets using a discounted cash flow analysis that incorporates observable market inputs. These market inputs include foreign currency spot and forward rates, and various interest rate curves, and are obtained from pricing data quoted by various banks,

third

-party sources and foreign currency dealers involving identical or comparable instruments (Level

Counterparties to these foreign currency forward contracts have at least an investment grade rating. Credit ratings on some of the Company's counterparties

may

change during the term of the financial instruments. The Company closely monitors its counterparties' credit ratings and, if necessary, will make any appropriate changes to its financial instruments. The fair value generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date.

The fair value of derivative instruments included in the consolidated balance sheets at

June 30

were as follows:

	Balance Sheet Location	2020		2019
Derivatives designated as hedges:
Interest rate swaps	Accrued liabilities	$	392	$	122
Interest rate swaps	Other long-term liabilities		1,052		544

The impact of the Company's derivative instruments on the consolidated statement of operations and comprehensive (loss) income for the years ended

June 30

was as follows:

	Statement of Comprehensive (Loss)
	Income Location	2020			2019
Derivatives designated as hedges:
Interest rate swaps	Interest expense	$	171		$	1
Interest rate swaps	Unrealized loss on cash flow hedge		(595	)		(509	)

Derivatives not designated as hedges:
Foreign currency forward contracts	Other income (expense), net	$	(9	)	$	4