The Company enters into interest rate swaps to manage a portion of its interest rate risk from financing certain dealer and distributor inventories through third party financing sources. The swaps are designated as cash flow hedges and are used to effectively fix the interest payments to a third party financing source, exclusive of lender spreads, ranging from 0.98% to 2.83% for a notional principal amount of $110 million with expiration dates ranging from July 2021 to June 2024.

In the second quarter of fiscal 2019, the Company began entering into interest rate swaps to manage a portion of its interest rate risk from anticipated floating rate, LIBOR based indebtedness, exclusive of lender spreads, ranging from 2.47% to 3.13%. The swaps are designated as cash flow hedges, in an aggregate amount of $120 million, with termination dates between June 2023 and December 2029.

The Company periodically enters into forward foreign currency contracts to hedge the risk from forecasted third party and intercompany sales or payments denominated in foreign currencies. The Company's primary foreign currency exchange rate exposures are with the Australian Dollar, the Brazilian Real, the Canadian Dollar, the Chinese Renminbi, the Euro, and the Japanese Yen against the U.S. Dollar. These contracts generally do not have a maturity of more than twenty-four months.

The Company uses raw materials that are subject to price volatility. The Company hedges a portion of its exposure to the variability of cash flows associated with commodities used in the manufacturing process by entering into forward purchase contracts or commodity swaps. Derivative contracts designated as cash flow hedges are used by the Company to reduce exposure to variability in cash flows associated with future purchases of natural gas. These contracts generally do not have a maturity of more than thirty-six months.

The Company has considered the counterparty credit risk related to all its interest rate, foreign currency, and commodity derivative contracts and does not deem any counterparty credit risk material at this time.

The notional amount of derivative contracts outstanding at the end of the period is indicative of the level of the Company’s derivative activity during the period. As of June 30, 2019 and July 1, 2018, the Company had the following outstanding derivative contracts (in thousands):



Contract		Notional Amount
		June 30, 2019	July 1, 2018
Interest Rate:
LIBOR Interest Rate (U.S. Dollars)	Fixed	230,000	110,000
Foreign Currency:
Australian Dollar	Sell	17,611	35,833
Brazilian Real	Sell	13,436	28,822
Canadian Dollar	Sell	14,610	14,430
Chinese Renminbi	Buy	70,555	62,209
Euro	Sell	2,750	32,592
Japanese Yen	Buy	0	587,500
Commodity:
Natural Gas (Therms)	Buy	7,627	10,553



Balance Sheet Location	Asset (Liability) Fair Value
	June 30, 2019			July 1, 2018
Interest rate contracts:
Other Current Assets	$	—		$	161
Other Long-Term Assets, Net	876			3,844
Other Long-Term Liabilities	(11,634		)	—
Foreign currency contracts:
Other Current Assets	672			3,881
Other Long-Term Assets, Net	16			31
Accrued Liabilities	(179		)	(195		)
Other Long-Term Liabilities	(11		)	—
Commodity contracts:
Other Current Assets	—			16
Other Long-Term Assets, Net	—			5
Accrued Liabilities	(176		)	(7		)
Other Long-Term Liabilities	(15		)	(29		)
	$	(10,451	)	$	7,707

The effect of derivatives designated as hedging instruments on the Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows (in thousands):



	Twelve months ended June 30, 2019
	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives, Net of Taxes (Effective Portion)			Classification of Gain (Loss)	Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)		Recognized in Earnings (Ineffective Portion)
Interest rate contracts	$	(3,307	)	Net Sales	$	1,127	$	—
Foreign currency contracts – sell	(1,604		)	Net Sales	1,139		—
Foreign currency contracts – buy	(1,039		)	Cost of Goods Sold	574		—
Commodity contracts	(133		)	Cost of Goods Sold	149		—
Interest rate contracts	$	(7,469	)	Interest Expense	$	—	$	—
	$	(13,552	)		$	2,989	$	—



	Twelve months ended July 1, 2018
	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives, Net of Taxes (Effective Portion)			Classification of Gain (Loss)	Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Recognized in Earnings (Ineffective Portion)
Interest rate contracts	$	1,921		Net Sales	$	251		$	—
Foreign currency contracts – sell	2,925			Net Sales	(4,116		)	—
Foreign currency contracts – buy	1,731			Cost of Goods Sold	(679		)	—
Commodity contracts	(17		)	Cost of Goods Sold	(96		)	—
	$	6,560			$	(4,640	)	$	—



	Twelve months ended July 2, 2017
	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives, Net of Taxes (Effective Portion)			Classification of Gain (Loss)	Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)			Recognized in Earnings (Ineffective Portion)
Interest rate contracts	$	1,973		Net Sales	$	(743	)	$	—
Foreign currency contracts – sell	(887		)	Net Sales	1,785			—
Foreign currency contracts – buy	297			Cost of Goods Sold	(2,142		)	—
Commodity contracts	93			Cost of Goods Sold	(258		)	—
	$	1,476			$	(1,358	)	$	—

During the next twelve months, the amount of the June 30, 2019 Accumulated Other Comprehensive Income (Loss) balance that is expected to be reclassified into gains is $0.8 million.

The Company enters into forward exchange contracts to hedge purchases and sales that are denominated in foreign currencies. The terms of these currency derivatives generally do not exceed twenty-four months, and the purpose is to protect the Company from the risk that the eventual dollars being transferred will be adversely affected by changes in exchange rates.

The Company has forward foreign exchange contracts to sell foreign currency, with the Euro as the most significant. These contracts are used to hedge foreign currency collections on sales of inventory. The Company also has forward contracts to purchase foreign currencies. The Company’s foreign currency forward contracts are carried at fair value based on current exchange rates.

The Company had the following forward currency contracts outstanding at the end of fiscal 2019 with the notional value shown in local currency and the contract value, fair value, and (gain) loss at fair value shown in U.S. dollars:

Hedge

In Thousands

Notional

Value

Contract

Value

Fair Value

(Gain) Loss

at Fair Value

Conversion

Currency

Latest

Expiration Date

Currency

Contract

Australian Dollar

Sell

17,611

12,660

12,329

(331

)

U.S.

February 2020

Brazilian Real

Sell

13,436

3,455

3,461

U.S.

December 2019

Canadian Dollar

Sell

14,610

9,968

11,171

U.S.

August 2020

Chinese Renminbi

Buy

70,555

10,154

10,267

(113

)

U.S.

October 2020

Euro

Sell

2,750

3,313

3,161

(151

)

U.S.

March 2020

The Company had the following forward currency contracts outstanding at the end of fiscal 2018 with the notional value shown in local currency and the contract value, fair value, and (gain) loss at fair value shown in U.S. dollars:



Hedge		In Thousands
		Notional Value	Contract Value	Fair Value	(Gain) Loss at Fair Value		Conversion Currency	Latest Expiration Date
Currency	Contract	Notional Value	Contract Value	Fair Value	(Gain) Loss at Fair Value		Conversion Currency	Latest Expiration Date
Australian Dollar	Sell	35,833	27,880	26,558	(1,322	)	U.S.	May 2019
Brazilian Real	Buy	28,822	6,682	7,571	(889	)	U.S.	March 2019
Canadian Dollar	Sell	14,430	11,393	11,020	(373	)	U.S.	August 2019
Chinese Renminbi	Buy	62,209	9,234	9,324	(90	)	U.S.	June 2019
Euro	Sell	32,592	39,648	38,603	(1,045	)	U.S.	July 2019
Japanese Yen	Buy	587,500	5,316	5,324	—		U.S.	November 2018

The Company continuously evaluates the effectiveness of its hedging program by evaluating its foreign exchange contracts compared to the anticipated underlying transactions. The Company did not have any ineffective currency hedges in fiscal 2019, 2018, or 2017.