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Derivative Financial Instruments
 12 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
12.
Derivative Financial Instruments
 
Market risks relating to the Company’s operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. During 2016, the Company entered into forward contracts to purchase pounds sterling (GBP) to hedge two deferred payments due in connection with the acquisition of Plastique. During 2018, the Company entered into three interest rate swaps with a notional amount of $150 million to hedge its exposure to variability in future LIBOR-based interest payments on variable rate debt. In addition, the Company’s Canadian subsidiary Morgan Schaffer enters into foreign exchange contracts to manage foreign currency risk as a portion of their revenue is denominated in U.S. dollars. The Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized may differ for open positions, which remain subject to ongoing market price fluctuations until settlement. All derivative instruments are reported in either accrued expenses or other assets on the balance sheet at fair value. For derivative instruments designated as cash flow hedges, the gain or loss on the derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. The interest rate swaps entered into during 2018 were not designated as cash flow hedges and, therefore, the gain or loss on the derivative is reflected in earnings each period. The following is a summary of the notional transaction amounts and fair values for the Company’s outstanding derivative financial instruments as of September 30, 2018.
 
(In thousands)
 
Notional Amount

(Currency)
 
Fair Value

(US$)
 
 
Float Rate
 
 
Fix Rate
 
Forward contracts
 
700 GBP
 
 
(94
)
 
 
 
 
 
 
 
 
Forward contracts
 
9,500 USD
 
 
(17
)
 
 
 
 
 
 
 
 
Forward contracts
 
200 EUR
 
 
6
 
 
 
 
 
 
 
 
 
Interest rate swap
 
150,000 USD
 
 
94
 
 
 
2.18
%
 
 
1.80
%
Interest rate swap *
 
150,000 USD
 
 
913
 
 
 
N/A
 
 
 
2.09
%
Interest rate swap **
 
150,000 USD
 
 
1,235
 
 
 
N/A
 
 
 
2.24
%
 
* This swap represents a forward contract and will be effective in November 2018.
** This swap represents a forward contract and will be effective in November 2019.
 
Fair Value of Financial Instruments
 
The Company’s forward contracts are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, as presented below as of September 30, 2018:
 
(In thousands)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
Asset:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Forward contracts
 
$
–
 
 
 
2,137
 
 
 
–
 
 
 
2,137
 
 
Valuation was based on third party evidence of similarly priced derivative instruments. There are no master netting arrangements with financial parties.