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Derivatives

3 Months Ended

Sep. 30, 2023

Derivatives

9. Derivatives

We monitor our exposure to foreign currency exchange rates and interest rates and from time-to-time use derivatives to manage certain of these risks. We designate derivatives as a hedge of a forecasted transaction or of the variability of the cash flows to be received or paid in the future related to a recognized asset or liability (cash flow hedge). All changes in the fair value of a highly effective cash flow hedge are recorded in Accumulated other comprehensive loss.

We routinely assess whether the derivatives used to hedge transactions are effective. If we determine a derivative ceases to be an effective hedge, we discontinue hedge accounting in the period of the assessment for that derivative, and immediately recognize any unrealized gains or losses related to the fair value of that derivative in the consolidated statements of operations.

We record derivatives at fair value in the consolidated balance sheets. For additional details regarding fair value, see “Note 10 — Fair Value Measurements.”

In March 2020, we entered into an interest rate swap agreement on $150,000 of notional principal that effectively converted the floating LIBOR portion of our interest obligation on that amount of debt to a fixed rate of 0.62%. In July 2022, this agreement increased to a notional principal amount of $300,000. In November 2022, we amended the March 2020 interest rate swap agreement to convert the floating portion of our interest obligation to SOFR. The agreement effectively converts the floating portion of our interest obligation on $300,000 of debt to a fixed interest rate of 0.61% through June 2025. We have designated the interest rate swap as a highly effective cash flow hedge.

The consolidated balance sheet includes the net fair values of our outstanding foreign currency option contracts within the respective line items, based on the net financial position and maturity date of the individual contracts. The consolidated balance sheet includes the net fair values of our outstanding interest rate swaps within the respective balance sheet line items, based on the expected timing of the cash flows. The consolidated balance sheet includes assets and liabilities for the fair values of outstanding derivatives that are designated and effective as cash flow hedges as follows:


		September 30,			June 30,
As of		2023			2023
Other current assets
Brazil Real options, net		$	—		$	333
Interest rate swap			14,198			14,031
Other assets
Interest rate swap			8,500			10,225
Total Fair Value
Brazil Real options, net			—			333
Interest rate swap			22,698			24,256

Notional amounts of the derivatives as of the balance sheet date were:


		September 30,
As of		2023
Interest rate swap		$	300,000

The consolidated statements of operations and statements of comprehensive (loss) income for the periods ended September 30, 2023 and 2022 included the effects of derivatives as follows:


		Three Months
For the Periods Ended September 30		2023			2022
Brazil Real options, net
(Income) expense recorded in consolidated statements of operations		$	(181)		$	438
Consolidated statement of operations - total cost of goods sold		$	163,623		$	163,875
Expense recorded in comprehensive (loss) income		$	333		$	168
Interest rate swap
Income recorded in consolidated statements of operations		$	(3,570)		$	(1,211)
Consolidated statement of operations - total interest expense, net		$	4,564		$	3,067
Expense (income) recorded in comprehensive (loss) income		$	1,558		$	(7,273)

We recognize gains and losses related to foreign currency derivatives as a component of cost of goods sold at the time the hedged item is sold. Inventory as of September 30, 2023, included realized net gains of $1,182 related to matured contracts. We anticipate the net gains included in inventory will be recognized in cost of goods sold within the next twelve to eighteen months.