XML 22 R11.htm IDEA: XBRL DOCUMENT
v3.23.3

Derivative Financial Instruments | 3 Months Ended
--- | ---
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities Disclosure | We use derivative financial instruments, such as interest rate swap contracts, cross-currency swap contracts, and currency forward and option contracts, to manage interest rate and foreign currency exposures. Derivatives are recorded in the consolidated balance sheets at fair value. If a derivative is designated as a cash flow hedge or net investment hedge, then the change in the fair value of the derivative is recorded in accumulated other comprehensive loss and subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. We have designated one intercompany loan as a net investment hedge, and any unrealized currency gains and losses on the loan are recorded in accumulated other comprehensive loss. Additionally, any ineffectiveness associated with an effective and designated hedge is recognized within accumulated other comprehensive loss. The change in the fair value of derivatives not designated as hedges is recognized directly in earnings as a component of other income, net. Hedges of Interest Rate Risk We enter into interest rate swap contracts to manage variability in the amount of our known or expected cash payments related to a portion of our debt. Our objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. We designate our interest rate swaps as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings as a component of interest expense, net. Amounts reported in accumulated other comprehensive loss related to interest rate swap contracts will be reclassified to interest expense, net as interest payments are accrued or made on our variable-rate debt. As of September 30, 2023, we estimate that $6,612 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending September 30, 2024. As of September 30, 2023, we had eleven effective outstanding interest rate swap contracts that were indexed to Term or Daily SOFR. Our interest rate swap contracts have varying start and maturity dates through April 2028.
Interest rate swap contracts outstanding: |  | Notional Amounts
Contracts accruing interest as of September 30, 2023 (1) |  | $ | 245,000 |
Contracts with a future start date |  | 430,000 |
Total |  | $ | 675,000 |
________________________ (1) Based on contracts outstanding as of September 30, 2023, the notional value of our contracted interest rate swaps accruing interest will fluctuate between $215,000 and $380,000 through April 2028 based on layered start dates and maturities. Hedges of Currency Risk Cross-Currency Swap Contracts We execute cross-currency swap contracts designated as cash flow hedges or net investment hedges. Cross-currency swaps involve an initial receipt of the notional amount in the hedged currency in exchange for our reporting currency based on a contracted exchange rate. Subsequently, we receive fixed rate payments in our reporting currency in exchange for fixed rate payments in the hedged currency over the life of the contract. At maturity, the final exchange involves the receipt of our reporting currency in exchange for the notional amount in the hedged currency. Cross-currency swap contracts designated as cash flow hedges are executed to mitigate our currency exposure to the interest receipts as well as the principal remeasurement and repayment associated with certain intercompany loans denominated in a currency other than our reporting currency, the U.S. dollar. As of September 30, 2023, we had one outstanding cross-currency swap contract designated as a cash flow hedge with a total notional amount of $58,478, maturing during June 2024. We entered into the cross-currency swap contract to hedge the risk of changes in one Euro-denominated intercompany loan entered into with one of our consolidated subsidiaries that has the Euro as its functional currency. Amounts reported in accumulated other comprehensive loss will be reclassified to other income, net as interest payments are accrued or paid, and upon remeasuring the intercompany loan. As of September 30, 2023, we estimate that $1,353 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending September 30, 2024. Other Currency Hedges We execute currency forward and option contracts in order to mitigate our exposure to fluctuations in various currencies against our reporting currency, the U.S. dollar. These contracts or intercompany loans may be designated as hedges to mitigate the risk of changes in the U.S. dollar equivalent value of a portion of our net investment in consolidated subsidiaries that have the Euro as their functional currency. Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment. As of September 30, 2023, we have one intercompany loan designated as a net investment hedge with a total notional amount of $310,270 that matures in May 2028. We have elected to not apply hedge accounting for all other currency forward and option contracts. During the three months ended September 30, 2023 and 2022, we experienced volatility within other income, net, in our consolidated statements of operations from unrealized gains and losses on the mark-to-market of outstanding currency forward and option contracts. We expect this volatility to continue in future periods for contracts for which we do not apply hedge accounting. Additionally, since our hedging objectives may be targeted at non-GAAP financial metrics that exclude non-cash items such as depreciation and amortization, we may experience increased, not decreased, volatility in our GAAP results as a result of our currency hedging program. In most cases, we enter into these currency derivative contracts, for which we do not apply hedge accounting, in order to address the risk for certain currencies where we have a net exposure to adjusted EBITDA, a non-GAAP financial metric. Adjusted EBITDA exposures are our focus for the majority of our mark-to-market currency forward and option contracts because a similar metric is referenced within the debt covenants of our amended and restated senior secured credit agreement (refer to Note 8 for additional information about this agreement). Our most significant net currency exposures by volume are the Euro and the British Pound (GBP). Our adjusted EBITDA hedging approach results in addressing nearly all of our forecasted Euro and GBP net exposures for the upcoming twelve months, with a declining hedged percentage out to twenty-four months. For certain other currencies with a smaller net impact, we hedge nearly all of our forecasted net exposures for the upcoming six months, with a declining hedge percentage out to fifteen months. As of September 30, 2023, we had the following outstanding currency derivative contracts that were not designated for hedge accounting and were primarily used to hedge fluctuations in the U.S. dollar value of forecasted transactions or balances denominated in Australian Dollar, Canadian Dollar, Czech Koruna, Danish Krone, Euro, GBP, Indian Rupee, Mexican Peso, New Zealand Dollar, Norwegian Krone, Philippine Peso, Swiss Franc and Swedish Krona:
Notional Amount |  | Effective Date |  | Maturity Date |  | Number of Instruments |  | Index
$651,202 |  | December 2021 through September 2023 |  | Various dates through September 2025 |  | 595 |  | Various
Financial Instrument Presentation The table below presents the fair value of our derivative financial instruments as well as their classification on the balance sheet as of September 30, 2023 and June 30, 2023. Our derivative asset and liability balances fluctuate with interest rate and currency exchange rate volatility.
| September 30, 2023
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet line item |  | Gross amounts of recognized assets |  | Gross amount offset in Consolidated Balance Sheet |  | Net amount |  | Balance Sheet line item |  | Gross amounts of recognized liabilities |  | Gross amount offset in Consolidated Balance Sheet |  | Net amount
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives in cash flow hedging relationships |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | Other current assets / other assets |  | $ | 23,949 |  |  | $ | — |  |  | $ | 23,949 |  |  | Other liabilities |  | $ | — |  |  | $ | — |  |  | $ | — |
Cross-currency swaps | Other current assets |  | 13 |  |  | — |  |  | 13 |  |  | Other current liabilities |  | — |  |  | — |  |  | — |
Total derivatives designated as hedging instruments |  |  | $ | 23,962 |  |  | $ | — |  |  | $ | 23,962 |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Currency forward contracts | Other current assets / other assets |  | $ | 5,837 |  |  | $ | (1,709) |  |  | $ | 4,128 |  |  | Other current liabilities / other liabilities |  | $ | (2,452) |  |  | $ | 907 |  |  | $ | (1,545) |
Currency option contracts | Other current assets / other assets |  | 935 |  |  | (1) |  |  | 934 |  |  | Other current liabilities / other liabilities |  | (2,186) |  |  | 681 |  |  | (1,505) |
Total derivatives not designated as hedging instruments |  |  | $ | 6,772 |  |  | $ | (1,710) |  |  | $ | 5,062 |  |  |  |  | $ | (4,638) |  |  | $ | 1,588 |  |  | $ | (3,050) |
| June 30, 2023
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet line item |  | Gross amounts of recognized assets |  | Gross amount offset in Consolidated Balance Sheet |  | Net amount |  | Balance Sheet line item |  | Gross amounts of recognized liabilities |  | Gross amount offset in Consolidated Balance Sheet |  | Net amount
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives in cash flow hedging relationships |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | Other assets |  | $ | 19,341 |  |  | $ | (123) |  |  | $ | 19,218 |  |  | Other liabilities |  | $ | — |  |  | $ | — |  |  | $ | — |
Cross-currency swaps | Other assets |  | — |  |  | — |  |  | — |  |  | Other current liabilities |  | (1,777) |  |  | — |  |  | (1,777) |
Total derivatives designated as hedging instruments |  |  | $ | 19,341 |  |  | $ | (123) |  |  | $ | 19,218 |  |  |  |  | $ | (1,777) |  |  | $ | — |  |  | $ | (1,777) |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Currency forward contracts | Other current assets / other assets |  | $ | 2,873 |  |  | $ | (572) |  |  | $ | 2,301 |  |  | Other current liabilities / other liabilities |  | $ | (6,074) |  |  | $ | 1,589 |  |  | $ | (4,485) |
Currency option contracts | Other current assets / other assets |  | 990 |  |  | — |  |  | 990 |  |  | Other current liabilities / other liabilities |  | (3,055) |  |  | — |  |  | (3,055) |
Total derivatives not designated as hedging instruments |  |  | $ | 3,863 |  |  | $ | (572) |  |  | $ | 3,291 |  |  |  |  | $ | (9,129) |  |  | $ | 1,589 |  |  | $ | (7,540) |
The following table presents the effect of our derivative financial instruments designated as hedging instruments and their classification within comprehensive loss, net of tax, for the three months ended September 30, 2023 and 2022:
| Three Months Ended September 30, |  |
| 2023 |  | 2022 |  |  |  |  |  |
Derivatives in cash flow hedging relationships |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 6,131 |  |  | $ | 12,954 |  |  |  |  |  |  |
Cross-currency swaps | 1,548 |  |  | 3,806 |  |  |  |  |  |  |
Derivatives in net investment hedging relationships |  |  |  |  |  |  |  |  |
Intercompany loan | 5,775 |  |  | 12,951 |  |  |  |  |  |  |
Currency forward contracts | (1,080) |  |  | — |  |  |  |  |  |  |
Total | $ | 12,374 |  |  | $ | 29,711 |  |  |  |  |  |  |
The following table presents reclassifications out of accumulated other comprehensive loss for the three months ended September 30, 2023 and 2022:
| Amount of Net Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income | Affected line item in the Statement of Operations
| Three Months Ended September 30, |  |  |
| 2023 |  | 2022 |  |  |  |  |  |  |
Derivatives in cash flow hedging relationships |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | (2,223) |  |  | $ | 397 |  |  |  |  |  |  |  | Interest expense, net
Cross-currency swaps | (1,936) |  |  | (3,742) |  |  |  |  |  |  |  | Other income, net
Total before income tax | (4,159) |  |  | (3,345) |  |  |  |  |  |  |  | Income (loss) before income taxes
Income tax | 611 |  |  | 407 |  |  |  |  |  |  |  | Income tax expense
Total | $ | (3,548) |  |  | $ | (2,938) |  |  |  |  |  |  |  |
The following table presents the adjustment to fair value recorded within the consolidated statements of operations for the three months ended September 30, 2023 and 2022 for derivative instruments for which we did not elect hedge accounting.
| Amount of Gain (Loss) Recognized in Net Income (Loss) | Affected line item in the Statement of Operations
| Three Months Ended September 30, |  |  |
| 2023 |  | 2022 |  |  |  |  |  |  |
Currency contracts | $ | 8,312 |  |  | $ | 28,645 |  |  |  |  |  |  |  | Other income, net
Total | $ | 8,312 |  |  | $ | 28,645 |  |  |  |  |  |  |  |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration