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Derivatives and Hedging Activities
 12 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities
17.
DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s receivables and borrowings.

Certain of the Company’s foreign operations expose the Company to fluctuations of foreign exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of its functional currency, the U.S. Dollar. Accordingly, the Company uses derivative financial instruments to manage and mitigate such risks. The Company does not use derivatives for speculative or trading purposes.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During fiscal 2024 and 2023, such derivatives were used to hedge the variable cash flows associated with existing variable rate debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCL and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. During the next 12 months, the Company estimates that an additional $3,094 will be reclassified as a decrease to interest expense.

As of June 30, 2025, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

 

Interest Rate Derivative

 

Number of Instruments

 

Notional Amount

 

Interest rate swap

 

4

 

$

400,000

 

 

Cash Flow Hedges of Foreign Exchange Risk

The Company is exposed to fluctuations in various foreign currencies against its functional currency, the U.S. Dollar. The Company, at times, uses forward contracts to manage its exposure to fluctuations in the GBP-EUR exchange rates. The Company designates these derivatives as cash flow hedges of foreign exchange risks.

For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in AOCL and subsequently reclassified in the same period during which the hedged transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. During the next 12 months, the Company estimates that an additional $114 relating to the foreign currency forward contracts will be reclassified to interest expense.

As of June 30, 2025, the Company had the following outstanding foreign currency derivatives that were used to hedge its foreign exchange risks:

 

Foreign Currency Derivative

 

Number of Instruments

 

Notional Sold

 

 

Notional Purchased

 

Foreign currency forward contract

 

3

 

£

14,067

 

 

€

16,600

 

Net Investment Hedges

The Company is exposed to fluctuations in foreign exchange rates on investments it holds in its European foreign entities and their exposure to the Euro. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in the foreign exchange rate on its foreign investment in Western Europe. Currency forward agreements involve fixing the USD-EUR exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in U.S. Dollars for their fair value at or close to their settlement date. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency-fixed-rate payments over the life of the agreement.

For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in AOCL as part of the cumulative translation adjustment. Amounts are reclassified out of AOCL into earnings when the hedged net investment is either sold or substantially liquidated.

During the fiscal year ended June 30, 2025, the Company terminated four EUR-USD cross-currency swaps across various counterparties and received proceeds of $2,363. The Company simultaneously entered into new, at-market cross currency swaps with the same aggregate notional amount as the previous net investment hedges. The gain from termination will remain in AOCL until the net investment is sold or substantially liquidated.

As of June 30, 2025, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations:

 

Foreign Currency Derivative

 

Number of Instruments

 

Notional Sold

 

 

Notional Purchased

 

Cross-currency swap

 

4

 

€

100,300

 

 

$

103,312

 

 

Fair Value Hedges

The Company is exposed to changes in the fair value of certain of its foreign denominated intercompany loans due to changes in foreign exchange spot rates. The Company uses fixed-to-fixed cross-currency swaps to hedge its exposure to changes in foreign exchange rates affecting gains and losses on intercompany loan principal and interest. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency-fixed-rate payments over the life of the agreement.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest and other financing expense, net.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company’s accounting policy election. The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction. During the next 12 months, the Company estimates that an additional $476 relating to cross-currency swaps will be reclassified as a decrease to interest expense.

During the three months ended June 30, 2025, the Company terminated one EUR-USD cross-currency swap and received proceeds of $552. The Company simultaneously entered into a new, at-market cross currency swap with the same notional amount as the previous fair value hedge. A portion of gain was recognized in the statement of comprehensive loss, and the balance was deferred to AOCL where it will be amortized on a straight-line basis.

As of June 30, 2025, the Company had the following outstanding foreign currency derivatives that were used to hedge changes in fair value attributable to foreign exchange risk:

 

Foreign Currency Derivative

 

Number of Instruments

 

Notional Sold

 

 

Notional Purchased

 

Cross-currency swap

 

1

 

€

24,700

 

 

$

25,453

 

 

 

As of June 30, 2025, the following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustment for fair value hedges:

 

 

Carrying Amount of the Hedged Asset

 

 

Cumulative Amount of Fair Value Hedge Adjustment Included in the Carrying Amount of the Hedged Asset

 

 

Fiscal Year Ended June 30,

 

 

Fiscal Year Ended June 30,

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

Intercompany loan receivable

 

$

28,982

 

 

$

26,465

 

 

$

2,517

 

 

$

(480

)

 

Designated Hedges

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2025:

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance Sheet Location

 

Fair Value

 

 

Balance Sheet Location

 

Fair Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Prepaid expenses and other current assets

 

$

3,091

 

 

Accrued expenses and other current liabilities

 

$

—

 

Interest rate swaps

 

Other noncurrent assets

 

 

140

 

 

Other noncurrent liabilities

 

 

—

 

Cross-currency swaps

 

Prepaid expenses and other current assets

 

 

2,335

 

 

Accrued expenses and other current liabilities

 

 

—

 

Cross-currency swaps

 

Other noncurrent assets

 

 

—

 

 

Other noncurrent liabilities

 

 

19,706

 

Foreign currency forward contracts

 

Prepaid expenses and other current assets

 

 

269

 

 

Accrued expenses and other current liabilities

 

 

—

 

Total derivatives designated as hedging instruments

 

 

 

$

5,835

 

 

 

 

$

19,706

 

 

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2024:

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance Sheet Location

 

Fair Value

 

 

Balance Sheet Location

 

Fair Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Prepaid expenses and other current assets

 

$

7,455

 

 

Accrued expenses and other current liabilities

 

$

—

 

Interest rate swaps

 

Other noncurrent assets

 

 

5,151

 

 

Other noncurrent liabilities

 

 

—

 

Cross-currency swaps

 

Prepaid expenses and other current assets

 

 

2,376

 

 

Accrued expenses and other current liabilities

 

 

—

 

Cross-currency swaps

 

Other noncurrent assets

 

 

—

 

 

Other noncurrent liabilities

 

 

3,333

 

Total derivatives designated as hedging instruments

 

 

 

$

14,982

 

 

 

 

$

3,333

 

 

The following table presents the pre-tax effect of the Company’s cash flow hedges, net investment hedges, and fair value hedges on AOCL for fiscal years ended June 30, 2025, 2024 and 2023:

 

 

Amount of (Loss) Gain Recognized in AOCL on Derivatives

 

 

Fiscal Year Ended June 30,

 

 

2025

 

 

2024

 

 

2023

 

Derivatives in cash flow hedging relationships:

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

(2,696

)

 

$

7,300

 

 

$

20,413

 

Foreign currency forward contracts

 

 

89

 

 

 

50

 

 

 

80

 

Derivatives in net investment hedging relationships:

 

 

 

 

 

 

 

 

 

Cross-currency swaps

 

 

(8,999

)

 

 

1,843

 

 

 

(1,279

)

Derivatives in fair value hedging relationships:

 

 

 

 

 

 

 

 

 

 Cross-currency swaps

 

 

(2,216

)

 

 

454

 

 

 

(310

)

 

 

$

(13,822

)

 

$

9,647

 

 

$

18,904

 

 

The following table presents the pre-tax effect of the Company’s cash flow hedges, net investment hedges, and fair value hedges on the consolidated statements of operations, recorded in interest and other financing expense, net, for fiscal years ended June 30, 2025, 2024 and 2023:

 

 

Amount of Gain (Loss) Reclassified from AOCL into Income (Expense)

 

 

Fiscal Year Ended June 30,

 

 

2025

 

 

2024

 

 

2023

 

Derivatives in cash flow hedging relationships:

 

 

 

 

 

 

 

 

 

Interest and other financing expense, net:

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

6,581

 

 

$

9,348

 

 

$

6,918

 

Cross-currency swaps

 

 

—

 

 

 

—

 

 

 

(275

)

Foreign currency forward contracts

 

 

126

 

 

 

—

 

 

 

—

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

 

(38

)

 

 

9

 

 

 

—

 

Derivatives in net investment hedging relationships:

 

 

 

 

 

 

 

 

 

 Cross-currency swaps

 

 

1,918

 

 

 

1,969

 

 

 

1,963

 

Derivatives in fair value hedging relationships:

 

 

 

 

 

 

 

 

 

Cross-currency swaps(1)

 

 

(2,056

)

 

 

970

 

 

 

(557

)

 

 

$

6,531

 

 

$

12,296

 

 

$

8,049

 

 

(1)
Net of amount that is excluded from effectiveness testing. The amount of gain, excluded from effectiveness testing, reclassified from AOCL into income for fiscal years 2025, 2024, and 2023 was $460, $490, and $489, respectively.