Derivatives

3 Months Ended

Sep. 30, 2021

Derivatives

Derivatives

8.  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 income (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 9 — Fair Value Measurements.”

In July 2017, we entered into an interest rate swap agreement on the first $150,000 of notional principal that effectively converts the floating LIBOR portion of our interest obligation on that amount of debt to a fixed interest rate of 1.8325%. The agreement matures in June 2022. In March 2020, we entered into an interest rate swap agreement on an additional $150,000 of notional principal that effectively converts the floating LIBOR portion of our interest obligation on that amount of debt to a fixed rate of 0.62%. On the maturity of the July 2017 agreement, this agreement increases to a notional principal amount of $300,000 through June 2025, and effectively converts the floating LIBOR portion of our interest obligation on $300,000 of debt to a fixed interest rate of 0.62%. The forecasted transactions are probable of occurring, and the interest rate swaps have been designated as highly effective cash flow hedges.

We entered into foreign currency option contracts to hedge cash flows related to monthly inventory purchases. The individual option contracts mature monthly through February 2023. The forecasted inventory purchases are probable of occurring and the individual option contracts were designated as highly effective cash flow hedges.

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	2021		2021
Other assets
Brazil Real options, net	$	—	$	355
Interest rate swaps		2,634		2,341
Accrued expense and other current liabilities
Brazil Real options, net		(467)		(150)
Interest rate swaps		(2,891)		(3,336)
Other liabilities
Brazil Real options, net		(95)		—
Interest rate swaps		—		—
Total Fair Value
Brazil Real options, net		(562)		205
Interest rate swaps		(257)		(995)

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

	September 30,
As of	2021
Brazil Real call options	R$	96,000
Brazil Real put options	R$	96,000
Interest rate swaps	$	300,000

The consolidated statements of operations and statements of other comprehensive income (“OCI”) for the periods ended September 30, 2021 and 2020 included the effects of derivatives as follows:

	Three Months
For the Periods Ended September 30	2021		2020
Brazil Real options, net
(Income) expense recorded in consolidated statement of operations	$	428	$	(3)
Consolidated statement of operations - total cost of goods sold	$	149,987	$	131,075
(Income) expense recorded in OCI	$	767	$	(376)
Interest rate swaps
Expense recorded in consolidated statements of operations		868		813
Consolidated statement of operations - total interest expense, net	$	2,889	$	2,810
(Income) expense recorded in OCI	$	(738)	$	(713)

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, 2021, included realized net losses of $1,527 related to matured contracts. We anticipate the net losses included in inventory will be recognized in cost of goods sold within the next twelve to eighteen months.