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.

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 the three and nine months ended March 31, 2025 and 2024, 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 $3,518 will be reclassified as a decrease to interest expense.

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 $153 relating to the foreign currency forward contracts will be reclassified to interest expense.

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 three months ended March 31, 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.

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 March 31, 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) income, and the balance was deferred to AOCL where it will be amortized on a straight-line basis.

As of March 31, 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 March 31, 2025 and June 30, 2024, 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
	March 31, 2025		June 30, 2024		March 31, 2025		June 30, 2024
Intercompany loan receivable	$	26,671	$	26,465	$	206	$	(480	)

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheet as of March 31, 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	$	3,510	Accrued expenses and other current liabilities	$	—
Interest rate swaps	Other noncurrent assets		1,126	Other noncurrent liabilities		—
Cross-currency swaps	Prepaid expenses and other current assets		2,333	Accrued expenses and other current liabilities		—
Cross-currency swaps	Other noncurrent assets		—	Other noncurrent liabilities		8,161
Foreign currency forward contracts	Prepaid expenses and other current assets		—	Accrued expenses and other current liabilities		119
Total derivatives designated as hedging instruments		$	6,969		$	8,280

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheet 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 the three and nine months ended March 31, 2025 and 2024:


	Amount of (Loss) Gain Recognized in AOCL on Derivatives
	Three Months Ended March 31,						Nine Months Ended March 31,
	2025			2024			2025			2024
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	(1,633	)	$	7,274		$	(2,611	)	$	5,028
Foreign currency forward contracts		152			(1	)		(304	)		50
Derivatives in net investment hedging relationships:
Cross-currency swaps		(3,512	)		2,322			(215	)		659
Derivatives in fair value hedging relationships:
Cross-currency swaps		(864	)		572			(52	)		163
	$	(5,857	)	$	10,167		$	(3,182	)	$	5,900

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 the three and nine months ended March 31, 2025 and 2024:


	Amount of Gain Reclassified from AOCL into Income (Expense)
	Three Months Ended March 31,						Nine Months Ended March 31,
	2025			2024			2025			2024
Derivatives in cash flow hedging relationships:
Interest and other financing expense, net:
Interest rate swaps	$	1,311		$	2,363		$	5,359		$	7,037
Foreign currency forward contracts		(92	)		—			36			—
Cost of sales:
Foreign currency forward contracts		(134	)		(10	)		(134	)		(10	)
Derivatives in net investment hedging relationships:
Cross-currency swaps		450			489			1,439			1,479
Derivatives in fair value hedging relationships:
Cross-currency swaps(1)		(995	)		122			146			369
	$	540		$	2,964		$	6,846		$	8,875

(1)

Net of amount that is excluded from effectiveness testing. The amount of gain, excluded from effectiveness testing, reclassified from AOCL into income for the three months ended March 31, 2025 and 2024 was $104 and $122, respectively. The amount of gain, excluded from effectiveness testing, reclassified from AOCL into income for the nine months ended March 31, 2025 and 2024 was $351 and $369, respectively.