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Fair Value Measurements

12 Months Ended

Jun. 30, 2023

6. Fair Value Measurements

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

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Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;

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Level 2 Inputs - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

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Level 3 Inputs - unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):


June 30, 2023	Level 1		Level 2		Level 3		Total
Assets
Certificates of deposit	$	—	$	7,151	$	—	$	7,151
Foreign currency derivatives		—		31		—		31
Total assets measured at fair value	$	—	$	7,182	$	—	$	7,182


June 30, 2022	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	1,314	$	—	$	1,314
Total assets measured at fair value	$	—	$	1,314	$	—	$	1,314
Liabilities
Foreign currency derivatives	$	—	$	31	$	—	$	31
Total liabilities measured at fair value	$	—	$	31	$	—	$	31

Level 1 Assets and Liabilities:

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities. The Company states accounts receivable, accounts payable and accrued liabilities at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

Level 2 Assets and Liabilities:

The Company's level 2 assets consist of certificates of deposit and derivative instruments. Certificates of deposit do not have regular market pricing and are considered Level 2. The fair value of derivative instruments under the Company’s foreign exchange forward contracts and interest rate swaps are estimated based on valuations provided by alternative pricing sources supported by observable inputs which are considered Level 2.

As of June 30, 2023, the Company had investment in certificates of deposit of $7.2 million with maturity of three months at the date of purchase and are recorded as cash equivalents in the consolidated balance sheets. The Company considers these cash equivalents to be available-for-sale and as of June 30, 2023, their fair value approximated their amortized cost.

As of June 30, 2023 and 2022, foreign exchange forward currency contracts not designated as hedging instruments had a notional amount of $3.4 million and $9.6 million, respectively. These contracts have maturities of less than 60 days. Changes in the fair value of these foreign exchange forward contracts not designated as hedging instruments are included in other income or expense in the consolidated statements of operations. For the years ended June 30, 2023, and 2022 the net loss recorded in the consolidated statements of operations from these contracts were $0.4 million and $1.4 million, respectively. For the year ended June 30, 2021, the net gains recorded in the consolidated statements of operations related to these contracts were $0.5 million. There were no outstanding foreign exchange forward contracts that were designated as hedging instruments at June 30, 2023 and at June 30, 2022. See Note 14, Derivatives and Hedging, for additional information.

The fair values of the interest rate swaps are based upon inputs corroborated by observable market data which is considered Level 2. As of June 30, 2023, the Company did not have any interest rate swap contracts. As of June 30, 2022, the Company had interest rate swap contracts, designated as cash flow hedges, with a total notional amount of $75.0 million. Changes in fair value of these contracts are recorded as a component of accumulated other comprehensive loss in the consolidated balance sheets. As of June 30, 2022, these contracts had unrealized gains of $1.3 million. See Note 14, Derivatives and Hedging, for additional information.

The fair value of the borrowings under the 2023 Credit Agreement and the 2019 Credit Agreement is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. Since the interest rate is variable in the 2023 Credit Agreement and 2019 Credit Agreement, the fair value approximates the face amount of the Company’s indebtedness of $225.0 million and $308.6 million as of June 30, 2023 and 2022, respectively.

Level 3 Assets and Liabilities:

Certain of the Company’s assets, including intangible assets and goodwill are measured at fair value on a non-recurring basis if impairment is indicated. There were no Level 3 assets as of June 30, 2023 and 2022.

There were no transfers of assets or liabilities between Level 1, Level 2 or Level 3 during the years ended June 30, 2023 and 2022. There were no impairments recorded during the years ended June 30, 2023 and 2022.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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