Note 10 - Derivative Financial Instruments

6 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

10)      Derivative Financial Instruments

The Company is exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency rates. The Company selectively uses derivative financial instruments in order to manage certain of these risks. Information about the Company’s derivative financial instruments is as follows:

Interest Rate Swaps

From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated its interest rate swap agreements, including those that may be forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.

The Company’s effective swap agreements convert the base borrowing rate on $150 million of debt due under our revolving credit agreement from a variable rate equal to 1 month Secured Overnight Financing Rate (SOFR) to a weighted average fixed rate of 0.85% at December 31, 2023. The fair value of the swaps, recognized in other comprehensive income, is as follows (in thousands, except percentages):

Effective Date	Notional Amount	Fixed Interest Rate	Maturity	December 31, 2023		June 30, 2023
February 6, 2023	25,000	2.80%	August 6, 2023	$	-	$	59
February 23, 2023	100,000	0.86%	March 23, 2025		4,394		6,716
April 24, 2020	25,000	0.88%	April 24, 2025		1,181		1,777
February 24, 2023	25,000	0.86%	March 24, 2025		1,102		1,683
				$	6,677	$	10,235

The Company reported no losses for the three and six months ended December 31, 2023, as a result of hedge ineffectiveness. Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expense concurrent with the hedged exposure.

Foreign Exchange Contracts

Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At December 31, 2023 and June 30, 2023, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized assets of $0.1 million and losses of $1.7 million, respectively, which approximate the unrealized gains and losses on the related loans. The contracts have maturity dates through fiscal year 2024, which correspond to the related intercompany loans.

The notional amounts of the Company’s forward contracts, by currency, are as follows (in thousands):

Currency	December 31, 2023		June 30, 2023
CAD		-		16,600
JPY		4,200,000		2,100,000

The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet (in thousands):

	Asset Derivatives
	December 31, 2023			June 30, 2023
Derivative designated	Balance			Balance
as hedging instruments	Sheet			Sheet
	Line Item	Fair Value		Line Item	Fair Value
Interest rate swaps	Prepaid expenses and other current assets	$	6,677	Prepaid expenses and other current assets	$	10,235
		$	6,677		$	10,235

	Liability Derivatives
	December 31, 2023			June 30, 2023
Derivative designated	Balance			Balance
as hedging instruments	Sheet			Sheet
	Line Item	Fair Value		Line Item	Fair Value
Foreign exchange contracts	Accrued liabilities	$	-	Accrued liabilities	$	315
		$	-		$	315

The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2023			2022			2023			2022
Interest rate swaps	$	(903	)	$	535		$	(275	)	$	4,760
Foreign exchange contracts		-			(574	)		315			(963	)
	$	(903	)	$	(39	)	$	40		$	3,797

The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):

Details about Accumulated													Affected line item
Other Comprehensive	Three Months Ended						Six Months Ended						in the Unaudited
Income (Loss) Components	December 31,						December 31,						Condensed Statements
	2023			2022			2023			2022			of Operations
Interest rate swaps	$	(1,713	)	$	(1,105	)	$	(3,433	)	$	(1,559	)	Interest expense
Foreign exchange contracts		-			599			(215	)		1,095		Other non-operating (income) expense, net
	$	(1,713	)	$	(506	)	$	(3,648	)	$	(464	)