Derivative Instruments

3 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Interest Rate Swap:

We are subject to interest rate risk related to the revolving credit facility and we enter into interest rate swap agreements that are based on LIBOR to manage this exposure. The interest rate swap agreements are designated as cash flow hedges that qualify for hedge accounting under the hypothetical derivative method. Fair value adjustments are recorded as a component of Accumulated Other Comprehensive Income (“AOCI”), net of tax in the Condensed Consolidated Balance Sheets. Balances in AOCI are reclassified into earnings when transactions related to the underlying risk are settled. As of September 30, 2022 we held an interest rate swap with a notional value totaling $40.0 million and a weighted average LIBOR fixed rate of 0.834%.

At September 30, 2022, our interest rate swap was recorded at fair value in current assets and non-current assets at $1.3 million and $1.4 million, respectively. At June 30, 2022, our interest rate swap was recorded in current assets and non-current assets at $0.9 million and $1.1 million, respectively.

The pre-tax balance of interest rate swap gains in AOCI as of September 30, 2022 was $2.7 million. See Note 9 - Accumulated Other Comprehensive Income of Notes to Condensed Consolidated Financial Statements for information regarding activity recorded as a component of AOCI during the three months ended September 30, 2022. As of September 30, 2022, we have $1.3 million of interest rate swap gains recorded in AOCI which are expected to be reclassified into earnings within the next twelve months.

Stock Warrants:

We hold a total investment of $2.0 million in a privately-held company, including $1.5 million in stock warrants. The investment in stock warrants is accounted for as a derivative instrument and is included in the Other Assets line of the Condensed Consolidated Balance Sheets. The stock warrants are convertible into equity shares of the privately-held company upon achieving certain milestones. The value of the stock warrants will fluctuate primarily in relation to the value of the privately-held company's underlying securities, either providing an appreciation in value or potentially expiring with no value. During the quarter ended September 30, 2022, the change in fair value of the stock warrants was not significant. See Note 12 - Fair Value of Notes to Condensed Consolidated Financial Statements for more information on the valuation of these securities.