The Company's results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. In an effort to manage the exposure to these risks, the Company periodically enters into various derivative instruments. The Company's accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with U.S. GAAP. The Company records all derivatives on the Condensed Consolidated Balance Sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges are adjusted to fair value through earnings in other income and expense.

Foreign Currency Derivatives – The Company conducts a portion of its business internationally in a variety of foreign currencies and is exposed to market risk for changes in foreign currency exchange rates. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted the Company uses currency options and forward contracts or other hedging instruments with third parties. These contracts will periodically hedge the exchange of various currencies, including the U.S. dollar, Brazilian real, euro, British pound and Canadian dollar.

The Company had contracts outstanding for purposes of managing cash flows with notional amounts of $47.4 million and $34.5 million for the exchange of foreign currencies at December 31, 2022 and June 30, 2022, respectively. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures included in the Condensed Consolidated Income Statements for the quarters and six months ended December 31, 2022 and 2021 are as follows:


	Quarter ended				Six months ended
	December 31,				December 31,
	2022		2021		2022		2021
	(in thousands)
Net foreign exchange derivative contract losses (gains)	$	871	$	(523)	$	1,309	$	(2,175)
Net foreign currency transactional and re-measurement (gains) losses	(524)		1,003		(39)		3,141
Net foreign currency exchange losses	$	347	$	480	$	1,270	$	966

Net foreign currency exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense. Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the U.S. dollar versus the euro, the British pound versus the euro, and the Canadian dollar versus the U.S. dollar..

Interest Rates - The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. The Company manages its exposure to changes in interest rates by using interest rate swaps to hedge this exposure and to achieve a desired proportion of fixed versus floating rate debt. On April 30, 2019, the Company entered into an interest rate swap agreement, which was amended on September 28, 2022 to change the reference rate from LIBOR to SOFR. The swap agreement has a notional amount of $100.0 million, with a $50.0 million tranche scheduled to mature on April 30, 2024 and a $50.0 million tranche scheduled to mature April 30, 2026. This swap

agreement is designated as a cash flow hedge to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap agreement are recognized as adjustments to interest expense. To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap are not included in current earnings but are reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for the quarters and six months ended December 31, 2022 and 2021.

The components of the cash flow hedge included in the Condensed Consolidated Statement of Comprehensive Income for the quarters and six months ended December 31, 2022 and 2021, are as follows:


	Quarter ended				Six months ended
	December 31,				December 31,
	2022		2021		2022		2021
	(in thousands)
Net interest (income) expense recognized as a result of interest rate swap	$	(345)	$	579	$	(313)	$	1,157
Unrealized gain in fair value of interest rate swap	349		999		2,849		983
Net increase in accumulated other comprehensive income	4		1,578		2,536		2,140
Income tax effect	1		406		652		555
Net increase in accumulated other comprehensive income, net of tax	$	3	$	1,172	$	1,884	$	1,585

The Company used the following derivative instruments at December 31, 2022 and June 30, 2022, reflected in its Condensed Consolidated Balance Sheets, for the risk management purposes detailed above:


		December 31, 2022		June 30, 2022
	Balance Sheet Location	Fair Value of Derivatives Designated as Hedge Instruments	Fair Value of Derivatives Not Designated as Hedge Instruments	Fair Value of Derivatives Designated as Hedge Instruments	Fair Value of Derivatives Not Designated as Hedge Instruments
		(in thousands)
Derivative assets:


Interest rate swap agreement	Other non-current assets	$4,223	—	$1,686	—
Derivative liabilities:
Foreign exchange contracts	Accrued expenses and other current liabilities	—	$9	—	$5
Foreign currency hedge	Accrued expenses and other current liabilities	$281	—	$93	—