Note 10 - Derivative Financial Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
10. Derivative Financial Instruments
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 consolidated balance sheets at fair value. The Company designates 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 accumulated other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps is reported in earnings within interest expense.
The Company’s effective swap agreements convert the base borrowing rate on $225 million of debt due under its Facility from a variable rate equal to 1 month Secured Overnight Financing Rate (SOFR) to a weighted average fixed rate of 3.48% at June 30, 2026. The fair value of the swaps, recognized in accumulated other comprehensive loss, is as follows (in thousands, except percentages):
The Company reported no losses for the years ended June 30, 2026, 2025, and 2024, 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 sales to foreign 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 June 30, 2026 and 2025, the Company had outstanding forward contracts related to hedges of intercompany loans that had an immaterial amount of net unrealized loss. The notional amounts of these instruments, by currency in thousands, are as follows:
The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet at June 30 (in thousands):
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):
The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):
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