Quarterly report [Sections 13 or 15(d)]

Derivatives and Hedging Activities

v3.25.1
Derivatives and Hedging Activities
 6 Months Ended
Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
The Company operates internationally and utilizes certain derivative financial instruments to manage its foreign currency, debt and interest rate exposures. At March 31, 2025 and September 30, 2024, derivative instruments were reflected on a gross-basis in the consolidated balance sheets as follows:
Derivatives: March 31, 2025 September 30, 2024
Interest Rate Swaps Cross-Currency Swaps Interest Rate Swaps Cross-Currency Swaps
Current assets:    
Other current assets $ 190  $ —  $ —  $ — 
Long-term assets:    
Other non-current assets 380  —  —  — 
Current liabilities:    
Other current liabilities (511) (32,645) (863) (18,042)
Long-term liabilities:    
Other non-current liabilities (824) (43,257) (1,743) (48,925)
Total derivatives(1)
$ (765) $ (75,902) $ (2,606) $ (66,967)
(1) Cross-currency swap amounts at March 31, 2025 and September 30, 2024 reflect $73,422 and $58,432 of partial advanced payments received from the counterparties to certain swap contracts, respectively (see below).
Note 8.   Derivatives and Hedging Activities (continued)

The following table presents information related to interest rate swaps entered into by the Company and designated as cash flow hedges:
March 31, 2025 September 30, 2024
Notional amount $ 225,000  $ 175,000 
Weighted-average maturity period (years) 3.2 3.2
Weighted-average received rate 4.32  % 4.85  %
Weighted-average pay rate 3.80  % 3.83  %

The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring. Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.

The fair value of the interest rate swaps reflected a net unrealized loss of $765 ($571 after tax) and $2,606 ($1,948 after tax) at March 31, 2025 and September 30, 2024, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI"). Unrecognized gains of $2,341 ($1,746 after tax) and $3,848 ($2,874 after tax) related to previously terminated London Interbank Offered Rate ("LIBOR") based swaps were also included in AOCI as of March 31, 2025 and September 30, 2024, respectively. Assuming market rates remain constant with the rates at March 31, 2025, a gain (net of tax) of approximately $755 included in AOCI is expected to be recognized in earnings over the next twelve months.

The Company utilizes certain cross currency swaps as net investment hedges of foreign operations and assesses effectiveness for these contracts based on changes in fair value attributable to changes in spot prices. The following table presents information related to cross currency swaps entered into by the Company and designated as net investment hedges:

Notional Amount Unrealized Gains (Losses)
Recognized in AOCI
Swap Currencies Maturity Date March 31, 2025 September 30, 2024 March 31, 2025 September 30, 2024
USD/EUR September 2027 $ 81,392  $ 81,392  $ (4,019) $ (5,440)
USD/SEK June 2025 20,000  20,000  (137) (468)
USD/SGD August 2026 20,000  20,000  959  (441)
USD/EUR August 2026 25,000  25,000  1,379  (30)
USD/CAD May 2025 25,000  —  (41) — 
$ 171,392  $ 146,392  $ (1,859)
(1)
 $ (6,379)
(1)
(1) Total unrealized gains (losses) are presented net of tax of $621 and $2,156 as of March 31, 2025 and September 30, 2024, respectively.

In connection with certain of these cross currency swaps, the Company received cash from the counterparties, representing partial advance payments of amounts due under the U.S. dollar leg of the swaps. Advance payment amounts totaled $73,422 at March 31, 2025, of which $32,406 and $41,016 were included in other current liabilities and other non-current liabilities on the Consolidated Balance Sheet, respectively. Advance payment amounts totaled $58,432 at September 30, 2024, of which $17,416 and $41,016 were included in other current liabilities and other non-current liabilities on the Consolidated Balance Sheet, respectively.

The Company previously used certain foreign currency debt instruments as net investment hedges of foreign operations with a notional amount of €30.0 million ($33,485) as of September 30, 2024. Currency losses of $3,820 (net of income taxes of $1,113), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2024.

Refer to Note 12, "Accumulated Other Comprehensive Income" for further details regarding amounts recorded in AOCI and the Consolidated Statements of Income (Loss) related to derivatives.