DERIVATIVE INSTRUMENTS

12 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

The Company is exposed to foreign currency exchange fluctuations through its global operations, with manufacturing and distribution facilities in various countries around the world. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments. The Company expects that any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying firm commitments or forecasted transactions. During fiscal 2014, the Company launched a program to qualify derivatives for hedge accounting treatment using foreign currency forward contracts. The Company continued entering into derivatives for which hedge accounting treatment has been applied during fiscal 2015 which the Company anticipates realizing in the Consolidated Statements of Operations in fiscal 2016 and 2017. The Company also continued to use certain derivatives as economic hedges of foreign currency exposure on firm commitments and forecasted transactions. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. The Company does not enter into derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives.

For derivatives accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of specific underlying forecasted transactions, the risk management objective and the strategy for undertaking the hedge transaction. In addition, the Company formally assesses both at inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. Any ineffective portion of a financial instrument's change in fair value is immediately recognized into earnings. If it is determined that a derivative or a portion of a derivative is not highly effective as a hedge, the Company will discontinue hedge accounting for the affected derivative or related portion in the related period. Additionally, all of the master agreements governing the Company’s derivative contracts contain standard provisions that could trigger early termination of the contracts in certain circumstances which would require the Company to discontinue hedge accounting, including if the Company were to merge with another entity and the creditworthiness of the surviving entity were to be “materially weaker” than that of the Company prior to the merger. As of June 30, 2015, foreign currency forward contracts in net liability positions that contained credit-risk-related features were $6.3.

The Company also attempts to minimize credit exposure to counterparties by entering into derivative contracts with counterparties that are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the fair value of contracts in net asset positions, which totaled $12.4 and $2.1 at June 30, 2015 and 2014, respectively. Accordingly, management of the Company believes risk of material loss under these hedging contracts is remote.

Quantitative Information

Derivatives are recognized on the balance sheet at their fair values. The following table presents the fair value of derivative instruments outstanding at June 30, 2015 and 2014:

	Asset					Liability
	Balance Sheet Classification	Fair Value				Balance Sheet Classification	Fair Value
		June 30, 2015		June 30, 2014			June 30, 2015		June 30, 2014
Derivatives designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other current assets	$	6.8	$	—	Accrued expenses and other current liabilities	$	4.8	$	10.5
Total derivatives designated as hedges		$	6.8	$	—		$	4.8	$	10.5
Derivatives not designated as hedges:
Foreign exchange forward contracts	Prepaid expenses and other current assets	$	5.6	$	2.1	Accrued expenses and other current liabilities	$	1.5	$	1.0
Total derivatives not designated as hedges		$	5.6	$	2.1		$	1.5	$	1.0
Total derivatives		$	12.4	$	2.1		$	6.3	$	11.5

The table below presents the gross amount of foreign exchange contract hedges recorded as assets and liabilities in Prepaid expenses and other current assets and Accrued expenses and other current liabilities in the Consolidated Balance Sheet, respectively, as of June 30, 2015:

										Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets			Financial Instruments		Cash Collateral Received		Net Amount
Assets	$	16.1		$	(3.7	)	$	12.4		$	—	$	—	$	12.4
Liabilities	$	(6.5	)	$	0.2		$	(6.3	)	$	—	$	—	$	(6.3	)

The table below presents the gross amount of foreign exchange contract hedges recorded as assets and liabilities in Prepaid expenses and other current assets and Accrued expenses and other current liabilities in the Consolidated Balance Sheet, respectively, as of June 30, 2014:

										Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts Recognized			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets			Financial Instruments		Cash Collateral Received		Net Amount
Assets	$	2.2		$	(0.1	)	$	2.1		$	—	$	—	$	2.1
Liabilities	$	(12.9	)	$	1.4		$	(11.5	)	$	—	$	—	$	(11.5	)

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments during the fiscal years ended June 30, 2015, 2014 and 2013 is presented below:

Consolidated Statements of Operations Classification of Gain (Loss) on Forward Exchange Contracts Recognized in Operations	Gain (Loss) Recognized in Operations Year Ended June 30,
	2015			2014			2013
Interest expense, net (a)	$	(37.2	)	$	0.4		$	0.8
Net revenues	$	(0.1	)	$	—		$	—
Cost of sales	$	(0.3	)	$	0.1		$	0.9
Selling, general and administrative	$	(0.2	)	$	(0.1	)	$	—

^(a)  The impact on interest expense, net at June 30, 2015 related to derivative contracts entered into to offset fluctuations in the underlying non-functional currency cash balances and intercompany loans at June 30, 2015 is due to increased foreign exchange exposure and higher volatility in currencies during the year, which is more than offset by the revaluation of underlying non-functional currency cash balances. 

The Company enters into foreign currency forward contracts for anticipated transactions for periods consistent with the Company’s identified exposures to minimize the effect of foreign exchange rate movements on revenues and costs and on the cash flows that the Company receives from foreign subsidiaries and third parties where there is a high probability that anticipated exposures will materialize. The foreign currency forward contracts entered into for these anticipated transactions have been designated as foreign currency cash-flow hedges and have varying maturities through the end of June 2016. Hedge effectiveness of foreign currency forward contracts is based on the forward-to-forward hypothetical derivative methodology and includes all changes in value.

The ineffective portion of foreign currency forward contracts is recorded in current-period earnings. For derivative contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses accumulated in Other comprehensive income (loss) (“AOCI”) are reclassified to earnings when the underlying forecasted transaction occurs. If it is no longer probable that the forecasted transaction will occur, then any gains or losses in AOCI are reclassified to current-period earnings. During the year ended June 30, 2015, the Company made a decision to implement a new business model for certain subsidiaries in Europe. As a result, the existing hedges were no longer deemed effective foreign currency cash-flow hedges. Those hedges were de-designated and the Company reclassified a net loss of $3.9 from AOCI to the Consolidated Statements of Operations.

As of June 30, 2015, all of the Company’s remaining foreign currency forward contracts designated as hedges were highly effective in all material respects. The accumulated loss on these derivative instruments in AOCI, net of tax, was $0.1 and $8.9 as of June 30, 2015 and June 30, 2014, respectively. The estimated net gain related to these effective hedges that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $0.2.

The amount of gains and losses reclassified from AOCI to the Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments during the fiscal years ended June 30, 2015, 2014 and 2013 is presented below:

Consolidated Statements of Operations Classification of Gain (Loss) Reclassified from AOCI/(L)	Gain (Loss) Recognized in Operations Year Ended June 30,
	2015		2014		2013
Net revenues	$	8.1	$	—	$	—
Cost of sales	$	0.3	$	—	$	—

As of June 30, 2015, the Company had foreign currency forward contracts designated as effective hedges in the notional amount of $277.0, that mature at various dates through June 2016. The foreign currencies of the counterparties in the hedged foreign currency forward contracts (notional value stated in U.S. dollars) are principally the British pound ($97.7), euro ($112.1), Australian dollar ($18.7), Canadian dollar ($37.0), and the Russian ruble ($10.3).

As of June 30, 2014, the Company had foreign currency forward contracts designated as effective hedges in the notional amount of $361.3.The foreign currencies of the counterparties in the hedged foreign currency forward contracts (notional value stated in U.S. dollars) are principally the British pound ($108.5), euro ($85.8), Australian dollar ($42.4), Canadian dollar ($49.5), Russian ruble ($38.3), Polish zloty ($30.2), U.S. dollar ($17.4), and Japanese yen ($2.5).

As of June 30, 2015 and June 30, 2014, the Company had foreign currency forward contracts not designated as hedges with a notional value of $1,297.6 and $535.4, respectively, which mature at various dates through June 2016.