Derivative Instruments and Hedging Activities

9 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

In the normal course of business, we are exposed to global market risks, including the effect of changes in foreign currency exchange rates. We use derivative instruments to manage our exposure to such risks and formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking hedge transactions. We recognize all derivatives in our Condensed Consolidated Balance Sheet (Unaudited) at fair value. We do not hold or issue derivatives for speculative purposes.

At March 31, 2017, we had open foreign currency forward contracts with an aggregate notional amount of $44 million, of which $2 million were classified as fair value hedges and $42 million were classified as cash flow hedges. This compares with open foreign currency forward contracts with an aggregate notional amount of $53 million at July 1, 2016, all of which were classified as fair value hedges. At March 31, 2017, contract expiration dates ranged from 13 days to approximately 15 months with a weighted average contract life of 8 months.

Fair Value Hedges

As of March 31, 2017, we had an outstanding foreign currency forward contract denominated in the Canadian Dollar to hedge certain balance sheet items. The net gains or losses on foreign currency forward contracts designated as fair value hedges were not material in the quarter and three quarters ended ended March 31, 2017 or in the quarter and three quarters endedApril 1, 2016. In addition, no amounts were recognized in earnings in the quarter and three quarters endedMarch 31, 2017 or in the quarter and three quarters endedApril 1, 2016 related to hedged firm commitments that no longer qualify as fair value hedges.

Cash Flow Hedges

We also have hedged U.S. Dollar payments to suppliers to maintain our anticipated profit margins in our international operations. As of March 31, 2017, we had outstanding foreign currency forward contracts denominated in the Euro, British Pound and Australian Dollar to hedge certain forecasted transactions. The net gains or losses from cash flow hedges recognized in earnings or recorded in other comprehensive income, including gains or losses related to hedge ineffectiveness, were not material in the quarter and three quarters endedMarch 31, 2017 or in the quarter and three quarters endedApril 1, 2016.