Derivative Instruments and Hedging Activities

12 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

We use derivative instruments to manage our foreign exchange and commodity cost exposures. All derivative instruments are recognized at fair value in other current assets or liabilities.

Derivatives Not Designated as Hedging Instruments

We use one-month foreign currency forward contracts to offset the impact of exchange rate volatility on certain assets and liabilities, including intercompany receivables and payables denominated in non-functional currencies. These forward contracts have not been designated as hedges, and the gains or losses on these forward contracts, along with the offsetting losses or gains due to the fluctuation of exchange rates on the underlying foreign currency denominated assets and liabilities, are recognized in other (expense) income. The notional amounts of the forward contracts were $228.5 million and $223.3 million at June 30, 2013 and 2012, respectively, with corresponding fair values of a $0.8 million asset at June 30, 2013 and a $2.6 million asset at June 30, 2012.

Cash Flow Hedges

During the third quarter of fiscal 2013, we expanded our hedge program to include foreign currency forward contracts to hedge a portion of our cash flow exposure to fluctuations in the Chinese renminbi versus the U.S. dollar. These derivative instruments are designated as cash flow hedges and target up to 70% of our projected U.S. dollar denominated third party sales from a subsidiary based in China. Gains and losses of the effective hedges are recorded as a component of accumulated other comprehensive income (AOCI) and reclassified to cost of sales during the period the third party sales occur. The notional amount of the forward contracts was $37.5 million at June 30, 2013, with an immaterial corresponding fair value at June 30, 2013. These forward contracts have maturities of 12 months or less.

We use derivatives in the form of call options to hedge the variability of gold and copper prices. These derivative instruments are designated as cash flow hedges and hedge approximately 60% of our planned gold and copper purchases. Gains and losses of the effective hedges are recorded as a component of AOCI and reclassified to cost of sales during the period the product containing the commodity is sold. The fair values of the call options were $1.1 million, $4.4 million and $7.8 million at June 30, 2013, 2012 and 2011, respectively. These call options have maturities of 12 months or less.

For the fiscal years ended June 30, 2013, 2012 and 2011, the impact to AOCI and earnings from cash flow hedges before taxes follows (in thousands):

	2013			2012		2011
Unrealized gain (loss) recognized in AOCI	$	(7,626	)	(7,197	)	$	231
Realized (loss) gain reclassified into earnings	(7,233		)	6,707		7,119

At June 30, 2013, $4.6 million is expected to be reclassified from AOCI to cost of sales within the next 12 months.