DERIVATIVES

We are exposed to certain risks relating to our ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk and foreign currency exchange rate risk. Accordingly, we have instituted interest rate and foreign currency hedging programs that are accounted for in accordance with ASC 815.

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Our interest rate hedging program is a cash flow hedge program designed to minimize interest rate volatility. We swap the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount, at specified intervals. We also employed an interest rate cap, which matured in March 2014, that compensates us if variable interest rates rise above a pre-determined rate. Our interest rate contracts are designated as hedging instruments.

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Our foreign currency hedging program is a cash flow hedge program designed to minimize foreign currency exchange rate volatility due to the foreign currency exchange exposure related to intercompany transactions. This program was expanded in the first quarter of the fiscal year ended June 30, 2013 in order to reduce the impact of foreign exchange rate risk on our gross margin. We primarily utilize forward currency exchange contracts and cross-currency swaps with maturities of no more than 12 months. These contracts are designated as hedging instruments.

We also enter into other economic hedges to mitigate foreign currency exchange risk and interest rate risk related to intercompany and significant external transactions. These contracts are not designated as hedges in accordance with ASC 815.

The following table presents the notional amounts and fair values of our derivatives as of March 31, 2014 and June 30, 2013. The gross position of all asset and liability amounts is reported in other current assets, other assets, other current liabilities, and other liabilities in our consolidated balance sheets.



(in thousands)	March 31, 2014					June 30, 2013
	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under ASC 815
Derivatives in an asset position:
Interest rate contracts	$	100,000	$	2,819		$	125,000	$	3,269
Foreign exchange contracts	152,178		5,380			20,245		333
Cross-currency swap contracts	25,760		1,125			27,312		1,032
Derivatives in a liability position:
Interest rate contracts	100,000		(1,719		)	100,000		(2,208		)
Foreign exchange contracts	33,386		(964		)	129,254		(3,889		)
Total designated derivatives	$	411,324	$	6,641		$	401,811	$	(1,463	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	50,016	$	995		$	20,756	$	91
Derivatives in a liability position:
Cross-currency interest rate swap contracts	—		—			44,580		(1,910		)
Foreign exchange contracts	84,822		(429		)	42,800		(992		)
Total non-designated derivatives	$	134,838	$	566		$	108,136	$	(2,811	)
Total derivatives	$	546,162	$	7,207		$	509,947	$	(4,274	)

We record the effective portion of any change in the fair value of derivatives designated as hedging instruments under ASC 815 to other accumulated comprehensive income (loss) in our consolidated balance sheets, net of deferred taxes, and any ineffective portion to miscellaneous (expense) income, net in our consolidated statements of income. During the three months ended March 31, 2014 and 2013, the amounts recorded in miscellaneous (expense) income, net in our consolidated statements of income to reflect ineffective portions of any hedges were a gain of $0.2 million and a loss of $0.5 million, respectively. During the nine months ended March 31, 2014 and 2013, the amounts recorded in miscellaneous (expense) income, net in our consolidated statements of income to reflect ineffective portions of any hedges were zero and a loss of $0.4 million, respectively.

The amounts recognized in other comprehensive income (loss), net of taxes, are presented below:



(in thousands)	Three Months Ended						Nine Months Ended
	March 31, 2014			March 31, 2013			March 31, 2014			March 31, 2013
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts, net of taxes	$	195		$	155		$	152		$	281
Foreign exchange contracts, net of taxes	10			(1,963		)	(4,987		)	(1,736		)
Cross-currency swap contracts, net of taxes	(29		)	741			85			338
Total designated derivatives	$	176		$	(1,067	)	$	(4,750	)	$	(1,117	)

The unrealized gain (loss) on derivative instruments is net of $0.2 million and $3.1 million of taxes for the three and nine months ended March 31, 2014, respectively. The unrealized loss on derivative instruments is net of $0.7 million taxes for both the three and nine months ended March 31, 2013. The estimated net amount of the existing gains that are expected to be reclassified into earnings within the next twelve months is $3.3 million.

The change in the fair value of derivatives not designated as hedging instruments under ASC 815 is recorded to miscellaneous (expense) income, net in our consolidated statements of income. The unrealized (loss) gain recognized are presented below:



(in thousands)	Three Months Ended					Nine Months Ended
	March 31, 2014		March 31, 2013			March 31, 2014		March 31, 2013
Derivatives not designated as hedging instruments under ASC 815
Cross-currency interest rate swap contracts	$	3,431	$	2,051		$	1,910	$	1,924
Foreign exchange contracts	736		(347		)	1,467		87
Total non-designated derivative unrealized (loss) gain, net	$	4,167	$	1,704		$	3,377	$	2,011