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.


•	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. Our interest rate contracts are designated as hedging instruments.

•

Our foreign currency hedging program is a cash flow hedge program designed to mitigate foreign currency exchange rate volatility due to the foreign currency exchange exposure related to our intercompany transactions, direct costs, services revenues and significant external transactions. 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 inherit 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 September 30, 2016 and June 30, 2016. All asset and liability amounts are reported in other current and non-current assets and other current and non-current liabilities.



(dollars in millions)	September 30, 2016					June 30, 2016
	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	75.8	$	3.9		$	81.2	$	3.5
Derivatives in a liability position:
Interest rate contracts	200.0		(0.6		)	200.0		(1.3		)
Foreign exchange contracts	97.1		(6.8		)	103.3		(8.9		)
Total designated derivatives	$	372.9	$	(3.5	)	$	384.5	$	(6.7	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	94.7	$	1.2		$	36.2	$	1.5
Derivatives in a liability position:
Foreign exchange contracts	19.0		(1.0		)	48.0		(1.4		)
Total non-designated derivatives	$	113.7	$	0.2		$	84.2	$	0.1
Total derivatives	$	486.6	$	(3.3	)	$	468.7	$	(6.6	)

Under certain circumstances, such as the occurrence of significant differences between actual cash payments and forecasted cash payments, the ASC 815 programs could be deemed ineffective. 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 income (expense), net in our consolidated statements of income. During the three months ended September 30, 2016 and 2015, we recorded a gain of $0.1 million and a loss of $1.0 million, respectively, in miscellaneous income (expense), net in our consolidated statements of income to reflect ineffective portions of hedges.

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



(dollars in millions)	Three Months Ended
	September 30, 2016		September 30, 2015
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts	$	0.4	$	(0.4	)
Foreign exchange contracts	1.8		(1.8		)
Total designated derivatives	$	2.2	$	(2.2	)

The unrealized gain (loss) on derivative instruments is net of taxes of $0.8 million and $0.7 million, respectively, for the three months ended September 30, 2016 and 2015. The estimated net amount of the existing losses 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 in miscellaneous (expense) income, net in our consolidated statements of income. The total gains and losses related to foreign exchange contracts not designated as hedging instruments were a gain of $0.1 million and a loss of $2.8 million for the three months ended September 30, 2016 and 2015, respectively.

The unrealized gain (loss) recognized are presented below:



(dollars in millions)	Three Months Ended
	September 30, 2016			September 30, 2015
Derivatives not designated as hedging instruments under ASC 815
Foreign exchange contracts	$	(1.1	)	$	(0.7	)
Total non-designated derivative unrealized loss, net	$	(1.1	)	$	(0.7	)