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, “Derivatives and Hedging” (“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, service 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 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 June 30, 2017 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.



	June 30, 2017					June 30, 2016
(dollars in millions)	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under ASC 815
Derivatives in an asset position:
Interest rate contracts	$	300.0	$	0.7		$	—	$	—
Foreign exchange contracts	122.7		4.8			81.2		3.5
Derivatives in a liability position:
Interest rate contracts						200.0		(1.3		)
Foreign exchange contracts	26.4		(0.3		)	103.3		(8.9		)
Total designated derivatives	$	449.1	$	5.2		$	384.5	$	(6.7	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	93.0	$	2.2		$	36.2	$	1.5
Derivatives in a liability position:
Foreign exchange contracts	62.7		(1.0		)	48.0		(1.4		)
Total non-designated derivatives	$	155.7	$	1.2		$	84.2	$	0.1
Total derivatives	$	604.8	$	6.4		$	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 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 Fiscal Years 2017 and 2016, the amounts recorded in miscellaneous (expense) income, net in our consolidated statements of income to reflect ineffective portions of any hedges were losses of $0.4 million and $2.3 million, respectively.

The amounts recognized for Fiscal Years 2017 and 2016 in other comprehensive income (loss) are presented below:



	Fiscal Years
(dollars in millions)	2017		2016
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts, net of taxes	$	1.1	$	(1.3	)
Foreign exchange contracts, net of taxes	7.5		(4.5		)
Total designated derivative unrealized gain (loss), net	$	8.6	$	(5.8	)

The unrealized gain (loss) on derivative instruments is net of $2.6 million and $1.3 million of taxes for Fiscal Years 2017 and 2016, respectively. 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 total gains and losses related to foreign exchange contracts not designated as hedging instruments were gains of $2.3 million and losses of $1.7 million for Fiscal Years 2017 and 2016, respectively. The unrealized (loss) gain recognized is presented below:



	Fiscal Years
(dollars in millions)	2017		2016
Derivatives not designated as hedging instruments under ASC 815
Foreign exchange contracts	$	1.1	$	1.3
Total non-designated derivative unrealized gain (loss), net	$	1.1	$	1.3