Derivative Instruments and Hedging Activities

6 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of our financial risk management program, we use certain derivative financial instruments. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We account for derivative instruments as a hedge of the related asset, liability, firm commitment or anticipated transaction, when the derivative is specifically designated and qualifies as a hedge of such items. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense (income), net.

The fair value of derivatives designated and not designated as hedging instruments in the condensed consolidated balance sheet are as follows:

(in thousands)	December 31, 2013			June 30, 2013
Derivatives designated as hedging instruments
Other current assets - range forward contracts	$	73		$	658
Other current liabilities - range forward contracts	(1,095		)	(522		)
Other assets - range forward contracts	—			69
Total derivatives designated as hedging instruments	(1,022		)	205
Derivatives not designated as hedging instruments
Other current assets - currency forward contracts	56			48
Other current liabilities - currency forward contracts	(132		)	(8		)
Total derivatives not designated as hedging instruments	(76		)	40
Total derivatives	$	(1,098	)	$	245

Certain currency forward contracts that hedge significant cross-border intercompany loans are considered as other derivatives and therefore do not qualify for hedge accounting. These contracts are recorded at fair value in the condensed consolidated balance sheet, with the offset to other expense (income), net. Losses related to derivatives not designated as hedging instruments have been recognized as follows:

	Three Months Ended December 31,				Six Months Ended  December 31,
(in thousands)	2013		2012		2013		2012
Other expense (income), net - currency forward contracts	$	72	$	261	$	114	$	1,470

FAIR VALUE HEDGES

Fixed-to-floating interest rate swap contracts, designated as fair value hedges, are entered into from time to time to hedge our exposure to fair value fluctuations on a portion of our fixed rate debt. We had no such contracts outstanding at December 31, 2013 or June 30, 2013.

CASH FLOW HEDGES

Range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts at maturity are recorded in accumulated other comprehensive loss, and are recognized as a component of other expense (income), net when the underlying sale of products or services is recognized into earnings. The notional amount of the contracts translated into U.S. dollars at December 31, 2013 and June 30, 2013, was $60.8 million and $102.2 million, respectively. The time value component of the fair value of range forward contracts is excluded from the assessment of hedge effectiveness. Assuming the market rates remain constant with the rates at December 31, 2013, we expect to recognize into earnings in the next 12 months $0.8 millionof losses on outstanding derivatives.

In February 2012, we settled forward starting interest rate swap contracts to convert $150.0 million of our floating rate debt to fixed rate debt. Upon settlement, we made a cash payment of $22.4 million. The loss is being amortized as a component of interest expense over the term of the related debt using the effective interest rate method. During the three months ended December 31, 2013 and 2012, $0.5 million and $0.5 million was recognized as interest expense, respectively. During the six months ended December 31, 2013 and 2012, $1.0 million and $0.9 million was recognized as interest expense, respectively.

The following represents gains and losses related to cash flow hedges:

	Three Months Ended December 31,						Six Months Ended  December 31,
(in thousands)	2013			2012			2013			2012
Losses recognized in other comprehensive loss, net	$	(273	)	$	(102	)	$	(843	)	$	(673	)
Losses reclassified from accumulated other comprehensive loss into other expense (income), net	$	324		$	298		$	714		$	257

No portion of the gains or losses recognized in earnings was due to ineffectiveness and no amounts were excluded from our effectiveness testing for the six months ended December 31, 2013 and 2012.