Derivative Instruments and Hedging Activities

9 Months Ended

Mar. 31, 2017

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, net.

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

(in thousands)	March 31, 2017			June 30, 2016
Derivatives designated as hedging instruments
Other current assets - range forward contracts	$	901		$	323
Other assets - range forward contracts	40			—
Total derivatives designated as hedging instruments	941			323
Derivatives not designated as hedging instruments
Other current assets - currency forward contracts	480			11
Other current liabilities - currency forward contracts	(1,352		)	(763		)
Total derivatives not designated as hedging instruments	(872		)	(752		)
Total derivatives	$	69		$	(429	)

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. Gains related to derivatives not designated as hedging instruments have been recognized as follows:

	Three Months Ended March 31,					Nine Months Ended March 31,
(in thousands)	2017		2016			2017		2016
Other expense (income), net - currency forward contracts	$	538	$	(182	)	$	161	$	(116	)

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, 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 March 31, 2017 and June 30, 2016, was $66.2 million and $53.3 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 March 31, 2017, we expect to recognize into earnings in the next 12 months $0.6 million of income on outstanding derivatives.

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

	Three Months Ended March 31,						Nine Months Ended March 31,
(in thousands)	2017			2016			2017		2016
(Losses) gains recognized in other comprehensive loss, net	$	(866	)	$	(914	)	$	615	$	(637	)
Losses reclassified from accumulated other comprehensive loss into other expense (income), net	$	390		$	629		$	1,158	$	293

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 nine months ended March 31, 2017 and 2016.

NET INVESTMENT HEDGES

During the three months ended March 31, 2017, we designated certain foreign currency-denominated intercompany loans payable with total aggregate principal amounts of €63.0 million as net investment hedges to hedge the foreign exchange exposure of our net investment in Euro-based subsidiaries. The remeasurements of these non-derivatives designated as net investment hedges are calculated each period with changes reported in foreign currency translation adjustment within accumulated other comprehensive loss. Such amounts will remain in accumulated other comprehensive loss unless we complete or substantially complete liquidation or disposal of our investment in the underlying foreign operations. A loss of $0.5 million was recorded as a component of foreign currency translation adjustments in other comprehensive income (loss) for the three and nine months ended March 31, 2017. We did not have net investment hedges during the three and nine months ended March 31, 2016.

As of March 31, 2017, the foreign currency-denominated intercompany loans payable designated as net investment hedges consisted of:

Instrument	Notional (EUR in thousands)(2)		Notional (USD in thousands)(2)		Maturity
Foreign currency-denominated intercompany loan payable	€	30,046	$	32,083	June 30, 2017
Foreign currency-denominated intercompany loan payable	26,327		28,112		June 26, 2022
Foreign currency-denominated intercompany loan payable	8,612		9,196		November 20, 2018
Foreign currency-denominated intercompany loan payable	2,032		2,169		October 11, 2017

(2) Includes principal and accrued interest.