Derivative Instruments and Hedging Activities

6 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

12. Derivative Instruments and Hedging Activities

We use derivative instruments to manage our foreign exchange and commodity cost exposures. All derivative instruments are recognized at fair value in other current assets or liabilities.

Derivatives Not Designated as Hedging Instruments

We use one-month foreign currency forward contracts (forward contracts) to offset the impact of exchange rate volatility on certain assets and liabilities, including intercompany receivables and payables denominated in non-functional currencies. These forward contracts have not been designated as hedges, and the gains or losses on these forward contracts, along with the offsetting losses or gains due to the fluctuation of exchange rates on the underlying foreign currency denominated assets and liabilities, are recognized in other income (expense). The notional amounts of the forward contracts were $232.9 million and $175.6 million at December 31, 2011 and June 30, 2011, respectively, with corresponding fair values of a $0.9 million asset at December 31, 2011 and a $2.7 million asset at June 30, 2011.

Cash Flow Hedges

We use derivatives in the form of call options to hedge the variability of gold and copper costs. These derivative instruments are designated as cash flow hedges and hedge approximately 60% of our planned gold and copper purchases. Gains and losses of the effective hedges are recorded as a component of accumulated other comprehensive income and reclassified to cost of sales during the period the product containing the commodity is sold. The fair values of the call options were $6.2 million and $7.8 million at December 31, 2011 and June 30, 2011, respectively. These call options have maturities of 12 months or less.

For the three and six months ended December 31, 2011 and 2010, the impact to accumulated other comprehensive income (AOCI) and earnings from cash flow hedges follows (in thousands):

	Three Months Ended December 31,						Six Months Ended December 31,
	2011			2010			2011			2010
Unrealized (loss) gain recognized in AOCI		(6,089	)		4,795			(4,587	)		4,073
Gain (loss) reclassified into earnings		3,564			(132	)		5,409			2,004

At December 31, 2011, $6.1 million is expected to be reclassified from AOCI to cost of sales within the next 12 months.