Derivatives and Hedging Activities

3 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 14: Derivatives and Hedging Activities

We enter into foreign currency forward contracts to reduce the impact of adverse fluctuations on earnings associated with foreign currency exchange rate changes. We do not enter into any derivative transactions for speculative purposes.

Most derivative contracts are used as hedges but are not designated or qualify as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These non-qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the point of shipment to the point of collection, generally three to six months and are marked-to-market with changes in fair value recorded in the condensed consolidated statements of operations in Miscellaneous income (expense), net. Any gains and losses on the fair value of these derivative contracts would largely offset corresponding foreign currency losses and gains on the underlying transactions.

In the case of derivative contracts used as hedges for significant orders with shipping dates that may extend more than six months in the future, we may designate those derivative contracts as cash flow hedges that qualify as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the order date through shipment and collection. For these cash flow hedges, any gains or losses on the fair value of these contracts would be charged to accumulated other comprehensive income (“AOCI”) and subsequently relieved to net revenue upon shipment to the customer. In addition, at the point of shipment to the customer, the cash flow hedge will be de-designated, with any future gains or losses from that point forward being charged to Miscellaneous income (expense), net which would then largely offset corresponding losses and gains on the underlying receivable transactions. In the case where a designated cash flow hedge is accounted for under the spot method, a portion of the otherwise AOCI adjustment would be charged to Miscellaneous income (expense), net and not offset by any corresponding gains or losses on an underlying transaction up to the point of shipment or revenue recognition.

Derivatives not designated as hedging instruments.

As of September 30, 2013, we had nine foreign currency forward contracts outstanding involving our German operations with notional amounts aggregating $3,003. These foreign currency hedges are not designated as hedging instruments. Net unrealized gains (losses) recognized from foreign currency forward contracts for the three months ended September 30, 2013 and 2012 were ($183) and $43, respectively, and were included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. These gains and losses are substantially offset by foreign exchange losses and gains on intercompany balances recorded by our subsidiaries.

The following table summarizes the fair value of derivative instruments as of September 30, 2013 and June 30, 2013.

Derivatives not designated as hedging instruments			Balance sheet location
September 30, 2013	Number of foreign exchange contracts:	9	Other accrued expenses	$	36
June 30, 2013	Number of foreign exchange contracts:	11	Prepaid expenses, prepaid taxes and other current assets	$	147

Derivative designated as a hedging instrument.

As of September 30, 2013, we had one foreign currency forward contract outstanding involving our Japanese operations with a notional amount of $26,183 to protect against foreign currency fluctuations for current transactions and longer term orders denominated in Japanese Yen.

This foreign currency hedge is designated as a hedging instrument qualifying as a cash flow hedge utilizing a window forward approach used in situations where multiple shipments occur over a period of time. The cash flow hedge is in effect for the period of April 2013 through June 30, 2014. The cash flow hedge is evaluated quarterly to ensure that hedge accounting treatment still applies.

This window forward approach allows for the use of the spot method to determine the amount to be included in AOCI. This method requires current period expensing of the impact of changes to the forward rates while allowing the changes of the spot rates to be recorded in AOCI. At the time the various shipments occur, AOCI is relieved for a pro-rata amount of the basis and is reclassed to net revenue in the consolidated statements of operations. Concurrently, that portion of the hedge related to current shipments is de-designated as a cash flow hedge for accounting purposes and any future changes in fair value related to that portion of the hedge will be included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. These gains and losses from the de-designated portion of the hedge are substantially offset by foreign exchange losses and gains on balances recorded by our subsidiary.

Net unrealized gains (losses) recognized from the ineffective portion of the cash flow hedge for the three months ended September 30, 2013 was $47 and the de-designated portion of the hedge for the same period was ($32) and both were included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. Amounts reclassified from AOCI based on revenue to customers resulted in a revenue decrease of $66. The amounts in AOCI are forecasted to be reclassed into net revenue over the next nine months.

The following table summarizes the foreign exchange cash flow hedge value as of September 30, 2013 and June 30, 2013:

Foreign currency derivative designated as hedging instruments			Balance sheet location
September 30, 2013	Number of foreign exchange contracts:	1	Other accrued expenses	$	348
			Accumulated other comprehensive loss		($169	)
June 30, 2013	Number of foreign exchange contracts:	1	Other accrued expenses	$	154
			Accumulated other comprehensive loss		($25	)