DERIVATIVES

We are exposed to certain risks relating to our ongoing business operations. The primary risks that we seek to manage 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.”

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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. We also employ an interest rate cap that compensates us if variable interest rates rise above a pre-determined rate. Our interest rate contracts are designated as hedging instruments.

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Our foreign currency hedging program is a cash flow hedge program designed to minimize foreign currency exchange rate volatility due to the foreign currency exchange exposure related to intercompany transactions. This program was expanded in the first quarter of our fiscal year ended June 30, 2013 in order to reduce the impact of foreign exchange rate risk on our gross margin. 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, 2013 and June 30, 2012. All asset and liability amounts are reported in other current assets and other current and non-current liabilities.



(in thousands)	June 30, 2013					June 30, 2012
	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under ASC 815
Derivatives in an asset position:
Interest rate contracts	$	125,000	$	3,269		$	50,000	$	2
Foreign exchange contracts	20,245		333			—		—
Cross-currency swap contracts	27,312		1,032			—		—
Derivatives in a liability position:
Interest rate contracts	100,000		(2,208		)	100,000		(2,417		)
Foreign exchange contracts	129,254		(3,889		)	—		—
Cross-currency swap contracts	—		—			25,106		(2,697		)
Total designated derivatives	$	401,811	$	(1,463	)	$	175,106	$	(5,112	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	20,756	$	91		$	—	$	—
Derivatives in a liability position:
Foreign exchange contracts	42,800		(992		)	100,815		(213		)
Cross-currency interest rate swap contracts	44,580		(1,910		)	43,405		(4,544		)
Total non-designated derivatives	$	108,136	$	(2,811	)	$	144,220	$	(4,757	)
Total derivatives	$	509,947	$	(4,274	)	$	319,326	$	(9,869	)

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 income (loss) in our consolidated balance sheet, net of deferred taxes, and any ineffective portion to miscellaneous income (expense) in our consolidated statements of income. The amounts recognized for Fiscal Year 2013 and Fiscal Year 2012 in other comprehensive income (loss) are presented below:



	Years Ended
(in thousands)	June 30, 2013			June 30, 2012
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts, net of taxes	$	2,818		$	(964	)
Foreign exchange contracts, net of taxes	(2,129		)	—
Cross-currency swap contracts, net of taxes	(65		)	(696		)
Total designated derivative unrealized gain (loss), net	$	624		$	(1,660	)

Under certain circumstances, such as the occurrence of significant differences between actual cash receipts and forecasted cash receipts, the ASC 815 programs could be deemed ineffective. During Fiscal Year 2013 and 2012, the amounts recorded to reflect ineffective portions of any hedges were not material. The estimated net amount of the existing losses that are expected to be reclassified into earnings within the next twelve months is $4.1 million.

The change in the fair value of derivatives not designated as hedging instruments under ASC 815 is recorded to miscellaneous expense, net in the income statement. The amounts recognized for Fiscal Year 2013 and Fiscal Year 2012 are presented below:



	Years Ended
(in thousands)	June 30, 2013			June 30, 2012
Derivatives not designated as hedging instruments under ASC 815
Cross-currency interest rate swap contracts	$	2,634		$	(4,963	)
Foreign exchange contracts	(688		)	(1,339		)
Total non-designated derivative unrealized gain (loss), net	$	1,946		$	(6,302	)