DERIVATIVES

We are exposed to certain risks relating to our ongoing business operations. The primary risks managed 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.

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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 Fiscal Year 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 September 30, 2013 and June 30, 2013. The gross position of all asset and liability amounts are reported in other current assets, other assets, other current liabilities, and other liabilities in our consolidated balance sheets.



(in thousands)	September 30, 2013					June 30, 2013
	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	$	2,641		$	125,000	$	3,269
Foreign exchange contracts	144,925		5,014			20,245		333
Cross-currency swap contracts	—		—			27,312		1,032
Derivatives in a liability position:
Interest rate contracts	100,000		(2,115		)	100,000		(2,208		)
Foreign exchange contracts	27,361		(1,179		)	129,254		(3,889		)
Cross-currency swap contracts	25,277		(177		)	—		—
Total designated derivatives	$	422,563	$	4,184		$	401,811	$	(1,463	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	28,010	$	377		$	20,756	$	91
Derivatives in a liability position:
Cross-currency interest rate swap contracts	46,283		(3,182		)	44,580		(1,910		)
Foreign exchange contracts	35,607		(365		)	42,800		(992		)
Total non-designated derivatives	$	109,900	$	(3,170	)	$	108,136	$	(2,811	)
Total derivatives	$	532,463	$	1,014		$	509,947	$	(4,274	)

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 sheets, net of deferred taxes, and any ineffective portion to miscellaneous income (expense) in our consolidated statements of income. The amounts recognized in other comprehensive income (loss), net of taxes, are presented below:



(in thousands)	Three Months Ended
	September 30, 2013			September 30, 2012
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts, net of taxes	$	(321	)	$	(51	)
Foreign exchange contracts, net of taxes	4,445			440
Cross-currency swap contracts, net of taxes	(153		)	(77		)
Total designated derivatives	$	3,971		$	312

The unrealized gain on derivative instruments is net of $2.7 million of taxes for the three months ended September 30, 2013 and net of $0.2 million of taxes for the three months ended September 30, 2012, respectively.

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 three months ended September 30, 2013 and 2012, the amounts recorded in miscellaneous expense, net in our consolidated statements of income to reflect ineffective portions of any hedges were a loss of $0.1 million and a gain of $0.1 million, respectively. The estimated net amount of the existing gains that are expected to be reclassified into earnings within the next twelve months is $2.2 million.

The change in the fair value of derivatives not designated as hedging instruments under ASC 815 is recorded to miscellaneous expense, net in our consolidated statements of income. The gains (losses) recognized are presented below:



(in thousands)	Three Months Ended
	September 30, 2013			September 30, 2012
Derivatives not designated as hedging instruments under ASC 815
Cross-currency interest rate swap contracts	$	(1,272	)	$	(901	)
Foreign exchange contracts	913			1,432
Total non-designated derivative unrealized (loss) gain, net	$	(359	)	$	531