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.

•

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 employed an interest rate cap, which matured in March 2014, that compensates us if variable interest rates rise above a pre-determined rate. Our interest rate contracts are designated as hedging instruments.

•

Our foreign currency hedging program is a cash flow hedge program designed to mitigate foreign currency exchange rate volatility due to the foreign currency exchange exposure related to intercompany and significant external 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 direct costs. In the third quarter of Fiscal Year 2014, we further expanded the program to reduce the foreign exchange rate risk on our service revenues. 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, 2014 and June 30, 2013. All asset and liability amounts are reported in other current and non-current assets and other current and non-current liabilities.



	June 30, 2014					June 30, 2013
(in thousands)	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under ASC 815
Derivatives in an asset position:
Interest rate contracts	$	100,000	$	2,049		$	125,000	$	3,269
Foreign exchange contracts	154,845		5,375			20,245		333
Cross-currency swap contracts	25,560		528			27,312		1,032
Derivatives in a liability position:
Interest rate contracts	100,000		(1,469		)	100,000		(2,208		)
Foreign exchange contracts	37,736		(369		)	129,254		(3,889		)
Total designated derivatives	$	418,141	$	6,114		$	401,811	$	(1,463	)
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	100,849	$	1,062		$	20,756	$	91
Derivatives in a liability position:
Foreign exchange contracts	49,863		(133		)	42,800		(992		)
Cross-currency interest rate swap contracts	—		—			44,580		(1,910		)
Total non-designated derivatives	$	150,712	$	929		$	108,136	$	(2,811	)
Total derivatives	$	568,853	$	7,043		$	509,947	$	(4,274	)

Under certain circumstances, such as the occurrence of significant differences between actual cash payments and forecasted cash payments, the ASC 815 programs could be deemed ineffective. 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 (expense) income, net in our consolidated statements of income. During Fiscal Years 2014 and 2013, the amounts recorded in miscellaneous (expense) income, net in our consolidated statements of income to reflect ineffective portions of any hedges were a gain of $0.2 million and a loss of $0.8 million, respectively.

The amounts recognized for Fiscal Year 2014 and Fiscal Year 2013 in other comprehensive income (loss) are presented below:



	Years Ended
(in thousands)	June 30, 2014			June 30, 2013
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts, net of taxes	$	(322	)	$	2,818
Foreign exchange contracts, net of taxes	5,423			(2,129		)
Cross-currency swap contracts, net of taxes	(23		)	(65		)
Total designated derivative unrealized gain (loss), net	$	5,078		$	624

The unrealized gain (loss) on derivative instruments is net of $3.2 million and $0.4 million of taxes for Fiscal Years 2014 and 2013, respectively. The estimated net amount of the existing gains that are expected to be reclassified into earnings within the next twelve months is $3.9 million.

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



	Years Ended
(in thousands)	June 30, 2014		June 30, 2013
Derivatives not designated as hedging instruments under ASC 815
Cross-currency interest rate swap contracts	$	1,910	$	2,634
Foreign exchange contracts	1,830		(688		)
Total non-designated derivative unrealized gain (loss), net	$	3,740	$	1,946