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 employed an interest rate cap, which matured in March 2014, that compensated us if variable interest rates rose 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 mitigate foreign currency exchange rate volatility due to the foreign currency exchange exposure related to intercompany and significant external transactions. This program also intends to reduce the impact of foreign exchange rate risk on our direct costs. In the third quarter of our fiscal year ended June 30, 2014 (“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 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 March 31, 2015 and June 30, 2014. The gross position of all asset and liability amounts is reported in other current assets, other assets, other current liabilities, and other liabilities in our consolidated balance sheets.



(in thousands)	March 31, 2015					June 30, 2014
	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	$	732		$	100,000	$	2,049
Foreign exchange contracts	28,941		740			154,845		5,375
Cross-currency swap contracts	—		—			25,560		528
Derivatives in a liability position:
Interest rate contracts	50,000		(202		)	100,000		(1,469		)
Foreign exchange contracts	172,533		(14,622		)	37,736		(369		)
Cross-currency swap contracts	18,303		(3,154		)	—		—
Total designated derivatives	$	369,777	$	(16,506	)	$	418,141	$	6,114
Derivatives not designated as hedging instruments under ASC 815
Derivatives in an asset position:
Foreign exchange contracts	$	93,010	$	677		$	100,849	$	1,062
Derivatives in a liability position:
Foreign exchange contracts	95,414		(3,680		)	49,863		(133		)
Total non-designated derivatives	$	188,424	$	(3,003	)	$	150,712	$	929
Total derivatives	$	558,201	$	(19,509	)	$	568,853	$	7,043

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 income (expense), net in our consolidated statements of income. During the three months ended March 31, 2015 and 2014, we recorded losses of $0.7 million and gains of $0.2 million, respectively, in miscellaneous income (expense), net in our consolidated statements of income to reflect ineffective portions of hedges. During the nine months ended March 31, 2015 and 2014, the amounts recorded in miscellaneous (expense) income, net in our consolidated statements of income to reflect ineffective portions of any hedges were losses of $2.2 million and zero, respectively.

The amounts recognized in other comprehensive (loss) income, net of taxes, are presented below:



(in thousands)	Three Months Ended						Nine Months Ended
	March 31, 2015			March 31, 2014			March 31, 2015			March 31, 2014
Derivatives designated as hedging instruments under ASC 815
Interest rate contracts	$	(283	)	$	(195	)	$	(24	)	$	(152	)
Foreign exchange contracts	(552		)	(10		)	(12,113		)	4,987
Cross-currency swap contracts	(32		)	29			5			(85		)
Total designated derivatives	$	(867	)	$	(176	)	$	(12,132	)	$	4,750

The unrealized gain (loss) on derivative instruments is net of $0.4 million and $0.2 million taxes, respectively, for the three months ended March 31, 2015 and 2014. The unrealized gain (loss) on derivative instruments is net of $6.7 million and $3.1 million taxes, respectively, for the nine months ended March 31, 2015 and 2014. The estimated net amount of the existing losses that are expected to be reclassified into earnings within the next twelve months is $14.1 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 total gains and losses related to foreign exchange contracts not designated as hedging instruments were losses of $5.7 million and $2.0 million for the three months ended March 31, 2015 and 2014, respectively. The total gains and losses related to foreign exchange contracts not designated as hedging instruments were a loss of $20.9 million and a gain of $0.4 million for the nine months ended March 31, 2015 and 2014, respectively. The unrealized (loss) gain recognized are presented below:



(in thousands)	Three Months Ended					Nine Months Ended
	March 31, 2015			March 31, 2014		March 31, 2015			March 31, 2014
Derivatives not designated as hedging instruments under ASC 815
Cross-currency interest rate swap contracts	$	—		$	3,431	$	—		$	1,910
Foreign exchange contracts	(813		)	736		(3,932		)	1,467
Total non-designated derivative unrealized (loss) gain, net	$	(813	)	$	4,167	$	(3,932	)	$	3,377