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Derivatives and Hedging Activities | 12 Months Ended
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Jun. 30, 2014
Derivatives and Hedging Activities |
Derivatives and Hedging Activities | 15. Derivatives and Hedging Activities The Company uses commodity forwards, interest rate swaps and foreign currency forwards to manage risks generally associated with commodity price, interest rate and foreign currency rate fluctuations. The following explains the various types of derivatives and includes a recap about the impact the derivative instruments have had on the Company’s financial position, results of operations and cash flows. Cash Flow Hedging — Commodity forward contracts: The Company enters into commodity forward contracts to fix the price of a portion of anticipated future purchases of certain critical raw materials and energy to manage the risk of cash flow variability associated with volatile commodity prices. The commodity forward contracts have been designated as cash flow hedges. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in other comprehensive income to the extent effective, and reclassified to costs of sales in the period during which the hedged transaction affects earnings or it becomes probable that the forecasted transaction will not occur. As of June 30, 2014, the Company had forward contracts to purchase 30.1 million pounds of certain raw materials with settlement dates through June 2019. Cash Flow Hedging — Forward interest rate swaps: Historically, the Company has entered into forward swap contracts to manage the risk of cash flow variability associated with fixed interest debt expected to be issued. The forward interest rate swaps have been designated as cash flow hedges. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income to the extent effective, and reclassified to interest expense in the period during which the hedged transaction affects earnings or it becomes probable that the forecasted transaction will not occur. Cash Flow Hedging — Foreign currency forward contracts: The Company uses foreign currency forward contracts to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro and Pound Sterling, in order to offset the effect of changes in exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in other comprehensive income to the extent effective, and reclassified to net sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur. The Company also uses foreign currency forward contracts to protect certain short-term asset positions denominated in foreign currency against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other income and expense. As of June 30, 2014, the fair value of the outstanding foreign currency forwards not designated as hedging instruments and the charges to income for changes in fair value for these contracts was not material. Fair Value Hedging - Interest rate swaps: The Company has used interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate. The Company has designated fixed to floating interest rate swaps as fair value hedges. Accordingly, the changes in the fair value of these instruments are immediately recorded in earnings. The mark-to-market values of both the fair value hedging instruments and the underlying debt obligations are recorded as equal and offsetting gains and losses in interest expense in the consolidated statements of income. As of June 30, 2014, the Company has no outstanding interest rate swaps, as all previous interest rate swaps have been settled and terminated. For the years ended June 30, 2014, 2013 and 2012, net gains of $0.0 million, $1.4 million and $1.4 million, respectively, were recorded as a reduction to interest expense. These amounts include the impact of previously terminated swaps which are being amortized over the remaining term of the underlying debt. The fair value and location of outstanding derivative contracts recorded in the accompanying consolidated balance sheets were as follows as of June 30, 2014 and 2013:
June 30, 2014 ($ in millions) |  | Foreign Currency Contracts |  | Commodity Contracts |  | Total Derivatives |
Asset Derivatives: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Other current assets |  | $ | — |  | $ | 11.3 |  | $ | 11.3 |
Other assets |  | — |  | 9.1 |  | 9.1 |
Total asset derivatives |  | $ | — |  | $ | 20.4 |  | $ | 20.4 |
Liability Derivatives: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Accrued liabilities |  | $ | 0.4 |  | $ | 4.3 |  | $ | 4.7 |
Other liabilities |  | 0.2 |  | 6.0 |  | 6.2 |
Total liability derivatives |  | $ | 0.6 |  | $ | 10.3 |  | $ | 10.9 |
June 30, 2013 ($ in millions) |  | Foreign Currency Contracts |  | Commodity Contracts |  | Total Derivatives |
Asset Derivatives: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Other current assets |  | $ | 0.9 |  | $ | — |  | $ | 0.9 |
Total asset derivatives |  | $ | 0.9 |  | $ | — |  | $ | 0.9 |
Liability Derivatives: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Accrued liabilities |  | $ | 0.4 |  | $ | 28.7 |  | $ | 29.1 |
Other liabilities |  | — |  | 44.0 |  | 44.0 |
Total liability derivatives |  | $ | 0.4 |  | $ | 72.7 |  | $ | 73.1 |
Cash Flow Hedges For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transactions affects earnings or it becomes probable that the forecasted transaction will not occur. The following is a summary of the gains (losses) related to cash flow hedges recognized during the years ended June 30, 2014, 2013 and 2012:
|  | Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) |
|  | Years Ended June 30, |
($ in millions) |  | 2014 |  | 2013 |  | 2012 |
Derivatives in Cash Flow Hedging Relationship: |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | $ | 59.3 |  | $ | (43.2 | ) | $ | (79.0 | )
Foreign exchange contracts |  | (1.6 | ) | 1.9 |  | (0.1 | )
Forward interest rate swaps |  | — |  | 2.7 |  | — |
Total |  | $ | 57.7 |  | $ | (38.6 | ) | $ | (79.1 | )
|  | Location of (Loss) Gain |  | Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion) |
|  | Reclassified from AOCI into |  | Years Ended June 30, |
($ in millions) |  | Income (Effective Portion) |  | 2014 |  | 2013 |  | 2012 |
Derivatives in Cash Flow Hedging Relationship: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | Cost of sales |  | $ | (20.5 | ) | $ | (24.9 | ) | $ | (23.4 | )
Foreign exchange contracts |  | Net sales |  | (0.8 | ) | 0.1 |  | 1.2 |
Forward interest rate swaps |  | Interest expense |  | 0.4 |  | 0.2 |  | — |
Total |  |  |  | $ | (20.9 | ) | $ | (24.6 | ) | $ | (22.2 | )
|  | Location of Loss Reclassified |  | Amount of Loss Reclassified from AOCI into Income (Ineffective Portion) |
|  | from AOCI into Income |  | Years Ended June 30, |
($ in millions) |  | (Ineffective Portion) |  | 2014 |  | 2013 |  | 2012 |
Derivatives in Cash Flow Hedging Relationship: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | Cost of sales |  | $ | (0.3 | ) | $ | — |  | $ | — |
Foreign exchange contracts |  | Net sales |  | — |  | — |  | — |
Forward interest rate swaps |  | Interest expense |  | — |  | — |  | — |
Total |  |  |  | $ | (0.3 | ) | $ | — |  | $ | — |
The Company estimates that $6.0 million of net derivative gains included in AOCI as of June 30, 2014 will be reclassified into earnings within the next twelve months. No significant cash flow hedges were discontinued during the year ended June 30, 2014. The changes in AOCI associated with derivative hedging activities during the years ended June 30, 2014, 2013 and 2012 were as follows:
|  | 2014 |  | 2013 |  | 2012 |
Balance at July 1 |  | $ | (41.5 | ) | $ | (32.8 | ) | $ | 2.6 |
Current period changes in fair value, net of tax |  | 36.0 |  | (24.2 | ) | (49.1 | )
Reclassification to earnings, net of tax |  | 13.1 |  | 15.5 |  | 13.7 |
Balance at June 30 |  | $ | 7.6 |  | $ | (41.5 | ) | $ | (32.8 | )
According to the provisions of the Company’s derivative arrangements, in the event that the fair value of outstanding derivative positions with certain counterparties exceeds certain thresholds, the Company may be required to issue cash collateral to the counterparties. The Company’s contracts with these counterparties allow for netting of derivative instrument positions executed under each contract. As of June 30, 2014 the Company had no cash collateral held by counterparties. The Company is exposed to credit loss in the event of nonperformance by counterparties on its derivative instruments as well as credit or performance risk with respect to its customer commitments to perform. Although nonperformance is possible, the Company does not anticipate nonperformance by any of the parties. In addition various master netting arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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