Derivative Financial Instruments

We are exposed to interest rate risk that we manage to some extent using derivative instruments. We have four interest rate swap contracts with an aggregate notional amount of $150.0 million and with forward start dates of September 30, 2016. Following that date, we expect to make quarterly interest payments calculated on this notional amount at a rate equal to a fixed rate of 2.341% minus 3-month LIBOR subject to a floor of 0.75%. If 3-month LIBOR exceeds the fixed rate, we would instead receive quarterly interest payments.

In conjunction with the LIBOR-based interest payments under our Term Loan, these swap contracts effectively fix the interest rate on $150.0 million of our Term Loan borrowings at 5.591% from September 30, 2016 through September 30, 2021.

We have designated our interest rate swap contracts as cash flow hedges of these future Term Loan interest payments and elected to apply the “shortcut” method of assessing hedge effectiveness. As a result, the gain or loss on the swap contracts is reported as a component of other comprehensive income (loss) and will be reclassified into interest expense as the related interest payments are made.

The fair values of the swap contracts are presented below.



	June 30,		September 30,
	2016		2015
	(in millions)
Other current liabilities	$	1.7	$	—
Other noncurrent liabilities	5.8		2.6
	$	7.5	$	2.6

The fair values and the classification of the fair values between current and noncurrent portions are based on calculated cash flows using publicly available interest rate forward rate yield curve information, but amounts due at the actual settlement dates are dependent on actual rates in effect at the settlement dates and may differ significantly from amounts shown above.