Derivatives

12 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

12. Derivatives

We monitor our exposure to foreign currency exchange rates and interest rates and from time-to-time use derivatives to manage certain of these risks. We designate derivatives as a hedge of a forecasted transaction or of the variability of the cash flows to be received or paid in the future related to a recognized asset or liability (cash flow hedge). All changes in the fair value of a highly effective cash flow hedge are recorded in accumulated other comprehensive income (loss).

We routinely assess whether the derivatives used to hedge transactions are effective. If we determine a derivative ceases to be an effective hedge, we discontinue hedge accounting in the period of the assessment for that derivative, and immediately recognize any unrealized gains or losses related to the fair value of that derivative in the consolidated statements of operations.

We record derivatives at fair value in the consolidated balance sheets. For additional details regarding fair value, see “—Fair Value Measurements.”

The following table details the Company’s outstanding derivatives that are designated and effective as cash flow hedges as of June 30, 2018:

Instrument

Hedge

Notional
Amount at
June 30, 2018

Consolidated
Balance Sheet

Fair value as of

June 30,
2018

June 30,
2017

Options

Brazilian Real calls

R$ 65,000

Other current assets

2,686

Swap

Interest rate swap

$150,000

Other assets

5,078

—

The following tables show the effects of derivatives on the consolidated statements of operations and other comprehensive income for the years ended June 30, 2018 and 2017.

For the Year Ended June 30		Gain (Loss) recorded in OCI						Gain (Loss) recognized in consolidated statements of operations							Consolidated Statement of Operations Line Item Total
Instrument	Hedge	2018			2017			Consolidated Statement of Operations	2018			2017			2018			2017
Options	Brazilian Real calls		$	(2,778)		$	31	Cost of goods sold		$	3,136		$	(1,483)		$	553,103		$	516,038
Swap	Interest rate swap		$	5,078		$	—	Interest expense, net		$	—		$	—		$	11,910		$	14,906

The foreign currency derivatives generally have a maturity of less than a year; the fair values of the total foreign currency derivatives outstanding as of June 30, 2018 were $71, which were recorded as part of other current assets on the balance sheet. The foreign currency derivatives are designated to hedge cash flows related to the purchase of inventory. We recognize gains (losses) related to these foreign currency derivatives as a component of cost of goods sold at the time the hedged item is sold. Realized gains of $1,084 and $966 related to matured contracts were recorded as a component of inventory as of June 30, 2018 and June 30, 2017, respectively. We recognized gains of $3,136 as an offset to costs of goods sold during the year ended June 30, 2018. We anticipate the net gains included in inventory as of June 30, 2018, will be recognized as an offset to cost of goods sold within the next three months.

In July 2017, we entered into an interest rate swap agreement on $150,000 of notional principal that effectively converts the floating LIBOR or base rate portion of our interest obligation on that amount of debt, to a fixed interest rate of 1.8325% plus the applicable rate. The agreement matures concurrent with the Credit Agreement. The forecasted transactions are probable of occurring, and the interest rate swap has been designated as a highly effective cash flow hedge. The fair value of the interest rate swap agreement is recorded as an asset or liability with a corresponding amount included in accumulated other comprehensive income (loss).