10. 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.”

In July 2017, we entered into an interest rate swap agreement on the first $150,000 of notional principal that effectively converts the floating LIBOR 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 concurrently with the Credit Agreement. In March 2020, we entered into an interest rate swap agreement on an additional $150,000 of notional principal that effectively converts the floating LIBOR portion of our interest obligation on that amount of debt to a fixed rate of 0.620% plus the applicable rate. On the maturity of the July 2017 agreement, this agreement increases to a notional principal amount of $300,000 through June 30, 2025, and effectively converts the floating LIBOR portion of our interest obligation on $300,000 of debt to a fixed interest rate of 0.620% plus the applicable rate. The forecasted transactions are probable of occurring, and the interest rate swaps have been designated as highly effective cash flow hedges.

We entered into foreign currency option contracts to hedge cash flows related to monthly inventory purchases. The individual option contracts mature monthly through March 2022. The forecasted inventory purchases are probable of occurring and the individual option contracts were designated as highly effective cash flow hedges.

Outstanding derivatives that are designated and effective as cash flow hedges as of March 31, 2020, were:


		Notional			Asset (Liability)
		Amount at			fair value as of
		March 31,		Consolidated	March 31,		June 30,
Instrument	Hedge	2020		Balance Sheet	2020		2019
Options	Brazilian Real calls	R$	135,000	(1)	$	83	$	413
Options	Brazilian Real puts	R$	135,000	(1)	$	(3,586)	$	(30)
Swap	Interest rate swap	$	300,000	Other liabilities	$	(7,090)	$	(977)

(1)

We record the net fair values of our outstanding foreign currency option contracts within the respective balance sheet line item based on the net financial position and maturity date of the individual contracts as of the balance sheet date. As of March 31, 2020, other current liabilities and other liabilities included net fair values of $1,871 and $1,632, respectively. As of June 30, 2019, other current assets included net fair values of $383.

The following tables show the effects of derivatives on the consolidated statements of operations and other comprehensive income for the three and nine months ended March 31, 2020 and 2019.


											Consolidated Statement
						Gain (Loss) recognized in consolidated					of Operations Line
For the Three Months Ended March 31		Gain (Loss) recorded in OCI				statements of operations					Item Total
						Consolidated
						Statement of
Instrument	Hedge	2020		2019		Operations	2020		2019		2020		2019
Options	Brazilian Real calls	$	(3,945)	$	(30)	Cost of goods sold	$	(8)	$	(5)	$	141,188	$	140,864
Swap	Interest rate swap	$	(6,050)	$	(1,434)	Interest expense, net	$	59	$	247	$	3,263	$	2,931


											Consolidated Statement
						Gain (Loss) recognized in					of Operations Line
For the Nine Months Ended March 31		Gain (Loss) recorded in OCI				consolidated statements of operations					Item Total
						Consolidated
						Statement
Instrument	Hedge	2020		2019		of Operations	2020		2019		2020		2019
Options	Brazilian Real calls	$	(3,886)	$	374	Cost of goods sold	$	(116)	$	1,079	$	418,153	$	424,791
Swap	Interest rate swap	$	(6,113)	$	(3,540)	Interest expense, net	$	228	$	523	$	10,049	$	8,729

We recognize gains (losses) related to foreign currency derivatives as a component of cost of goods sold at the time the hedged item is sold. Realized net losses of $107 related to matured contracts were recorded as a component of inventory as of March 31, 2020.