DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of our financial risk management program, we use certain derivative financial instruments. We do not enter into derivative transactions for speculative purposes and, therefore, hold no derivative instruments for trading purposes. We account for derivative instruments as a hedge of the related asset, liability, firm commitment or anticipated transaction, when the derivative is specifically designated and qualifies as a hedge of such items. Our objective in managing foreign exchange exposures with derivative instruments is to reduce volatility in cash flow. We measure hedge effectiveness by assessing the changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other expense, net.

The fair value of derivatives designated and not designated as hedging instruments in the condensed consolidated balance sheet are as follows:



(in thousands)	December 31, 2017			June 30, 2017
Derivatives designated as hedging instruments
Other current assets - range forward contracts	$	25		$	1
Other current liabilities - range forward contracts	(1,224		)	(671		)
Other assets - range forward contracts	3			—
Other liabilities - range forward contracts	(6		)	(101		)
Total derivatives designated as hedging instruments	(1,202		)	(771		)
Derivatives not designated as hedging instruments
Other current assets - currency forward contracts	184			358
Other current liabilities - currency forward contracts	(23		)	(138		)
Total derivatives not designated as hedging instruments	161			220
Total derivatives	$	(1,041	)	$	(551	)

Certain currency forward contracts that hedge significant cross-border intercompany loans are considered as other derivatives and therefore do not qualify for hedge accounting. These contracts are recorded at fair value in the condensed consolidated balance sheet, with the offset to other expense, net. Gains related to derivatives not designated as hedging instruments have been recognized as follows:



	Three Months Ended December 31,						Six Months Ended December 31,
(in thousands)	2017			2016			2017			2016
Other expense, net - currency forward contracts	$	(92	)	$	(59	)	$	(208	)	$	(377	)

CASH FLOW HEDGES

Range forward contracts (a transaction where both a put option is purchased and a call option is sold) are designated as cash flow hedges and hedge anticipated cash flows from cross-border intercompany sales of products and services. Gains and losses realized on these contracts are recorded in accumulated other comprehensive loss and are recognized as a component of other expense, net when the underlying sale of products or services is recognized into earnings. The notional amount of the contracts translated into U.S. dollars at December 31, 2017 and June 30, 2017, was $77.9 million and $75.3 million, respectively. The time value component of the fair value of range forward contracts is excluded from the assessment of hedge effectiveness. Assuming the market rates remain constant with the rates at December 31, 2017, we expect to recognize into earnings in the next 12 months $1.6 million of expense on outstanding derivatives.

The following represents gains and losses related to cash flow hedges:



	Three Months Ended December 31,					Six Months Ended December 31,
(in thousands)	2017			2016		2017			2016
(Losses) gains recognized in other comprehensive loss, net	$	(287	)	$	1,606	$	(906	)	$	1,481
Losses reclassified from accumulated other comprehensive loss into other expense, net	$	870		$	382	$	1,262		$	768

No portion of the gains or losses recognized in earnings was due to ineffectiveness and no amounts were excluded from our effectiveness testing for the six months ended December 31, 2017 and 2016.

NET INVESTMENT HEDGES

As of December 31, 2017, we had certain foreign currency-denominated intercompany loans payable with total aggregate principal amounts of €33.0 million as net investment hedges to hedge the foreign exchange exposure of our net investment in Euro-based subsidiaries. Losses of $0.5 million and $1.9 million were recorded as a component of foreign currency translation adjustments in other comprehensive income for the three and six months ended December 31, 2017, respectively. We did not have net investment hedges during the three and six months ended December 31, 2016.

As of December 31, 2017, the foreign currency-denominated intercompany loans payable designated as net investment hedges consisted of:



Instrument	Notional (EUR in thousands)⁽²⁾		Notional (USD in thousands)⁽²⁾		Maturity
Foreign currency-denominated intercompany loan payable	€	26,929	$	32,279	June 26, 2022
Foreign currency-denominated intercompany loan payable	8,667		10,388		November 20, 2018
Foreign currency-denominated intercompany loan payable	2,004		2,402		October 11, 2019

⁽²⁾ Includes principal and accrued interest.