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DERIVATIVE INSTRUMENTS | 6 Months Ended
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Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Foreign Exchange Risk Management The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business, including through exposure to inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the transaction currency. To manage this exposure, beginning in June 2021, the Company entered into non- deliverable forward foreign-exchange contracts (the “NDF contracts”) that are intended to offset changes in cash flow attributable to currency exchange movements. The NDF contracts have been designated as foreign exchange cash flow hedges. The Company entered into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material. The Company also continued to use certain derivatives as economic hedges of foreign currency exposure on firm commitments, which do not qualify for hedge accounting. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. The Company does not enter into derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Condensed Consolidated Statements of Operations to which the derivative relates. In September 2020, the Company terminated its existing net investment cross currency swap derivatives with notional amount of $550.0 in exchange for cash payment of $37.6. The related loss from this termination is included in accumulated other comprehensive income (loss) (“AOCI/(L)”) until the sale or substantial liquidation of the underlying net investments. Beginning in July 2021, the Company entered into foreign exchange forward contracts to naturally hedge up to 80% of the Company's euro denominated external debt as part of management's strategy to minimize the impact of currency movements on those debt instruments. The notional amount of those contracts was €1,500.0 million as of December 31, 2021. As a result, foreign currency denominated borrowings designated as net investment hedges decreased from nominal exposures of €1,809.5 million as of June 30, 2021 to €312.6 million as of December 31, 2021. Interest Rate Risk The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative and positive impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. These interest rate swaps are designated and qualify as cash flow hedges. In December 2021, the Company terminated certain existing interest rate swaps with a notional amount of $200.0 in exchange for a settlement of $1.9. The related loss from this termination is included in Interest expense, net in the Condensed Consolidated Statement of Operations. As of December 31, 2021 and June 30, 2021, the Company had interest rate swap contracts designated as effective hedges in the notional amount of $800.0 and $1,900.0, respectively. Derivative and non-derivative financial instruments which are designated as hedging instruments: The accumulated (loss)/gain on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $24.3 and $5.4 as of December 31, 2021 and June 30, 2021, respectively. The accumulated loss on derivative instruments classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $(37.6) as of December 31, 2021 and June 30, 2021. The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
Gain (Loss) Recognized in OCI | Three Months Ended December 31, |  | Six Months Ended December 31,
| 2021 |  | 2020 |  | 2021 |  | 2020
Foreign exchange forward contracts | $ | — |  |  | $ | 0.8 |  |  | $ | 1.7 |  |  | $ | (0.4) |
Interest rate swap contracts | 2.5 |  |  | 0.2 |  |  | 1.9 |  |  | 0.4 |
Cross-currency swap contracts | — |  |  | — |  |  | — |  |  | (25.1) |
Net investment hedges | 2.2 |  |  | (174.4) |  |  | 18.9 |  |  | (347.5) |
The accumulated loss on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $(5.6) and $(15.5) as of December 31, 2021 and June 30, 2021, respectively. The estimated net loss related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings, net of tax, within the next twelve months is $(5.0). As of December 31, 2021, all of the Company's remaining foreign currency forward contracts designated as hedges were highly effective. The amount of gains and losses reclassified from AOCI/(L) to the Condensed Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below:
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging Relationships | Three Months Ended December 31,
| 2021 |  | 2020
| Net revenues |  | Cost of sales |  | Interest expense, net |  | Net revenues |  | Cost of sales |  | Interest expense, net
Foreign exchange forward contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into income | $ | (0.1) |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Interest rate swap contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into income | — |  |  | — |  |  | (4.8) |  |  | — |  |  | — |  |  | (11.5) |
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging Relationships | Six Months Ended December 31,
| 2021 |  | 2020
| Net revenues |  | Cost of sales |  | Interest expense, net |  | Net revenues |  | Cost of sales |  | Interest expense, net
Foreign exchange forward contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into income | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | 1.0 |  |  | $ | — |  |  | $ | — |
Interest rate swap contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into income | — |  |  | — |  |  | (9.8) |  |  | — |  |  | — |  |  | (21.3) |
Derivatives not designated as hedging: The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below:
Condensed Consolidated Statements of Operations Classification of Gain (Loss) Recognized in Operations | Three Months Ended December 31, |  | Six Months Ended December 31,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Foreign exchange contracts | Selling, general and administrative expenses | $ | 0.1 |  |  | $ | — |  |  | $ | 0.1 |  |  | $ | 0.1 |
Foreign exchange contracts | Interest expense, net | 12.9 |  |  | 10.9 |  |  | 20.2 |  |  | 16.2 |
Foreign exchange contracts | Other expense, net | (0.3) |  |  | (0.1) |  |  | (0.5) |  |  | (0.4) |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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