FOREIGN CURRENCY DERIVATIVES

6 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FOREIGN CURRENCY DERIVATIVES

FOREIGN CURRENCY DERIVATIVES

The Company's foreign currency derivatives consist primarily of foreign currency forward exchange contracts, option contracts and cross-currency swaps.  The derivatives expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the derivative instrument.  The Company's maximum exposure to loss due to credit risk that it would incur if parties to derivative contracts failed completely to perform according to the terms of the contracts was equal to the carrying value of the Company's derivative contracts as of September 30, 2013.  The Company seeks to mitigate such risk by limiting its counterparties to large financial institutions.  In addition, the Company monitors the potential risk of loss with any one counterparty resulting from this type of credit risk on an ongoing basis.

The Company enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between Plantronics and the counterparty as a result of multiple, separate derivative transactions. As of September 30, 2013, the Company has International Swaps and Derivatives Association (ISDA) agreements with three applicable banks and financial institutions which contain netting provisions. Plantronics has elected to present the fair value of derivative assets and liabilities within the Company's consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period. Derivatives not subject to master netting agreements are not eligible for net presentation. As of the applicable dates presented below, no cash collateral had been received or pledged related to these derivative instruments.

Offsetting of Financial Assets/Liabilities under Master Netting Agreements with Derivative Counterparties

As of September 30, 2013:

	Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities			Cash Collateral Received		Net Amount of Derivative Assets
Derivatives subject to master netting agreements	$	70	$	(70	)	$	—	$	—
Derivatives not subject to master netting agreements	—							—
Total	$	70						$	—

	Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets			Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)				Gross Amount of Eligible Offsetting Recognized Derivative Assets		Cash Collateral Received		Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements	$	(1,577	)	$	70	$	—	$	(1,507	)
Derivatives not subject to master netting agreements	(866		)					(866		)
Total	$	(2,443	)					$	(2,373	)

As of March 31, 2013:

	Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities			Cash Collateral Received		Net Amount of Derivative Assets
Derivatives subject to master netting agreements	$	1,005	$	(215	)	$	—	$	790
Derivatives not subject to master netting agreements	660							660
Total	$	1,665						$	1,450

	Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets			Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)				Gross Amount of Eligible Offsetting Recognized Derivative Assets		Cash Collateral Received		Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements	$	(215	)	$	215	$	—	$	—
Derivatives not subject to master netting agreements	(79		)					(79		)
Total	$	(294	)					$	(79	)

Refer to Note 4, Fair Value Measurements, for disclosure of the Company's fair value hierarchy for its derivative instruments.

Non-Designated Hedges

As of September 30, 2013, the Company had foreign currency forward contracts denominated in Euros ("EUR"), British Pound Sterling ("GBP"), and Australian Dollars ("AUD").  The Company does not elect to obtain hedge accounting for these forward contracts. These forward contracts hedge against a portion of the Company’s foreign currency-denominated cash balances, receivables and payables. The following table summarizes the notional value of the Company’s outstanding foreign exchange currency contracts and approximate U.S. Dollar ("USD") equivalent at September 30, 2013:

	Local Currency		USD Equivalent		Position	Maturity
	(in thousands)		(in thousands)
EUR	€	16,000	$	21,632	Sell EUR	1 month
GBP	£	2,600	$	4,191	Sell GBP	1 month
AUD	A$	4,600	$	4,276	Sell AUD	1 month

Foreign currency transactions, net of the effect of forward contract hedging activity, resulted in immaterial net gains and immaterial net losses, respectively in the three and six months ended September 30, 2013 and immaterial net gains and immaterial net losses, respectively, in the three and six months ended September 30, 2012, which are included in interest and other income (expense), net in the condensed consolidated statements of operations.

Cash Flow Hedges

On a monthly basis, the Company enters into option contracts with a one-year term.  The Company does not purchase options for trading purposes.  As of September 30, 2013, the Company had foreign currency option contracts of approximately €50.8 million and £21.0 million.  As of March 31, 2013, the Company had foreign currency option contracts of approximately €50.2 million and £19.9 million.

In the three and six months ended September 30, 2013, an immaterial loss on cash flow hedges was recognized in net revenues in the condensed consolidated statement of operations, compared to realized gains of $1.2 million and $3.1 million for the three and six months periods in the prior year, respectively.  A loss of $2.0 million, net of tax, in accumulated other comprehensive income ("AOCI") as of September 30, 2013 is expected to be reclassified to net revenues during the next 12 months due to the recognition of the hedged forecasted sales.

The Company hedges expenditures denominated in Mexican Peso (“MX$”), which are designated as cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC.  The Company hedges a portion of the forecasted MX$ denominated expenditures with a cross-currency swap.  The effective portion of the hedge gain or loss is initially reported as a component of AOCI and subsequently reclassified into cost of revenues when the hedged exposure affects operations.  Any ineffective portion of related gains or losses is recorded in the condensed consolidated statements of operations immediately.  As of September 30, 2013 and March 31, 2013, the Company had foreign currency swap contracts of approximately MX$361.1 million and MX$325.4 million, respectively.

In the three and six months ended September 30, 2013 and 2012, there were no material realized gains or losses on MX$ cash flow hedges recognized in cost of revenues in the condensed consolidated statement of operations and there were no material gains or losses in AOCI as of September 30, 2013 to be recognized during the next 12 months due to the recognition of the hedged forecasted expenditures.  

The following table summarizes the notional value of the Company’s outstanding MX$ cross-currency swaps and approximate USD Equivalent at September 30, 2013:

	Local Currency		USD Equivalent		Position	Maturity
	(in thousands)		(in thousands)
MX$	$	361,100	$	27,500	Buy MX$	Monthly over	15 months

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts

The fair value of derivative contracts was as follows:

	Derivative Assets Reported in Other Current Assets				Derivative Liabilities Reported in Accrued Liabilities
	September 30,		March 31,		September 30,		March 31,
(in thousands)	2013		2013		2013		2013
Foreign exchange contracts designated as cash flow hedges	$	70	$	1,665	$	2,443	$	294

Effect of Designated Derivative Contracts on AOCI

The following table represents the balance of designated derivative contracts as of September 30, 2013 and March 31, 2013, and the pre-tax impact of designated derivative contracts on AOCI for the six months ended September 30, 2013:

(in thousands)	Gain (loss) included in AOCI as of March 31, 2013		Amount of gain (loss) recognized in AOCI (effective portion)			Amount of gain (loss) reclassified from AOCI to income (loss) (effective portion)		Gain (loss) included in AOCI as of September 30, 2013
Foreign exchange contracts designated as cash flow hedges	$	1,371	$	(3,646	)	$	98	$	(2,373	)

Effect of Designated Derivative Contracts on the Condensed Consolidated Statements of Operations

The effect of designated derivative contracts on results of operations recognized in gross profit in the condensed consolidated statements of operations was as follows:

	Three Months Ended					Six Months Ended
	September 30,					September 30,
(in thousands)	2013			2012		2013		2012
Gain (loss) on foreign exchange contracts designated as cash flow hedges	$	(156	)	$	1,074	$	98	$	2,768

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations

The effect of non-designated derivative contracts on results of operations recognized in interest and other income (expense), net in the condensed consolidated statements of operations was as follows:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
(in thousands)	2013			2012			2013			2012
Gain (loss) on foreign exchange contracts	$	(1,266	)	$	(648	)	$	(1,193	)	$	819