FOREIGN CURRENCY DERIVATIVES

9 Months Ended

Dec. 31, 2014

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 that it would incur due to credit risk 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 assets as of December 31, 2014.  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 the Company and the counterparty as a result of multiple, separate derivative transactions. As of December 31, 2014, 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 on the Company's condensed consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. 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 December 31, 2014 and March 31, 2014, no cash collateral had been received or pledged related to these derivative instruments.

The gross fair value of our outstanding derivative contracts at the end of each period was as follows:

(in thousands)	December 31, 2014		March 31, 2014
Derivative Assets (recorded in 'Other current assets')
Non-designated hedges	$	1,019	$	153
Cash flow hedges	6,280		973
Total Derivative Assets	$	7,299	$	1,126
Derivative Liabilities (recorded in 'Other accrued liabilities')
Non-designated hedges	$	1	$	80
Cash flow hedges	3,617		2,804
Total Derivative Liabilities	$	3,618	$	2,884

Non-Designated Hedges

As of December 31, 2014, 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 December 31, 2014:

(in thousands)	Local Currency		USD Equivalent		Position	Maturity
EUR	€	29,400	$	35,824	Sell EUR	1 month
GBP	£	8,000	$	12,408	Sell GBP	1 month
AUD	A$	7,400	$	5,982	Sell AUD	1 month

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

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

	Three Months Ended   December 31,					Nine Months Ended December 31,
(in thousands)	2014		2013			2014		2013
Gain (loss) on foreign exchange contracts	$	2,183	$	(372	)	$	5,160	$	(1,564	)

Cash Flow Hedges

On a monthly basis, the Company enters into option contracts with a one-year term.  The Company hedges a portion of the forecasted EUR and GBP denominated revenues with costless collars. The Company does not purchase options for trading purposes.  As of December 31, 2014, the Company had foreign currency option contracts of approximately €64.6 million and £28.9 million.  As of March 31, 2014, the Company had foreign currency option contracts of approximately €55.7 million and £23.9 million.

The Company hedges a portion of the forecasted Mexican Peso (“MXN”) denominated expenditures with a cross-currency swap.  As of December 31, 2014 and March 31, 2014, the Company had foreign currency swap contracts of approximately MXN525.1 million and MXN204.6 million, respectively. The following table summarizes the notional value of the Company’s outstanding MXN cross-currency swaps and approximate USD Equivalent at December 31, 2014:

(in thousands)	Local Currency	USD Equivalent		Position	Maturity
MXN	525,120	$	38,334	Buy MXN	Monthly over	17 months

Effect of Designated Derivative Contracts on AOCI and Condensed Consolidated Statements of Operations

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three and nine months ended December 31, 2014 and 2013:

	Three Months Ended   December 31,						Nine Months Ended December 31,
(in thousands)	2014			2013			2014			2013
Gain (loss) included in AOCI as of beginning of period	$	2,601		$	(2,373	)	$	(1,442	)	$	1,371
Amount of gain (loss) recognized in OCI (effective portion)	508			(222		)	3,604			(3,868		)
Amount of gain (loss) reclassified from OCI into net revenues (effective portion)	1,220			(116		)	61			(262		)
Amount of gain (loss) reclassified from OCI into cost of revenues (effective portion)	(63		)	(64		)	149			180
Total amount of gain (loss) reclassified from AOCI to income (loss) (effective portion)	1,157			(180		)	210			(82		)
Gain (loss) included in AOCI as of end of period	$	1,952		$	(2,415	)	$	1,952		$	(2,415	)

The Company will reclassify all amounts accumulated in other comprehensive income into earnings within the next twelve months. During the three and nine months ended December 31, 2014, the Company recognized an immaterial gain on the ineffective portion of its cash flow hedges, which is reported in interest and other income (expense), net in the condensed consolidated statements of operations. There was no ineffective portion of hedges designated as cash flow hedging instruments during the three and nine months ended December 31, 2013.