FOREIGN CURRENCY DERIVATIVES

3 Months Ended

Jun. 30, 2016

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 Company does not purchase derivative financial instruments for speculative trading purposes.  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 June 30, 2016.  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 June 30, 2016, the Company has International Swaps and Derivatives Association (ISDA) agreements with four 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 March 31, 2016 and June 30, 2016, no cash collateral had been received or pledged related to these derivative instruments.

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

(in thousands)	March 31, 2016		June 30, 2016
Derivative Assets (recorded in 'Other current assets')
Non-designated hedges	$	33	$	915
Cash flow hedges	1,952		3,327
Total Derivative Assets	$	1,985	$	4,242
Derivative Liabilities (recorded in 'Accrued liabilities')
Non-designated hedges	$	1,163	$	374
Cash flow hedges	3,255		2,288
Total Derivative Liabilities	$	4,418	$	2,662

Non-Designated Hedges

As of June 30, 2016, the Company had foreign currency forward contracts denominated in Euros ("EUR"), British Pound Sterling ("GBP"), Australian Dollars ("AUD"), and Canadian Dollars ("CAD").  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 June 30, 2016:

(in thousands)	Local Currency		USD Equivalent		Position	Maturity
EUR	€	26,900	$	30,000	Sell EUR	1 month
GBP	£	4,060	$	5,392	Sell GBP	1 month
AUD	A$	13,600	$	10,168	Sell AUD	1 month
CAD	C$	2,470	$	1,913	Sell CAD	1 month

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

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

	Three Months Ended   June 30,
(in thousands)	2015			2016
Gain (loss) on foreign exchange contracts	$	(1,128	)	$	1,943

Cash Flow Hedges

Costless Collars

The Company hedges a portion of the forecasted EUR and GBP denominated revenues with costless collars. On a monthly basis, the Company enters into option contracts with a six to eleven month term.  Collar contracts are scheduled to mature at the beginning of each fiscal quarter, at which time the instruments convert to forward contracts. The Company also enters into cash flow forwards with a three month term. Once the hedged revenues are recognized, the forward contracts become non-designated hedges to protect the resulting foreign monetary asset position for the Company. 

The notional value of the Company's outstanding EUR and GBP option and forward contracts at the end of each period was as follows:

(in millions)	March 31, 2016		June 30, 2016
	EUR	GBP	EUR	GBP
Option contracts	€59.4	£18.4	€59.6	£18.5
Forward contracts	€23.9	£9.1	€22.4	£8.9

The Company will reclassify all amounts accumulated in other comprehensive income into earnings within the next twelve months.

Cross-currency Swaps

The Company hedges a portion of the forecasted Mexican Peso (“MXN”) denominated expenditures with a cross-currency swap. A loss of $1.4 million, net of tax, in AOCI as of June 30, 2016 is expected to be reclassified to cost of revenues during the next 12 months due to the recognition of the hedged forecasted expenditures. As of March 31, 2016 and June 30, 2016, the Company had foreign currency swap contracts of approximately MXN 481.0 million and MXN 491.9 million, respectively.

The following table summarizes the notional value of the Company’s outstanding MXN cross-currency swaps and approximate USD Equivalent at June 30, 2016:

(in thousands)	Local Currency	USD Equivalent		Position	Maturity
MXN	491,940	$	27,763	Buy MXN	Monthly over	21 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 months ended June 30, 2015 and 2016:

	Three Months Ended   June 30,
(in thousands)	2015			2016
Gain (loss) included in AOCI as of beginning of period	$	5,705		$	(1,106	)
Amount of gain (loss) recognized in other comprehensive income (“OCI”)  (effective portion)	(2,838		)	954
Amount of gain (loss) reclassified from OCI into net revenues (effective portion)	3,538			160
Amount of gain (loss) reclassified from OCI into cost of revenues (effective portion)	(773		)	(727		)
Total amount of gain (loss) reclassified from AOCI to income (loss) (effective portion)	2,765			(567		)
Gain included in AOCI as of end of period	$	102		$	415

During the three months ended June 30, 2015 and 2016 the Company recognized an immaterial gain on the ineffective portion of its cash flow hedges, which is reported in other non-operating income and (expense), net in the condensed consolidated statements of operations.