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 Company's agreements was equal to the net asset value of the Company's derivatives as of March 31, 2018. The Company seeks to mitigate such risk by limiting its counterparties to several large financial institutions. In addition, the Company monitors the potential risk of loss with any single 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 March 31, 2018, 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 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 March 31, 2017 and March 31, 2018, 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 March 31, 2017:



	Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the 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	$	2,120	$	(1,395	)	$	—	$	725
Derivatives not subject to master netting agreements	—							—
Total	$	2,120						$	725



	Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheets			Gross Amounts Not Offset in the 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	$	(1,395	)	$	1,395	$	—	$	—
Derivatives not subject to master netting agreements	—							—
Total	$	(1,395	)					$	—

As of March 31, 2018:



	Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the 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	$	772	$	(772	)	$	—	$	—
Derivatives not subject to master netting agreements	—							—
Total	$	772						$	—



	Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheets			Gross Amounts Not Offset in the 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	$	(3,037	)	$	772	$	—	$	(2,265	)
Derivatives not subject to master netting agreements	—							—
Total	$	(3,037	)					$	(2,265	)

The Company's derivative instruments are measured using Level 2 fair value inputs.

Non-Designated Hedges

As of March 31, 2018, 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 March 31, 2018:



	Local Currency		USD Equivalent		Position	Maturity
	(in thousands)		(in thousands)
EUR	€	32,050	$	39,557	Sell EUR	1 month
GBP	£	10,900	$	15,313	Sell GBP	1 month
AUD	A$	13,600	$	10,456	Sell AUD	1 month
CAD	C$	2,500	$	1,939	Sell CAD	1 month

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

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



	Fiscal Year Ended March 31,
(in thousands)	2016		2017		2018
Gain on foreign exchange contracts	$	494	$	4,599	$	7,405

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 6 to 12 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, 2017		March 31, 2018
	EUR	GBP	EUR	GBP
Option contracts	€73.5	£23.9	€77.8	£23.7
Forward contracts	€11.2	£3.3	€16.7	£3.7

There were no material gains or losses in AOCI as of March 31, 2018 to be recognized during the next 12 months due to the recognition of the hedged forecasted revenue.

Cross-currency Swaps

The Company hedges a portion of the forecasted Mexican Peso (“MXN”) denominated expenditures with a cross-currency swap. There were no material gains or losses in AOCI as of March 31, 2018 to be recognized during the next 12 months due to the recognition of the hedged forecasted expenses. As of March 31, 2017 and 2018, the Company had foreign currency swap contracts of approximately MXN 287.2 million and MXN 31.8 million, respectively.

The following table summarizes the notional value of the Company's outstanding MXN currency swaps and approximate USD Equivalent at March 31, 2018:

Local Currency

USD Equivalent

Position

Maturity

(in thousands)

MX$

31,830

1,599

Buy MXN

Monthly over

3 months

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

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges on AOCI and the consolidated statements of operations for fiscal years ended March 31, 2016, 2017, and 2018:



(in thousands)	2016			2017			2018
Gain (loss) included in AOCI as of beginning of period	$	5,705		$	(1,106	)	$	541

Amount of gain (loss) recognized in OCI (effective portion)	(3,786		)	3,095			(6,741		)

Amount of (gain) loss reclassified from OCI into net revenues (effective portion)	(7,826		)	(4,111		)	4,715
Amount of (gain) loss reclassified from OCI into cost of revenues (effective portion)	4,801			2,663			(208		)
Total amount of (gain) loss reclassified from AOCI to consolidated statements of operations (effective portion)	(3,025		)	(1,448		)	4,507

Gain (loss) included in AOCI as of end of period	$	(1,106	)	$	541		$	(1,693	)

The Company recognized immaterial loss in the consolidated statements of operations on the ineffective portion of the cash flow hedges reported in other non-operating income and (expense), net during the year ended March 31, 2018 and 2016 compared to an immaterial gain in Fiscal Year 2017.