FOREIGN CURRENCY DERIVATIVES

3 Months Ended

Jun. 30, 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 June 30, 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 Plantronics and the counterparty as a result of multiple, separate derivative transactions. As of June 30, 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 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. 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 June 30, 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)	June 30, 2014	March 31, 2014
Derivative Assets (recorded in 'Other current assets')
Non-designated hedges	31.3	153.3
Cash flow hedges	803.1	973.4
Total Derivative Assets	834.4	1,126.7
Derivative Liabilities (recorded in 'Other accrued liabilities')
Non-designated hedges	193.6	79.7
Cash flow hedges	1,751.3	2,803.8
Total Derivative Liabilities	1,944.9	2,883.5

Non-Designated Hedges

As of June 30, 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 June 30, 2014:

(in thousands)	Local Currency		USD Equivalent		Position	Maturity
EUR	€	18,400	$	25,082	Sell EUR	1 month
GBP	£	4,000	$	6,505	Sell GBP	1 month
AUD	A$	7,500	$	7,046	Sell AUD	1 month

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, net in the condensed consolidated statements of operations was as follows:

	Three Months Ended June 30,
(in thousands)	2014		2013
Gain on foreign exchange contracts	$	14	$	74

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 June 30, 2014, the Company had foreign currency option contracts of approximately €56.5 million and £25.0 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 June 30, 2014 and March 31, 2014, the Company had foreign currency swap contracts of approximately MXN132.8 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 June 30, 2014:

(in thousands)	Local Currency	USD Equivalent		Position	Maturity
MXN	132,750	$	9,928	Buy MXN	Monthly over	6 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 the accumulated other comprehensive income and condensed consolidated statements of income for the three months ended June 30, 2014 and 2013:

	Three Months Ended June 30,
(in thousands)	2014			2013
Gain (loss) included in AOCI as of beginning of period	$	(1,442	)	$	1,371
Amount of gain (loss) recognized in OCI (effective portion)	73			(1,663		)
Amount of gain (loss) reclassified from OCI into net revenues (effective portion)	(870		)	(16		)
Amount of gain (loss) reclassified from OCI into cost of revenues (effective portion)	108			270
Total amount of gain (loss) reclassified from AOCI to income (loss) (effective portion)	(762		)	254
Loss included in AOCI as of end of period	$	(607	)	$	(546	)

The Company will reclassify all amounts accumulated in other comprehensive income into earnings within the next twelve months. The Company recognized an immaterial loss in the consolidated statement operations on the ineffective portion of the cash flow hedges reported in interest and other income, net during the three months ended June 30, 2014. There was no ineffective portion of hedges designated as cash flow hedging instruments during the three months ended June 30, 2013.