Plantronics 2006 Annual Report Download - page 101

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part ii
portion of the hedge gain or loss is initially reported as a component of accumulated other comprehensive
income (loss) and subsequently reclassified into earnings when the hedged exposure affects earnings. Any
ineffective portions of related gains or losses are recorded in the statements of operations immediately.
On a monthly basis, Plantronics enters into option contracts with a one-year term. It does not purchase
options for trading purposes. As of March 31, 2006, the Company had foreign currency put and call
option contracts of approximately 445.2 million and £19.6 million. As of March 31, 2005, it had foreign
currency put and call option contracts of approximately 443.1 million and £14.9 million. Collectively, the
Company’s option contracts are collars to hedge against a portion of its anticipated foreign denominated
sales.
In fiscal 2005, Plantronics entered into forward exchange contracts to hedge against a portion of its
forecasted foreign denominated construction costs of its manufacturing and design center in Suzhou,
China. At March 31, 2006, Plantronics did not have any outstanding forward foreign exchange contracts
for the Chinese Yuan (CNY) as the construction of the manufacturing and design center was completed;
all contracts were settled at maturity in the fourth quarter of fiscal 2006. Plantronics had hedged these
forecasted transactions with forward currency contracts that mature in less than one year. These
transactions were designated as cash flow hedges. The effective portion of the hedge gain or loss was
initially reported as a component of accumulated other comprehensive income (loss) and subsequently
reclassified into earnings when the hedged exposure affected earnings. Any ineffective portions of related
gains or losses were immediately recorded in the statements of operations.
As of the acquisition date, Altec Lansing had hedged a fixed amount of its Euro denominated receivable
balance. Altec Lansing entered into forward contracts where it would deliver Euros at fixed rates through
until the end of the third quarter of fiscal 2006. Open contracts at month end were marked to market and
the gain or loss was immediately included in earnings. Altec Lansing did not purchase options for trading
purposes. As of March 31, 2006, no forward contracts remained outstanding.
The following table summarizes Plantronics’ cash flow hedging positions.
Balance Sheet Statement of Operations
Accumulated Other Other Income
March 31, 2005 (in thousands) Comprehensive Income (loss) Net Revenues and Expenses
Realized loss on closed
transactions $ — $(2,848) $ —
Recognized but unrealized
loss on open transactions (1,615) — —
$(1,615) $(2,848) $ —
AR 2006 ⯗95