Plantronics 2009 Annual Report Download - page 97

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89
Non-Designated Hedges
The Company enters into foreign exchange forward contracts to reduce the impact of foreign currency fluctuations on assets and
liabilities denominated in currencies other than the functional currency of the reporting entity. These foreign exchange forward
contracts are not subject to the hedge accounting provisions of SFAS No. 133, but are carried at fair value with changes in the fair
value recorded within Interest and other income (expense), net on the statement of operations in accordance with SFAS No. 52,
"Foreign Currency Translation". Gains and losses on these contracts are intended to offset the impact of foreign exchange rate
changes on the underlying foreign currency denominated assets and liabilities, and therefore, do not subject the Company to material
balance sheet risk. We do not enter into foreign currency forward contracts for trading purposes.
As of March 31, 2009, the Company had foreign currency forward contracts of €18.7 million and £6.5 million denominated in Euros
and Great Britain Pounds. As of March 31, 2008, the Company had foreign currency forward contracts of €15.8 million and £6.2
denominated in Euros and Great Britain Pounds.
The following table summarizes the Company’s outstanding foreign exchange currency contracts, and approximate U.S. dollar
equivalent, at March 31, 2009 (local currency and dollar amounts in thousands):
Local
Currency
USD
Equivalent Position Maturity
EUR 18,700 $ 24,876 Sell Euro 1 month
GBP 6,500 9,296 Sell GBP 1 month
Foreign currency transactions, net of the effect of hedging activity on forward contracts, resulted in net gains of $2.3 million and $0.9
million in fiscals 2007 and 2008, respectively, and net losses of $6.3 million in fiscal 2009 and are included in Interest and other
income (expense), net in the Consolidated statement of operation.
Cash Flow Hedges
The Company’s hedging activities include a hedging program to hedge the economic exposure from anticipated Euro and Great
Britain Pound denominated sales from ACG. The Company hedges a portion of these forecasted foreign denominated sales with
currency options. These transactions are designated as cash flow hedges and are accounted for under the hedge accounting provisions
of SFAS No. 133. The effective portion of the hedge gain or loss is initially reported as a component of Accumulated other
comprehensive income (loss) and subsequently reclassified into Net revenues 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, the
Company enters into option contracts with a one-year term. It does not purchase options for trading purposes. As of March 31, 2008,
the Company had foreign currency put and call option contracts of approximately €48.4 million and £18.7 million. As of March 31,
2009, it had foreign currency put and call option contracts of approximately €48.4 million and £14.4 million.
In fiscal 2007, 2008, and 2009, realized gains (losses) of $(2.9) million, $(3.9) million and $4.5 million on cash flow hedges were
recognized in Net revenues in the consolidated statements of operations. The Company expects to reclassify the entire amount of $6.7
million of gains accumulated in other comprehensive income (loss) to Net revenues during the next 12 months due to the recognition
of the hedged forecasted sales.