Plantronics 2010 Annual Report Download - page 88

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80
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. 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 the
Derivatives and Hedging Topic of the FASB ASC. The effective portion of the hedge gain or loss is initially reported as a component
of Accumulated other comprehensive income 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, 2010, the Company had foreign currency put and call option contracts of approximately €40.2 million and £10.8 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 2008, 2009 and 2010, realized gains (losses) of $(3.9) million, $4.5 million and $1.8 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
$2.5 million of gains accumulated in other comprehensive income to Net revenues during the next 12 months due to the recognition of
the hedged forecasted sales.
In the second quarter of fiscal 2010, the Company began hedging expenditures denominated in Mexican Peso which are designated as
cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB
ASC. The Company hedges a portion of the forecasted Peso denominated expenditures with a cross-currency swap. The effective
portion of the hedge gain or loss is initially reported as a component of Accumulated other comprehensive income and subsequently
reclassified into Cost of revenues when the hedged exposure affects operations. Any ineffective portion of related gains or losses is
recorded in the Consolidated statements of operations immediately. As of March 31, 2010, the Company had foreign currency swap
contracts of approximately Mex$251.3 million. There were no swap contracts as of March 31, 2009.
In fiscal 2010, realized gains of $0.5 million on Peso cash flow hedges were recognized in Cost of revenues in the Consolidated
statements of operations. There were no realized gains or losses in fiscal 2009. The Company expects to reclassify the entire amount
of $0.3 million of gains accumulated in other comprehensive income to Cost of revenues during the next 12 months due to the
recognition of the hedged forecasted expenditures.
The following table summarizes the Company’s outstanding Peso currency swaps and approximate U.S. Dollar equivalent (“USD”), at
March 31, 2010:
Local Currency Position Maturity
(in thousands) (in thousands)
Mexican Peso 251,270 $ 19,630 Buy Peso Monthly over
12 months
USD Equivalent
stments related to the Company’s own credit risk and counterparty credit risk.
Fair Value of Derivative Contracts
The fair value of derivative contracts were as follows:
w include fair value adjuThe amounts in the tables belo
Balance Sheet March 31, March 31, Balance Sheet March 31, March 31,
(in thousands) Line Item 2009 2010 Line Item 2009 2010
Foreign exchange contracts designated as cash flow hedges Other current assets $ 7,613 $ 2,845 Accrued liabilities $ 875 $ 74
Total derivatives designated as hedging instruments 7,613 2,845 875 74
Foreign exchange contracts not designated Other current assets - - Accrued liabilities 2 -
Total derivatives $ 7,613 $ 2,845 $ 877 $ 74
in Other Current Assets
Derivative Liabilities
Derivative Assets Reported Reported in Other Current
Accrued Liabilities