Plantronics 2012 Annual Report Download - page 41

7170
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 the Derivatives and Hedging Topic of the FASB ASC, but are
carried at fair value with changes in the fair value recorded within Interest and other income (expense), net in the Consolidated
statements of operations in accordance with the Foreign Currency Matters Topic of the FASB ASC. 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. The Company does not enter into foreign
currency forward contracts for trading purposes.
As of March 31, 2012, the Company had foreign currency forward contracts denominated in Euros ("EUR"), Great Britain Pounds
("GBP") and Australian Dollars ("AUD"). 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 equivalent (“USD Equivalent”) at March 31, 2012:
Local
Currency
USD
Equivalent Position Maturity
(in thousands) (in thousands)
EUR 19,000 $ 25,349 Sell EUR 1 month
GBP 3,600 $ 5,756 Sell GBP 1 month
AUD 2,600 $ 2,688 Sell AUD 1 month
As of March 31, 2011, the notional value of the Company's foreign currency forward contracts was €18.0 million, £4.0 million
and A$3.4 million denominated in EUR, GBP and AUD, respectively.
Foreign currency transactions, net of the effect of hedging activity on forward contracts, resulted in immaterial gains in fiscal year
2012, 2011 and 2010, which are included in Interest and other income (expense), net in the Consolidated statements of operations.
Cash Flow Hedges
The Company’s hedging activities include a hedging program to hedge the economic exposure from anticipated EUR and GBP
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 portion of related gains or losses is recorded in the Consolidated 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, 2012, the Company had foreign currency put and call option contracts of approximately
€63.7 million and £20.0 million. As of March 31, 2011, it had foreign currency put and call option contracts of approximately
€52.7 million and £14.5 million.
In fiscal year 2012, a realized loss of $2.4 million on cash flow hedges was recognized in Net revenues in the Consolidated
statement of operations. In fiscal years 2011 and 2010, realized gains of $2.5 million and $1.8 million, respectively, on cash flow
hedges were recognized in Net revenues in the Consolidated statements of operations. The Company expects to reclassify the
entire gain of $1.2 million, net of tax, in Accumulated other comprehensive income as of March 31, 2012 to Net revenues during
the next 12 months due to the recognition of the hedged forecasted sales.
The Company hedges expenditures denominated in Mexican Peso (“MX$”), 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 MX$ 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, 2012 and 2011, the Company had foreign currency swap
contracts of approximately MX$317.5 million and MX$343.9 million, respectively.
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In fiscal years 2012, 2011 and 2010, there were no material realized gains on MX$ cash flow hedges recognized in Cost of revenues
in the Consolidated statements of operations and there were no material gains in Accumulated other comprehensive income as of
March 31, 2012 to be recognized during the next 12 months due to the recognition of the hedged forecasted expenditures.
The following table summarizes the notional value of the Company's outstanding MX$ currency swaps and approximate USD
Equivalent at March 31, 2012:
Local Currency USD Equivalent Position Maturity
(in thousands) (in thousands)
MX$ 317,500 $ 23,511 Buy MX$ Monthly over 12
months
The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit
risk.
Fair Value of Derivative Contracts
The fair value of derivative contracts under the Derivatives and Hedging Topic of the FASB ASC was as follows:
Derivative Assets Reported
in Other Current Assets
Derivative Liabilities Reported
in Accrued Liabilities
(in thousands)
March 31,
2012
March 31,
2011
March 31,
2012
March 31,
2011
Foreign exchange contracts designated as cash flow hedges $ 2,658 $ 360 $ 721 $ 4,201
Effect of Designated Derivative Contracts on Accumulated Other Comprehensive Income
The following table represents only the balance of designated derivative contracts under the Derivatives and Hedging Topic of
the FASB ASC as of March 31, 2012 and 2011 and the pre-tax impact of designated derivative contracts on Accumulated other
comprehensive income ("OCI") for fiscal years ended March 31, 2012 and 2011:
(in thousands)
Gain (loss)
included in
OCI as of
March 31,
2011
Amount of gain
(loss) recognized in
OCI (effective
portion)
Amount of gain
(loss) reclassified
from OCI to
income (loss)
(effective portion)
Gain (loss)
included in
OCI as of
March 31,
2012
Foreign exchange contracts designated as cash flow hedges $ (3,814) $ 2,951 $ (2,800) $ 1,937
(in thousands)
Gain (loss)
included in
OCI as of
March 31,
2010
Amount of gain
(loss) recognized in
OCI (effective
portion)
Amount of gain
(loss) reclassified
from OCI to
income (loss)
(effective portion)
Gain (loss)
included in
OCI as of
March 31,
2011
Foreign exchange contracts designated as cash flow hedges $ 2,771 $ (3,668) $ 2,917 $ (3,814)
Effect of Designated Derivative Contracts on the Consolidated Statements of Operations
The effect of designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC on results of operations
recognized in Gross profit in the Consolidated statements of operations was as follows:
Fiscal Year Ended March 31,
(in thousands) 2012 2011 2010
Gain (loss) on foreign exchange contracts designated as cash flow hedges $ (2,800) $ 2,917 $ 2,282
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