This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 ("Securities Act") and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). Forward-looking statements may generally be identified by the use of such words as "anticipate," "believe," “could,” "expect," "intend," “may,” "plan," "potential," "shall," "will," “would,” or variations of such words and similar expressions, or the negative of these terms. Specific forward-looking statements contained within this Form 10-Q include, but are not limited to, statements regarding (i) our belief that our revenues may be materially affected by fluctuations in exchange rates, the global economy and consumer spending,

(ii) how our new cloud-based service offerings complement our existing and future hardware offerings, (ii)(iii) our belief that our "as-a-service" offerings will expand the reach of our solutions portfolio and grow our business, (iii)(iv) our intention to provide customer data insight through software and service solutions, (iv)(v) the Unified Communications ("UC") market, including adoption of UC products, our position, and timing and growth expectations in this market, (v)(vi) our expectations regarding the impact of our Simply Smarter Communications technology solutions"as a service" offerings in the UC market, (vi)(vii) our intentions regarding investments in long-term growth opportunities and our core research and development effort, (vii)(viii) our intentions regarding the focus of our sales, marketing and customer services and support teams on UC, (viii)(ix) the future of UC technologies, including the transition of businesses to UC-supported systems, the effect on headset adoption and use, the effects on enterprises that adopt UC and our expectations concerning our revenue opportunity and profit growth, (ix) our expectations for the expansion of key strategic alliances, (x) our position in the Enterprise and Consumer markets, (xi) our belief that our revenues may be materially affected by fluctuations in exchange rates, the global economy and consumer spending, (xii) our expectations regarding the global economy, as well as our investment strategies and focus, (xiii) the maintenance of our reputation in the industry, (xiv) our expenses, including research, development and engineering expenses and selling, general and administrative expenses, (xv)(xi) fluctuations in our cash provided by operating activities as a result of various factors including fluctuations in revenues and operating expenses, timing of product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of taxes and other payments, (xvi)(xii) our future tax rate and payments related to unrecognized tax benefits, (xvii)(xiii) our anticipated range of capital expenditures for the remainder of fiscal year 2017 and the sufficiency of our cash, cash equivalents, and cash from operations to sustain future operations and discretionary cash requirements, (xviii)(xiv) our planned investment of and need for our foreign cash and our ability to repatriate that cash, (xix)(xv) our ability to draw funds on our credit facility as needed, (xx)(xvi) future fluctuations in our cash provided by operating activities, (xxi)(xvii) the sufficiency of our capital resources to fund operations, and (xxii)(xviii) the outcome and effect of legal proceedings, in particular our litigation with GN Netcom, as well as other statements regarding our future operations, financial condition and prospects and business strategies.  Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, those discussed in this Quarterly Report on Form 10-Q; in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on May 16, 2016; and other documents filed with the SEC.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.  Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

We are a leading designer, manufacturer, and marketer of lightweight communications headsets, telephone headset systems, other communication endpoints, and accessories for the worldwide business and consumer markets under the Plantronics brand. In addition, we manufacture and market specialty telephone products under our Clarity brand, such as telephones for the hearing impaired, and other related products for people with special communication needs. Our major product categories are Enterprise, which includes headsets optimized for Unified Communications (“UC”), other corded and cordless communication headsets, audio processors, and telephone systems; and Consumer, which includes Bluetooth and corded products for mobile device applications, personal computer and gaming headsets, and specialty products marketed for hearing impaired individuals.

We ship our products to approximately 80 countries through a network of distributors, retailers, resellers, wireless carriers, original equipment manufacturers, and telephony service providers.  We have well-developed distribution channels in North America, Europe, and in some parts of the Asia Pacific region where use of our products is widespread.  Our distribution channels in other geographic regions are less mature, and while we primarily serve contact centers in those regions, we continue to expand into the office, mobile, and gaming and computer audio markets in those regions and other international locations.  

Compared to the priorfirst half of fiscal year quarter,2016, net revenues increased 8.1%4.3% to $223.1$439.3 million. The increase in net revenues was primarily driven by higher revenues within our Consumer product category, which grew 23.1%18.0% or $19.7 million from the year ago period. Net revenuesperiod, partially offset by a decrease within our Enterprise product category also increased, growing by 2.7%which declined 0.6% or $1.8 million from the year ago period. We

Typically, we generate approximately 40% to 45% of our revenues from international sales; therefore, the impact of currency movements on our net revenues can be significant. In addition, in some international locations where we sell in United States Dollar ("USD") we also face additional pricing pressure, discounting, and lost business as thea stronger USD negatively impacts buying decisions. While the overall impact of foreign exchange fluctuations on our net revenues was not material, unfavorable impacts from the global economy and consumer spending together with exchange rate fluctuations could continue to negatively impact our net revenues in future periods.

Operating profit for the remainderfirst half of our fiscal year 2017.

Revenues from our Consumer products channel are seasonal and typically strongest in our third fiscal quarter, which includes the majority of the holiday shopping season. Additionally, other factors directly impact our Consumer product category performance, such as consumer preferences, changes in consumer confidence and other macroeconomic factors, fluctuations in foreign currency rates relative to the USD, product life-cycles (including the introduction and pace of adoption of new technology), and the competitive retail environment. In addition, retailer placements can cause volatility in quarter to quarter results.

Looking forward to the remainder of fiscal year 2017, UC continues to be oura primary focus area. With the vast majority of the UC opportunity still ahead of us, we believe we are in the early stage of a potentially long period of growth. We believe UC represents oura key long-term driver of revenue and profit growth, as we anticipate UC systems will become more commonly adopted by enterprises to reduce costs and improve collaboration. The increased adoption of UC in conjunction with our "as-a-service" offerings will also allow us to offer previously unavailable data insights that customers deem valuable. We believe growth of UC will increase overall headset adoption in enterprise environments, and we expect most of the growth in our Enterprise product category over the next five years to come from headsets designed for UC.

We remain cautious about the macroeconomic environment due to global economic and geopolitical uncertainty, which makes it difficult for us to gauge what impact the economy may have on our future business. Moreover, the UC market has not matured as quickly as we had initially anticipated. We will continue to monitor and prioritize expenditures that further our strategic long-term growth opportunities, including the use of software and services as part of our portfolio. UC will also remain the central focus of our sales force, marketing group, and other customer service and support teams as we continue investing in key strategic alliances and integrations with major UC vendors.

Enterprise products represent our largest source of both revenues and unit volumes.  Net revenues may vary due to seasonality, the timing of new product introductions and discontinuation of existing products, discounts and other incentives, and channel mix. Net revenues derived from sales into the Consumer products retail channel typically account for a seasonal increase in net revenues in the third quarter of our fiscal year.

Compared to the same prior year period, U.S. net revenues increased 2.5% in the six months ended September 30, 2016 due to solid growth in our domestic UC product revenues and Consumer product sales, driven by newly launched stereo Bluetooth and mono Bluetooth products and growth in UC product revenues.gaming products. These increases were partially offset by a decrease in coreCore Enterprise product revenues.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues consists primarily of direct manufacturing and contract manufacturer costs, warranty, freight, depreciation, and duties expense, freight expense, depreciation, duty expense, chargecharges for excess and obsolete inventory, royalties, and an allocation of overhead expenses, including facilities, IT, and human resources. 

Compared to the same prior year period,periods, gross profit as a percentage of net revenues decreased in the three and six months ended JuneSeptember 30, 2016 due primarily to a product mix shift within Enterprise toward more UC sales, which carry lower margins than our non-UC Enterprise products, and a product mix shift from Enterprise to Consumer. The decrease was partially offset by favorable material cost reductions.reductions and the favorable impact of the non-recurrence of a $3.6 million adjustment to our customer discount reserve for channel inventory taken in the year ago quarter.

There are significant variances in gross profit percentages between our higher and lower margin products; therefore, small variations in product mix, which can be difficult to predict, can have a significant impact on our gross profit.  Gross profit may also vary based on distribution channel, return rates, and other factors.

Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside services, including legal fees associated with protecting our intellectual property, expensed materials, travel expenses, depreciation, and an allocation of overhead expenses, including facilities, IT, and human resources.

During the three and six months ended JuneSeptember 30, 2016, research, development, and engineering expenses decreased compared to the same prior year periodperiods due primarily to decreased compensation and employee-related costs driven by lower headcount.the timing of the new product development cycle.

SELLING, GENERAL, AND ADMINISTRATIVE

Selling, general, and administrative expenses consist primarily of compensation costs, marketing costs, travel expenses, litigation and professional service fees, and allocations of overhead expenses, including facilities, IT, and human resources.

Compared to the same periodperiods a year ago, selling, general, and administrative expenses increased in the three and six months ended JuneSeptember 30, 2016 due primarily to increased legal fees related to on-going litigation, partially offset by decreased compensation and employee-related$2.8 million in executive transition costs driven by lower headcount.recorded in the quarter ended September 30, 2016.

INTEREST EXPENSE

Interest expense of $2.7 million and $7.3 million for the three months ended JuneSeptember 30, 2015 and 2016 respectively, was $7.3 million. Interest expense for the six months ended September 30, 2015 and 2016 was $10.1 million and $14.5 million, respectively. Such costs are primarily related to the 5.50% Senior Notes (as defined below) and includedinclude an immaterial amount in amortization of debt issuance costs.

INCOME TAX EXPENSE

We and our subsidiaries are subject to taxation in the U.S. as well as various foreign and state jurisdictions. All U.S. federal tax matters have been concluded for tax years prior to fiscal year 2013. The California Franchise Tax Board completed its examination of our 2007 and 2008 tax years. We have received a Notice of Proposed Assessment and responded by filing a protest letter. The amount of the proposed assessment is not material. Foreign income tax matters for material tax jurisdictions have been concluded for tax years prior to fiscal year 2011, except for the United Kingdom, which has been concluded for tax years prior to fiscal year 2015.

Our primary source of liquidity is cash provided by operating activities and, on occasion, financing obtained from capital markets.

As of JuneSeptember 30, 2016, we had a revolving credit facility available to provide up to $100.0 million of additional financing. The credit facility expires in May 2019.

We estimate total capital expenditures for fiscal year 2017 will be approximately $25.0 million to $30.0 million. Large capital expenditures during the year include costs associated with the purchase and related construction of a new smarter working office for our European headquarters in the Netherlands as well as costs associated with building and leasehold improvements at our U.S. headquarters, the implementation of a manufacturing execution system at our facility in Mexico, and other IT-related expenditures. The remainder of the anticipated capital expenditures for fiscal year 2017 consist primarily of capital investment in our manufacturing capabilities, including tooling for new products. We will continue to evaluate new business opportunities and new markets. Our future growth within the existing business or new opportunities and markets may require us to obtain additional financing or make additional capital expenditures to support such growth.

Net cash used for financing activities during the threesix months ended JuneSeptember 30, 2016 increased from the prior year period.  This increase was driven primarily by the non-recurrence of net proceeds received from issuance of $500.0 million aggregate principal amount of 5.50% senior notes (the “5.50% Senior Notes”) in the year ago period partially offset by a decrease in cash used for repurchases of our common stock.

On August 2,November 1, 2016, we announced that ourthe Audit Committee of theour Board ("the Audit Committee") had declared a cash dividend of $0.15 per share, payable on SeptemberDecember 9, 2016 to stockholders of record at the close of business on August 19,November 18, 2016.  We expect to continue paying a quarterly dividend of $0.15 per share; however, the actual declaration of dividends and the establishment of record and payment dates are subject to final determination by the Audit Committee each quarter after its review of our financial performance and financial position.

Our primary discretionary cash requirements have historically been for repurchases of our common stock and to fund stockholder dividends.  As a result of the issuance of the 5.50% Senior Notes, we have contractually required interest payments of approximately $13.8 million each November and May through the life of the notes. These payments require use of our domestic cash.

In October 2012, GN brought an antitrust action against Plantronics, Inc., alleging violations of the Sherman Act, the Clayton Act, and Delaware common law. In July 2016, we were ordered to pay sanctions related to certain discovery matters in the litigation consisting of monetary sanctions in the form of reasonable fees and costs incurred by GN in connection with the disputes leading to the motion for sanctions in an amount to be determined, and punitive sanctions in the amount of $3 million. As a result, for the three months ended June 30, 2016, we have accrued a $5 million charge within accrued liabilities on our condensed consolidated balance sheet. We expectrelated to makethis matter. During the three months ended September 30, 2016 we made a $3 million payment related to this liabilityliability. We expect to pay the remaining balance, which was reduced to$1.9 million, in the secondthird quarter of fiscal year 2017 which will require the use of our domestic cash. The timing of any additional paymentsThis amount is not yet known.included within accrued liabilities on our condensed consolidated balance sheet. The court also awarded additional non-monetary sanctions, including possible evidentiary sanctions and adverse inference jury instructions at trial. We believe the order may be appealed and reversed upon a favorable resolution of the antitrust case and we are not accruing any financial damages related to the underlying antitrust case. We believe that the underlying antitrust action is without merit and are vigorously defending ourselves; however, if GN prevails in its antitrust suit against us, we could be required to pay substantial damages, which would have a material adverse effect on our financial position, statement of cash flows, and results of operations.

From time to time, depending on market conditions, our Board has authorized plans under which we may repurchase shares of our common stock in the open market or through privately negotiated transactions. During the threesix months ended JuneSeptember 30, 2016, we repurchased 441,738613,021 shares of our common stock in the open market as part of these publicly announced repurchase programs. The total cost of these repurchases was $18.6$26.8 million, with an average price of $42.19$43.76 per share. In addition, we withheld 199,686206,561 shares with a total value of $8.8$9.1 million in satisfaction of employee tax withholding obligations upon the vesting of restricted stock granted under our stock plans.

In May 2011, we entered into a credit agreement with Wells Fargo Bank, National Association ("the Bank"), which was most recently amended in May 2016 (as amended, the "Amended Credit Agreement") to extend the term of the Credit Agreement by one year to May 9, 2019, and to waive a default under the Credit Agreement in effect as of March 31, 2016 in which our debt to EBITDA ratio minimally exceeded the previously agreed upon ratio of 3:1. The breach of the covenant was primarily a result of the restructuring expenses recorded in the third and fourth quarters of fiscal year 2016.

The Amended Credit Agreement provides for a $100.0 million unsecured revolving credit facility. Revolving loans under the Credit Agreement will bear interest, at our election, at (i) the Bank’s announced prime rate less 1.20% per annum or (ii) a daily one-month LIBOR rate plus 1.40% per annum. Principal, together with all accrued and unpaid interest, on the revolving loans is due and payable on May 9, 2019. We are also obligated to pay a commitment fee of 0.37% per annum on the average daily unused amount of the revolving line of credit, which fee shall be payable quarterly in arrears. We may prepay the loans and terminate the commitments under the Credit Agreement at any time, without premium or penalty, subject to the reimbursement of certain costs. As of JuneSeptember 30, 2016, we had no outstanding borrowings under the line of credit. The line of credit requires us to comply with the following two financial covenant ratios, in each case at each fiscal quarter end and determined on a rolling four-quarter basis:

In addition, we and our subsidiaries are required to maintain unrestricted cash, cash equivalents, and marketable securities plus availability under the Credit Agreement at the end of each fiscal quarter of at least $300.0 million. The Credit Agreement contains customary events of default that include, among other things, payment defaults, covenant defaults, cross-defaults with certain other indebtedness, bankruptcy and insolvency defaults, and judgment defaults. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement.

On May 2, 2016, we received a waiver from the lender for noncompliance with the minimum EBITDA covenant at March 31, 2016. Pursuant to the terms of the waiver and amendment to the Credit Agreement, the $16.2 million of restructuring charges recorded in our fiscal year 2016 will be excluded from the lender’s rolling four-quarter EBITDA calculation.  This exclusion of restructuring charges does not automatically extend to any such future charges, should they be incurred. The breach was not considered to be a cross-default on our 5.50% Senior Notes and as such had no impact on the amount or timing of amounts payable related to those debt instruments. As of JuneSeptember 30, 2016, we were in compliance with all ratios and covenants by a substantial margin.

Our liquidity, capital resources, and results of operations in any period could be affected by repurchases of our common stock, the payment of cash dividends, the exercise of outstanding stock options, restricted stock grants under stock plans, and the issuance of common stock under our Employee Stock Purchase Plan (“ESPP”).  We receive cash from the exercise of outstanding stock options under our stock plan and the issuance of shares under our ESPP. However, the resulting increase in the number of outstanding shares from these equity grants and issuances could affect our earnings per share. We cannot predict the timing or amount of proceeds from the sale or exercise of these securities or whether they will be exercised, forfeited, canceled, or will expire. 

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides us with financing and liquidity support, market risk, or credit risk support.

We utilize several contract manufacturers to procure raw materials, components, and subassemblies for our products. We provide these contract manufacturers with demand information that typically covers periods up to 13 weeks, and they use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers. Consistent with industry practice, we acquire components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information. As of JuneSeptember 30, 2016, we had outstanding off-balance sheet third-party manufacturing, component purchase, and other general and administrative commitments of $164.2$173.2 million, including off-balance sheet consigned inventories of $43.6$57.6 million as discussed above.

The financial statements include the accounts of the Company and its wholly owned subsidiaries.  All intercompany balances and transactions have been eliminated.

In JuneAugust 2016, the Financial Accounting Standards Board ("FASB") issued additional guidance regarding the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is intended to eliminate the diversity in practice by adding or clarifying guidance on eight specific cash flow issues. The guidance is effective for the Company's fiscal year ending March 31, 2019 with early adoption permitted provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method unless deemed impracticable, in which case, prospective application is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its statement of cash flows.

In June 2016, the FASB issued additional guidance regarding the measurement of credit losses on financial instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses.  The guidance is effective for the Company's fiscal year ending March 31, 2021 with early adoption permitted beginning in the first quarter of fiscal year 2020. The Company is currently evaluating the impact the adoption of this standard will have on its results of operations, financial position, and cash flows.

In March 2016, the FASB issued additional guidance regarding share-based compensation, which outlines new provisions intended to simplify various aspects related to accounting for share-based payments and their presentation in the financial statements. The guidance is effective for the Company's fiscal year ending March 31, 2018. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its results of operations, financial position, and cash flows.

In February 2016, the FASB issued additional guidance regarding both operating and financing leases, requiring lessees to recognize on their balance sheets “right-of-use assets” and corresponding lease liabilities, measured on a discounted basis over the lease term. Virtually all leases will be subject to this treatment except leases that meet the definition of a “short-term lease.”  For expense recognition, the dual model requiring leases to be classified as either operating or finance leases has been retained from the prior standard. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. Classification will use criteria very similar to those applied in current lease accounting, but without explicit bright lines. Extensive additional quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of expense recognized and expected to be recognized. The new lease guidance will essentially eliminate off-balance sheet financing. The guidance is effective for the Company's fiscal year ending March 31, 2020. The new standard must be adopted using a modified retrospective transition that provides for certain practical expedients and requires the new guidance to be applied at the beginning of the earliest comparative period presented. While we are not yet in a position to assess the full impact of the application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right-to-use assets may have a significant impact on its total assets and liabilities with a minimal impact on its equity.

In January 2016, the FASB issued additional guidance regarding the recognition and measurement of financial assets and liabilities. Changes to the current GAAP model primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The Company is required to adopt the standard in the first quarter of its fiscal year ending March 31, 2019, but may elect to adopt earlier as permitted under the standard. The Company is currently evaluating what impact, if any, the adoption of this standard will have on its results of operations, financial position, and cash flows.

In July 2015, the FASB issued additional guidance regarding the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. The Company is required to adopt the standard in the first quarter of its fiscal year ending March 31, 2018, but may elect to adopt earlier as permitted under the standard. The adoption is not expected to have a material impact on the Company's results of operations, financial position, or cash flows.

In May 2014, the FASB issued additional guidance regarding revenue from contracts with customers. While the standard supersedes existing revenue recognition guidance, it closely aligns with current GAAP. Under the new standard, revenue will be recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. In March 2016, the FASB issued additional guidance concerning "Principal versus Agent" considerations (reporting revenue gross versus net); in April 2016, the FASB issued additional guidance on identifying performance obligations and licensing; and in May 2016, the FASB issued additional guidance on collectability, noncash consideration, presentation of sales tax, and transition. These updates are intended to improve the operability and understandability of the implementation guidance and have the same effective date and transition requirements as the greater "contracts with customers" standard. The Company is required to adopt the standard, as amended, in the first quarter of its fiscal year ending March 31, 2019 although, under the standard, it may adopt as early as the first quarter of its fiscal year ending March 31, 2018.  Presently, the Company is not yet in a position to assess the application date. The Company is currently evaluating whathas not yet completed its final review of the impact if any, the adoption of this standard will haveguidance, although it currently does not anticipate a material impact on its revenue recognition practices. The Company continues to review variable consideration, potential disclosures, and its method of adoption to complete its evaluation of the impact on its consolidated results of operations, financial position, and cash flows.statements. In addition, the Company will continue to monitor additional changes, modifications, clarifications or interpretations being undertaken by the FASB, which may impact its current conclusions.

The following tables summarize the Company’s cash and available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category recorded as cash and cash equivalents, short-term, or long-term investments as of JuneSeptember 30, 2016 and March 31, 2016 (in thousands):

There were no transfers between fair value measurement levels during the three and six months ended JuneSeptember 30, 2015 and 2016.

All financial assets and liabilities are recognized or disclosed at fair value in the financial statements or the accompanying notes thereto. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

The Company's Level 1 financial assets consist of Mutual Funds and US Treasury Notes. The fair value of Level 1 financial instruments is measured based on the quoted market price of identical securities.

As of JuneSeptember 30, 2016, the Company held bank deposits of $0.8 million and investments in mutual funds totaling $10.6$11.5 million, all of which related to debt and equity securities that are held in a rabbi trusttrusts under non-qualified deferred compensation plans. The total related deferred compensation liability was $10.6$12.8 million at JuneSeptember 30, 2016. The fair value of debt and equity securities held in the rabbi trusttrusts at March 31, 2016 was $9.5 million. The total related deferred compensation liability at March 31, 2016 was $9.5$10.7 million.

The bank deposits are recorded on the condensed consolidated balance sheets under "Cash and cash equivalents". The securities are classified as trading securities and are recorded on the condensed consolidated balance sheets under "Short-term investments". The liability is recorded on the condensed consolidated balance sheets under “Other long-term liabilities” and "Accrued liabilities".

 

The Company's warranty obligation is included as a component of accrued liabilities on the condensed consolidated balance sheets. Changes in the warranty obligation during the threesix months ended JuneSeptember 30, 2015 and 2016 were as follows:

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets of a subsidiary, matters related to the Company's conduct of business and tax matters prior to the sale. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various triggering events relating to the sale and use of its products and services.  

In addition, the Company also provides protection to customers against claims related to undiscovered liabilities, additional product liability, or environmental obligations.  In addition, theThe Company has also entered into indemnification agreements with its directors, officers and certain of its officersother personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers of the Company.Company or certain of its affiliated entities. The Company maintains director and officer liability insurance, which may cover certain liabilities arising from its obligation to indemnify its directors, officers and officerscertain other personnel in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these agreements due to the limited history of prior claims and the unique facts and circumstances involved in each particular claim. Such indemnification obligations might not be subject to maximum loss clauses. Historically, the Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in the condensed consolidated financial statements.

On October 12, 2012, GN Netcom, Inc. ("GN") sued the Company in the United States ("U.S.") District Court for the District of Delaware, alleging violations of the Sherman Act, the Clayton Act, and Delaware common law. In its complaint, GN specifically alleges four causes of action: monopolization, attempted monopolization, concerted action in restraint of trade, and tortious interference with business relations. GN claims that the Company dominates the market for headsets sold into contact centers in the U.S. and that a critical channel for sales of headsets to contact centers is through a limited network of specialized independent distributors (“SIDs”). GN asserts that the Company attracts SIDs through exclusive distributor agreements and alleges that the use of these agreements is illegal.

The Company believes that the underlying antitrust action is without merit and is vigorously defending itself. However, following the court order described above, there exists an increased risk of the jury finding in favor of the plaintiff. The date for further proceedings of the underlying antitrust case has not yet been scheduled. The Company is unable to provide an estimate of the possible loss or range of possible loss resulting from these allegations and has not accrued any financial damages relating to the antitrust case. The trial for the underlying antitrust case is currently scheduled to commence in October 2017.

 

In addition to the specific mattersmatter discussed above, the Company is involved in various legal proceedings arising in the normal course of conducting business.  For such legal proceedings, where applicable, the Company has accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to the Company's financial condition, results of operations, or cash flows.  With respect to proceedings for which no accrual has been made, the Company is not able to estimate an amount or range of any reasonably possible additional losses because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings.  However, based upon the Company's historical experience, the resolution of these proceedings is not expected to have a material effect on the Company's financial condition, results of operations or cash flows.  The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.

In May 2015, the Company issued $500.0 million aggregate principal amount of 5.50% senior notes (the “5.50% Senior Notes”). The 5.50% Senior Notes mature on May 31, 2023, and bear interest at a rate of 5.50% per annum, payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2015. The Company received net proceeds of $488.4 million from the issuance of the 5.50% Senior Notes, net of issuance costs of $11.6 million which are being amortized to interest expense over the term of the 5.50% Senior Notes using the effective interest method.

The fair value of the 5.50% Senior Notes was determined based on inputs that were observable in the market, including the trading price of the 5.50% Senior Notes when available (Level 2). The estimated fair value and carrying value of the 5.50% Senior Notes were as follows:

The Company may redeem all or a part of the 5.50% Senior Notes, upon not less than 30 or more than a 60 day notice; however, the applicable redemption price will be determined as follows:

In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 5.50% Senior Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 5.50% Senior Notes contain restrictive covenants that, among other things, limit the Company's ability to create certain liens and enter into sale and leaseback transactions; create, assume, incur, or guarantee additional indebtedness of its subsidiaries without such subsidiary guaranteeing the 5.50% Senior Notes on an unsecured unsubordinated basis; and consolidate or merge with, or convey, transfer or lease all or substantially all of the assets of the Company and its subsidiaries to another person. As of JuneSeptember 30, 2016, the Company was in compliance with all covenants.

On May 9, 2011, the Company entered into a credit agreement with Wells Fargo Bank, National Association ("the Bank"), which was most recently amended on May 2, 2016 (as amended, the "Amended Credit Agreement") to extend the term of the Credit Agreement by one year to May 9, 2019, and to waive a default under the Credit Agreement in effect as of March 31, 2016 in which the Company's debt to EBITDA ratio minimally exceeded the previously agreed upon ratio of 3:1. The breach of the covenant was primarily a result of the restructuring expenses recorded in the third and fourth quarters of fiscal year 2016.

The Amended Credit Agreement provides for a $100.0 million unsecured revolving credit facility. Revolving loans under the Credit Agreement will bear interest, at the Company’s election, at (i) the Bank’s announced prime rate less 1.20% per annum or (ii) a daily one-month LIBOR rate plus 1.40% per annum. Interest is payable quarterly in arrears on the first day of each April, July, October and January, commencing July 1, 2015.2016. Principal, together with all accrued and unpaid interest, on the revolving loans is due and payable on May 9, 2019. The Company is also obligated to pay a commitment fee of 0.37% per annum on the average daily unused amount of the revolving line of credit, which fee shall be payable quarterly in arrears on the first day of each April, July, October and January, commencing July 1, 2015.2016.

The Company may prepay the loans and terminate the commitments under the Credit Agreement at any time, without premium or penalty, subject to the reimbursement of certain costs. As of March 31, 2016 and JuneSeptember 30, 2016, the Company had no outstanding borrowings under the line of credit.

The Credit Agreement contains customary affirmative and negative covenants, including, among other things, covenants limiting the ability of the Company to incur debt, make capital expenditures, grant liens, merge or consolidate, and make investments. The Credit Agreement also requires the Company to comply with certain financial covenants, including (i) a maximum ratio of funded debt to EBITDA and (ii) a minimum EBITDA coverage ratio, in each case, tested as of each fiscal quarter and determined on a rolling four-quarter basis. In addition, the Company and its subsidiaries are required to maintain unrestricted cash, cash equivalents and marketable securities plus availability under the Credit Agreement at the end of each fiscal quarter of at least $300.0 million. The Credit Agreement contains customary events of default that include, among other things, payment defaults, covenant defaults, cross-defaults with certain other indebtedness, bankruptcy and insolvency defaults, and judgment defaults. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement.

The Company recognizes the grant-date fair value of stock-based compensation as compensation expense using the straight-line attribution approach over the service period for which the stock-based compensation is expected to vest. The following table summarizes the amount of stock-based compensation included in the condensed consolidated statements of operations:

The gross fair value of the Company's outstanding derivative contracts at the end of each period was as follows:

The effect of non-designated derivative contracts recognized in other non-operating income and (expense), net in the condensed consolidated statements of operations was as follows:

The Company hedges a portion of the forecasted EUR and GBP denominated revenues with costless collars. On a monthly basis, the Company enters into option contracts with a six to eleven month term.  Collar contracts are scheduled to mature at the beginning of each fiscal quarter, at which time the instruments convert to forward contracts. The Company also enters into cash flow forwards with a three month term. Once the hedged revenues are recognized, the forward contracts become non-designated hedges to protect the resulting foreign monetary asset position for the Company.