Plantronics 2005 Annual Report Download - page 75

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part ii
denominated sales. However, we have no assurance that exchange rate fluctuations will not materially
adversely affect our business in the future.
The following table provides information about our financial instruments and underlying transactions
that are sensitive to foreign exchange rates, including foreign currency forward-exchange contracts and
nonfunctional currency-denominated receivables and payables. The net amount that is exposed to
changes in foreign currency rates is then subjected to a 10% change in the value of the foreign currency
versus the U.S. dollar.
Net
Underlying FX Gain FX Gain
Foreign Net Exposed (Loss) From (Loss) From
USD Value Currency Long (Short) 10% 10%
March 31, 2005 of Net FX Transaction Currency Appreciation Depreciation
in millions Contracts Exposures Position of USD of USD
Currency –
forward
contracts
Euro $5.9 $ 21.3 $(15.4) $(1.7) $1.4
Great British
Pound 2.2 9.0 (6.8) (3.2) 0.6
Net position $8.1 $ 30.3 $(22.2) $(4.9) $2.0
Beginning fiscal 2004, we expanded our hedging activities to include a hedging program to hedge our
economic exposure by hedging a portion of forecasted Euro and Great British Pound denominated sales
As of March 31, 2005, we had foreign currency call option contracts of approximately 443.1 million and
£14.9 million denominated in Euros and Great British Pounds, respectively. As of March 31, 2005, we
also had foreign currency put option contracts of approximately 443.1 million and £14.9 million
denominated in Euros and Great British Pounds, respectively. Collectively, our option contracts hedge
against a portion of our forecasted foreign denominated sales. If these net exposed currency positions are
subjected to either a 10% appreciation or 10% depreciation versus the U.S. dollar, we could incur a gain of
$7.5 million or a loss of $8.1 million.
The table below presents the impact on our currency option contracts of a hypothetical 10% appreciation
and a 10% depreciation of the U.S. dollar against the indicated option contract type for cash flow hedges:
FX Gain FX Gain
(Loss) From (Loss) From
USD Value 10% 10%
March 31, 2005 of Net FX Appreciation Depreciation
in millions Contracts of USD of USD
Currency – option contracts
Call options $(84.1) $2.9 $(6.6)
Put options 80.0 4.6 (1.5)
Net position $ (4.1) $7.5 $(8.1)
During fiscal 2005, we entered into forward foreign exchange contracts of approximately CNY
94.9 million denominated in China Yuan, which is $11.7 million. These forward foreign exchange
AR 2005 ⯗47