Plantronics 2008 Annual Report Download - page 66

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non-employee directors based on estimated fair values. SFAS No. 123(R) replaced SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS No. 123”), and supersedes the Company’s previous accounting under the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Under the intrinsic value
method, with the exception of the Company’s restricted stock awards, the Company generally recorded no stock-based compensation
expense associated with its stock option and ESPP awards.
The Company elected to apply the modified prospective transition adoption method as provided by SFAS No. 123(R), and
consequently, previously reported amounts have not been restated. Under this method, compensation expense for share-based
payments include: (a) compensation expense for all stock-based payment awards granted prior to but not yet vested as of April 2,
2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation
expense for all stock-based payment awards granted or modified on or after April 2, 2006, based on the grant date fair value estimated
in accordance with the provisions of SFAS No. 123(R). The estimated fair value of the Company’s stock-based awards is amortized
over the vesting period of the awards on a straight-line basis. Compensation expense is recognized only for those awards that are
expected to vest, and as such, amounts have been reduced by estimated forfeitures. Previously, under SFAS No. 123, the Company
recorded forfeitures as they occurred.
Prior to the adoption of SFAS No. 123(R), benefits of tax deductions in excess of recognized compensation costs were reported as
operating cash flows in the consolidated statements of cash flows. SFAS No. 123(R) requires that they be reported as a financing cash
inflow rather than as an operating cash inflow.
The Company has elected to adopt the alternative transition method provided in FASB Staff Position No. 123(R)-3, "Transition
Election Related to Accounting for Tax Effects of Share-Based Payment Awards" for calculating the tax effects of stock-based
compensation pursuant to SFAS No. 123(R). The alternative transition method includes simplified methods to establish the beginning
balance of the additional paid-in capital pool ("APIC pool") related to the tax effects of employee stock-based compensation, and to
determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-
based compensation awards that are outstanding upon adoption of SFAS No. 123(R).
Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-
term securities, long-term investments, and trade receivables. Plantronics’ investment policies for cash limit investments to those that
are short-term and low risk and also limit the amount of credit exposure to any one issuer and restrict placement of these investments
to issuers evaluated as creditworthy. With the recent uncertainties in the credit markets, the Company has classified all of its ARS
investments as long-term since these investments are not currently liquid, and the Company will not be able to access these funds until
a future auction of these investments is successful, the underlying securities are redeemed by the issuer, or a buyer is found outside of
the auction process. All of the ARS investments are investment grade quality and were in compliance with the Company’s investment
policy at the time of acquisition. Cash equivalents have a maturity when purchased, of three months or less; short-term securities have
a maturity, when purchased, of greater than three months. Concentrations of credit risk with respect to trade receivables are generally
limited due to the large number of customers that comprise the Company’s customer base and their dispersion across different
geographies and markets. Plantronics performs ongoing credit evaluations of its customers' financial condition and generally requires
no collateral from its customers. The Company maintains an allowance for uncollectible accounts receivable based upon expected
collectibility of all accounts receivable.
Certain components that meet the Company’s requirements are available only from a limited number of suppliers. The rapid rate of
technological change and the necessity of developing and manufacturing products with short lifecycles may intensify these risks. The
inability to obtain components as required, or to develop alternative sources, as required in the future, could result in delays or
reductions in product shipments, which in turn could have a material adverse effect on the Company’s business, financial condition,
results of operations and cash flows.
Other Guarantees and Obligations
As permitted and/or required under Delaware law and to the maximum extent allowable under that law, the Company has agreements
whereby it indemnifies its current and former officers and directors for certain events or occurrences while the officer or director is, or
was, serving at the Company’s request in such capacity. These indemnifications are valid as long as the director or officer acted in
good faith and in a manner that a reasonable person believed to be in, or not opposed to, the best interests of the corporation, and with
respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum
potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited;
however, the Company has a director and officer insurance policy that may, within the coverage afforded by the policy, limit its