Plantronics 2010 Annual Report Download - page 56

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a
result of a number of factors including those set forth in "Risk Factors Affecting Future Operating Results."
INTEREST RATE AND MARKET RISK
We had cash and cash equivalents totaling $350.0 million at March 31, 2010 compared to $158.2 million at March 31, 2009. We had
short-term investments totaling $19.2 million as of March 31, 2010 compared to $60.0 million at March 31, 2009. We had no long-
term investments as of March 31, 2010 as compared to $23.7 million as of March 31, 2009. Cash equivalents have a remaining
maturity of three months or less at the date of purchase; short-term securities have a remaining maturity of greater than three months at
the date of purchase; and long-term investments have maturities greater than one year, or we do not currently have the ability to
liquidate the investment. As of March 31, 2010, all of the ARS portfolio was held in our name at a limited number of major financial
institutions and were concentrated primarily in student loans. The ARS were classified as short-term trading securities due to
management’s intent to exercise the put option with UBS and the expectation that the ARS will be sold within twelve months
Interest rates have continued to decline in fiscal 2010 compared to the prior year. Our cash and cash equivalents, net of short-term
working capital needs, are primarily invested in U.S. Treasury funds, which had an average yield of approximately 0.10% for fiscal
2010. Approximately 40% of our interest income in fiscal 2010 was derived from our ARS portfolio which had an average yield of
approximately 0.71%. The ARS are currently resetting at rates of approximately 0.75% in April 2010. If these rates continue, our
interest income will slightly increase in fiscal 2011 as compared to fiscal 2010. Beyond that, a hypothetical increase or decrease in
our interest rates by 10 basis points would have a minimal impact on our interest income. In addition, if we sell our ARS under the
Rights during the period from June 30, 2010 through July 2, 2012 as we intend to do and invest the proceeds in a securities portfolio
similar to our current cash, cash equivalents and short-term investment portfolio as of March 31, 2010, our interest income could
decrease.
FOREIGN CURRENCY EXCHANGE RATE RISK
We use a hedging strategy to diminish, and make more predictable, the effect of currency fluctuations. All of our hedging activities
are entered into with large financial institutions including Wells Fargo, Bank of America Corporation, Goldman Sachs Group, Inc.,
and JPMorgan Chase & Co. who are periodically evaluated for credit risks. We hedge our balance sheet exposure by hedging Euro
and Great Britain Pound denominated receivables, payables, and cash balances, and our economic exposure by hedging a portion of
anticipated Euro and Great Britain Pound denominated sales and Mexican Peso denominated costs. We can provide no assurance that
our strategy will be successfully implemented and that exchange rate fluctuations will not materially adversely affect our business in
the future.
We experienced foreign currency gains in fiscal 2010, partially a result from our hedging activities. Although we hedge a portion of
our foreign currency exchange exposure, weakening of certain foreign currencies, particularly the Euro and the Great Britain Pound in
comparison to the U.S. Dollar, could result in foreign exchange losses in future periods.
Non-designated Hedges
We hedge our Euro and Great Britain Pound denominated receivables, payables and cash balances by entering into foreign exchange
forward contracts.