Plantronics 2010 Annual Report Download - page 68

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Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period, less common stock subject to repurchase. Diluted earnings per share is computed by
dividing the net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive
common stock outstanding during the period. Potentially dilutive common shares include shares issuable upon the exercise of
outstanding stock options, the vesting of restricted stock awards and the estimated shares to be purchased under the Company’s
employee stock purchase plan, which are reflected in diluted earnings per share by application of the treasury stock method. Under
the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of stock-based
compensation cost for future services that the Company has not yet recognized, and the amount of tax benefit that would be recorded
in additional paid-in capital upon exercise are assumed to be used to repurchase shares. (See Note 16)
Comprehensive Income (Loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (expense). Other
comprehensive income (loss) refers to income, expenses, gains, and losses that under generally accepted accounting principles are
recorded as an element of stockholders’ equity but are excluded from net income (loss). Accumulated other comprehensive income,
as presented in the accompanying consolidated balance sheets, consists of foreign currency translation adjustments, unrealized gains
and losses on derivatives designated as cash flow hedges, net of tax, and unrealized gains and losses related to the Company’s
investments, net of tax.
Foreign Operations and Currency Translation
The functional currency of the Company’s foreign sales and marketing offices, except as noted in the following paragraph, is the local
currency of the respective operations. For these foreign operations, the Company translates assets and liabilities into U.S. dollars
using the period-end exchange rates in effect as of the balance sheet date and translates revenues and expenses using the average
monthly exchange rates. The resulting cumulative translation adjustments are included in Accumulated other comprehensive income,
a separate component of Stockholders' equity in the accompanying consolidated balance sheets.
The functional currency of the Company’s European finance, sales and logistics headquarters in the Netherlands, sales office and
warehouse in Japan, manufacturing facilities in Tijuana, Mexico and logistic and research and development facilities in China, is the
U.S. Dollar. For these foreign operations, assets and liabilities denominated in foreign currencies are re-measured at the period-end or
historical rates, as appropriate. Revenues and expenses are re-measured at average monthly rates which the Company believes to be a
fair approximation of actual rates. Currency transaction gains and losses are recognized in current operations. Realized foreign
currency exchange gains (losses) were $0.9 million, $(6.3) million, and $1.0 million in fiscal 2008, 2009 and 2010, respectively.
Stock-Based Compensation Expense
The Company applies the provisions of the Compensation – Stock Compensation Topic of the FASB ASC which requires the
measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee
directors based on estimated fair values.
The Company has elected to adopt the alternative transition method for calculating the tax effects of stock-based compensation
pursuant to the accounting principle. 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 the accounting principle.
Treasury Shares
The Company repurchases treasury shares in accordance with approved repurchase plans. On January 25, 2008, the Board of
Directors authorized the repurchase of 1,000,000 shares of common stock under which the Company may purchase shares in the open
market, depending on the market conditions, from time to time. During fiscal 2008 and 2009, the Company repurchased 1,000,000
shares of its common stock under this repurchase plan in the open market at a total cost of $18.3 million and an average price of
$18.30 per share. On November 10, 2008, the Board of Directors authorized a new plan to repurchase 1,000,000 shares of common
stock. During fiscal 2009 and 2010, the Company repurchased 1,000,000 shares of its common stock under this plan in the open
market at a total cost of $23.7 million and an average price of $23.66 per share. On November 27, 2009, the Board of Directors
authorized a new plan to repurchase 1,000,000 shares of common stock. During fiscal 2010, the Company repurchased 1,000,000
shares of its common stock under this plan in the open market at a total cost of $26.3 million and an average price of $26.26 per share.