Plantronics 2011 Annual Report Download - page 27

We are exposed to fluctuations in foreign currency exchange rates which may adversely affect our revenues, gross profit, and
profitability.
Fluctuations in foreign currency exchange rates impact our revenues and profitability because we report our financial statements
in U.S. Dollars, whereas a significant portion of our sales to customers are transacted in other currencies, particularly the Euro
and the Great Britain Pound (“GBP”). Furthermore, fluctuations in foreign currency rates impact our global pricing strategy
resulting in our lowering or raising selling prices in one or more currencies in order to avoid disparity with U.S. Dollar prices and
to respond to currency-driven competitive pricing actions. We also have significant manufacturing operations in Mexico and
fluctuations in the Mexican Peso exchange rate can impact our gross profit and profitability. Currency exchange rates are volatile,
and while we hedge our major exposures, changes in exchange rates in the future may still have a negative impact on our financial
results. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in
relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political
developments.
We hedge a portion of our Euro and GBP forecasted revenue exposures for the future 12 month period. In addition, we hedge a
portion of our Peso forecasted cost of revenues. Although we have employed these hedging techniques to minimize these risks,
we can offer no assurance that such strategies will be effective. If the Euro and GBP fall against the U.S. Dollar, our revenues,
gross profit and profitability in the future could be negatively affected.
We also have foreign currency forward contracts denominated in Euros, GBP and Australian Dollars which hedge against a portion
of our foreign-currency denominated assets and liabilities. Our foreign currency forward contracts reduce, but do not eliminate,
the impact of currency exchange rate movements. For example, we do not execute forward contracts in all currencies in which
we conduct business.
Our corporate tax rate may increase, which could adversely impact our cash flow, financial condition and results of operations.
We have significant operations in various tax jurisdictions throughout the world, and a substantial portion of our taxable income
has been generated historically in jurisdictions outside of the U.S. Currently, some of our operations are taxed at rates substantially
lower than U.S. tax rates. If our income in these lower tax jurisdictions were no longer to qualify for these lower tax rates, the
applicable tax laws were rescinded or changed, or the mix of our earnings shifts from lower rate jurisdictions to higher rate
jurisdictions, our operating results could be materially adversely affected. If U.S. or other foreign tax authorities change applicable
tax laws or successfully challenge the manner in which our profits are currently recognized, our overall taxes could increase, and
our business, cash flow, financial condition, and results of operations could be materially adversely affected.
Our Board of Directors has authorized the repurchase of up to 7,000,000 shares of our common stock to enhance stockholder
value which enhanced value may not be realized. Stock repurchases may not prove to be the best use of our cash resources
and may require us to draw funds on our new credit agreement.
In May 2011, our Board of Directors authorized the repurchase of up to 7,000,000 shares of our outstanding common stock. On
May 9, 2011, we entered into two separate Master Confirmation and Supplemental Confirmations with Goldman, Sachs & Co.
(“Goldman”) pursuant to an accelerated share repurchase program (the “ASR Program”) under which we will repurchase shares
of our common stock for an aggregate purchase price of $100 million, which was paid to Goldman in May 2011. To augment our
financial flexibility to facilitate this share repurchase program, on May 9, 2011, we entered into a credit agreement (the “Credit
Agreement”) with Wells Fargo Bank, National Association which provides for a $100 million unsecured revolving credit facility.
At the closing of the Credit Agreement and through the filing of this Form 10-K, we did not draw any funds under the facility as
we used domestic cash on hand to make the payment to Goldman.
There can be no assurance of the following:
• the impact on our stock price as a result of the ASR Program; and
• when or if we will repurchase additional shares under the 7,000,000 share authorization or to make additional stock
repurchases thereafter;
Also, we will require additional funds to repurchase shares over and above those in the ASR Program. If we do not generate
further domestic cash flow from operations, to make our repurchases, we may be required to draw funds on the Credit Agreement
at which time we would incur interest expense. The Credit Agreement contains affirmative and negative covenants with which
we must comply. These restrictions apply regardless of whether any loans are outstanding and could adversely impact how we
operate our business.
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