Plantronics 2015 Annual Report Download - page 27

We may also decide to incur indebtedness to support our repurchases, dividends or other activities. We have previously drawn
funds and have increased the frequency and amount of draws under our Credit Agreement in connection with our corporate return
of capital policy and generally from time to time. Amounts drawn under the Credit Agreement are subject interest charges.
Moreover, 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, our operating
results, and dividend declarations, which, in turn, may negatively impact our stock price. In addition, as we borrow additional
funds under the Credit Agreement, we may be required to increase the borrowing limit under the Credit Agreement or seek additional
sources of borrowing. Given current credit and debt markets, there is no assurance that if we were to seek additional credit or
debt, it would be available when needed or if it is available, the cost or terms and conditions would be acceptable.
Our corporate tax rate may increase or we may incur additional income tax liabilities, 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 historically been generated 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applicable tax laws were rescinded or changed, or the mix of our earnings shifts from lower rate jurisdictions to higher rate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. In addition, various governmental tax authorities have
recently increased their scrutiny of tax strategies employed by corporations and individuals. 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.
We are also subject to examination by the Internal Revenue Service ("IRS") and other tax authorities, including state revenue
agencies and foreign governments. In July 2012, the IRS commenced an examination of our 2010 tax year. While we regularly
assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to
determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these
examinations will not materially adversely affect our financial condition and results of operations.
Our business will be materially adversely affected if we are unable to develop, manufacture, and market new products in
response to changing customer requirements and new technologies.
The technology used in our products is evolving more rapidly now than in the past and we anticipate this trend will continue.
Historically, new products primarily offered stylistic changes and quality improvements rather than significant new technologies.
Our increasing reliance and focus on the UC market has resulted in a growing number of our products that integrate complex,
state-of-the-art technology, increasing the risks associated with new product ramp-up, including product performance and defects
in the early stages of production. For example, in the fourth quarter of fiscal year 2015, we announced the recall of a newly
launched product, the Encore Pro, that failed to meet our quality standards. The recall negatively impacted revenues in the fourth
quarter of fiscal year 2015 and the first quarter of fiscal year 2016.
Office phones have begun to incorporate Bluetooth functionality, which has opened the market to consumer Bluetooth headsets
and reduced the demand for our traditional office telephony headsets and adapters, which has resulted in lost revenue and lower
margins. Additionally, with the advent of more and different types of mobile devices the need for traditional desk phones with a
distinct headset is decreasing, and may limit the sale of both corded and cordless headsets in the future. Moreover, the increasing
adoption of wireless headsets has also resulted in increased development costs associated with the introduction of new wireless
standards and more frequent changes in those standards and capabilities as compared to wired technologies. If sales and margins
on our traditional corded products decline and we are unable to successfully design, develop, and market alternatives at historically
comparable margins, our revenue and profits may decrease.
In addition, innovative technologies such as UC have moved the platform for certain of our products from our customers' closed
proprietary systems to open platforms such as the PC, smart phones and tablets. In turn, these devices have become more open
as a result of technologies such as cloud computing and trends toward more open source software code development. As a result,
the risk that current and potential competitors could enter our markets and commoditize our products by offering similar products
has increased.
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