Plantronics 2005 Annual Report Download - page 87

part ii
COMPREHENSIVE INCOME
Comprehensive income includes charges or credits to equity that are not the result of transactions with
owners. 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 hedges and unrealized gains and losses related to our marketable securities.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ‘‘Accounting for Stock-Based Compensation’’
(‘‘SFAS 123’’), encourages, but does not require, companies to record compensation cost for stock-based
employee compensation plans based on the fair value of options granted. We have elected to continue to
account for stock-based compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees’’ and related interpreta-
tions, and to provide additional disclosures with respect to the pro forma effects of adoption had we
recorded compensation expense in accordance with SFAS 123.
Had compensation expense for our stock option and stock purchase plans been determined based on the
fair value method prescribed by SFAS 123, our net income and net income per share would have been as
follows (in thousands, except income per share):
Fiscal Year Ended March 31, 2003 2004 2005
Net income:
Net income — as reported $ 41,476 $ 62,279 $ 97,520
Add Stock-based employee compensation expense, net
of tax effect, included in net income — — 121
Less stock based compensation expense determined
under fair value based method, net of taxes (14,196) (14,484) (35,278)
Net income — pro forma $ 27,280 $ 47,795 $ 62,363
Basic net income per share — as reported $ 0.92 $ 1.39 $ 2.02
Basic net income per share — pro forma $ 0.60 $ 1.06 $ 1.29
Diluted net income per share — as reported $ 0.89 $ 1.31 $ 1.92
Diluted net income per share — pro forma $ 0.59 $ 1.00 $ 1.23
The impact on pro forma net income and net income per share in the table above may not be indicative of
the effect in future years as options vest over several years and Plantronics continues to grant stock
options to new and current employees.
On March 8, 2005, we accelerated the vesting of certain unvested and ‘‘out-of-the-money’’ stock options
outstanding under the company’s stock plans that have exercise prices per share of $38.19 or higher.
Options to purchase approximately 1.5 million shares of the company’s common stock became fully
vested and exercisable immediately. In addition, in order to prevent unintended personal benefits to
executive officers and directors, restrictions will be imposed on any shares received through the exercise of
accelerated options held by those individuals. Those restrictions will prevent the sale of any shares
received from the exercise of an accelerated option prior to the earlier of the original vesting date of the
option or the individual’s termination of employment.
The Company believes that the acceleration of the vesting was in the best interest of stockholders as it
will enable the Company to avoid recognizing in its income statement compensation expense associated
with the options in future periods, primarily as a result of FASB Statement No. 123R ‘‘Share — Based
Payment’’, which becomes effective for the Company in the first quarter of fiscal 2007.
AR 2005 ⯗59