Plantronics 2006 Annual Report Download - page 88

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Foreign Operations and Currency Translation
The functional currency of Plantronics’ manufacturing operations and design center in Tijuana, Mexico,
foreign research and development facilities, and foreign sales and marketing offices, except for the
Netherlands entity, is the local currency of the respective operations. For these foreign operations, the
Company translates assets and liabilities into U.S. dollars using period-end exchange rates in effect as of
the balance sheet date and translates revenues and expenses using average monthly exchange rates. The
resulting cumulative translation adjustments are included in accumulated other comprehensive income
(loss) as a separate component of stockholders’ equity in the accompanying condensed consolidated
balance sheets.
The functional currency of the Company’s European finance, sales and logistics headquarters in the
Netherlands, sales office, warehouse and distribution center in Hong Kong, and manufacturing facilities
in Suzhou and Dongguan, China, is the U.S. dollar. For these foreign operations, assets and liabilities are
re-measured at the period-end or historical rates as appropriate. Revenues and expenses are re-measured
at average monthly rates. Currency transaction gains and losses are recognized in current operations.
Pro Forma Effects of Stock-Based Compensation
SFAS 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 awards granted. Plantronics has 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 interpretations, and to provide
additional disclosures with respect to the pro forma effects of adoption had the Company recorded
compensation expense as provided in SFAS 123 and SFAS No. 148, ‘‘Accounting for Stock-Based
Compensation—Transition and Disclosure.’’
Had compensation expense for the Company’s stock option and stock purchase plans been determined
based on a fair value method as prescribed by SFAS 123, the Company’s net income and net income per
share would have been as follows:
Fiscal Year Ended March 31,
(in thousands, except per share amounts)
2004 2005 2006
Net income—as reported $ 62,279 $ 97,520 $ 81,150
Add stock-based employee compensation expense, net of
tax effect, included in net income — 121 748
Less stock based compensation expense determined
under fair value based method, net of taxes (14,484) (35,278) (11,967)
Net income—pro forma $ 47,795 $ 62,363 $ 69,931
Basic net income per share—as reported $ 1.39 $ 2.02 $ 1.72
Basic net income per share—pro forma $ 1.06 $ 1.29 $ 1.48
Diluted net income per share—as reported $ 1.31 $ 1.92 $ 1.66
Diluted net income per share—pro forma $ 1.00 $ 1.23 $ 1.43
82 ⯗Plantronics