Plantronics 2006 Annual Report Download - page 90

Certain components that meet the Company’s requirements are available only from a limited number of
suppliers. The rapid rate of technological change and the necessity of developing and manufacturing
products with short lifecycles may intensify these risks. The inability to obtain components as required, or
to develop alternative sources, if and as required in the future, could result in delays or reductions in
product shipments, which in turn could have a material adverse effect on our business, financial
condition, results of operations or cash flows.
Other Guarantees and Obligations
As permitted and/or required under Delaware law and to the maximum extent allowable under that law,
Plantronics has agreements whereby it indemnifies its current and former officers and directors for certain
events or occurrences while the officer or director is, or was, serving at Plantronics’ request in such
capacity. These indemnifications are valid as long as the director or officer acted in good faith and in a
manner that a reasonable person believed to be in, or not opposed to, the best interests of the corporation,
and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The maximum potential amount of future payments the Company could be
required to make under these indemnification agreements is unlimited; however, the Company has a
director and officer insurance policy that limits Plantronics’ exposure and enables Plantronics to recover a
portion of any future amounts paid. As a result of its insurance policy coverage, Plantronics believes the
estimated fair value of these indemnification obligations is not significant.
As is customary in Plantronics’ industry, as provided for in local law in the U.S. and other jurisdictions,
the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or
payment of judgment for intellectual property claims related to the use of Plantronics’ products. From
time to time, Plantronics indemnifies customers against combinations of loss, expense, or liability arising
from various trigger events relating to the sale and the use of Plantronics’ products and services. In
addition, Plantronics also provides protection to customers against claims related to undiscovered
liabilities, additional product liability or environmental obligations. In Plantronics’ experience, claims
made under these indemnifications are rare and the associated estimated fair value of the liability is not
material.
3. Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (the ‘‘FASB’’) issued Statement of
Financial Accounting Standards (‘‘SFAS’’) FASB Staff Position (‘‘FSP’’) No. 109-2, ‘‘Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation
Act of 2004’’ (‘‘FSP No. 109-2’’). This staff position provides guidance on how companies should account
for the effects of the American Jobs Creation Act of 2004 (‘‘AJCA’’) that was signed into law on
October 22, 2004. In fiscal 2006, management determined that no cash would be repatriated from off-
shore subsidiaries under the provisions in the American Jobs Creation Act of 2004.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) ‘‘Share-Based Payment’’
(‘‘SFAS No. 123R’’), which requires the measurement and recognition of compensation expense for all
stock-based compensation payments and supersedes the current accounting under Accounting Principles
Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees’’ (‘‘APB 25’’). SFAS No. 123R is
effective for all annual periods beginning after June 15, 2005 and addresses all forms of share-based
payment (‘‘SBP’’) awards, including shares issued under certain employee stock purchase plans, stock
options, restricted stock and stock appreciation rights. In March 2005, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 107 (‘‘SAB 107’’) relating to the adoption of
SFAS 123R.
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