Plantronics 2007 Annual Report Download - page 60

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56 P l a n t r o n i c s
At March 31, 2007, we had working capital of $258.4 million, including $103.4 million of cash, cash
equivalents and short-term investments, compared with working capital of $201.4 million, including
$76.7 million of cash, cash equivalents and short-term investments at March 31, 2006.
We have a $100 million revolving line of credit and a letter of credit sub-facility. Borrowings under the
line of credit are unsecured and bear interest at the London inter-bank offered rate (“LIBOR”) plus
0.75%. The line of credit expires on August 1, 2010. In the year ended March 31, 2007, we made
aggregate principal payments of $22.0 million against the outstanding balance and the line of credit was
fully repaid in the fourth quarter of fiscal 2007. At March 31, 2007, there were no outstanding borrowings
under the credit facility and our commitments under a letter of credit sub-facility were $1.4 million. The
amounts outstanding under the letter of credit sub-facility are principally associated with purchases of
inventory. The terms of the credit facility contain covenants that materially limit our ability to incur
additional debt and pay dividends, among other matters. It also requires us to maintain, in addition to a
minimum annual net income, a maximum leverage ratio and a minimum quick ratio. These covenants
may adversely affect us to the extent we cannot comply with them. We are currently in compliance with
the covenants under our amended Credit Agreement.
We enter into foreign currency forward-exchange contracts, which typically mature in one month, to
hedge the exposure to foreign currency fluctuations of foreign currency-denominated receivables,
payables, and cash balances. We record on the balance sheet at each reporting period the fair value of our
forward-exchange contracts and record any fair value adjustments in results of operations. Gains and
losses associated with currency rate changes on contracts are recorded as other income (expense), offsetting
transaction gains and losses on the related assets and liabilities.
We also have a hedging program to hedge a portion of forecasted revenues denominated in the Euro and
Great British Pound with put and call option contracts used as collars. At each reporting period, we record
the net fair value of our unrealized option contracts on the balance sheet with related unrealized gains and
losses as a component of accumulated other comprehensive income, a separate element of stockholders’
equity. Gains and losses associated with realized option contracts are recorded within revenue.
Our liquidity, capital resources, and results of operations in any period could be affected by the exercise
of outstanding stock options, sale of restricted stock to employees, and the issuance of common stock
under our employee stock purchase plan. Further, the resulting increase in the number of outstanding
shares could affect our per share earnings. However, we cannot predict the timing or amount of proceeds
from the sale or exercise of these securities, or whether they will be exercised at all.
We believe that our current cash, cash equivalents and cash provided by operations, and our line of credit
will be sufficient to fund operations for at least the next twelve months. However, any projections of
future financial needs and sources of working capital are subject to uncertainty. See “Certain Forward-
Looking Information” and “Risk Factors” in this Annual Report on Form 10-K for factors that could
affect our estimates for future financial needs and sources of working capital.
OFF BALANCE SHEET ARRANGEMENTS
We have not entered into any transactions with unconsolidated entities whereby we have financial
guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that
expose us to material continuing risks, contingent liabilities, or any other obligation under a variable
interest in an unconsolidated entity that provides financing and liquidity support or market risk or credit
risk support to the Company.