Plantronics 2007 Annual Report Download - page 66

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62 P l a n t r o n i c s
We applied the same modeling technique as we used at March 31, 2006 to measure the hypothetical
changes in fair values in our short-term investments, excluding cash and cash equivalents, held at March
31, 2007 that are sensitive to changes in interest rates. Based upon our analysis, the fair values did not
change materially as our investments are of short duration and the amount held at March 31, 2007 was
not significant enough to result in a material change in fair value.
As of April 28, 2007, we had no borrowings under the revolving credit facility and $1.4 million committed
under the letter of credit sub-facility. If we choose to borrow additional amounts under this facility in the
future and market interest rates rise, then our interest payments would increase accordingly.
FOREIGN CURRENCY EXCHANGE RATE RISK
We are engaged in a hedging strategy to diminish, and make more predictable, the effect of currency
fluctuations. We hedge our balance sheet exposure by hedging Euro and Great British Pound denominated
receivables, payables, and cash balances, and our economic exposure by hedging a portion of anticipated
Euro and Great British Pound denominated sales. However, we have no assurance our strategy will be
successfully implemented and that exchange rate fluctuations will not materially adversely affect our
business in the future.
Non-designated Hedges
We hedge our Euro and Great British Pound denominated receivables, payables and cash balances by
entering into foreign exchange forward contracts.
The table below presents the impact of a hypothetical 10% appreciation and a 10% depreciation of the
U.S. dollar against the forward currency contracts:
March 31, 2007
(in millions) Position
USD Value
of Net FX
Contracts
FX Gain
(Loss) From
10%
Appreciation
of USD
FX Gain
(Loss) From
10%
Depreciation
of USD
Currency - forward contracts
Euro Sell Euro $34.4 $3.4 $(3.4)
Great British Pound Sell GBP 12.2 1.2 (1.2)
Net position $46.6 $4.6 $(4.6)
Cash Flow Hedges
Approximately 33%, 36%, and 39% of revenue in fiscal 2005, 2006, and 2007, respectively, was derived
from sales outside of the United States, which were predominantly denominated in the Euro and the
Great British Pound in each of the fiscal years.
As of March 31, 2007, we had foreign currency call option contracts of approximately €57.0 million and
£16.3 million denominated in Euros and Great British Pounds, respectively. As of March 31, 2007, we
also had foreign currency put option contracts of approximately €57.0 million and £16.3 million
denominated in Euros and Great British Pounds, respectively. Collectively, our option contracts hedge
against a portion of our forecasted foreign denominated sales. If these net exposed currency positions are
subjected to either a 10% appreciation or 10% depreciation versus the U.S. dollar, we could incur a gain
of $9.7 million or a loss of $10.8 million.