STOCKHOLDERS' EQUITY

Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income were as follows:



	March 31,
(in thousands)	2011			2010
Accumulated unrealized gain (loss) on cash flow hedges, net of tax of $100 and $100, respectively	$	(3,715	)	$	2,705
Accumulated foreign currency translation adjustments	5,181			3,567
Accumulated unrealized gain on investments, net of tax	7			—
Accumulated other comprehensive income	$	1,473		$	6,272

Capital Stock

In March 2002, the Company established a stock purchase rights plan under which stockholders may be entitled to purchase the Company’s stock or stock of an acquirer of the Company at a discounted price in the event of certain efforts to acquire control of the Company. The rights expire on the earliest of (a) April 12, 2012, or (b) the exchange or redemption of the rights pursuant to the rights plan.

From time to time, the Board of Directors authorizes plans under which the Company may repurchase shares of its common stock in the open market, depending on the market conditions.

During fiscal 2009, the Company repurchased in the open market 1,007,500 shares of its common stock which were remaining under the 1,000,000 repurchase plans each authorized by the Board of Directors on January 25, 2008 and November 10, 2008. The total cost of these repurchases was $17.8 million with an average price of $17.68 per share.

During fiscal 2010, the Company repurchased in the open market 1,935,100 shares of its common stock which were under repurchase plans authorized by the Board of Directors on the following dates: November 10, 2008, November 27, 2009 and March 1, 2010 for 1,000,000 each. The total cost of these repurchases was $49.7 million with an average price of $25.66 per share.

During fiscal 2011, the Company repurchased in the open market 3,315,000 shares of its common stock which were under repurchase plans authorized by the Board of Directors on the following dates: March 1, 2010, June 4, 2010, August 27, 2010 and March 1, 2011 for 1,000,000 each. The total cost of these repurchases was $105.5 million with an average price of $31.83 per share. As of March 31, 2011 there were 660,900 remaining shares authorized for repurchase.

On May 2, 2011, subsequent to the end of the Company's fiscal year, the Board of Directors authorized the repurchase of up to 7,000,000 shares of the Company's outstanding common stock. As part of this authorization, on May 9, 2011, the Company entered into two separate Master Confirmation and Supplemental Confirmations with Goldman, Sachs & Co. to repurchase an aggregate of $100 million of the Company's common stock under an accelerated share repurchase program. (See Note 19)

Primarily through employee benefit plans, we reissued 171,730 treasury shares for proceeds of $3.8 million and 284,090 treasury shares for proceeds of $3.6 million during the years ended March 31, 2011 and 2010, respectively.

On December 7, 2010, December 2, 2009 and January 13, 2009, the Company retired 4.0 million shares, 2.0 million shares and 16.0 million shares of treasury stock, respectively, which were returned to the status of authorized but unissued shares. These were non-cash equity transactions in which the cost of the reacquired shares was recorded as a reduction to both Retained earnings and Treasury stock.

In fiscal 2011 and 2010, the Company paid quarterly cash dividends of $0.05 per share resulting in total dividends of $9.7 million and $9.8 million, respectively. Subsequent to fiscal 2011, on May 3, 2011, the Company announced that the Board of Directors had declared the Company’s twenty-eighth quarterly cash dividend of $0.05 per share of the Company’s common stock, payable on June 10, 2011 to stockholders of record on May 20, 2011.

Stock Plans

Stock options granted subsequent to September 2007 generally vest over a three-year period. Options granted from September 2004 to September 2007 generally vested over a four-year period and those options granted prior to September 2004 generally vested over a five-year period. Restricted stock grants generally have vesting periods over three or four years, depending on the size of the grant. The Management Equity Committee is authorized to make option and restricted stock grants to employees who are not senior executives pursuant to guidelines approved by the Compensation Committee and subject to quarterly reporting to the Compensation Committee. The Company currently grants options and restricted stock from only the 2003 Stock Plan. The Company settles stock option exercises and releases of vested restricted stock with newly issued common shares.

2003 Stock Plan

In June 2003, the Board of Directors and stockholders approved the Plantronics Inc. Parent Corporation 2003 Stock Plan (the "2003 Stock Plan"). The 2003 Stock Plan, which has a term of 10 years (unless amended or terminated earlier by the Board of Directors) and is due to expire in September 2013, provides for incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted stock units. As of March 31, 2011, there have been 10,200,000 shares of common stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization or certain corporate reorganizations) cumulatively reserved since inception under the 2003 Stock Plan for issuance to employees, directors and consultants of Plantronics.

Under the 2003 Stock Plan, all stock options may not be granted at less than 100% of the estimated fair market value of the Company's common stock at the date of grant. Incentive stock options may not be granted at less than 100% of the estimated fair market value of the Company's common stock at the date of grant, as determined by the Board of Directors, and the option term may not exceed 7 years. Incentive stock options granted to a 10% stockholder may not be granted at less than 110% of the estimated fair market value of the common stock at the date of grant and the option term may not exceed five years.

Awards of restricted stock and restricted stock units with a per share or per unit purchase price lower than 100% of fair market value on the grant date will be counted against the total number of shares issuable under the Plan as 2.5 shares for every 1 share subject thereto. No participant shall receive restricted stock awards in any fiscal year having an aggregate initial value greater than $1,000,000, and no participant shall receive restricted stock units in any fiscal year having an aggregate initial value greater than $1,000,000.

At March 31, 2011, options to purchase 4,018,912 shares of common stock and unvested restricted stock of 687,884 were outstanding, and there were 1,473,497 shares available for future grant under the 2003 Stock Plan which takes into account the 2.5 ratio for grants of restricted stock as noted above.

1993 Stock Option Plan

In September 1993, the Board of Directors approved the Plantronics Inc. Parent Corporation 1993 Stock Option Plan (the "1993 Stock Option Plan"). Under the 1993 Stock Option Plan, there were 22,927,726 shares of common stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization, or certain corporate reorganizations) cumulatively reserved since inception for issuance to employees and consultants of Plantronics. The 1993 Stock Option Plan, which provided for incentive stock options as well as nonqualified stock options to purchase shares of common stock, had a term of 10 years; therefore, the ability to grant new options under this 1993 Stock Option Plan expired in September 2003. At March 31, 2011, options to purchase 1,312,070 shares of common stock were outstanding under the 1993 Stock Option Plan.

Directors' Stock Option Plan

In September 1993, the Board of Directors adopted a Directors' Stock Option Plan (the "Directors' Option Plan") and has cumulatively reserved since inception a total of 300,000 shares of common stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization or certain corporate reorganizations) for issuance to non-employee directors of Plantronics. The ability to grant new options under the Directors' Option Plan expired by its terms in September 2003. Non-employee directors participate in the 2003 Stock Plan. At March 31, 2011, options to purchase 24,000 shares of common stock were outstanding under the Directors' Option Plan.

Inducement Plan

In August 2005, the Board of Directors reserved 145,000 shares for the issuance of stock awards to Altec Lansing employees (the “Inducement Plan”). At March 31, 2011, options to purchase 5,000 shares of common stock were outstanding. All remaining shares of common stock under the Inducement Plan are not available for future grants as the reservation of such shares was subsequently canceled.

Employee Stock Purchase Plan ("ESPP")

On June 10, 2002, the Board of Directors of Plantronics approved the 2002 ESPP, which was approved by the stockholders on July 17, 2002, to provide certain employees with an opportunity to purchase Plantronics' common stock through payroll deductions. The plan qualifies under Section 423 of the Internal Revenue Code. Under the 2002 ESPP, which is effective through June 2012, the purchase price of Plantronics' common stock is equal to 85% of the lesser of the fair market value closing price of Plantronics' common stock on (i) the first day of the offering period, or (ii) the last day of the offering period. Each offering period is generally six months long. There were 170,376, 281,598 and 337,538, shares issued under the 2002 ESPP in fiscal 2011, 2010 and 2009, respectively. At March 31, 2011, there were 500,019 shares reserved for future issuance under the 2002 ESPP.

Stock Plan Activity

Stock Options

The following is a summary of the Company’s stock option activity during fiscal 2011:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Outstanding at March 31, 2010	7,631		$	25.06
Options granted	542		$	32.86
Options exercised	(2,196	)	$	22.81
Options forfeited or expired	(617	)	$	35.43
Outstanding at March 31, 2011	5,360		$	25.58	3.1	$	62,072
Vested or expected to vest at March 31, 2011	5,265		$	25.53	3.1	$	61,259
Exercisable at March 31, 2011	4,124		$	25.55	2.3	$	48,557

The total intrinsic values of stock options exercised during fiscal years 2011, 2010 and 2009 were $26.2 million, $9.0 million and $2.0 million, respectively. The total cash received from employees as a result of employee stock option exercises during fiscal 2011 was $50.1 million.

Restricted Stock

The following is a summary of the Company’s restricted stock award activity during fiscal 2011:



	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested at March 31, 2010	361		$	21.41
Granted	491		$	33.54
Vested	(137	)	$	22.14
Forfeited	(27	)	$	27.72
Non-vested at March 31, 2011	688		$	29.52

The weighted average grant-date fair value of restricted stock awards is based on the quoted market price of the Company's common stock on the date of grant. The weighted average grant-date fair values of restricted stock awards granted during fiscal years 2011, 2010 and 2009 were $33.54, $24.62 and $14.50, respectively. The total grant-date fair values of restricted stock awards that vested during fiscal years 2011, 2010 and 2009 were $3.1 million, $3.1 million and $2.5 million, respectively.

Stock-Based Compensation

The following table summarizes the amount of stock-based compensation expense included in the consolidated statements of operations, including both continuing and discontinued operations for the periods presented:



	Fiscal Year Ended March 31,
(in thousands)	2011				2010			2009
Cost of revenues	$	2,202			$	1,929		$	2,265

Research, development and engineering	3,765			—	3,505			3,663
Selling, general and administrative	9,906			—	9,443			9,814
Stock-based compensation expense included in operating expenses	13,671			—	12,948			13,477
Total stock-based compensation	15,873			—	14,877			15,742
Income tax benefit	(4,892		)		(4,746		)	(4,940		)
Total stock-based compensation expense, net of tax	$	10,981			$	10,131		$	10,802

There was no stock-based compensation included in discontinued operations for the year ended March 31, 2011. For the years ended March 31, 2010 and 2009, stock-based compensation presented in the table above includes amounts recorded in discontinued operations of $1.2 million and $1.0 million, respectively. Of the $1.2 million in fiscal 2010, $0.3 million related to stock option modification charges as a result of the sale of the AEG segment and was included in the costs incurred upon closing of the sale.

As of March 31, 2011, the total unrecognized compensation cost related to unvested stock options was $9.4 million which is expected to be recognized over a weighted average period of 1.7 years, and the total unrecognized compensation cost related to non-vested restricted stock awards was $13.5 million which is expected to be recognized over a weighted average period of 2.8 years.

Valuation Assumptions

The Company estimates the fair value of stock options and ESPP shares using a Black-Scholes option valuation model. The fair value of the stock options and ESPP shares granted during the respective periods is estimated on the date of grant using the following weighted average assumptions:



	Employee Stock Options									ESPP
Fiscal Year Ended March 31,	2011			2010			2009			2011			2010			2009
Expected volatility	45.7		%	53.7		%	51.6		%	38.7		%	49.0		%	63.0		%
Risk-free interest rate	1.4		%	2.0		%	2.9		%	0.2		%	0.2		%	0.9		%
Expected dividends	0.6		%	1.0		%	1.2		%	0.6		%	0.8		%	1.6		%
Expected life (in years)	4.2			4.5			4.4			0.5			0.5			0.5
Weighted-average grant date fair value	$	11.92		$	8.71		$	7.65		$	8.67		$	7.22		$	4.56

The Company recognizes the grant-date fair value of stock-based compensation as compensation expense in the Consolidated statements of operations using the straight-line attribution approach over the service period for which the stock-based compensation is expected to vest.

The expected stock price volatility for the years ended March 31, 2011, 2010 and 2009 was determined based on an equally weighted average of historical and implied volatility. Implied volatility is based on the volatility of the Company’s publicly traded options on its common stock with a term of six months or less. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The dividend yield assumption is based on our current dividend and the market price of our common stock at the date of grant.