Science & Technology
Science and Technology
Science and Technology
Wed, January 28, 2009
Tue, January 27, 2009
Plantronics: Plantronics Announces Third Quarter Results
SANTA CRUZ, CA--(Marketwire - January 27, 2009) - Plantronics, Inc. (
"Worsening economic conditions affected all parts of our business and make us cautious about the outlook for fiscal 2010. As announced on January 14th, we have taken significant steps to reduce our cost structure with the objective of being profitable and cash flow positive through this economic cycle while continuing to focus on core strategic initiatives such as Unified Communications. Our focus on inventory reduction in the December quarter resulted in a reduction of more than $25 million or approximately 16%, and enabled us to remain cash flow positive in the quarter," said Ken Kannappan, President and CEO. "We've made progress in our consumer businesses by introducing competitive products, gaining market share and reducing costs. However, it's clear that this economic cycle will require further actions to improve profitability and we are actively evaluating our alternatives," Kannappan concluded.
Audio Communications Group (ACG) Non-GAAP Results (Office & Contact Center, Mobile, Gaming and Computer, Other) Comparisons are to the Same Quarter in the Prior Year
Third quarter fiscal 2009 net revenues of $152.6 million were down 22.1% compared with $196.0 million, with weakness in all geographies and product groups other than our Clarity products. Office and Contact Center revenue of $101.7 million declined 22.4%, with office corded products revenue declining 21% while office cordless products revenue declined 24%. Bluetooth headset revenue was $33.6 million, down 22%, and Gaming & Computer products revenue was $8.5 million, down 18%.
Gross margin in the third quarter of fiscal 2009 was 40.1% compared with 46.2% in the year-ago quarter. The lower gross margin was due to poor overall factory utilization and lower Bluetooth gross margin as the result of higher warranty costs. Operating income decreased to $9.0 million from $35.4 million, and the operating margin was 5.9% compared with 18.1%. Operating expenses declined by 5.4% from $55.2 million to $52.2 million.
The Company continues to believe that the implementation of Unified Communications (UC) technologies by large corporations will be a significant long-term driver of office headset adoption, and as a result, a key long-term driver of revenue and profit growth. "Despite weak economic conditions, trial deployments of UC solutions and headsets continue to grow, with some evidence that the cost savings and productivity enhancements derived from UC are driving the expansion of existing deployments in both in the U.S. and Europe. This is encouraging, but further growth during the recession may be unlikely," stated Kannappan.
Audio Entertainment Group (AEG) Non-GAAP Results (Docking Audio, PC Audio, Other) Comparisons are to the Same Quarter in the Prior Year
Third quarter fiscal 2009 net revenues of $30.2 million were down 18.0% from $36.9 million driven by the exceptionally weak holiday season in the U.S. and weak consumer spending globally. As a result of this, all product lines were down versus the year ago quarter despite better product placements.
Gross margin declined from $5.0 million to $1.1 million or 13.5% to 3.6% as a result of higher requirements for inventory provisions and makers' claims, foreign exchange, and the overall composition of revenue. Relative to our internal plans and the related guidance for the quarter, the principal factors which caused the shortfall in gross profit were rework and expediting costs on a key product line, the negative impact of foreign exchange movements and the composition of revenue.
Operating expenses declined 28.5% from $8.3 million to $5.9 million. Despite the progress on the cost structure, the operating loss increased from $3.3 million to $4.8 million as a result of the lower gross margin.
Business Outlook
The following statements are based on current expectations. As described in "Safe Harbor" below, many of these statements are forward-looking. Actual results are subject to a variety of risks and uncertainties and may differ materially from the forward-looking statements.
We have a "book and ship" business model whereby we ship most orders to our customers within 48 hours of our receipt of those orders, and we thus cannot rely on the level of backlog to provide visibility into potential future revenues. Our business is inherently difficult to forecast, and there can be no assurance that the incoming orders we expect to receive over the balance of the quarter will materialize. With increasing economic uncertainty, our business is even more difficult to forecast than usual. On January 14, 2009, we announced a series of actions to lower our cost structure and improve efficiencies. These actions include a restructuring plan to reduce our worldwide workforce by approximately 18% in comparison to September 30, 2008, along with other cost cutting measures including management salary reductions and decreases in other operating expenses. As a result of the reduction in the worldwide workforce, we expect to record restructuring and other related charges, primarily for employee termination benefits, of approximately $7.7 to $8.2 million in total, of which $1 million was recognized in the third quarter. We expect the balance of $6.7 million to $7.2 million to be recognized in the fourth quarter of fiscal 2009. Annualized savings from the cost reductions are expected to be over $50 million in fiscal 2010 compared with our annualized expenditure level in the second quarter of fiscal 2009. In addition, the Company plans an approximate 50% reduction in capital expenditures for fiscal year 2010.
Revenues in all portions of our business are expected to decline in the fourth quarter. Gross margins are expected to be under pressure due to lower production, a weak demand environment and competitive pricing in the Bluetooth segment. Non-GAAP operating expenses are expected to decline further in the fourth quarter as a result of the restructuring activities announced on January 14, 2009. In addition the company remains committed to managing expenses in line with its goal of remaining profitable and positive cash flow generation.
Subject to the foregoing, we are currently expecting the following financial results for the fourth quarter of fiscal 2009:
-- Net revenues for the fourth quarter of fiscal 2009 to be in the range of $125 - $135 million; -- A Non-GAAP operating loss of $4 - $10 million; -- A GAAP loss.
Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its next press release announcing its fourth quarter fiscal year 2009 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the fourth quarter fiscal year 2009 will not be based on internal company information and should be assessed accordingly by investors.
Conference Call Scheduled to Discuss Actual Financial Results
Plantronics has scheduled a conference call to discuss third quarter results. The conference call will take place Tuesday, January 27 at 2:00 PM (PST). All interested investors and potential investors in Plantronics stock are invited to participate. To listen to the call, please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." Participants from North America should call (888) 301-8736 and other participants should call (706) 634-7260.
A replay of the call with the conference ID #60282103 will be available for 72 hours at (800) 642-1687 for callers from North America and at (706) 645-9291 for all other callers. The conference call will also be simultaneously web cast at [ www.plantronics.com ] under Investor Relations, and the web cast of the conference call will remain available at the Plantronics Web site for thirty days.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses and charges such as restructuring and other related charges, certain tax credits and the release of certain tax reserves, stock-based compensation expenses related to stock options, awards and employee stock purchases, purchase accounting amortization and goodwill and long-lived asset impairment charges from non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin and non-GAAP effective tax rate. Plantronics excludes these expenses from its non-GAAP measures primarily because Plantronics does not believe they are reflective of ongoing operating results and are not part of its target operating model. Plantronics believes that the use of non-GAAP financial measures provides meaningful supplemental information regarding its performance and liquidity, and helps investors compare actual results to its long-term target operating model goals. Plantronics believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting and analyzing future periods.
SAFE HARBOR
This release contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to (i) our restructuring plan, (ii) our expectation that we will incur approximately $7.7 to $8.2 million in related restructuring charges and the timing of such charges, (iii) our expectation that we will realize annualized savings from cost reductions of over $50 million, (iv) our expectations regarding our capital expenditures, (v) our objective to maintain our profitability, be cash flow positive and increase our competitive position, (vi) our ability to continue to focus on certain strategic initiatives, (vii) further actions we may take to improve profitability, (viii) the future of Unified Communications technologies, including their implementation, growth in deployments and the effect on headset adoption, (ix) our position in the Unified Communications market, (x) our estimate of revenue for the fourth quarter of fiscal 2009, and (xi) our estimate of GAAP and Non-GAAP financial results for the fourth quarter of fiscal 2009 and related components of earnings per share, as well as other matters discussed in this press release that are not purely historical data. Plantronics does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by such statements.
Among the factors that could cause actual results to differ materially from those contemplated are:
-- All aspects of our business are difficult to predict, particularly in light of the current economic conditions in both the domestic and international markets; -- We do not know how the market for each of our product groups will continue to be negatively affected as a result of the recession in the United States or global economy; -- Fluctuations in foreign exchange rates; -- The bankruptcy of additional distributors or key customers or the bankruptcy of or reduction in capacity of our key suppliers; -- Additional actions we take may affect GAAP results; -- Failure to match production to demand given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts to meet demand without having excess inventory or incurring cancellation charges; -- We have significant intangible assets and goodwill recorded on our balance sheet. If the carrying value of our intangible assets and goodwill is not recoverable, additional impairment losses must be recognized which would adversely affect our financial results; -- We have experienced volatility in prices from our suppliers, including our manufacturers located in China, and in light of the uncertainties of the economy in the United States and around the world, which could negatively affect profitability and/or market share; and -- Additional risk factors include: interruption in the supply of sole- sourced critical components, continuity of component supply at costs consistent with our plans, the inherent risks of our substantial foreign operations, and problems which might affect our manufacturing facilities in Mexico or in China.
For more information concerning these and other possible risks, please refer to the Company's Annual Report on Form 10-K filed May 27, 2008, quarterly reports filed on Form 10-Q and other filings with the Securities and Exchange Commission as well as recent press releases. These filings can be accessed over the Internet at [ http://www.sec.gov/edgar/searchedgar/companysearch.html ].
Financial Summaries
The following related charts are provided:
-- [ Summary Unaudited Condensed Consolidated Financial Statements ]
-- [ Summary Unaudited Condensed Statements of Operations by Segment ]
-- Unaudited GAAP to Non-GAAP Statements of Operations Reconciliations for the [ three and nine months ended December 31, 2008 ] and [ December 31, 2007 ]
--[ Summary Unaudited Statements of Operations and Related Data on a Non-GAAP Basis ]
About Plantronics
In 1969, a Plantronics headset carried the historic third words from the moon: "That's one small step for man, one giant leap for mankind." Since then, Plantronics has become the headset of choice for mission-critical applications such as air traffic control, 911 dispatch, and the New York Stock Exchange. Today, this history of Sound Innovation® is the basis for every product we build for the office, contact center, personal mobile, entertainment and residential markets. The Plantronics family of brands includes Plantronics, Altec Lansing, Clarity, and Volume Logic. For more information, go to [ www.plantronics.com ] or call (800) 544-4660.
Altec Lansing, Clarity, Plantronics, Sound Innovation, Volume Logic and AudioIQ are trademarks or registered trademarks of Plantronics, Inc. All other trademarks are the property of their respective owners.
PLANTRONICS, INC. SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data and percentages) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, December 31, ------------------ ------------------- 2007 2008 2007 2008 -------- -------- -------- --------- Net revenues $232,824 $182,836 $647,543 $ 618,856 Cost of revenues 139,067 121,971 385,784 373,339 -------- -------- -------- --------- Gross profit 93,757 60,865 261,759 245,517 Gross profit % 40.3% 33.3% 40.4% 39.7% Research, development and engineering 19,308 18,664 58,004 57,209 Selling, general and administrative 48,424 43,202 140,476 139,345 Restructuring and other related charges 2,882 1,048 2,882 1,283 Impairment of goodwill and long-lived assets - 117,464 - 117,464 -------- -------- -------- --------- Total operating expenses 70,614 180,378 201,362 315,301 -------- -------- -------- --------- Operating income (loss) 23,143 (119,513) 60,397 (69,784) Operating income (loss) % 9.9% (65.4%) 9.3% (11.3%) Interest and other income (expense), net 2,184 (1,499) 5,311 (3,129) -------- -------- -------- --------- Income (loss) before income taxes 25,327 (121,012) 65,708 (72,913) Income tax expense (benefit) 6,219 (29,003) 15,103 (19,046) -------- -------- -------- --------- Net income (loss) $ 19,108 $(92,009) $ 50,605 $ (53,867) ======== ======== ======== ========= % of net revenues 8.2% (50.3%) 7.8% (8.7%) Basic earnings (loss) per common share $ 0.39 $ (1.90) $ 1.05 $ (1.11) Diluted earnings (loss) per common share $ 0.39 $ (1.90) $ 1.03 $ (1.11) Shares used in basic per share calculations 48,379 48,449 48,110 48,641 Shares used in diluted per share calculations 49,533 48,449 49,148 48,641 Tax rate 24.6% 24.0% 23.0% 26.1% UNAUDITED CONSOLIDATED BALANCE SHEETS March December 31, 31, 2008 2008 -------- -------- ASSETS Cash and cash equivalents $163,091 $153,452 Short-term investments - 29,965 -------- -------- Total cash, cash equivalents, and short-term investments 163,091 183,417 Accounts receivable, net 131,493 106,463 Inventory 127,088 137,563 Deferred income taxes 13,760 12,472 Other current assets 14,771 28,385 -------- -------- Total current assets 450,203 468,300 Long-term investments 25,136 24,016 Property, plant and equipment, net 98,530 98,440 Intangibles, net 91,511 27,192 Goodwill 69,171 13,996 Other assets 6,842 9,516 -------- -------- $741,393 $641,460 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 47,896 $ 32,157 Accrued liabilities 67,318 56,284 Total current liabilities 115,214 88,441 Deferred tax liability 32,570 5,611 Long-term income taxes payable 14,137 11,925 Other long-term liabilities 852 885 -------- -------- Total liabilities 162,773 106,862 Stockholders' equity 578,620 534,598 -------- -------- $741,393 $641,460 ======== ======== AUDIO COMMUNICATIONS GROUP SUMMARY CONDENSED FINANCIAL STATEMENTS (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, December 31, ------------------- ------------------- 2007 2008 2007 2008 -------- --------- -------- --------- Net revenues $195,955 $ 152,616 $562,574 $ 546,492 Cost of revenues 106,257 92,199 302,216 304,159 -------- --------- -------- --------- Gross profit 89,698 60,417 260,358 242,333 Gross profit % 45.8% 39.6% 46.3% 44.3% Research, development and engineering 16,544 16,645 49,522 50,721 Selling, general and administrative 42,103 38,579 121,129 123,887 Restructuring and other related charges - 288 - 288 Impairment of goodwill and long-lived assets - - - - -------- --------- -------- --------- Total operating expenses 58,647 55,512 170,651 174,896 -------- --------- -------- --------- Operating income $ 31,051 $ 4,905 $ 89,707 $ 67,437 Operating income % 15.8% 3.2% 15.9% 12.3% AUDIO ENTERTAINMENT GROUP SUMMARY CONDENSED FINANCIAL STATEMENTS (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, December 31, ------------------- ------------------- 2007 2008 2007 2008 -------- --------- -------- --------- Net revenues $ 36,869 $ 30,220 $ 84,969 $ 72,364 Cost of revenues 32,810 29,772 83,568 69,180 -------- --------- -------- --------- Gross profit 4,059 448 1,401 3,184 Gross profit % 11.0% 1.5% 1.6% 4.4% Research, development and engineering 2,764 2,019 8,482 6,488 Selling, general and administrative 6,321 4,623 19,347 15,458 Restructuring and other related charges 2,882 760 2,882 995 Impairment of goodwill and long-lived assets - 117,464 - 117,464 -------- --------- -------- --------- Total operating expenses 11,967 124,866 30,711 140,405 -------- --------- -------- --------- Operating loss $ (7,908) $(124,418) $(29,310) $(137,221) Operating loss % (21.4%) (411.7%) (34.5%) (189.6%) PLANTRONICS, INC. UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except per share data and percentages) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, 2008 December 31, 2008 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $182,836 $ - $182,836 $618,856 $ - $618,856 Cost of revenues 121,971 (1,390)(1) 120,581 373,339 (5,004)(1) 368,335 -------- -------- -------- -------- -------- -------- Gross profit 60,865 1,390 62,255 245,517 5,004 250,521 Gross profit % 33.3% 34.0% 39.7% 40.5% Research, development and engineering 18,664 (854)(1) 17,810 57,209 (2,928)(1) 54,281 Selling, general and admini- strative 43,202 (2,931)(1) 40,271 139,345 (9,761)(1) 129,584 Restructuring and other related charges 1,048 (1,048)(2) - 1,283 (1,283)(2) - Impairment of goodwill and long-lived assets 117,464 (117,464)(3) - 117,464 (117,464)(3) - -------- -------- -------- -------- -------- -------- Total operating expenses 180,378 (122,297) 58,081 315,301 (131,436) 183,865 -------- -------- -------- -------- -------- -------- Operating income (loss) (119,513) 123,687 4,174 (69,784) 136,440 66,656 Operating income (loss) % (65.4%) 2.3% (11.3%) 10.8% Interest and other income (expense), net (1,499) - (1,499) (3,129) - (3,129) -------- -------- -------- -------- -------- -------- Income (loss) before income taxes (121,012) 123,687 2,675 (72,913) 136,440 63,527 Income tax expense (benefit) (29,003) 27,665(4) (1,338) (19,046) 33,739(5) 14,693 -------- -------- -------- -------- -------- -------- Net income (loss) $(92,009) $ 96,022 $ 4,013 $(53,867) $102,701 $ 48,834 ======== ======== ======== ======== ======== ======== % of net revenues (50.3%) 2.2% (8.7%) 7.9% Diluted earnings (loss) per common share $ (1.90) $ 1.98 $ 0.08 $ (1.11) $ 2.11 $ 1.00 Shares used in diluted per share calculations 48,449 48,449 48,449 48,641 48,641 48,641 AUDIO COMMUNICATIONS GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, 2008 December 31, 2008 ----------------------------- ----------------------------- GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- ------- -------- -------- ------- -------- Net revenues $152,616 $ - $152,616 $546,492 $ - $546,492 Cost of revenues 92,199 (758)(1) 91,441 304,159 (2,549)(1) 301,610 -------- ------- -------- -------- ------- -------- Gross profit 60,417 758 61,175 242,333 2,549 244,882 Gross profit% 39.6% 40.1% 44.3% 44.8% Research, development and engineering 16,645 (821)(1) 15,824 50,721 (2,815)(1) 47,906 Selling, general and administrative 38,579 (2,224)(1) 36,355 123,887 (7,389)(1) 116,498 Restructuring and other related charges 288 (288)(2) - 288 (288)(2) - -------- ------- -------- -------- ------- -------- Total operating expenses 55,512 (3,333) 52,179 174,896 (10,492) 164,404 -------- ------- -------- -------- ------- -------- Operating income $ 4,905 $ 4,091 $ 8,996 $ 67,437 $13,041 $ 80,478 Operating income % 3.2% 5.9% 12.3% 14.7% AUDIO ENTERTAINMENT GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended December 31, 2008 --------------------------------- GAAP Excluded Non-GAAP ---------- --------- -------- Net revenues $ 30,220 $ - $ 30,220 Cost of revenues 29,772 (632)(1) 29,140 ---------- --------- -------- Gross profit 448 632 1,080 Gross profit % 1.5% 3.6% Research, development and engineering 2,019 (33)(1) 1,986 Selling, general and administrative 4,623 (707)(1) 3,916 Restructuring and other related charges 760 (760)(2) - Impairment of goodwill and long-lived assets 117,464 (117,464)(3) - ---------- --------- -------- Total operating expenses 124,866 (118,964) 5,902 ---------- --------- -------- Operating loss $ (124,418) $ 119,596 $ (4,822) Operating loss % (411.7%) (16.0%) UNAUDITED STATEMENTS OF OPERATIONS Nine Months Ended December 31, 2008 ---------------------------------- GAAP Excluded Non-GAAP ---------- --------- --------- Net revenues $ 72,364 $ - $ 72,364 Cost of revenues 69,180 (2,455)(1) 66,725 ---------- --------- --------- Gross profit 3,184 2,455 5,639 Gross profit % 4.4% 7.8% Research, development and engineering 6,488 (113)(1) 6,375 Selling, general and administrative 15,458 (2,372)(1) 13,086 Restructuring and other related charges 995 (995)(2) - Impairment of goodwill and long-lived assets 117,464 (117,464)(3) - --------- --------- --------- Total operating expenses 140,405 (120,944) 19,461 --------- --------- --------- Operating loss $ (137,221) $ 123,399 $ (13,822) Operating loss % (189.6%) (19.1%) (1) Excluded amount represents stock-based compensation and purchase accounting amortization. (2) Excluded amount represents restructuring and other related charges. (3) Excluded amount represents impairment of goodwill and long-lived assets. (4) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization, restructuring and other related charges, impairment of goodwill and long-lived assets and $2,078 related to a tax benefit from expiration of certain statutes of limitations. (5) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization, restructuring and other related charges, impairment of goodwill and long-lived assets and $3,813 related to a tax benefit from expiration of certain statutes of limitations.
Use of Non-GAAP Financial Information
To supplement our consolidated financial statements presented on a GAAP basis, Plantronics uses non-GAAP measures of operating results, which are adjusted to exclude non-recurring and non-cash expenses and charges, such as restructuring and other related charges, certain tax credits and the release of certain tax reserves, stock-based compensation expenses related to stock options, awards and employee stock purchases under FAS 123R, purchase accounting amortization and goodwill and long-lived assets. Plantronics does not believe these expenses and charges are reflective of ongoing operating results and are not part of our target operating model. At the segment level, we have presented non-GAAP statements that only show our results to the operating income line. On a consolidated basis, we have presented full non-GAAP statement of operations. The non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and the reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
PLANTRONICS, INC. UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except per share data and percentages) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, 2007 December 31, 2007 ----------------------------- ----------------------------- GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- ------- -------- -------- ------- -------- Net revenues $232,824 $ - $232,824 $647,543 $ - $647,543 Cost of revenues 139,067 (1,776)(1) 137,291 385,784 (5,948)(2) 379,836 -------- ------- -------- -------- ------- -------- Gross profit 93,757 1,776 95,533 261,759 5,948 267,707 Gross profit % 40.3% 41.0% 40.4% 41.3% Research, development and engineering 19,308 (909)(1) 18,399 58,004 (2,794)(1) 55,210 Selling, general and admini- strative 48,424 (3,405)(1) 45,019 140,476 (9,813)(1) 130,663 Restructuring and other related charges 2,882 (2,882)(3) - 2,882 (2,882)(3) - -------- ------- -------- -------- ------- -------- Total operating expenses 70,614 (7,196) 63,418 201,362 (15,489) 185,873 -------- ------- -------- -------- ------- -------- Operating income 23,143 8,972 32,115 60,397 21,437 81,834 Operating income % 9.9% 13.8% 9.3% 12.6% Interest and other income, net 2,184 - 2,184 5,311 - 5,311 -------- ------- -------- -------- ------- -------- Income before income taxes 25,327 8,972 34,299 65,708 21,437 87,145 Income tax expense 6,219 1,953(4) 8,172 15,103 6,324(5) 21,427 -------- ------- -------- -------- ------- -------- Net income $ 19,108 $ 7,019 $ 26,127 $ 50,605 $15,113 $ 65,718 ======== ======= ======== ======== ======= ======== % of net revenues 8.2% 11.2% 7.8% 10.1% Diluted earnings per common share $ 0.39 $ 0.14 $ 0.53 $ 1.03 $ 0.31 $ 1.34 Shares used in diluted per share calculations 49,533 49,533 49,533 49,148 49,148 49,148 AUDIO COMMUNICATIONS GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, 2007 December 31, 2007 ----------------------------- ----------------------------- GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- ------- -------- -------- ------- -------- Net revenues $195,955 $ - $195,955 $562,574 $ - $562,574 Cost of revenues 106,257 (871)(1) 105,386 302,216 (2,402)(1) 299,814 -------- ------- -------- -------- ------- -------- Gross profit 89,698 871 90,569 260,358 2,402 262,760 Gross profit % 45.8% 46.2% 46.3% 46.7% Research, development and engineering 16,544 (874)(1) 15,670 49,522 (2,693)(1) 46,829 Selling, general and admini- strative 42,103 (2,613)(1) 39,490 121,129 (7,178)(1) 113,951 -------- ------- -------- -------- ------- -------- Total operating expenses 58,647 (3,487) 55,160 170,651 (9,871) 160,780 -------- ------- -------- -------- ------- -------- Operating income $ 31,051 $ 4,358 $ 35,409 $ 89,707 $12,273 $101,980 Operating income % 15.8% 18.1% 15.9% 18.1% AUDIO ENTERTAINMENT GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31, 2007 December 31, 2007 ----------------------------- ----------------------------- GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- ------- -------- -------- ------- -------- Net revenues $ 36,869 $ - $ 36,869 $ 84,969 $ - $ 84,969 Cost of revenues 32,810 (905)(1) 31,905 83,568 (3,546)(2) 80,022 -------- ------- -------- -------- ------- -------- Gross profit (loss) 4,059 905 4,964 1,401 3,546 4,947 Gross profit (loss) % 11.0% 13.5% 1.6% 5.8% Research, development and engineering 2,764 (35)(1) 2,729 8,482 (101)(1) 8,381 Selling, general and admini- strative 6,321 (792)(1) 5,529 19,347 (2,635)(1) 16,712 Restructuring and other related charges 2,882 (2,882)(3) - 2,882 (2,882)(3) - -------- ------- -------- -------- ------- -------- Total operating expenses 11,967 (3,709) 8,258 30,711 (5,618) 25,093 -------- ------- -------- -------- ------- -------- Operating loss $ (7,908) $ 4,614 $ (3,294) $(29,310) $ 9,164 $(20,146) Operating loss % (21.4%) (8.9%) (34.5%) (23.7%) (1) Excluded amount represents stock-based compensation and purchase accounting amortization. (2) Excluded amount represents stock-based compensation, purchase accounting amortization and $517 related to the impairment of a long-lived asset. (3) Excluded amount represents restructuring and other related charges. (4) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization and restructuring and other related charges. (5) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization, restructuring and other related charges and impairment of a long-lived asset.
Use of Non-GAAP Financial Information
To supplement our consolidated financial statements presented on a GAAP basis, Plantronics uses non-GAAP measures of operating results, which are adjusted to exclude non-recurring and non-cash expenses and charges, such as restructuring and other related charges, certain tax credits and the release of certain tax reservces, stock-based compensation expenses related to stock options, awards and employee stock purchases under FAS 123R, purchase accounting amortization and goodwill and long-lived assets. Plantronics does not believe these expenses and charges are reflective of ongoing operating results and are not part of our target operating model. At the segment level, we have presented non-GAAP statements that only show our results to the operating income line. On a consolidated basis, we have presented full non-GAAP statement of operations. The non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and the reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
Summary of Unaudited Statements of Operations and Related Data (1) Q108 Q208 Q308 Q408 Net revenues $ 206,495 $ 208,224 $ 232,824 $ 208,743 Cost of revenues 121,107 121,438 137,291 119,618 Gross profit 85,388 86,786 95,533 89,125 Gross profit % 41.4% 41.7% 41.0% 42.7% Research, development and engineering 18,509 18,302 18,399 18,016 Selling, general and administrative 42,776 42,868 45,019 45,368 Operating expenses 61,285 61,170 63,418 63,384 Operating income 24,103 25,616 32,115 25,741 Operating income % 11.7% 12.3% 13.8% 12.3% Income before income taxes 25,437 27,409 34,299 26,284 Income tax expense (benefit) 6,391 6,864 8,172 3,862 Income tax expense (benefit) as a percent of income before taxes 25.1% 25.0% 23.8% 14.7% Net income $ 19,046 $ 20,545 $ 26,127 $ 22,422 Diluted shares outstanding 48,681 49,310 49,533 48,994 Diluted EPS $ 0.39 $ 0.42 $ 0.53 $ 0.46 Net revenues from unaffiliated customers: Audio Communication Group Office and Contact Center $ 132,205 $ 131,357 $ 131,017 $ 125,379 Mobile 41,238 35,859 48,788 45,995 Gaming and Computer Audio 6,485 8,277 10,449 8,401 Other 5,644 5,554 5,701 5,586 Audio Entertainment Group 20,923 27,177 36,869 23,382 Net revenues by geographic area from unaffiliated customers: Domestic $ 131,108 $ 126,399 $ 139,106 $ 124,535 International 75,387 81,825 93,718 84,208 Balance Sheet accounts and metrics: Accounts receivable, net $ 121,705 $ 128,705 $ 136,550 $ 131,493 Days sales outstanding 53 56 53 57 Inventory, net $ 136,253 $ 133,516 $ 131,320 $ 127,088 Inventory turns 3.6 3.6 4.2 3.8 FY08 Q109 Q209 Q309 Net revenues $ 856,286 $ 219,164 $ 216,856 $ 182,836 Cost of revenues 499,454 126,464 121,290 120,581 Gross profit 356,832 92,700 95,566 62,255 Gross profit % 41.7% 42.3% 44.1% 34.0% Research, development and engineering 73,226 18,660 17,811 17,810 Selling, general and administrative 176,031 44,980 44,333 40,271 Operating expenses 249,257 63,640 62,144 58,081 Operating income 107,575 29,060 33,422 4,174 Operating income % 12.6% 13.3% 15.4% 2.3% Income before income taxes 113,429 30,600 30,252 2,675 Income tax expense (benefit) 25,289 7,339 8,692 (1,338) Income tax expense (benefit) as a percent of income before taxes 22.3% 24.0% 28.7% (50.0%) Net income $ 88,140 $ 23,261 $ 21,560 $ 4,013 Diluted shares outstanding 49,090 49,245 49,489 48,449 Diluted EPS $ 1.80 $ 0.47 $ 0.44 $ 0.08 Net revenues from unaffiliated customers: Audio Communication Group Office and Contact Center $ 519,958 $ 122,803 $ 119,530 $ 101,694 Mobile 171,880 59,882 60,911 36,011 Gaming and Computer Audio 33,612 9,621 8,977 8,531 Other 22,485 6,221 5,931 6,380 Audio Entertainment Group 108,351 20,637 21,507 30,220 Net revenues by geographic area from unaffiliated customers: Domestic $ 521,148 $ 134,402 $ 139,856 $ 107,799 International 335,138 84,762 77,000 75,037 Balance Sheet accounts and metrics: Accounts receivable, net $ 131,493 $ 130,530 $ 115,032 $ 106,463 Days sales outstanding 54 48 52 Inventory, net $ 127,088 $ 136,974 $ 163,433 $ 137,563 Inventory turns 3.7 3.0 3.5 (1) Non-GAAP.
