Science & Technology
Science and Technology
Science and Technology
Wed, October 28, 2009
Tue, October 27, 2009 Plantronics Announces Second Quarter Fiscal 2010 Results
SANTA CRUZ, CA--(Marketwire - October 27, 2009) - Plantronics, Inc. (
Plantronics also announced that its Board of Directors declared a quarterly dividend of $0.05 per share. The dividend is payable on December 10, 2009 to stockholders of record at the close of business on November 20, 2009.
"Revenues were above expectations as we experienced stable demand in our Office & Contact Center business and increased demand in our consumer markets. Our improved cost structure allowed us to achieve our long-term targeted gross and operating margins at the current revenue level," stated Ken Kannappan, President & CEO. "Our new corporate organizational structure along with the pending sale of Altec Lansing, our AEG segment, will produce better and more efficient corporate alignment to target our top market opportunity, Unified Communications ("UC"), providing an excellent earnings growth opportunity ahead as UC adoption becomes more substantial."
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Gaming and Computer & Clarity)
Comparisons are to the Same Quarter in the Prior Year
Second quarter fiscal 2010 net revenues of $144.4 million decreased 26% compared with $195.3 million in the prior year quarter, but increased 2% from $141.1 million in the first quarter of fiscal 2010. General economic weakness led to declines in net revenues in all major geographies and most product groups compared with the prior year quarter. Revenues in the U.S., Asia Pacific and Latin America regions improved sequentially.
Office and Contact Center net revenues were $93.5 million, a decrease of 22% from $119.5 million in the second quarter of fiscal 2009 and a sequential decrease of 3% from $95.9 million in the prior quarter. Bluetooth headset net revenues were $33.3 million, a decrease of 42% from the year ago quarter of $57.4 million, and a sequential increase of 10% from $30.3 million. The prior year quarter was stronger in part due to higher demand driven by hands-free legislation in California and Washington states which was partially offset by higher average selling prices in the second quarter of fiscal 2010. The Discovery 975 Bluetooth headset, introduced during the quarter, received positive editorial and consumer reviews and is now available through a number of top consumer electronics retailers.
Gross margin in the second quarter of fiscal 2010 was 48.7% compared with 47.9% in the second quarter of the prior year. The improvement was primarily due to a favorable product mix, lower freight costs, and lower requirements for excess and obsolete inventory provisions, partially offset by higher manufacturing costs as a result of lower production volumes.
Actions taken by the Company earlier this calendar year continued to have a beneficial effect, with operating expenses down by 22% from $55.6 million in the prior year quarter to $43.6 million in the current quarter. As a result of the leaner cost structure, operating income was $26.7 million resulting in an 18.5% operating margin. While these results were down from the second quarter in the prior year, the results are within the Company's long term target model for this business.
The Company continues to believe that the implementation of 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. Our UC portfolio continued to enjoy strong customer and partner reception. The Company expects that there will be a significantly higher level of growth in UC enabled products compared to headsets for desk phones in the future, and continues to believe that revenue from headset sales related to UC will be material to the Company beginning in fiscal 2011.
Audio Entertainment Group (AEG) Non-GAAP Results
(Docking Audio, PC Audio & Other)
Comparisons are to the Same Quarter in the Prior Year
Second quarter fiscal 2010 net revenues of $23.0 million increased 7% from $21.5 million in the prior year quarter driven by higher sales of Docking Audio products in all major geographies, and were up 21% sequentially from $19.0 million in the prior quarter. In addition, we experienced higher PC Audio sales in Asia and EMEA, which were offset by lower PC Audio sales in the U.S.
Gross margin increased to 20.9% from 9.0% as a result of improved product mix and margins along with lower requirements for excess and obsolete inventory provisions. This was partially offset by higher freight charges, royalty costs and other manufacturing costs.
Operating expenses declined by 12% from $6.5 million in the prior year quarter to $5.7 million in the current quarter, and the operating loss decreased from $4.6 million in the prior year quarter to $0.9 million in the current quarter.
On October 2, 2009, the Company entered into an Asset Purchase Agreement to sell Altec Lansing, its AEG segment, to an affiliate of Prophet Equity LP, a Southlake, Texas based private equity firm ("Prophet"). On October 23, 2009, the Company and Prophet entered into a letter agreement which amended the Asset Purchase Agreement to provide that the closing date for the sale of the AEG segment will be extended to not later than December 1, 2009.
Subsequent to the closing of the sale of the AEG segment, the Company will report all future and historical AEG segment results as discontinued operations in its financial statements beginning in the third quarter of fiscal 2010.
Business Outlook
Continuing Operations (Excludes Audio Entertainment Group business segment due to pending sale expected to be completed no later than December 1, 2009)
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.
Plantronics has a "book and ship" business model whereby it ships most orders to customers within 48 hours of its receipt of those orders, and, therefore, the level of backlog does not provide reliable visibility into potential future revenues. The Company's business is inherently difficult to forecast, and there can be no assurance that the incoming orders it expects to receive over the balance of the quarter will materialize. With continuing uncertainty resulting from the global economic conditions, the Company's business remains difficult to forecast. The December quarter tends to be characterized by an increase in incoming sales orders during October which diminishes in December.
Net revenues in the third quarter of fiscal 2010 are expected to be higher than the second quarter of fiscal 2010 and the third quarter of fiscal 2009, primarily based on the fact that the December quarter has historically been a stronger quarter than the September quarter and the current bookings trend supports our belief that revenues will be in the ranges below.
Subject to the foregoing, we are currently expecting the following range of financial results for continuing operations (excludes AEG due to the pending sale expected to be completed no later than December 1, 2009) for the third quarter of fiscal 2010:
-- Net revenues of $155 million - $160 million; -- Non-GAAP operating income of $26 million to $29 million; -- Non-GAAP earnings per share of $0.38 - $0.42; -- Non-GAAP consolidated tax rate to be approximately 26%; -- The EPS cost of stock-based compensation to be approximately $0.05; and -- GAAP earnings per share of $0.33 to $0.37.
If these results are achieved, the performance compared with Q3 Fiscal 2009 would be revenue growth of approximately 2% to 5% and Non-GAAP operating income growth of 189% to 222%.
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 third quarter fiscal 2010 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the third quarter fiscal 2010 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 second quarter fiscal 2010 results. The conference call will take place Tuesday, October 27th at 2:00 PM (PDT). 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 #22257821 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 website 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 impairment of goodwill and long-lived assets from non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP gross margin, 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 considered as 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) implementation of UC technologies by large enterprises as a significant driver of headset adoption, and, its effect on our revenue and profit growth; (ii) our products, including the Discovery 975 and the Savi Office and Savi Go headsets; (iii) revenue from headset sales related to UC and its materiality to the Company beginning in fiscal 2011; (iv) growing adoption and deployment of UC in general and our expectation that this will be advantageous for headset sales; (v) seasonality during the December quarter and its effect on our financial results; (vi) our estimates of GAAP and non-GAAP financial results for the third quarter of fiscal 2010, including revenue and earnings per share; (vii) our estimated tax rate for the third quarter of fiscal 2010; (viii) our estimated stock-based compensation expense for the third quarter of fiscal 2010; (ix) the anticipated closing of the sale of the AEG segment no later than December 1, 2009, 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:
-- economic conditions in both the domestic and international markets; -- fluctuations in foreign exchange rates; -- the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; -- the effect of restructuring actions on GAAP results; -- our ability to realize our UC plans and to achieve the financial results projected to arise from UC adoption could be adversely affected by the following factors: (i) as UC becomes more widely adopted, the risk that competitors will offer solutions that will effectively commoditize our headsets which, in turn, will reduce the sales prices for our headsets; (ii) our plans are dependent upon adoption of our UC solution by major platform providers such as Microsoft, Avaya, IBM and Cisco, and we have a limited ability to influence such providers with respect to the functionality of their platforms, their rate of deployment, and their willingness to integrate their platforms with our solutions; (iii) the development of UC solutions is technically complex and this may delay or obstruct our ability to introduce solutions to the market on a timely basis and that are cost effective, feature rich, stable and attractive to our customers; (iv) as UC becomes more widely adopted we anticipate that competition for market share will increase, and some competitors may have superior technical and economic resources, and (v) UC solutions may not be adopted with the breadth and speed in the marketplace that we currently anticipate; -- 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; -- further impairment losses on the carrying value of our intangible assets and goodwill could be recognized if it is determined the value is not recoverable which would adversely affect our financial results; -- volatility in prices from our suppliers, including our manufacturers located in China, have and could negatively affect our profitability and/or market share; -- the consummation of the sale of the AEG segment is subject to certain closing conditions which may not be met and, in the event the sale does not close, our business may be materially and adversely affected; -- in the event the sale of the AEG segment is consummated, the effects of the sale, including the level of cash flow and the timing of the receipt of any cash flow resulting from such sale are uncertain; and -- additional risk factors including: 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, and unexpected delays and uncertainties affecting our ability to realize targeted expense reductions and annualized savings by outsourcing the manufacturing of our Bluetooth products in China to GoerTek, Inc.
For more information concerning these and other possible risks, please refer to the Company's Annual Report on Form 10-K filed May 26, 2009, 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 six months ended September 30, 2009 and September 30, 2008 -- Summary Unaudited Statements of Operations and Related Data on a Non- GAAP Basis
About Plantronics
Plantronics is a world leader in personal audio communications for professionals and consumers. From unified communication solutions to Bluetooth headsets, Plantronics delivers unparalleled audio experiences and quality that reflect our nearly 50 years of innovation and customer commitment. Plantronics is used by every company in the Fortune 100 and is the headset of choice for air traffic control, 911 dispatch and the New York Stock Exchange. For more information, please visit [ www.plantronics.com ] or call (800) 544-4660.
Altec Lansing, Clarity, Plantronics, the logo design and Savi are trademarks or registered trademarks of Plantronics, Inc. The Bluetooth name and the Bluetooth trademarks are owned by Bluetooth SIG, Inc. and are used by Plantronics, Inc. under license. 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 Six Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2009 2008 2009 ---------- ---------- ---------- ---------- Net revenues $ 216,856 $ 167,415 $ 436,020 $ 327,540 Cost of revenues 123,083 94,729 251,368 187,298 ---------- ---------- ---------- ---------- Gross profit 93,773 72,686 184,652 140,242 Gross profit % 43.2% 43.4% 42.3% 42.8% Research, development and engineering 18,850 15,179 38,545 30,258 Selling, general and administrative 47,745 37,439 96,143 74,921 Restructuring and other related charges (140) 857 235 1,454 Impairment of long-lived assets - 25,194 - 25,194 ---------- ---------- ---------- ---------- Total operating expenses 66,455 78,669 134,923 131,827 ---------- ---------- ---------- ---------- Operating income (loss) 27,318 (5,983) 49,729 8,415 Operating income (loss) % 12.6% (3.6%) 11.4% 2.6% Interest and other income (expense), net (3,170) 884 (1,630) 2,231 ---------- ---------- ---------- ---------- Income (loss) before income taxes 24,148 (5,099) 48,099 10,646 Income tax expense (benefit) 6,500 (4,353) 9,957 742 ---------- ---------- ---------- ---------- Net income (loss) $ 17,648 $ (746) $ 38,142 $ 9,904 ========== ========== ========== ========== % of net revenues 8.1% (0.4%) 8.7% 3.0% Earnings (loss) per common share: Basic $ 0.36 $ (0.02) $ 0.78 $ 0.20 Diluted $ 0.36 $ (0.02) $ 0.77 $ 0.20 Shares used in computing earnings (loss) per share: Basic 48,796 48,737 48,738 48,632 Diluted 49,489 48,737 49,362 49,118 Tax rate 26.9% 85.4% 20.7% 7.0% UNAUDITED CONSOLIDATED BALANCE SHEETS March 31, September 30, 2009 2009 ---------- ---------- ASSETS Cash and cash equivalents $ 158,193 $ 244,170 Short-term investments 59,987 24,999 ---------- ---------- Total cash, cash equivalents, and short-term investments 218,180 269,169 Accounts receivable, net 83,657 103,003 Inventory, net 119,296 100,024 Deferred income taxes 12,486 12,765 Other current assets 29,936 17,191 Assets held for sale - 9,267 ---------- ---------- Total current assets 463,555 511,419 Long-term investments 23,718 22,015 Property, plant and equipment, net 95,719 71,224 Intangibles, net 26,575 4,067 Goodwill 14,005 14,005 Other assets 9,548 10,978 ---------- ---------- Total assets $ 633,120 $ 633,708 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 32,827 $ 34,315 Accrued liabilities 53,143 54,005 ---------- ---------- Total current liabilities 85,970 88,320 Deferred tax liability 8,085 - Long-term income taxes payable 12,677 14,215 Other long-term liabilities 1,021 991 ---------- ---------- Total liabilities 107,753 103,526 Stockholders' equity 525,367 530,182 ---------- ---------- Total liabilities and stockholders' equity $ 633,120 $ 633,708 ========== ========== AUDIO COMMUNICATIONS GROUP SUMMARY CONDENSED FINANCIAL STATEMENTS (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2009 2008 2009 ---------- ---------- ---------- ---------- Net revenues $ 195,349 $ 144,458 $ 393,876 $ 285,620 Cost of revenues 102,603 76,527 211,960 152,685 ---------- ---------- ---------- ---------- Gross profit 92,746 67,931 181,916 132,935 Gross profit % 47.5% 47.0% 46.2% 46.5% Research, development and engineering 16,879 13,542 34,076 27,211 Selling, general and administrative 42,358 32,913 85,308 66,097 Restructuring and other related charges - 857 - 1,435 ---------- ---------- ---------- ---------- Total operating expenses 59,237 47,312 119,384 94,743 ---------- ---------- ---------- ---------- Operating income $ 33,509 $ 20,619 $ 62,532 $ 38,192 Operating income % 17.2% 14.3% 15.9% 13.4% AUDIO ENTERTAINMENT GROUP SUMMARY CONDENSED FINANCIAL STATEMENTS (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2009 2008 2009 ---------- ---------- ---------- ---------- Net revenues $ 21,507 $ 22,957 $ 42,144 $ 41,920 Cost of revenues 20,480 18,202 39,408 34,613 ---------- ---------- ---------- ---------- Gross profit 1,027 4,755 2,736 7,307 Gross profit % 4.8% 20.7% 6.5% 17.4% Research, development and engineering 1,971 1,637 4,469 3,047 Selling, general and administrative 5,387 4,526 10,835 8,824 Restructuring and other related charges (140) - 235 19 Impairment of long-lived assets - 25,194 - 25,194 ---------- ---------- ---------- ---------- Total operating expenses 7,218 31,357 15,539 37,084 ---------- ---------- ---------- ---------- Operating loss $ (6,191) $ (26,602) $ (12,803) $ (29,777) Operating loss % (28.8%) (115.9%) (30.4%) (71.0%) PLANTRONICS, INC. UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except per share data and percentages) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, 2009 September 30, 2009 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $167,415 $ - $167,415 $327,540 $ - $327,540 Cost of revenues 94,729 (2,422)(2) 92,307 187,298 (6,605)(3) 180,693 -------- -------- -------- -------- -------- -------- Gross profit 72,686 2,422 75,108 140,242 6,605 146,847 Gross profit % 43.4% 44.9% 42.8% 44.8% Research, development and engineer- ing 15,179 (854)(1) 14,325 30,258 (1,700)(1) 28,558 Selling, general and adminis- trative 37,439 (2,472)(1) 34,967 74,921 (5,061)(1) 69,860 Restructuring and other related charges 857 (857)(4) - 1,454 (1,454)(4) - Impairment of long-lived assets 25,194 (25,194)(5) - 25,194 (25,194)(5) - -------- -------- -------- -------- -------- -------- Total operating expenses 78,669 (29,377) 49,292 131,827 (33,409) 98,418 -------- -------- -------- -------- -------- -------- Operat- ing income (loss) (5,983) 31,799 25,816 8,415 40,014 48,429 Operat- ing income (loss) % (3.6%) 15.4% 2.6% 14.8% Interest and other income (expense), net 884 - 884 2,231 - 2,231 -------- -------- -------- -------- -------- -------- Income (loss) before income taxes (5,099) 31,799 26,700 10,646 40,014 50,660 Income tax expense (benefit) (4,353) 11,056 (6) 6,703 742 12,430 (6) 13,172 -------- -------- -------- -------- -------- -------- Net income (loss) $ (746) $ 20,743 $ 19,997 $ 9,904 $ 27,584 $ 37,488 ======== ======== ======== ======== ======== ======== % of net revenues (0.4%) 11.9% 3.0% 11.4% Diluted earnings (loss) per common share $ (0.02) $ 0.42 $ 0.40 $ 0.20 $ 0.56 $ 0.76 Shares used in diluted per share calculat- ions 48,737 49,567 (7) 49,567 49,118 49,118 49,118 AUDIO COMMUNICATIONS GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, 2009 September 30, 2009 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $144,458 $ - $144,458 $285,620 $ - $285,620 Cost of revenues 76,527 (2,382)(2) 74,145 152,685 (6,504)(3) 146,181 -------- -------- -------- -------- -------- -------- Gross profit 67,931 2,382 70,313 132,935 6,504 139,439 Gross profit % 47.0% 48.7% 46.5% 48.8% Research, development and engineer- ing 13,542 (809)(1) 12,733 27,211 (1,628)(1) 25,583 Selling, general and adminis- trative 32,913 (2,090)(1) 30,823 66,097 (4,216)(1) 61,881 Restructuring and other related charges 857 (857)(4) - 1,435 (1,435)(4) - -------- -------- -------- -------- -------- -------- Total operating expenses 47,312 (3,756) 43,556 94,743 (7,279) 87,464 -------- -------- -------- -------- -------- -------- Operat- ing income $ 20,619 $ 6,138 $ 26,757 $ 38,192 $ 13,783 $ 51,975 Operat- ing income % 14.3% 18.5% 13.4% 18.2% AUDIO ENTERTAINMENT GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, 2009 September 30, 2009 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $ 22,957 $ - $ 22,957 $ 41,920 $ - $ 41,920 Cost of revenues 18,202 (40)(1) 18,162 34,613 (101)(1) 34,512 -------- -------- -------- -------- -------- -------- Gross profit 4,755 40 4,795 7,307 101 7,408 Gross profit % 20.7% 20.9% 17.4% 17.7% Research, development and engineering 1,637 (45)(1) 1,592 3,047 (72)(1) 2,975 Selling, general and adminis- trative 4,526 (382)(1) 4,144 8,824 (845)(1) 7,979 Restructuring and other related charges - - - 19 (19)(4) - Impairment of long-lived assets 25,194 (25,194)(5) - 25,194 (25,194)(5) - -------- -------- -------- -------- -------- -------- Total operating expenses 31,357 (25,621) 5,736 37,084 (26,130) 10,954 -------- -------- -------- -------- -------- -------- Operat- ing loss $(26,602) $ 25,661 $ (941) $(29,777) $ 26,231 $ (3,546) Operat- ing loss % (115.9%) (4.1%) (71.0%) (8.5%) (1) Excluded amount represents stock-based compensation and purchase accounting amortization. (2) Excluded amount represents stock-based compensation, purchase accounting amortization and $1,707 of accelerated depreciation on assets related to restructuring activity. (3) Excluded amount represents stock-based compensation, purchase accounting amortization and $5,205 of accelerated depreciation on assets related to restructuring activity. (4) Excluded amount represents restructuring and other related charges. (5) Excluded amount represents impairment of long-lived assets (6) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization, restructuring and other related charges, and impairment of long-lived assets. (7) As the Company incurred a GAAP net loss for the period, the inclusion of stock options in the shares used for computing diluted earnings per share would have been anti-dilutive and would have reduced the net loss per share. However, as we have non-GAAP net income, the diluted shares used for the Non-GAAP diluted earnings per share includes the effect of stock options. 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, purchase accounting amortization and impairment of 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 Plantronics 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 Six Months Ended September 30, 2008 September 30, 2008 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $216,856 $ - $216,856 $436,020 $ - $436,020 Cost of revenues 123,083 (1,793)(1) 121,290 251,368 (3,614)(1) 247,754 -------- -------- -------- -------- -------- -------- Gross profit 93,773 1,793 95,566 184,652 3,614 188,266 Gross profit % 43.2% 44.1% 42.3% 43.2% Research, development and enginee- ring 18,850 (1,039)(1) 17,811 38,545 (2,074)(1) 36,471 Selling, general and adminis- trative 47,745 (3,412)(1) 44,333 96,143 (6,830)(1) 89,313 Restructuring and other related charges (140) 140 (2) - 235 (235)(2) - -------- -------- -------- -------- -------- -------- Total operating expenses 66,455 (4,311) 62,144 134,923 (9,139) 125,784 -------- -------- -------- -------- -------- -------- Operat- ing income 27,318 6,104 33,422 49,729 12,753 62,482 Operat- ing income % 12.6% 15.4% 11.4% 14.3% Interest and other income (expense), net (3,170) - (3,170) (1,630) - (1,630) -------- -------- -------- -------- -------- -------- Income before income taxes 24,148 6,104 30,252 48,099 12,753 60,852 Income tax expense 6,500 2,192 (3) 8,692 9,957 6,074 (4) 16,031 -------- -------- -------- -------- -------- -------- Net income $ 17,648 $ 3,912 $ 21,560 $ 38,142 $ 6,679 $ 44,821 ======== ======== ======== ======== ======== ======== % of net revenues 8.1% 9.9% 8.7% 10.3% Diluted earnings per common share $ 0.36 $ 0.08 $ 0.44 $ 0.77 $ 0.14 $ 0.91 Shares used in diluted per share calculat- ions 49,489 49,489 49,489 49,362 49,362 49,362 AUDIO COMMUNICATIONS GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, 2008 September 30, 2008 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $195,349 $ - $195,349 $393,876 $ - $393,876 Cost of revenues 102,603 (883)(1) 101,720 211,960 (1,791)(1) 210,169 -------- -------- -------- -------- -------- -------- Gross profit 92,746 883 93,629 181,916 1,791 183,707 Gross profit % 47.5% 47.9% 46.2% 46.6% Research, development and engineer- ing 16,879 (1,001)(1) 15,878 34,076 (1,994)(1) 32,082 Selling, general and adminis- trative 42,358 (2,584)(1) 39,774 85,308 (5,165)(1) 80,143 Restructuring and other related charges - - - - - (2) - -------- -------- -------- -------- -------- -------- Total operating expenses 59,237 (3,585) 55,652 119,384 (7,159) 112,225 -------- -------- -------- -------- -------- -------- Operat- ing income $ 33,509 $ 4,468 $ 37,977 $ 62,532 $ 8,950 $ 71,482 Operat- ing income % 17.2% 19.4% 15.9% 18.1% AUDIO ENTERTAINMENT GROUP UNAUDITED GAAP TO NON-GAAP RECONCILIATION (in thousands, except percentages) UNAUDITED STATEMENTS OF OPERATIONS Three Months Ended Six Months Ended September 30, 2008 September 30, 2008 ------------------------------ ------------------------------ GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP -------- -------- -------- -------- -------- -------- Net revenues $ 21,507 $ - $ 21,507 $ 42,144 $ - $ 42,144 Cost of revenues 20,480 (910)(1) 19,570 39,408 (1,823)(1) 37,585 -------- -------- -------- -------- -------- -------- Gross profit 1,027 910 1,937 2,736 1,823 4,559 Gross profit % 4.8% 9.0% 6.5% 10.8% Research, development and engineer- ing 1,971 (38)(1) 1,933 4,469 (80)(1) 4,389 Selling, general and adminis- trative 5,387 (828)(1) 4,559 10,835 (1,665)(1) 9,170 Restructuring and other related charges (140) 140 (2) - 235 (235)(2) - -------- -------- -------- -------- -------- -------- Total operating expenses 7,218 (726) 6,492 15,539 (1,980) 13,559 -------- -------- -------- -------- -------- -------- Operat- ing loss $ (6,191) $ 1,636 $ (4,555) $(12,803) $ 3,803 $ (9,000) Operat- ing loss % (28.8%) (21.2%) (30.4%) (21.4%) (1) Excluded amount represents stock-based compensation and purchase accounting amortization. (2) Excluded amount represents restructuring and other related charges. (3) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization and restructuring and other related charges. (4) Excluded amount represents tax benefit from stock-based compensation, purchase accounting amortization, restructuring and other related charges and $1,735 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, purchase accounting amortization and impairment of 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 Plantronics 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- Non-GAAP (in thousands, except per share data and percentages) Q109 Q209 Q309 Q409 Net revenues $ 219,164 $ 216,856 $ 182,836 $ 146,763 Cost of revenues 126,464 121,290 120,581 95,517 Gross profit 92,700 95,566 62,255 51,246 Gross profit % 42.3% 44.1% 34.0% 34.9% Research, development and engineering 18,660 17,811 17,810 13,938 Selling, general and administrative 44,980 44,333 40,271 33,633 Operating expenses 63,640 62,144 58,081 47,571 Operating income 29,060 33,422 4,174 3,675 Operating income % 13.3% 15.4% 2.3% 2.5% Income before income taxes 30,600 30,252 2,675 3,260 Income tax expense (benefit) 7,339 8,692 (1,338) 2,714 Income tax expense (benefit) as a percent of income before taxes 24.0% 28.7% (50.0%) 83.3% Net income $ 23,261 $ 21,560 $ 4,013 $ 546 Diluted shares outstanding 49,245 49,489 48,449 48,431 Diluted earnings per share $ 0.47 $ 0.44 $ 0.08 $ 0.01 Net revenues from unaffiliated customers: Audio Communication Group Office and Contact Center $ 122,803 $ 119,530 $ 101,694 $ 85,642 Mobile 59,882 60,911 36,011 30,615 Gaming and Computer Audio 9,621 8,977 8,531 6,923 Clarity 6,221 5,931 6,380 4,918 Audio Entertainment Group 20,637 21,507 30,220 18,665 Net revenues by geographic area from unaffiliated customers: Domestic $ 134,402 $ 139,856 $ 107,799 $ 90,182 International 84,762 77,000 75,037 56,581 Balance Sheet accounts and metrics: Accounts receivable, net $ 130,530 $ 115,032 $ 106,463 $ 83,657 Days sales outstanding 54 48 52 51 Inventory, net $ 136,974 $ 163,433 $ 137,563 $ 119,296 Inventory turns 3.7 3.0 3.5 3.2 FY09 Q110 Q210 Net revenues $ 765,619 $ 160,125 $ 167,415 Cost of revenues 463,852 88,386 92,307 Gross profit 301,767 71,739 75,108 Gross profit % 39.4% 44.8% 44.9% Research, development and engineering 68,219 14,233 14,325 Selling, general and administrative 163,217 34,893 34,967 Operating expenses 231,436 49,126 49,292 Operating income 70,331 22,613 25,816 Operating income % 9.2% 14.1% 15.4% Income before income taxes 66,787 23,960 26,700 Income tax expense (benefit) 17,407 6,469 6,703 Income tax expense (benefit) as a percent of income before taxes 26.1% 27.0% 25.1% Net income $ 49,380 $ 17,491 $ 19,997 Diluted shares outstanding 48,589 48,665 49,567 Diluted earnings per share $ 1.02 $ 0.36 $ 0.40 Net revenues from unaffiliated customers: Audio Communication Group Office and Contact Center $ 429,669 $ 95,923 $ 93,503 Mobile 187,419 32,310 34,665 Gaming and Computer Audio 34,052 8,810 9,015 Clarity 23,450 4,119 7,275 Audio Entertainment Group 91,029 18,963 22,957 Net revenues by geographic area from unaffiliated customers: Domestic $ 472,239 $ 98,787 $ 104,027 International 293,380 61,338 63,388 Balance Sheet accounts and metrics: Accounts receivable, net $ 83,657 $ 88,350 $ 103,003 Days sales outstanding 50 55 Inventory, net $ 119,296 $ 108,898 $ 100,024 Inventory turns 3.2 3.7
