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Revenue Grows on Strong Office & Call Center and Bluetooth Mobile Demand;
EPS Exceeds Guidance
SANTA CRUZ, Calif., July 24 /PRNewswire-FirstCall/ -- Plantronics,
Inc., (NYSE: PLT) today announced first quarter fiscal 2008 net revenues of
$206.5 million compared with $195.1 million in the first quarter of fiscal
2007. Revenues were within our guidance of $205 to $210 million.
Plantronics' GAAP diluted earnings per share increased 24% to $0.31 in the
first quarter compared with $0.25 in the first quarter of fiscal 2007.
Non-GAAP diluted earnings per share were $0.37 compared with $0.28 in the
first quarter of fiscal 2007. Earnings per share exceeded previously
provided GAAP guidance of $0.20 to $0.23 and non-GAAP guidance of $0.26 to
$0.29. The difference between GAAP and non-GAAP earnings per share for the
current period is the cost of equity-based compensation.
"Our revenue performance during the first quarter of fiscal 2008 was
driven by growth in our headset business, especially for office and contact
center products. Enterprise demand remained healthy and our new product
offerings have been well received. We also introduced a number of new
mobile and consumer products targeting emerging opportunities such as music
phones. Our operating margin grew as a result of a better product mix and
improved efficiencies throughout the Company," stated Ken Kannappan,
President & CEO of Plantronics.
"Our focus areas for fiscal 2008 and fiscal 2009 are to increase
penetration in the office, upgrade existing customers with compelling new
products, grow our Bluetooth market share while improving profitability,
achieve a turnaround of the Audio Entertainment Group, and improve the
overall profitability of the Company," concluded Kannappan.
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Computer, Clarity)
First quarter net revenues of $185.6 million were up 13.3% compared
with $163.7 million in the year-ago quarter. Revenue growth compared to the
year- ago quarter was driven by demand for wireless products, with office
wireless up over 20% from a year ago and mobile Bluetooth up 27% from the
same period. This growth was partially offset by slight declines in sales
of computer and Clarity products.
Gross margin in Q1 FY08 was 46.6% compared with 43.3% in the year-ago
quarter. Among the factors contributing to a higher gross margin compared
to Q1 FY07 were an improved product mix, higher production levels and
better absorption of fixed costs which includes increased utilization of
our China manufacturing plant, and cost reduction on our Bluetooth mobile
and office wireless products. Operating margin in Q1 FY08 was 17.7%
compared with 13.7% in the year-ago quarter because gross margins were
higher in Q1FY08 and operating expenses grew more slowly than revenues.
Audio Entertainment Group (AEG) Non-GAAP Results
(Altec Lansing)
First quarter net revenues of $20.9 million were down 33% from $31.3
million in the year-ago quarter. This business is in a turnaround and
requires a significant product refresh to be competitive. We believe this
will occur near the end of the next 18 months. Some positive signs for AEG
in Q1FY08 included initial sales of the iM600 for docking audio and
announcements of the Upgrader Series of headphones and the PT Series of
wireless digital surround sound speakers designed for flat panel TV's.
Given the early stage of the product transition, the division's gross
margins declined as a result of product margin erosion among the older
products as well as provisions for excess and obsolete inventory and lower
revenues. The gross margin in Q1 FY08 was negative 10.6% compared with
17.7% in the year-ago quarter.
Non-GAAP operating loss was $10.8 million in the quarter compared with
an operating loss of $5.6 million in the same quarter of the prior year.
"Despite these results, we believe that a successful turnaround of the
business is possible when we refresh the product offering and establish
systems to introduce successful new AEG products thereafter at regular
intervals. We expect sales to rebound and the targeted range of
profitability to be restored within the next two years," stated Kannappan.
Business Outlook
The following statements are based on current expectations. Many of
these statements are forward-looking, and actual results may differ
materially.
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. The September quarter tends to be characterized by a
slowdown in incoming purchase orders during July which intensifies in
August, but historically picks up strongly after Labor Day. This pattern
tends to be particularly true in our highest margin office and contact
center business. This trend has begun to manifest itself in the current
quarter, and we need the historical pick up in September to recur to
achieve the revenue levels we are forecasting. 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.
We are currently expecting revenues for AEG to increase sequentially and
for the operating losses to be somewhat lower than the first quarter, but
higher than Q2 last year. Subject to the foregoing, we are currently
expecting the following financial results for the second quarter of fiscal
2008:
- Net revenues for the second quarter of fiscal 2008 to be in the range
of $206 - $212 million;
- Non-GAAP consolidated tax rate to be approximately 24%;
- The EPS cost of equity compensation pursuant to FAS 123R to be
approximately $0.05 - $0.06;
- Non-GAAP earnings per share for the second quarter of fiscal 2008 to be
in the range of $0.30 - $0.35; and
- GAAP earnings per share of approximately $0.25 to $0.29.
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 second quarter fiscal year 2008 results or by other
public disclosure. Any statements by persons outside Plantronics
speculating on the progress of the second quarter of the fiscal year will
not be based on internal Company information and should be assessed
accordingly by investors. The statements do not reflect the potential
impact of any mergers or acquisitions that may be completed after the date
of this release.
Conference Call Scheduled to Discuss Financial Results
Plantronics has scheduled a conference call to discuss the contents of
this release. The conference call will take place today, Tuesday, July 24
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 #2594540 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 http://www.plantronics.com under Investor Relations.
Use of Non-GAAP Financial Information
Plantronics excludes stock-based compensation related to stock options
and employee stock purchases 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 they are non-cash expenses that
Plantronics does not believe are reflective of ongoing operating results.
The Company believes that the use of non-GAAP financial measures provide
meaningful supplemental information regarding its performance and
liquidity. We believe that both management and investors benefit from
referring to these non-GAAP financial measures in assessing the Company's
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. Specific forward-
looking statements include our belief that a successful turnaround of our
AEG business can be achieved with a refreshed product offering within the
next 18 months, including a rebound in sales with a goal of approaching the
range of AEG's target operating model within the next two years, and our
estimates of net revenues, margins, operating expenses, tax rate and
earnings for the second quarter of fiscal 2008. These forward-looking
statements involve a number of risks and uncertainties, and are based on
current information and management judgment.
Among the factors that could cause actual results to differ materially
from those projected are:
- Our operating results are difficult to predict;
- The ability to achieve the turnaround of AEG is uncertain because:
- it is dependent upon our ability to more effectively research and
implement features in our AEG products that consumers want and are
willing to purchase;
- we must be able to meet the market windows for these products;
- we must be able to retain or obtain the shelf space for these
products in our sales channel; and
- we must retain or improve the brand recognition associated with the
Altec Lansing brand during the turnaround;
- Failure to achieve any of these objectives may adversely affect our
financial results;
- 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, an impairment loss must be recognized
which would adversely affect our financial results;
- The market for our products is characterized by rapidly changing
technology, short product life cycles, and frequent new product
introductions, and we may not be able to develop, manufacture or market
new products in response to changing customer requirements and new
technologies;
- The actions of existing and/or new competitors, especially with regard
to pricing and promotional programs;
- Product mix is difficult to estimate and standard margin varies
considerably by product;
- 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;
- The inability to successfully develop, manufacture and market new
products and achieve volume shipment schedules to meet demand;
- A softening of the level of market demand for our products;
- Variations in sales and profits in higher tax, as compared to lower
tax, jurisdictions;
- Fluctuations in foreign exchange rates;
- Class action lawsuits are being brought against us and other Bluetooth
headset manufacturers claiming "noise induced hearing loss". While we
believe these suits are without merit, the costs to defend against them
could be high and the results of litigation are not predictable in any
event;
- Changes in the regulatory environment either as to headsets directly or
as to the products, such as mobile phones, with which our products are
used;
- Additional risk factors include: changes in the timing and size of
orders from our customers, price erosion, increased requirements from
retail customers for marketing and advertising funding, interruption in
the supply of sole-sourced critical components, continuity of component
supply at costs consistent with our plans, failure of our distribution
channels to operate as we expect, failure to develop products that keep
pace with technological changes, the inherent risks of our substantial
foreign operations, problems which might affect our manufacturing
facilities in Mexico or in China, and the loss of the services of key
executives and employees.
For more information concerning these and other possible risks, please
refer to the Company's Annual Report on Form 10-K filed May 29, 2007,
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 Reconciliation
for Plantronics, Inc.
- Unaudited GAAP to Non-GAAP Statements of Operations Reconciliations
by Segment
- Summary Unaudited Statements of Operations and Related Data
About Plantronics
In 1969, a Plantronics headset carried the historic first 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(R)
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 http://www.plantronics.com or call (800)
544-4660.
Altec Lansing, Clarity, Plantronics, Sound Innovation, and Volume Logic
are trademarks or registered trademarks of Plantronics, Inc. All other
trademarks are the property of their respective owners.
FOR INFORMATION, CONTACT:
Greg Klaben
Vice President, Investor Relations
(831) 458-7533
PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30, June 30,
2006 2007
Net revenues $195,069 $206,495
Cost of revenues 119,470 122,949
Gross profit 75,599 83,546
Gross profit % 38.8% 40.5%
Research, development and engineering 18,659 19,488
Selling, general and administrative 44,453 46,111
Gain on sale of land (2,637) --
Total operating expenses 60,475 65,599
Operating income 15,124 17,947
Operating income % 7.8% 8.7%
Interest and other income (expense), net 985 1,334
Income before income taxes 16,109 19,281
Income tax expense 3,818 4,306
Net income $12,291 $14,975
% of net revenues 6.3% 7.3%
Diluted earnings per common share $0.25 $0.31
Shares used in diluted per share calculations 48,268 48,681
Tax rate 23.7% 22.3%
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, June 30,
2007 2007
ASSETS
Cash and cash equivalents $94,131 $97,093
Short-term investments 9,234 13,334
Total cash, cash equivalents, and
short-term investments 103,365 110,427
Accounts receivable, net 113,758 121,705
Inventory 126,605 136,253
Deferred income taxes 12,659 12,874
Other current assets 18,474 18,538
Total current assets 374,861 399,797
Property, plant and equipment, net 97,259 98,653
Intangibles, net 100,120 98,080
Goodwill 72,825 72,825
Other assets 6,239 5,923
$651,304 $675,278
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 49,956 46,922
Accrued liabilities 54,025 58,858
Income taxes payable 12,476 3,847
Total current liabilities 116,457 109,627
Deferred tax liability 37,344 34,746
Long-term liability 696 15,068
Total liabilities 154,497 159,441
Stockholders' equity 496,807 515,837
$651,304 $675,278
AUDIO COMMUNICATIONS GROUP
SUMMARY CONDENSED FINANCIAL STATEMENTS
(in thousands)
UNAUDITED STATEMENTS OF OPERATIONS
Three Months Ended
June 30, June 30,
2006 2007
Net revenues $163,737 $185,572
Cost of revenues 93,664 99,796
Gross profit 70,073 85,776
Gross profit % 42.8% 46.2%
Research, development and engineering 16,018 16,784
Selling, general and administrative 35,875 40,006
Gain on sale of land (2,637) --
Total operating expenses 49,256 56,790
Operating income $20,817 $28,986
Operating income % 12.7% 15.6%
AUDIO ENTERTAINMENT GROUP
SUMMARY CONDENSED FINANCIAL STATEMENTS
(in thousands)
UNAUDITED STATEMENTS OF OPERATIONS
Three Months Ended
June 30, June 30,
2006 2007
Net revenues $31,332 $20,923
Cost of revenues 25,806 23,153
Gross profit (loss) 5,526 (2,230)
Gross profit (loss) % 17.6% (10.7)%
Research, development and engineering 2,641 2,704
Selling, general and administrative 8,578 6,105
Total operating expenses 11,219 8,809
Operating loss $(5,693) $(11,039)
Operating loss % (18.2)% (52.8)%
PLANTRONICS, INC.
UNAUDITED GAAP TO NON-GAAP RECONCILIATION
(in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2007
GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP
(1),(2) (1)
Net revenues $195,069 $-- $195,069 $206,495 $-- $206,495
Cost of
revenues 119,470 (789) 118,681 122,949 (641) 122,308
Gross profit 75,599 789 76,388 83,546 641 84,187
Gross profit % 38.8% 39.2% 40.5% 40.8%
Research,
development
and engineering 18,659 (1,026) 17,633 19,488 (928) 18,560
Selling,
general and
administrative 44,453 (2,621) 41,832 46,111 (2,544) 43,567
Gain on sale
of land (2,637) 2,637 -- -- -- --
Total operating
expenses 60,475 (1,010) 59,465 65,599 (3,472) 62,127
Operating
income 15,124 1,799 16,923 17,947 4,113 22,060
Operating
income % 7.8% 8.7% 8.7% 10.7%
Interest and other
income (expense),
net 985 -- 985 1,334 -- 1,334
Income before
income taxes 16,109 1,799 17,908 19,281 4,113 23,394
Income tax
expense 3,818 443 4,261 4,306 1,309 5,615
Net income $12,291 $1,356 $13,647 $14,975 $2,804 $17,779
% of net
revenues 6.3% 7.0% 7.3% 8.6%
Diluted earnings
per common share $0.25 $0.03 $0.28 $0.31 $0.06 $0.37
Shares used in
diluted per share
calculations 48,268 48,268 48,268 48,681 48,681 48,681
AUDIO COMMUNICATIONS GROUP
UNAUDITED GAAP TO NON-GAAP RECONCILIATION
(in thousands)
UNAUDITED STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2007
GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP
(1),(2) (1)
Net revenues $163,737 $-- $163,737 $185,572 $-- $185,572
Cost of revenues 93,664 (781) 92,883 99,796 (623) 99,173
Gross profit 70,073 781 70,854 85,776 623 86,399
Gross profit % 42.8% 43.3% 46.2% 46.6%
Research,
development
and engineering 16,018 (998) 15,020 16,784 (893) 15,891
Selling,
general and
administrative 35,875 (2,518) 33,357 40,006 (2,348) 37,658
Gain on sale
of land (2,637) 2,637 -- -- -- --
Total operating
expenses 49,256 1,639 48,377 56,790 (3,241) 53,549
Operating
income $20,817 $(858) $22,477 $28,986 $3,864 $32,850
Operating
income % 12.7% 13.7% 15.6% 17.7%
AUDIO ENTERTAINMENT GROUP
UNAUDITED GAAP TO NON-GAAP RECONCILIATION
(in thousands)
UNAUDITED STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2007
GAAP Excluded Non-GAAP GAAP Excluded Non-GAAP
(1) (1)
Net revenues $31,332 $-- $31,332 $20,923 $-- $20,923
Cost of revenues 25,806 (8) 25,798 23,153 (18) 23,135
Gross profit
(loss) 5,526 8 5,534 (2,230) 18 (2,212)
Gross profit
(loss) % 17.6% 17.7% (10.7)% (10.6)%
Research,
development and
engineering 2,641 (28) 2,613 2,704 (35) 2,669
Selling,
general and
administrative 8,578 (103) 8,475 6,105 (196) 5,909
Total operating
expenses 11,219 (131) 11,088 8,809 (231) 8,578
Operating
loss $(5,693) $139 $(5,554) $(11,039) $249 $(10,790)
Operating
loss % (18.2)% (17.7)% (52.8)% (51.6)%
(1) Excludes stock-based compensation.
(2) Excludes gain on sale of land.
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 the impact of all stock-based compensation charges
under FAS 123R, which Plantronics considers non-recurring transactions. 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)
Q107 Q207 Q307
Net revenues $195,069 $194,934 $215,435
Cost of revenues 118,681 117,357 133,855
Gross profit 76,388 77,577 81,580
Gross profit % 39.2% 39.8% 37.9%
Research, development and engineering 17,633 16,055 16,902
Selling, general and administrative 41,832 41,570 43,619
Operating expenses 59,465 57,625 60,521
Operating income 16,923 19,952 21,059
Operating income % 8.7% 10.2% 9.8%
Income before income taxes 17,908 20,219 22,552
Income tax expense 4,261 5,049 4,479
Income tax expense as a percent of
income before taxes 23.8% 25.0% 19.9%
Net income $13,647 $15,170 $18,073
Diluted shares outstanding 48,268 47,626 47,922
EPS $0.28 $0.32 $0.38
Net revenues from unaffiliated customers:
Audio Communication Group
Office and Contact center $114,267 $115,813 $118,280
Mobile 35,806 33,199 43,080
Gaming and Computer 7,289 7,727 8,364
Other specialty products 6,375 6,294 6,787
Audio Entertainment Group 31,332 31,900 38,924
Net revenues by geographic area
from unaffiliated customers:
Domestic $126,900 $122,782 $126,178
International 68,169 72,152 89,257
Balance Sheet accounts and metrics:
Accounts receivable, net $121,702 $118,646 $131,735
Days sales outstanding 56 55 55
Inventory, net $135,979 $139,426 $134,263
Inventory turns 3.5 3.4 4.0
(1) Non-GAAP.
Summary of Unaudited Statements of Operations and Related Data (1)
Q407 FY07 Q108
Net revenues $194,716 $800,154 $206,495
Cost of revenues 117,738 487,631 122,308
Gross profit 76,978 312,523 84,187
Gross profit % 39.5% 39.1% 40.8%
Research, development and engineering 17,470 68,060 18,560
Selling, general and administrative 44,911 171,932 43,567
Operating expenses 62,381 239,992 62,127
Operating income 14,597 72,531 22,060
Operating income % 7.5% 9.1% 10.7%
Income before income taxes 15,941 76,620 23,394
Income tax expense 2,507 16,296 5,615
Income tax expense as a percent
of income before taxes 15.7% 21.3% 24.0%
Net income $13,434 $60,324 $17,779
Diluted shares outstanding 48,218 48,020 48,681
EPS $0.28 $1.26 $0.37
Net revenues from unaffiliated customers:
Audio Communication Group
Office and Contact center $126,964 $475,324 $132,205
Mobile 34,774 146,859 41,238
Gaming and Computer 6,782 30,162 6,485
Other specialty products 4,713 24,169 5,644
Audio Entertainment Group 21,483 123,640 20,923
Net revenues by geographic area
from unaffiliated customers:
Domestic $115,846 $491,706 $131,295
International 78,870 308,448 75,200
Balance Sheet accounts and metrics:
Accounts receivable, net $113,758 $113,758 $121,705
Days sales outstanding 53 53
Inventory, net $126,605 $126,605 $136,253
Inventory turns 3.8 3.6
(1) Non-GAAP.
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