UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 26, 2020~~July 3, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission File Number: 001-12696

Plantronics, Inc.

(Exact name of registrant as specified in its charter)


Delaware			77-0207692
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

345 Encinal Street

Santa Cruz, California 95060

(Address of principal executive offices)

(Zip Code)

(831) ~~426-5858~~420-3002

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	~~PLT~~POLY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~July 26, ~~2020,~~2021, ~~41,246,609~~42,321,794 shares of the registrant's common stock were outstanding.

~~Plantronics, Inc.~~PLANTRONICS, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I. I	FINANCIAL INFORMATION	~~Page No.~~
Item 1.	Condensed Consolidated F inancial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of July 3, 2021 and April 3, 2021	4
	Condensed Consolidated Statements of Operations for the Three Months Ended July 3, 2021 and June 27, 2020	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended July 3, 2021 and June 27, 2020	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 3, 2021 and June 27, 2020	7
	Condensed Consolidated Statements of Stockholders' Deficit for the Three Months Ended July 3, 2021 and June 27, 2020	9
	Notes to the Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	428

Overview	629

Results of Operations	731

Financial Condition	1236

Off Balance Sheet Arrangements and Contractual Obligations	1338

Critical Accounting Estimates	1438

~~Financial Statements (Unaudited):~~Item 3.	15

~~Condensed Consolidated Balance Sheets as of September 26, 2020 and March 28, 2020~~	15

~~Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 26, 2020 and September 28, 2019~~	16

~~Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 26, 2020 and September 28, 2019~~	17

~~Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 26, 2020 and September 28, 2019~~	18

~~Condensed Consolidated Statements of Stockholders' (Deficit) / Equity for the Three and Six Months Ended September 26, 2020 and September 28, 2019~~	19

~~Notes to Condensed Consolidated Financial Statements~~	21

Quantitative and Qualitative Disclosures About Market Risk	4139
Item 4.
Controls and Procedures	4341

PART ~~II.~~ II	OTHER INFORMATION
Item 1.
Legal Proceedings	4341
Item 1A.
Risk Factors	4341
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	4442

~~Mine Safety Disclosures~~Item 6.	45

~~Other Information~~	45

Exhibits	4543

~~Cross Reference Table~~	46

Signatures		4744

~~Plantronics®, Poly®, Simply Smarter Communications® ,~~Plantronics, Poly, the Propeller design, the Poly logo, and ~~the propeller design~~Polycom are ~~trademarks or registered~~ trademarks of Plantronics, Inc. ~~All other trademarks are the property of their respective owners.~~

~~DECT™ is a trademark of ETSI registered for the benefit of its members in France and other jurisdictions.~~

~~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.

Table of Contents

~~Part~~PART I --- FINANCIAL INFORMATION

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ITEM 1. FINANCIAL STATEMENTS

~~CERTAIN FORWARD-LOOKING INFORMATION:~~PLANTRONICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)


	July 3, 2021		April 3, 2021
ASSETS
Current assets
Cash and cash equivalents	$	196,761	$	202,560
Restricted cash	0		493,908
Short-term investments	15,953		14,559
Accounts receivable, net	271,592		267,464
Inventory, net	187,476		194,405
Other current assets	61,974		65,214
Total current assets	733,756		1,238,110
Non-current assets

Property, plant, and equipment, net	131,294		140,875
Purchased intangibles, net	311,180		341,614
Goodwill	796,216		796,216
Deferred tax assets	101,841		95,800
Other non-current assets	60,774		51,654
Total assets	$	2,135,061	$	2,664,269

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	$	163,926	$	151,244
Accrued liabilities	361,940		394,084
Current portion of long-term debt	0		478,807
Total current liabilities	525,866		1,024,135
Non-current liabilities
Long-term debt, net	1,497,119		1,496,064

Long-term income taxes payable	85,858		86,227

Other non-current liabilities	138,772		138,609
Total liabilities	2,247,615		2,745,035
Commitments and contingencies (Note 7)	0		0
Stockholders' deficit
Common stock	921		912
Additional paid-in capital	1,566,688		1,556,272
Accumulated other comprehensive income (loss)	1,602		(3,221)
Accumulated deficit	(802,044)		(765,233)
Total stockholders' equity before treasury stock	767,167		788,730
Less: Treasury stock, at cost	(879,721)		(869,496)
Total stockholders' deficit	(112,554)		(80,766)
Total liabilities and stockholders' deficit	$	2,135,061	$	2,664,269

~~This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning~~The accompanying notes are an integral part of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "estimate," "intend," "predict," "project," or "will," or variations of such words and similar expressions are based on current expectations and entail various risks and uncertainties. Specific forward-looking statements and the associated risks and uncertainties contained within this Form 10-Q include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 (coronavirus) outbreak, and its impact across our businesses, our operations and global supply chain, including (a) our expectations the virus has caused and will continue to cause an increase in customer and partner demand for our product lines, including increased demand in collaboration endpoints, and our ability to design new product offerings to meet the change in demand due to a global hybrid work environment, (b) our inability to source component parts from key suppliers in sufficient quantities necessary to meet the high demand for certain product lines, including our Enterprise Headsets and continued uncertainty and potential impact on future quarters if these sourcing constraints continue and/or price volatility occurs, which could continue to negatively affect our profitability and/or market share, (c) expectations related to our voice product lines, as well as our services attachment rate for such products, which have been, and may continue to be, negatively impacted as companies have delayed returning their workforces to offices in many countries due to the continued impact of COVID-19; (d) expectations related to our ability to fulfill the backlog generated by supply constraints, to timely supply the number of products to fulfill current and future customer demand, including expectations that our manufacturing facility in Tijuana, Mexico will continue production at the capacity necessary to meet such demand, (e) the impact of the virus on our distribution partners, resellers, end-user customers and our production facilities, including our ability to obtain alternative sources of supply if our production facility or other suppliers are impacted by future shut downs, (f) the impact if global or regional economic conditions deteriorate further, on our customers and/or partners, including increased demand for pricing accommodations, delayed payments, delayed deployment plans, insolvency or other issues which may increase credit losses, (g) risks related to restrictions or delays in global return to worksites as a result of COVID-19, which continues to impact our employees worldwide and our customers, which has negatively impacted our voice product lines for the quarter, and restricted customer engagement; and (h) the complexity of the forecast analysis and the design and operation of internal controls; and (ii) our belief that we can manufacture or supply products in a timely manner to satisfy perishable demand; (iii) expectations related to our customers’ purchasing decisions and our ability to pivot quickly enough and/or match product production to demand, particularly given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges; (iv) risks associated with significant and abrupt changes in product demand which increases the complexity of management’s evaluation of potential excess or obsolete inventory; (v) risks associated with the bankruptcy orcondensed consolidated financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; (vi) risks associated with the potential interruption in the supply of sole-sourced critical components, our ability to move to a dual-source model, and the continuity of component supply at costs consistent with our plans, which has negatively impacted in the quarter and may continue to impact our ability to timely supply product to meet our customer demand; (vii) expectations related to our services segment revenues, particularly as we introduce new generation, less complex, product solutions, or as companies shift from on premises to work from home options for their workforce, which may result in decreased demand for our professional, installation and/or managed service offerings; (viii) expectations that our current cash on hand, additional cash generated from operations, together with sources of cash through our credit facility, either alone or in combination with our election to suspend our dividend payments, will meet our liquidity needs during and following the unknown duration and impact of the COVID-19 pandemic; (ix) expectations relating to our ability to generate sufficient cash flow from operations to meet our debt covenants and timely repay all principal and interest amounts drawn under our credit facility as they become due; (x) risks associated with our channel partners’ sales reporting, product inventories and product sell through since we sell a significant amount of products to channel partners who maintain their own inventory of our products; (xi) our efforts to execute to drive sales and sustainable profitable revenue growth, to improve our profitability and cash flow, and accelerate debt reduction and de-levering; (xii) our expectations for new products launches, the timing of their releases and their expected impact on future growth and on our existing products; (xiii) our belief that our Partner Program will drive growth and profitability for both us and our partners through the sale of our product, services and solutions; (xiv) risks associated with forecasting sales and procurement demands, which are inherently difficult, particularly with continuing uncertainty in regional and global economic conditions; (xv) uncertainties attributable to currency fluctuations, including fluctuations in foreign exchange rates and/or new or greater tariffs on our products; (xvi) our expectations regarding our ability to control costs, streamline operations and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; (xvii) expectations relating to our quarterly and annual earnings guidance, particularly as economic uncertainty, including, without limitation, uncertainty related to thestatements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)


	Three Months Ended
	July 3, 2021		June 27, 2020
Net revenues
Net product revenues	$	371,203	$	291,458
Net service revenues	59,969		64,262
Total net revenues	431,172		355,720
Cost of revenues
Cost of product revenues	235,196		176,615
Cost of service revenues	20,787		22,773
Total cost of revenues	255,983		199,388
Gross profit	175,189		156,332

Operating expenses
Research, development, and engineering	45,466		50,029
Selling, general, and administrative	120,734		116,644
Loss, net from litigation settlements	0		17,561
Restructuring and other related charges	28,972		29,330
Total operating expenses	195,172		213,564

Operating loss	(19,983)		(57,232)
Interest expense	21,782		21,184
Other non-operating income, net	(692)		(224)
Loss before income taxes	(41,073)		(78,192)
Income tax benefit	(4,262)		(3,177)
Net loss	$	(36,811)	$	(75,015)

Per share data
Basic and diluted loss per common share	$	(0.88)	$	(1.85)
Basic and diluted shares used in computing loss per common share	42,061		40,460

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)


	Three Months Ended
	July 3, 2021		June 27, 2020
Net loss	$	(36,811)	$	(75,015)

Other comprehensive income, before tax
Unrealized gains on cash flow hedges
Unrealized cash flow hedge gains (losses)	440		(1,579)
Net losses (gains) reclassified into net revenues	1,772		(909)
Net gains reclassified into cost of revenues	(236)		0
Net losses reclassified into interest expense	3,089		3,723
Net unrealized gains on cash flow hedges	5,065		1,235



Income tax (expense) benefit in other comprehensive income	(243)		264
Other comprehensive income	4,822		1,499

Comprehensive loss	$	(31,989)	$	(73,516)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three Months Ended
	July 3, 2021		June 27, 2020
Cash flows from operating activities
Net loss	$	(36,811)	$	(75,015)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	39,833		43,400
Amortization of debt issuance costs	2,937		1,340
Stock-based compensation	10,416		9,355
Deferred income taxes	(5,943)		(7,169)
Provision for excess and obsolete inventories	5,310		6,082
Restructuring and other related charges	28,972		29,330
Cash payments for restructuring charges	(12,230)		(13,085)
Other operating activities	(2,998)		(1,851)
Changes in assets and liabilities
Accounts receivable, net	(3,758)		37,914
Inventory, net	6,326		(16,008)
Current and other assets	365		3,483
Accounts payable	12,515		12,321
Accrued liabilities	(40,631)		11,236
Income taxes	(3,454)		389
Net cash provided by operating activities	849		41,722

Cash flows from investing activities


Purchases of short-term investments	(404)		(108)

Capital expenditures	(6,052)		(5,437)
Proceeds from sale of property and equipment	0		1,900
Other investing activities	(4,000)		0
Cash used in investing activities	(10,456)		(3,645)

Cash flows from financing activities

Employees' tax withheld and paid for restricted stock and restricted stock units	(10,225)		(2,739)
Proceeds from issuances under stock-based compensation plans	9		5
Proceeds from revolving line of credit	0		50,000
Repayments of revolving line of credit	0		(50,000)


Repayments of long-term debt	(480,689)		0

Net cash used in financing activities	(490,905)		(2,734)

Effect of exchange rate changes on cash and cash equivalents and restricted cash	805		544
Net (decrease) increase in cash and cash equivalents and restricted cash	(499,707)		35,887

Cash and cash equivalents and restricted cash at beginning of period	696,468		213,879
Cash and cash equivalents and restricted cash at end of period	$	196,761	$	249,766

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

~~continued impact~~The following table provides a reconciliation of ~~COVID-19,~~cash and cash equivalents and restricted cash reported within the ~~macro-economic~~condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:


(in thousands)	July 3, 2021		April 3, 2021
Cash and cash equivalents	$	196,761	$	202,560
Restricted cash	0		493,908
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	196,761	$	696,468

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(in thousands)

(Unaudited)


	Three Months Ended July 3, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Treasury Stock		Total Stockholders' Deficit
	Shares	Amount
Balances at April 3, 2021	41,751	$	912	$	1,556,272	$	(3,221)	$	(765,233)	$	(869,496)	$	(80,766)
Net loss	—	—		—		—		(36,811)		—		(36,811)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		4,823		—		—		4,823

Proceeds from issuances under stock-based compensation plans	569	9		—		—		—		—		9



Stock-based compensation	—	—		10,416		—		—		—		10,416


Employees' tax withheld and paid for restricted stock and restricted stock units	0	—		—		—		—		(10,225)		(10,225)




Balances at July 3, 2021	42,320	$	921	$	1,566,688	$	1,602	$	(802,044)	$	(879,721)	$	(112,554)


	Three Months Ended June 27, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Stockholders' Deficit
	Shares	Amount
Balances at March 28, 2020	40,406	$	896	$	1,501,340	$	(13,582)	$	(707,904)	$	(863,566)	$	(82,816)
Net loss	—	—		—		—		(75,015)		—		(75,015)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		1,499		—		—		1,499

Proceeds from issuances under stock-based compensation plans	519	5		—		—		—		—		5
Repurchase of restricted common stock	(10)	—		—		—		—		—		—

Stock-based compensation	—	—		9,355		—		—		—		9,355


Employees' tax withheld and paid for restricted stock and restricted stock units	(233)	—		—		—		—		(2,739)		(2,739)




Balances at June 27, 2020	40,682	$	901	$	1,510,695	$	(12,083)	$	(782,919)	$	(866,305)	$	(149,711)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION

Plantronics, Inc. (“Poly,” the “Company”) is a leading global communications company that designs, manufactures, and ~~political climate~~markets integrated communications and ~~other external factors, puts further pressure~~collaboration solutions that span headsets, open Session Initiation Protocol ("SIP") and native ecosystem desktop phones, conference room phones, video conferencing solutions and peripherals, including cameras, speakers, and microphones, cloud management and analytics software solutions, and services. The Company has two operating and reportable segments, Products and Services, and offers its products under the

, Plantronics and Polycom brands.

Founded in 1961, the Company is incorporated in the state of Delaware under the name Plantronics, Inc. and in March 2019, the Company changed the name under which it markets itself to Poly. The Company is listed on ~~management judgments used to develop forward looking~~the New York Stock Exchange ("NYSE") under the ticker symbol "POLY."

The accompanying unaudited condensed consolidated financial ~~guidance~~statements of the Company have been prepared on a basis materially consistent with and ~~other prospective~~should be reviewed in conjunction with the Company's audited consolidated financial ~~information; (xviii) expectations related to GAAP~~statements as of and ~~non-GAAP financial results~~ for the ~~second quarter~~year ended April 3, 2021 and full Fiscal Year 2021, including net revenues, adjusted EBITDA, tax rates, intangibles amortization, diluted weighted average shares outstanding and diluted EPS; (xix) our expectations of the impact of the acquisition of Polycom as it relates to our strategic vision and additional market and strategic partnership opportunities for our combined hardware, software and services offerings; (xx) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our positionnotes thereto included in the market, including risks associated with the potential failure of our UC&C solutions to be adopted with the breadth and speed we anticipate; (xxi) our belief that the increased adoption of certain technologies and our open architecture approach has and will continue to increase demand for our solutions; (xxii) expectations related to the micro and macro-economic conditions in our domestic and international markets and their impact on our future business; (xxiii) our forecast and estimates with respect to tax matters, including expectations with respect to utilizing our deferred tax assets; (xxiv) our expectations related to building strategic alliances and key partnerships with providers of collaboration tools and platforms to drive revenue growth and market share; and (xxv) our expectations regarding pending and potential future litigation, in addition to other matters discussed in this Quarterly Report on Form 10-Q that are not purely historical data. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, those discussed in this Quarterly Report on Form 10-Q; in Part I, "Item 1A. Risk Factors" of ourCompany's Annual Report on Form 10-K, ~~for the fiscal year ended March 28, 2020,~~which was filed with the Securities and Exchange Commission ("SEC") on ~~June 8, 2020;~~May 18, 2021 and ~~other documents we~~include all adjustments necessary to fairly state the information set forth herein. Certain information and footnote disclosures normally included in financial statements prepared pursuant to the rules and regulations of the SEC applicable to interim financial information and in accordance with accounting principles generally accepted in the United States of America ("GAAP") have ~~filed with~~been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements contain all adjustments necessary for a fair presentation of the ~~SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether~~Company’s consolidated financial position and the consolidated results of operations and cash flows as ~~a result~~ of ~~new information, future events, or otherwise, except as required by applicable law. Given these risks~~the dates and ~~uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.~~

~~Table of Contents~~

~~OVERVIEW~~

Plantronics, Inc. (“Poly,” “Company,” “we,” “our,” or “us”) is a leading global communications company that designs, builds, and markets collaboration solutions. Poly combines legendary audio expertise and powerful video and conferencing capabilities to create endpoints that power meaningful human connections and provide solutions that make life easier when they work together and with our partner's services. Our headsets, video and audio conferencing, desk phones, analytics software and services are used worldwidefor the periods presented and are ~~a leading choice~~normal and recurring in nature The Company's reporting currency is United States Dollars ("USD.") The interim period results are subject to variation and are not necessarily indicative of the results of operations to be expected for ~~every type~~the full fiscal year. The financial statements include the accounts of ~~home, workspace, or hybrid setting.~~

~~Our major product categories are Headsets, Video, Voice,~~the Company and ~~Services. Headsets include wired~~its wholly owned subsidiaries. All intercompany balances and wireless communication headsets; Voice includes open Session Initiation Protocol (“SIP”) and native ecosystem desktop phones as well as conference room phones; Video includes video conferencing solutions and peripherals, such as cameras, speakers, and microphones. Our broad portfolio of Services include video interoperability, hardware and software support for our devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping customers achieve their collaboration goals.

All of our solutions are designed to integrate seamlessly with the platform and cloud conferencing services of our strategic alliance partners, whose solutions are generally deployed to create Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), Video as a Service ("VaaS"), and/or Device as a Service ("DaaS") environments. Our cloud management and analytics software enable IT administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deeper understanding of user behaviors.

We sell our products through a well-developed global network of distributors and channel partners, including value-added resellers, integrators, direct marketing resellers, and service providers as well as through both traditional and online retailers, office supply distributors, and e-commerce channels. Wetransactions have ~~well-established distribution channels in the Americas, Europe, Middle East, Africa, and Asia Pacific where use of our products is widespread~~

~~COVID-19 Risks and Uncertainties~~been eliminated.

The ~~novel strain~~Company’s fiscal year ends on the Saturday closest to the last day of ~~COVID-19 has continued to spread globally~~March. The Company’s current fiscal year ends on April 2, 2022 and ~~continues to add uncertainty~~consists of 52 weeks. The Company's prior fiscal year ended on April 3, 2021 and ~~influence global economic activity, the global supply chain~~consisted of 53 weeks. The three months ended July 3, 2021 and ~~financial markets. The impact of the pandemic on our operations has varied by local conditions, government mandates and business limitations, including travel bans, remote work and other restrictions.~~June 27, 2020 both contain 13 weeks.

~~As a result, we continued to experience elevated demand for certain Enterprise Headsets~~Risks and Video devices and a decline in demand for our Voice products, including a decline in the attachment rates for services associated with such products, as companies continued to shift from in-office to work-from-home arrangements for many of their office workers. The impact of COVID-19 is fluid and uncertain, and it has caused, and may continue to cause, various negative effects as we ~~continue to experience periodic constraints in our supply chain, specifically~~ ~~the sourcing of certain components and raw materials, and increased logistics costs to meet the high customer demand for specific Headsets and Video products.~~uncertainties

~~In responding~~The Company is subject to ~~this pandemic, employee safety continues~~a greater degree of uncertainty than normal in making the judgments and estimates needed to ~~be a critical concern~~apply its significant accounting policies due to the ongoing COVID-19 pandemic. The Company and we have taken measures to protect our employees globally by adherence to public safety and shelter in place directives, physical distancing protocols within offices and manufacturing facilities, providing personal protective equipment, including face masks and hand sanitizers, conducting routine sanitation of facilities, requiring health monitoring before entry into Company facilities and restricting the number of visitors to our sites. The safety protocols implemented globally meet or exceed current regulations, however we continue to monitor employees’ safety and evolving regulatory requirements. Although our manufacturing facility remains open and certain office employees may utilize our offices when necessary, the majority of all non-factory employees continue to work from home, using headsetshas assessed accounting estimates and other ~~Company-issued equipment.~~

matters, including those using prospective financial information, using information that is reasonably available as of the issuance date of the consolidated financial statements. The ~~full~~accounting estimates and other matters the Company has assessed included, but were not limited to, impairment of goodwill and other long-lived assets, provisions for doubtful accounts, valuation allowances for deferred tax assets, inventory and related reserves, and revenue recognition and related reserves. The Company may make changes to these estimates and judgments, which could result in material impacts to the consolidated financial statements in future periods. The extent and duration of the impact of the COVID-19 pandemic on ~~our~~the Company's business ~~continues to be~~is highly uncertain and difficult to ~~predict~~predict. The Company relies on contract manufacturers and ~~will depend on many factors outside~~sourcing of ~~our control, including~~materials from the ~~extent and duration~~Asia Pacific region, as well as its owned manufacturing facility in Mexico. The Company has experienced disruptions in both its own supply chain as well as those of the pandemic, mutations of the virus, the development and availability of effective treatments or vaccines, mandates of protective public safety measures, and the impact of the pandemic on the global economy, global supply chains, and demand for our products. It is not possible at this time to foresee whether the outbreak of COVID-19 or other events beyond our control will be effectively contained, nor can we estimate the entirety of the impact that COVID-19 or such other pandemics or natural or man-made disaster will have on the global economy, our business, customers, suppliers or other business partners. As such, impacts from such events to the Company are highly uncertain and the Company will continue to assess the impact from such events on our financial statements.

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~~Second Quarter Fiscal Year 2021 Highlights~~

Total net revenues for the second quarter of Fiscal Year 2021 were $411 million, a decrease of $50.7 million or 11.0% compared to the same quarter in Fiscal Year 2020, primarily driven by lower net sales in our Voice and Consumer Headset revenues partially offset by increases in Enterprise Headset and Video revenues. ~~Refer to further discussion on total net revenues in the~~ ~~Results of Operations~~ ~~below.~~

Product gross margins for the second quarter of Fiscal Year 2021 were 39.8 percent, a decrease of 220 basis points compared to the same quarter in Fiscal Year 2020, primarily driven by increases in logistics costs and factory capacity expansion for Headset and Video products. These unfavorable impacts were partially offset by changes in our product mix to higher margin Headset and Video products.

~~We repurchased $37.4 million of our outstanding debt, including $30 million of the Term B facility and $7.4 million of our 5.50% senior notes during the second quarter of Fiscal Year 2021.~~

~~RESULTS OF OPERATIONS~~

We group our operations into two reportable segments: Products and Services. Our Products segment consists of Headsets, Voice, and Video product categories and our Services segment consists of support, professional, managed, and cloud services and solutions.

~~NET REVENUES~~

~~The following table sets forth net revenues by reportable segment for the three and six months ended September 26, 2020 and September 28, 2019:~~

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Net revenues
Products $ 347,677 $ 395,137 $ (47,460) (12.0) % $ 639,135 $ 777,882 $ (138,747) (17.8) %
Services 63,292 66,572 (3,280) (4.9) % 127,554 131,594 (4,040) (3.1) %
Total net revenues $ 410,969 $ 461,709 $ (50,740) (11.0) % $ 766,689 $ 909,476 $ (142,787) (15.7) %

~~Products~~

Ne~~t products revenues decreased in the three and six months ended September 26, 2020 compared to the prior year periods, primarily due to the following:~~

•~~Voice product revenues declined~~its contract manufacturers as a result of COVID-19 and, as this virus has impacted various regions differently, the ~~COVID-19 shift in demand toward "work from home" products.~~

•~~Consumer Headsets declined significantly year over year primarily due to our decision to discontinue certain low-margin mono and stereo products and the sale of our gaming headset assets~~Company may in the ~~fiscal fourth quarter~~future experience further business operation disruptions. Such disruptions have had, and may continue to have, a material impact on the Company's ability to fulfill customer orders and adversely affect the ability to meet customer demands as companies utilize work-from-home and hybrid work models. Additionally, if a significant number of ~~FY20.~~

•~~Partially offsetting~~ the ~~declines~~Company's workforce employed in ~~Voice~~any of these manufacturing facilities or in the Company's offices were to contract the virus, the Company may experience delays or the inability to develop, produce and ~~Consumer, was growth in Enterprise Headset~~deliver the Company's products on a timely basis. Furthermore, capital markets and ~~Video net revenues driven~~economies worldwide have also been negatively impacted by the COVID-19 ~~shift toward "work from home"~~pandemic, and the need for office workers to be able to effectively communicate and collaborate regardless of location. Although we continue to experience periodic supply constraints on certain headsets and new video products, we were able to shipit is possible that it could cause a ~~record number of headsets and video units during the quarter, Video demand was also driven by remote learning, telemedicine, and the continued ramp of our new video portfolio.~~

~~Services~~

Net revenues decreased slightly in the three and six months ended September 26, 2020 in our Support Services category due to the Video product mix shift from legacy Platform and Telepresence to recently launched Studio video bars, which are less complex, easier to install and operate, and carry optional service contracts. The decrease was mostly offset by the impact of the deferred revenue fair value adjustment resulting from the Polycom Acquisition.

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~~The following table sets forth net revenues by geographic region for the three and six months ended September 26, 2020 and September 28, 2019:~~

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Net revenues
U.S. $ 183,777 $ 213,127 $ (29,350) (13.8) % $ 352,058 $ 437,954 $ (85,896) (19.6) %
Europe and Africa 130,399 128,973 1,426 1.1 % 224,505 245,952 (21,447) (8.7) %
Asia Pacific 71,569 87,453 (15,884) (18.2) % 135,833 162,301 (26,468) (16.3) %
Americas, excluding U.S. 25,224 32,156 (6,932) (21.6) % 54,293 63,269 (8,976) (14.2) %
Total international net revenues 227,192 248,582 (21,390) (8.6) % 414,631 471,522 (56,891) (12.1) %
Total net revenues $ 410,969 $ 461,709 $ (50,740) (11.0) % $ 766,689 $ 909,476 $ (142,787) (15.7) %

~~United States (U.S.)~~

Compared to the same prior year period, U.S. net revenues for the three and six months ended September 26, 2020 decreased primarily due to declines in our Voice product revenues; a result of COVID-19 shift in demand toward "work from home" products. Our Consumer Headset product revenues declined driven by our decision to eliminate lower margin consumer products from our portfolio, including the Fiscal Year 2020 sale of gaming headset assets. Sales of our Enterprise Headset products declined slightly primarily due to a shift in product demand to UC&C products where we have experienced some supply shortages of component parts. These declines were partially offset by growth in our Video product revenues as new products ramp.

~~International~~

International net revenues for the three and six months ended September 26, 2020 decreased from the same prior year period primarily due to declines in Voice and Consumer Headset product revenues. These declines were partially offset by an increase in our Enterprise Headset product revenues.

~~During the three~~ ~~months ended September 26, 2020, changes in foreign exchange rates unfavorably impacted net revenues by $7.1 million, net~~ ~~of the effects of hedging, compared to a $3.8 million unfavorable impact on revenue in the prior year period.~~

~~During the six months ended September 26, 2020, changes in foreign exchange rates unfavorably impacted net revenues by $4.7 million, net of the effects of hedging, compared to a $7.7 million unfavorable impact on revenue in the~~ ~~prior year period.~~

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~~COST OF REVENUES AND GROSS PROFIT~~

Cost of revenues consists primarily of direct and contract manufacturing costs, amortization of acquired technology, freight, warranty, charges for excess and obsolete inventory, depreciation, duties, royalties, and overhead expenses.

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Products:
Net revenues $ 347,677 $ 395,137 $ (47,460) (12.0) % $ 639,135 $ 777,882 $ (138,747) (17.8) %
Cost of revenues 209,261 229,323 (20,062) (8.7) % 385,876 437,939 (52,063) (11.9) %
Gross profit $ 138,416 $ 165,814 $ (27,398) (16.5) % $ 253,259 $ 339,943 $ (86,684) (25.5) %
Gross profit % 39.8 % 42.0 % 39.6 % 43.7 %
Services:
Net revenues $ 63,292 $ 66,572 $ (3,280) (4.9) % $ 127,554 $ 131,594 $ (4,040) (3.1) %
Cost of revenues 20,962 26,315 (5,353) (20.3) % 43,735 52,820 (9,085) (17.2) %
Gross profit $ 42,330 $ 40,257 $ 2,073 5.1 % $ 83,819 $ 78,774 $ 5,045 6.4 %
Gross profit % 66.9 % 60.5 % 65.7 % 59.9 %
Total:
Net revenues $ 410,969 $ 461,709 $ (50,740) (11.0) % $ 766,689 $ 909,476 $ (142,787) (15.7) %
Cost of revenues 230,223 255,638 (25,415) (9.9) % 429,611 490,759 (61,148) (12.5) %
Gross profit $ 180,746 $ 206,071 $ (25,325) (12.3) % $ 337,078 $ 418,717 $ (81,639) (19.5) %
Gross profit % 44.0 % 44.6 % 44.0 % 46.0 %

~~Products~~

Compared to the prior year period, gross profit as a percentage of net revenues decreased in the three months ended September 26, 2020, primarily due to COVID-19 related incremental manufacturing and logistics costs, fixed cost items spread over lower net revenues, and Video and Voice product transitions. Partially offsetting these unfavorable items was a decrease in intangible asset amortization expense resulting from the long-lived asset impairment of existing technology related to our Voice products in the fourth quarter of Fiscal Year 2020 and a favorable product mix.

~~Compared to the prior year period, gross profit as a percentage of net revenues~~ ~~decreased~~ ~~in the six months ended September 26, 2020, primarily due to~~ COVID-19 related incremental manufacturing and logistics costs and fixed cost items spread over lower net revenues. Partially offsetting these unfavorable items was a decrease in intangible asset amortization expense resulting from the long-lived asset impairment of existing technology related to our Voice products in the fourth quarter of Fiscal Year 2020 and favorable product mix.

Given the significant variances in gross profit percentages between our higher and lower margin products, gross profit percentages may be impacted by variations in product mix and other factors, including production levels, distribution channels, and return rates.

~~Services~~

~~Compared to the prior year period,~~ the gross profit as a percentage of net revenues increased in the three and six months ended September 26, 2020, primarily due to the decrease in the Polycom acquisition-related deferred revenue fair value adjustment and a lower fixed cost base.

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~~OPERATING EXPENSES~~

~~Operating expenses for the three and six months ended September 26, 2020 and September 28, 2019 were as follows:~~

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Research, development, and engineering $ 52,148 $ 57,415 $ (5,267) (9.2) % $ 102,177 $ 116,939 $ (14,762) (12.6) %
Selling, general and administrative 115,605 148,419 (32,814) (22.1) % 232,250 312,027 (79,777) (25.6) %
(Gain) loss, net from litigation settlements — — — — % 17,561 (1,162) 18,723 1,611.3 %
Restructuring and other related charges 6,170 5,847 323 5.5 % 35,500 25,372 10,128 39.9 %
Total Operating Expenses $ 173,923 $ 211,681 $ (37,758) (17.8) % $ 387,488 $ 453,176 $ (65,688) (14.5) %
% of net revenues 42.3 % 45.8 % 50.5 % 49.8 %

~~Research, development, and engineering expenses~~ ~~decreased~~ ~~during the three and six months ended September 26, 2020 when compared to the prior year period primarily due to~~ ~~lower compensation expense driven by reduction in headcount, cost control efforts, and decreased expenses due to COVID-19 restrictions.~~

~~Selling, general and administrative expenses~~ ~~decreased during the three months ended September 26, 2020 when compared to the prior year period primarily due~~ ~~to lower compensation expense driven by reduced headcount, cost control efforts, and decreased travel expenses due to COVID-19 restrictions.~~ ~~The decreases were partially offset by higher incentive compensation when compared to the prior year period. Selling, general and administrative expense~~s decreased during the six months ended September 26, 2020 when compared to the prior year period primarily due to integration related expenses that did not occur in the current period, lower compensation expense, driven by reduced headcount and lower sales commissions, decreased expenses due to COVID-19 restrictions, and other cost control efforts.

~~During the six months ended September 26, 2020 we recorded litigation charges for settlements that occurred during the period. See Note 7,~~ ~~Commitments and Contingencies, of the accompanying notes to condensed consolidated financial statements for further information regarding on-going litigation.~~

~~Compared to the prior year period, restructuring and other related charges increased in the~~ ~~six~~ months ended September 26, 2020, primarily due to restructuring actions initiated during the period to reduce expenses and optimize our cost structure and align with projected revenue levels. These actions consisted of headcount reductions and office closures. For more information regarding restructuring activities, see Note 9, ~~Restructuring and Other Related Charges, of the accompanying notes to condensed consolidated financial statements.~~

~~INTEREST EXPENSE~~

~~Interest expense for the three and six months ended September 26, 2020 and September 28, 2019 was as follows:~~

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Interest expense $ (18,581) $ (23,797) $ 5,216 21.9 % $ (39,765) $ (47,729) $ 7,964 16.7 %
% of net revenues (4.5) % (5.2) % (5.2) % (5.2) %

~~Interest expense~~ decreased for the three and six months ended September 26, 2020 primarily due to a lower outstanding balance on the term loan facility, the gains recognized on the repurchase of outstanding debt, and lower interest rates. ~~See Note 8,~~ ~~Debt, of the accompanying notes to condensed consolidated financial statements.~~local and/or global economic recession.

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~~OTHER NON-OPERATING INCOME, NET~~

~~Other non-operating income, net for~~The severity of the ~~three~~impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and ~~six months ended September 26, 2020~~severity of the pandemic and ~~September 28, 2019 was as follows:~~

Three Months Ended Six Months Ended
(in thousands, except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Other non-operating income (loss), net $ 1,366 $ (625) $ 1,991 (318.6) % $ 1,592 $ (292) $ 1,884 (645.2) %
% of net revenues 0.3 % (0.1) % 0.2 % — %

~~Other non-operating income, net for~~ the ~~three~~extent and ~~six months ended September 26, 2020 increased primarily~~severity of the impact on its customers and suppliers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, including potential write-offs due to ~~immaterial net foreign currency gains~~financial weakness and/or bankruptcy of its customers, supply chain disruptions and ~~immaterial unrealized gains on~~uncertain demand, and the ~~deferred compensation portfolio during~~impact of any initiatives or programs that the ~~current period compared~~Company may undertake to ~~immaterial net foreign currency losses in the prior period.~~

~~INCOME TAX BENEFIT~~

Three Months Ended Six Months Ended
(in thousands except percentages) September 26, 2020 September 28, 2019 Change September 26, 2020 September 28, 2019 Change
Loss before income taxes $ (10,392) $ (30,032) $ 19,640 65.4 % $ (88,583) $ (82,480) $ (6,103) (7.4) %
Income tax expense (benefit) 3,013 (4,122) 7,135 173.1 % (163) (11,699) 11,536 98.6 %
Net loss $ (13,405) $ (25,910) $ 12,505 48.3 % $ (88,420) $ (70,781) $ (17,639) (24.9) %
Effective tax rate (29.0) % 13.7 % 0.2 % 14.2 %

~~The Company~~address financial and operational challenges faced by its ~~subsidiaries are subject to taxation in the U.S.~~customers and in various foreign and state jurisdictions. Our income tax expense or benefit is determined using an estimate of our annual effective tax rate and adjusted for discrete items that are taken into account in the relevant period. The effective tax rates for the three months ended September 26, 2020 and September 28, 2019 were (29.0)% and 13.7%, respectively. The effective tax rates for the six months ended September 26, 2020 and September 28, 2019 were 0.2% and 14.2%, respectively.

~~The change in our effective tax rate for the~~ ~~three~~ and six months ended September 26, 2020 relative to the prior year is primarily due to a benefit from internal intangible property restructuring between our wholly-owned subsidiaries to better align the IP structure to our evolving operations.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the two-year period ended March 28, 2020 and Fiscal Year 2021 forecasted results in the U.S. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of September 26, 2020, a valuation allowance against U.S. federal and state deferred tax assets continues to be maintained for the three months ended September 26, 2020.suppliers.

As of ~~September 26, 2020, we~~the issuance date of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Reclassifications

Certain prior year amounts have been reclassified for consistency with current year presentation. Each of the reclassifications was immaterial and had ~~approximately $86.3 million~~no effect on the Company's results of operations or cash flows.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") did not and are not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

3. CASH AND CASH EQUIVALENTS, RESTRICTED CASH, AND SHORT-TERM INVESTMENTS

The following tables summarize the Company’s cash and cash equivalents, restricted cash, and short-term investments amortized cost, gross unrealized gains, gross unrealized losses, and fair value on a recurring basis by significant investment category recorded as of July 3, 2021 and April 3, 2021 (in thousands):


July 3, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash & Cash Equivalents		Short-term investments
Cash	$	171,751	$	—	$	—	$	171,751	$	171,751	$	—
Level 1:
Mutual funds	13,553		2,401		(1)		15,953		0		15,953

Money market funds	25,010		0		0		25,010		25,010		—









Total cash, cash equivalents and short-term investments measured at fair value	$	210,314	$	2,401	$	(1)	$	212,714	$	196,761	$	15,953


April 3, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash & Cash Equivalents		Restricted Cash		Short-Term Investments
Cash	$	177,551	$	—	$	—	$	177,551	$	177,551	$	—	$	—
Restricted cash(1)	493,908						493,908				493,908
Level 1:
Mutual funds	12,622		1,945		(8)		14,559		0				14,559

Money market funds	25,009		0		0		25,009		25,009









Total cash, cash equivalents, restricted cash and short-term investments measured at fair value	$	709,090	$	1,945	$	(8)	$	711,027	$	202,560	$	493,908	$	14,559

(1) Restricted cash represents the cash held in ~~non-US net deferred tax assets ("DTAs") after valuation allowance. A significant portion of our DTAs relate~~trust and restricted for use to internal intangible property restructuring between wholly-owned subsidiaries. At this time, based on evidence currently available, we consider it more likely than not that we will have sufficient taxable income inredeem the ~~future that will allow us~~5.50% Senior Notes. Refer to realize our DTAs; however, failure to generate sufficient future taxable income could result in some or all DTAs not being utilized in the future. If we are unable to generate sufficient future taxable income, a substantial valuation allowance to reduce our DTAs may be required.Note 8, Debt.

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~~FINANCIAL CONDITION~~As of July 3, 2021 and April 3, 2021, the Company's short-term investments consisted of assets related to its deferred compensation plans and are classified as trading securities. The assets are reported at fair value, with unrealized gains and losses included in current period earnings. For more information regarding the Company's deferred compensation plan, see Note 4, Deferred Compensation. The Company did 0t incur any material realized or unrealized gains or losses in the three months ended July 3, 2021 or June 27, 2020. There were no transfers between fair value measurement levels during the three months ended July 3, 2021 or June 27, 2020.

~~Liquidity~~

4. DEFERRED COMPENSATION

As of July 3, 2021, the Company held investments in mutual funds with a fair value totaling $16.0 million, all of which related to debt and ~~Capital Resources~~equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability was $16.0 million at July 3, 2021. As of April 3, 2021, the Company held investments in mutual funds with a fair value totaling $14.6 million, all of which related to debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability at April 3, 2021 was $14.6 million.

The ~~following tables present selected financial information~~investments are classified as trading securities and ~~statistics as of September 26, 2020~~are recorded in short-term investments in the condensed consolidated balance sheets. The liability is recorded in accrued liabilities and ~~March 28, 2020 and for~~other non-current liabilities in the ~~first six months of Fiscal Years 2021 and 2020 (in thousands):~~

September 26, 2020 March 28, 2020
Cash, cash equivalents, and short-term investments $ 227,876 $ 225,720
Property, plant and equipment, net $ 150,348 $ 165,858
Long-term debt, net of issuance costs $ 1,587,556 $ 1,621,694
Working capital $ 193,057 $ 209,203

Six Months Ended
September 26, 2020 September 28, 2019
Cash provided by operating activities $ 40,257 $ 33,566
Cash used for investing activities $ (9,219) $ (7,754)
Cash used for financing activities $ (32,881) $ (39,587)
condensed consolidated balance sheets.

Our cash and cash equivalents as of September 26, 2020 consisted of bank deposits with third party financial institutions. We monitor bank balances in our operating accounts and adjust the balances as appropriate. Cash balances are held throughout the world, including substantial amounts held outside of the U.S. As of September 26, 2020, of our $227.9 million of cash, cash equivalents, and short-term investments, $129.4 million was held domestically while $98.5 million was held by foreign subsidiaries, and approximately 73% was based in USD-denominated instruments. Our remaining investments were composed of Mutual Funds.

5. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS

~~During~~Accounts receivable, net:


(in thousands)	July 3, 2021		April 3, 2021
Accounts receivable	$	360,004	$	352,108

Provisions for promotions, rebates, and other	(86,586)		(82,315)
Provisions for doubtful accounts and sales allowances	(1,826)		(2,329)
Accounts receivable, net	$	271,592	$	267,464

The Company maintains a provision for doubtful accounts for estimated losses resulting from the ~~six months ended September 26, 2020, cash generated by operating activities~~inability of ~~$40.3 million was~~its customers to make required payments. The Company regularly performs credit evaluations of its customers’ financial conditions and considers factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks, and economic conditions that may affect a ~~result of $88.4 million of net loss, non-cash adjustments~~customer’s ability to net loss of $119.6 million and an increase in the net change in operating assets and liabilities of $9.1 million. Cash used in investing activities of $(9.2) million during the six months ended September 26, 2020 consisted primarily of cash used to acquire property, plant and equipment of $10.9 million and partially offset by proceeds from assets held for sales of $1.9 million. Cash used in financing activities of $(32.9) million during the six months ended September 26, 2020 consisted primarily of $35.6 million repayment of long-term debt and $3.0 million for taxes paid on behalf of employees related to net share settlements of vested employee equity awards. The uses of cash were partially offset by $5.7 million of proceeds from issuance of common stock from our Employee Stock Purchase Plan ("ESPP").pay.

Inventory, net:


(in thousands)	July 3, 2021		April 3, 2021
Raw materials	$	83,420	$	87,050
Work in process	4,927		9,511
Finished goods	99,129		97,844
Inventory, net	$	187,476	$	194,405

During the six months ended September 28, 2019, cash generated by operating activities of $33.6 million was a result of $70.8 million of net loss, non-cash adjustments to net loss of $117.3 million and a decrease in the net change in operating assets and liabilities of $12.9 million. Cash used in investing activities of $(7.8) million during the six months ended September 28, 2019 ~~consisted primarily of cash used to acquire property, plant and equipment of $9.3 million partially offset by proceeds from the sale of real property of $2.1 million.~~ Accrued Liabilities:~~Cash used in financing activities of $(39.6) million during the six months ended September 28, 2019~~ consisted primarily of early repayment of long-term debt of $25.0 million, payment of the quarterly dividend on our common stock of $11.9 million, and taxes paid on behalf of employees related to net share settlements of vested employee equity awards of $9.3 million. ~~The uses of cash were partially offset by proceeds from issuance of common stock from our Employee Stock Purchase Plan ("ESPP") of $6.6 million.~~


(in thousands)	July 3, 2021		April 3, 2021
Short-term deferred revenue	$	136,433	$	141,375
Employee compensation and benefits	61,095		84,318
Operating lease liabilities, current	20,293		21,701
Provision for returns	19,011		25,133







Accrued other	125,108		121,557
Accrued liabilities	$	361,940	$	394,084

~~Debt~~

In July 2018, in connection with the Acquisition, we entered into a Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto and borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs. During the second quarter of Fiscal Year 2021, we repurchased $30.0 million of our outstanding principal and recorded an immaterial gain on the extinguishment of debt. As of September 26, 2020, we had $1.099 billion of the term loan outstanding.

On February 20, 2020, we entered into an Amendment No. 2 to the Credit Agreement (the “Amendment”) in order to relax certain financial covenants on the revolving line of credit. The financial covenants under the Credit Agreement are for the

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~~benefit of~~The Company's warranty obligation is recorded in accrued liabilities in the ~~revolving credit lenders only~~condensed consolidated balance sheets. Changes in the warranty obligation during the three months ended July 3, 2021 and ~~do not apply to any other debt of the Company.~~ June 27, 2020 were as follows:


	Three Months Ended
(in thousands)	July 3, 2021		June 27, 2020
Warranty obligation at beginning of period	$	17,384	$	15,261

Warranty provision related to products shipped	4,157		9,428
Deductions for warranty claims processed	(6,800)		(4,269)
Adjustments related to preexisting warranties	3,603		(533)
Warranty obligation at end of period	$	18,344	$	19,887

6. PURCHASED INTANGIBLE ASSETS

As of ~~September 26, 2020,~~July 3, 2021 and April 3, 2021, the ~~Company has five outstanding letters~~carrying value of ~~credit on the revolving credit facility for a total of $1.4 million~~purchased intangibles, excluding fully amortized assets and ~~had $98.6 million available under the revolving line of credit. As of September 26, 2020, the Company was in compliance with the financial covenants.~~goodwill, is as follows:


	July 3, 2021							April 3, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing Assets
Existing technology	$	427,123	$	(293,310)	$	133,813	2.1 years	$	427,123	$	(277,071)	$	150,052
Customer relationships	240,024		(139,724)		100,300		3.0 years	240,024		(128,740)		111,284
Trade name/Trademarks	115,600		(38,533)		77,067		6.0 years	115,600		(35,322)		80,278
Total intangible assets	$	782,747	$	(471,567)	$	311,180	3.3 years	$	782,747	$	(441,133)	$	341,614

~~On July 30, 2018, we entered into a 4-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022.~~ During the ~~six~~three months ended ~~September 26,~~July 3, 2021 and June 27, 2020, the Company ~~reclassified into interest~~recognized amortization expense ~~$7.3 million and recorded~~ ~~a $15.9~~of $30.4 million ~~unrealized loss on its interest rate swap derivative designated as a cash flow hedge.~~and

~~During Fiscal Year 2016, we obtained $488.4~~ $32.4 million, from debt financing, net of issuance costs. The debt matures on May 31, 2023 and bears interest at an annual rate of 5.50%. During the second quarter of Fiscal Year 2021 we repurchased $7.4 million of our outstanding principal and recorded an immaterial gain on the extinguishment of debt. As of September 26, 2020, we had $488.8 million of debt outstanding.

~~Further information regarding the Company’s debt issuances and related hedging activity can be found in Note 8, Debt~~ ~~and Note 13,~~ ~~Derivatives,~~ ~~of the accompanying notes to condensed consolidated financial statements.~~

~~Capital Return Program~~

On November 28, 2018, the Board approved a 1 million share repurchase program expanding our capacity to repurchase shares to approximately 1.7 million shares. During the first half of Fiscal Year 2021, we did not repurchase any shares of our common stock. As of September 26, 2020, there remained 1,369,014 shares authorized for repurchase under the existing stock repurchase program. See Note 11~~, Common Stock Repurchases, of the accompanying notes to condensed consolidated financial statements.~~respectively.

~~We believe that our current cash and cash equivalents, short-term investments, cash provided by operations, and availability of additional funds under the Credit Agreement, as amended from time~~Expected amortization expense attributable to time, will be sufficient to fund our operations. However, any projections of future financial needs and sources of working capital are subject to uncertainty on our financial results. Readers are cautioned to review the risks, uncertainties, and assumptions set forth in this Quarterly Report on Form 10-Q, including the section entitled "~~Certain Forward-Looking Information" and the risk factors set forth in our Annual Report on Form 10-K~~purchased intangibles for the fiscal year ended March 28, 2020, filed with the SEC on June 8, 2020, and other periodic filings with the SEC, any of which could affect our estimates for future financial needs and sources of working capital.

~~OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS~~

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides us with financing and liquidity support, market risk, or credit risk support.

~~Consigned Inventory~~

~~A substantial portion~~each of the ~~raw materials, components,~~next five years and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our consolidated balance sheet until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the riskthereafter as of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results. As of September 26, 2020, and March 28, 2020, we had off-balance sheet consigned inventories of $42.1 million and $21.7 million, respectively.July 3, 2021 is as follows:


(in thousands)	Amount
2022 (remaining nine months)	$	83,424
2023	111,232
2024	65,936
2025	21,688
2026	12,844
Thereafter	16,056
	$	311,180

Table of Contents

7. COMMITMENTS AND CONTINGENCIES

Future Minimum Lease Payments

Future minimum lease payments under non-cancelable operating leases as of July 3, 2021 were as follows:


(in thousands)	Operating Leases(1)
2022 (remaining nine months)	$	17,939
2023	10,464
2024	8,719
2025	6,791
2026	5,627
Thereafter	16,086
Total lease payments	$	65,626
Less: Imputed interest(2)	(7,955)
Present value of lease liabilities	$	57,671

(1) The weighted average remaining lease term was 4.8 years as of July 3, 2021.

(2) The weighted average discount rate was 4.7% as of July 3, 2021.

Unconditional Purchase Obligations

We use several contract manufacturers to manufacture raw materials, components, and subassemblies for our products through our supply of demand information that typically covers periods up to 13 weeks. The contract manufacturers use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers using a combination of purchase orders, supplier contracts, including annual minimum purchase obligations, and open orders based on projected demand information. As of September 26, 2020, we had outstanding off-balance sheet third-party manufacturing, component purchase, and other general and administrative commitments of $420.4 million, including the off-balance sheet consigned inventories of $42.1 million.

~~Except as described above, there have been no material changes in our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended March 28, 2020.~~

~~CRITICAL ACCOUNTING ESTIMATES~~

For a complete description of what we believe to be the critical accounting estimates used in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the fiscal year ended March 28, 2020, filed with the SEC on June 8, 2020. There have been no material changes to our critical accounting estimates during the six months ended September 26, 2020.

~~Recent Accounting Pronouncements~~

~~For more information regarding the Recent Accounting Pronouncements that may impact us, see Note 2,~~ ~~Recent Accounting Pronouncements, of the accompanying notes to the condensed consolidated financial statements.~~

~~Table of Contents~~

~~Financial Statements (Unaudited)~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(in thousands)~~

~~(Unaudited)~~

September 26, 2020 March 28,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 213,901 $ 213,879
Short-term investments 13,975 11,841
Accounts receivable, net 239,479 246,835
Inventory, net 183,636 164,527
Other current assets 51,987 47,946
Total current assets 702,978 685,028
Property, plant, and equipment, net 150,348 165,858
Goodwill 796,216 796,216
Purchased intangibles, net 403,110 466,915
Deferred tax assets 86,790 82,496
Other assets 62,101 60,661
Total assets $ 2,201,543 $ 2,257,174
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 136,463 $ 102,159
Accrued liabilities 373,458 373,666
Total current liabilities 509,921 475,825
Long term debt, net of issuance costs 1,587,556 1,621,694
Long-term income taxes payable 91,235 98,319
Other long-term liabilities 157,836 144,152
Total liabilities 2,346,548 2,339,990
Commitments and contingencies (Note 7)
Stockholders' deficit:
Common stock 907 896
Additional paid-in capital 1,526,677 1,501,340
Accumulated other comprehensive loss (9,650) (13,582)
Accumulated deficit (796,324) (707,904)
Total stockholders' equity before treasury stock 721,610 780,750
Less: Treasury stock, at cost (866,615) (863,566)
Total stockholders' deficit (145,005) (82,816)
Total liabilities and stockholders' deficit $ 2,201,543 $ 2,257,174

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(in thousands, except per share data)~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Net revenues
Net product revenues $ 347,677 $ 395,137 $ 639,135 $ 777,882
Net service revenues 63,292 66,572 127,554 131,594
Total net revenues 410,969 461,709 766,689 909,476
Cost of revenues
Cost of product revenues 209,261 229,323 385,876 437,939
Cost of service revenues 20,962 26,315 43,735 52,820
Total cost of revenues 230,223 255,638 429,611 490,759
Gross profit 180,746 206,071 337,078 418,717
Operating expenses:
Research, development, and engineering 52,148 57,415 102,177 116,939
Selling, general, and administrative 115,605 148,419 232,250 312,027
(Gain) loss, net from litigation settlements 0 0 17,561 (1,162)
Restructuring and other related charges 6,170 5,847 35,500 25,372
Total operating expenses 173,923 211,681 387,488 453,176
Operating income (loss) 6,823 (5,610) (50,410) (34,459)
Interest expense (18,581) (23,797) (39,765) (47,729)
Other non-operating income (loss), net 1,366 (625) 1,592 (292)
Loss before income taxes (10,392) (30,032) (88,583) (82,480)
Income tax expense (benefit) 3,013 (4,122) (163) (11,699)
Net loss $ (13,405) $ (25,910) $ (88,420) $ (70,781)
Loss per common share:
Basic $ (0.33) $ (0.65) $ (2.17) $ (1.80)
Diluted $ (0.33) $ (0.65) $ (2.17) $ (1.80)
Shares used in computing loss per common share:
Basic 40,970 39,584 40,715 39,411
Diluted 40,970 39,584 40,715 39,411

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

~~(Unaudited)~~

Three Months Ended Six Months Ended
September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Net loss $ (13,405) $ (25,910) $ (88,420) $ (70,781)
Other comprehensive income (loss):
Foreign currency translation adjustments 0 0 0 (219)
Unrealized gains (losses) on cash flow hedges:
Unrealized cash flow hedge gains (losses) arising during the period (3,006) 2,369 (4,585) (4,335)
Net (gains) losses reclassified into income for revenue hedges 1,652 (1,568) 743 (2,927)
Net (gains) losses reclassified into income for cost of revenue hedges 0 (62) 0 (166)
Net (gains) losses reclassified into income for interest rate swaps 3,528 945 7,251 1,597
Net unrealized gains (losses) on cash flow hedges 2,174 1,684 3,409 (5,831)
Aggregate income tax benefit (expense) of the above items 259 (434) 523 1,147
Other comprehensive income (loss) 2,433 1,250 3,932 (4,903)
Comprehensive loss $ (10,972) $ (24,660) $ (84,488) $ (75,684)

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands)~~

~~(Unaudited)~~

Six Months Ended
September 26, 2020 September 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (88,420) $ (70,781)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 84,371 115,074
Amortization of debt issuance costs 2,660 2,722
Stock-based compensation 19,618 27,597
Deferred income taxes (4,056) (45,067)
Provision for excess and obsolete inventories 9,158 5,682
Restructuring and related charges 35,500 25,372
Cash payments for restructuring charges (24,459) (22,949)
Other operating activities (3,162) 8,894
Changes in assets and liabilities, net of acquisition:
Accounts receivable, net 7,627 3,778
Inventory, net (27,550) (55,584)
Current and other assets (5,945) 9,352
Accounts payable 32,892 34,910
Accrued liabilities 23,025 (31,694)
Income taxes (21,002) 26,260
Cash provided by operating activities 40,257 33,566
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investments 0 170
Purchase of investments (238) (806)
Capital expenditures (10,881) (9,260)
Proceeds from sale of property and equipment 1,900 2,142
Cash used for investing activities (9,219) (7,754)
CASH FLOWS FROM FINANCING ACTIVITIES
Employees' tax withheld and paid for restricted stock and restricted stock units (3,049) (9,281)
Proceeds from issuances under stock-based compensation plans 5,731 6,616
Proceeds from revolving line of credit 50,000 0
Repayments of revolving line of credit (50,000) 0
Payment of cash dividends 0 (11,922)
Repayments of long-term debt (35,563) (25,000)
Cash used for financing activities (32,881) (39,587)
Effect of exchange rate changes on cash and cash equivalents 1,865 (2,292)
Net increase (decrease) in cash and cash equivalents 22 (16,067)
Cash and cash equivalents at beginning of period 213,879 202,509
Cash and cash equivalents at end of period $ 213,901 $ 186,442
SUPPLEMENTAL DISCLOSURES
Cash paid for income taxes $ 23,204 $ 5,836
Cash paid for interest $ 38,415 $ 39,777

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) / EQUITY~~

~~(in thousands)~~

~~(Unaudited)~~

Three Months Ended September 26, 2020
Common Stock Additional Paid-In Accumulated Other Comprehensive Retained Treasury Total Stockholders'
Shares Amount Capital Loss Earnings Stock Deficit
Balances at June 27, 2020 40,682 $ 901 $ 1,510,695 $ (12,083) $ (782,919) $ (866,305) $ (149,711)
Net loss — — — — (13,405) — (13,405)
Net unrealized gains (losses) on cash flow hedges, net of tax — — — 2,433 — — 2,433
Proceeds from issuances under stock-based compensation plans 129 1 0 — — — 1
Stock-based compensation — — 10,263 — — — 10,263
Employees' tax withheld and paid for restricted stock and restricted stock units (22) — — — — (310) (310)
Proceeds from ESPP 457 5 5,719 — — — 5,724
Other equity changes — — — — — — —
Balances at September 26, 2020 41,246 $ 907 $ 1,526,677 $ (9,650) $ (796,324) $ (866,615) $ (145,005)

Three Months Ended September 28, 2019
Common Stock Additional Paid-In Accumulated Other Comprehensive Retained Treasury Total Stockholders'
Shares Amount Capital Loss Earnings Stock Equity
Balances at June 29, 2019 39,578 $ 887 $ 1,445,097 $ (6,628) $ 92,437 $ (862,295) $ 669,498
Net loss — — — — (25,910) — (25,910)
Net unrealized gains (losses) on cash flow hedges, net of tax — — — 1,277 — — 1,277
Proceeds from issuances under stock-based compensation plans 101 1 165 — — — 166
Repurchase of restricted common stock (9) — — — — — —
Cash dividends — — — — (5,982) — (5,982)
Stock-based compensation — — 14,693 — — — 14,693
Employees' tax withheld and paid for restricted stock and restricted stock units (21) — — — — (660) (660)
Proceeds from ESPP 268 2 6,023 — — — 6,025
Balances at September 28, 2019 39,917 $ 890 $ 1,465,978 $ (5,351) $ 60,545 $ (862,955) $ 659,107

Six Months Ended September 26, 2020
Common Stock Additional Paid-In Accumulated Other Comprehensive Retained Treasury Total Stockholders'
Shares Amount Capital Loss Earnings Stock Deficit
Balances at March 28, 2020 $ 40,406 $ 896 $ 1,501,340 $ (13,582) $ (707,904) $ (863,566) $ (82,816)
Net loss — — — — (88,420) — (88,420)
Net unrealized gains (losses) on cash flow hedges, net of tax — — — 3,932 — — 3,932
Proceeds from issuances under stock-based compensation plans 648 6 0 — — — 6
Repurchase of restricted common stock (10) — — — — — —
Stock-based compensation — — 19,618 — — — 19,618
Employees' tax withheld and paid for restricted stock and restricted stock units (255) — — — — (3,049) (3,049)
Proceeds from ESPP 457 5 5,719 — — — 5,724
Other equity changes — — — — — — —
Balances at September 26, 2020 $ 41,246 $ 907 $ 1,526,677 $ (9,650) $ (796,324) $ (866,615) $ (145,005)

~~Table of Contents~~

Six Months Ended September 28, 2019
Common Stock Additional Paid-In Accumulated Other Comprehensive Retained Treasury Total Stockholders'
Shares Amount Capital Loss Earnings Stock Equity
Balances at March 30, 2019 $ 39,518 $ 884 $ 1,431,607 $ (475) $ 143,344 $ (853,673) $ 721,687
Net loss — — — — (70,781) — (70,781)
Foreign currency translation adjustments — — — (219) — — (219)
Net unrealized gains (losses) on cash flow hedges, net of tax — — — (4,657) — — (4,657)
Proceeds from issuances under stock-based compensation plans 372 4 751 — — — 755
Repurchase of restricted common stock (29) — — — — — —
Cash dividends — — — — (11,922) — (11,922)
Stock-based compensation — — 27,597 — — — 27,597
Employees' tax withheld and paid for restricted stock and restricted stock units (212) — — — — (9,282) (9,282)
Proceeds from ESPP 268 2 6,023 — — — 6,025
Impact of new accounting standards adoption — — — — (89) — (89)
Other equity changes — — — — (7) — (7)
Balances at September 28, 2019 $ 39,917 $ 890 $ 1,465,978 $ (5,351) $ 60,545 $ (862,955) $ 659,107

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~1. BASIS OF PRESENTATION~~

In the opinion of management, the accompanying unaudited condensed consolidated financial statements ("financial statements") of Plantronics, Inc. ("the Company") have been prepared on a basis materially consistent with the Company's March 28, 2020 audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments, necessary to fairly state the information set forth herein. Certain information and footnote disclosures normally included in financial statements prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim financial information and in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2020, which was filed with the SEC on June 8, 2020. The results of operations for the interim period ended September 26, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

~~The financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.~~

The Company’s fiscal year ends on the Saturday closest to the last day of March. The Company’s current and prior fiscal years end on March 27, 2021 and March 28, 2020, respectively, and both consist of 52 weeks. The Company’s results of operations for the three and six months ended September 26, 2020 and September 28, 2019 both contain 13 weeks.

~~Risks and uncertainties~~

As described in the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2020, which was filed with the SEC on June 8, 2020, the Company is subject to a greater degree of uncertainty than normal in making the judgments and estimates needed to apply its significant accounting policies as a result of the COVID-19 pandemic. The Company continues to assess various accounting estimates and other matters in context to the unknown future impacts of COVID-19 using information that is reasonably available as of the issuance date of the condensed consolidated financial statements. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on its customers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of these condensed consolidated financial statements, the extent to which the pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

~~Reclassifications~~

~~Certain prior year amounts have been reclassified for consistency with current year presentation. Each of the reclassifications was immaterial and had no effect on the Company's results of operations.~~

~~2. RECENT ACCOUNTING PRONOUNCEMENTS~~

~~Recently Adopted Pronouncement~~

In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance regarding the measurement of credit losses on financial instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The Company adopted the new standard effective March 29, 2020, using a modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated. The adoption had an immaterial impact on the Company’s financial position, results of operations or cash flows.

~~Table of Contents~~

~~3. CASH, CASH EQUIVALENTS, AND INVESTMENTS~~

The following tables summarize the Company’s cash, cash equivalents, and investments’ adjusted cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category recorded as cash and cash equivalents, and short-term investments as of September 26, 2020 and March 28, 2020 (in thousands):

September 26, 2020 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value Cash & Cash Equivalents Short-term investments
(due in 1 year or less)
Cash $ 188,894 $ — $ — $ 188,894 $ 188,894 $ —
Level 1:
Mutual Funds 13,339 762 (126) 13,975 0 13,975
Money Market Funds 25,007 0 0 25,007 25,007
Total cash, cash equivalents
and investments measured at fair value $ 227,240 $ 762 $ (126) $ 227,876 $ 213,901 $ 13,975

March 28, 2020 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value Cash & Cash Equivalents Short-term investments (due in 1 year or less)
Cash $ 213,879 $ — $ — $ 213,879 $ 213,879 $ —
Level 1:
Mutual Funds 12,938 31 (1,128) 11,841 0 11,841
Total cash, cash equivalents
and investments measured at fair value $ 226,817 $ 31 $ (1,128) $ 225,720 $ 213,879 $ 11,841

As of September 26, 2020, and March 28, 2020, all of the Company's investments are classified as trading securities and are reported at fair value, with unrealized gains and losses included in current period earnings. For more information regarding the Company's deferred compensation plan, see Note 4, ~~Deferred Compensation~~.

The Company did not incur any material realized or unrealized gains or losses in the three months ended September 26, 2020, and September 28, 2019. The Company recognized an unrealized gain of $1.8 million during the six months ended September 26, 2020. The Company did not incur any material realized or unrealized gains or losses in the six months ended September 28, 2019.

~~There were no transfers between fair value measurement levels during the three and six months ended September 26, 2020, and September 28, 2019.~~

All financial assets and liabilities are recognized or disclosed at fair value in the financial statements. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

~~Level 1~~

The Company's Level 1 financial assets consist of Mutual Funds and Money Market Funds. The fair value of Level 1 financial instruments is measured based on the quoted market price of identical securities.

~~Level 2~~

The Company's Level 2 financial assets and liabilities consist of derivative foreign currency contracts, an interest rate swap, a term loan facility, and 5.50% Senior Notes. The fair value of the Level 2 derivative foreign currency contracts and interest rate swap are determined using pricing models that use observable market inputs. For more information regarding the Company's derivative assets and liabilities, see Note 13, ~~Derivatives~~. The fair value of the Level 2 5.50% Senior Notes and term loan facility are determined based on inputs that were observable in the market, including the trading price of the notes when available. For more information regarding the Company's 5.50% Senior Notes and term loan facility, see Note 8, ~~Debt~~.

~~Table of Contents~~

~~Level 3~~

The Company's revolving credit facility falls under the Level 3 hierarchy. The fair value of the Level 3 revolving credit facility is determined based on inputs that were unobservable in the market. For more information regarding the Company's debt, refer to Note 8, ~~Debt~~.

~~4. DEFERRED COMPENSATION~~

As of September 26, 2020, the Company held investments in mutual funds with a fair value totaling $14.0 million, all of which related to debt and equity securities that are held in rabbi trusts under non-qualified deferred compensation plans. The total related deferred compensation liability was $13.9 million at September 26, 2020. As of March 28, 2020, the Company held investments in mutual funds with a fair value totaling $11.8 million, all of which related to debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability at March 28, 2020 was $11.7 million.

The securities are classified as trading securities and are recorded on the condensed consolidated balance sheets under "short-term investments". The liability is recorded on the condensed consolidated balance sheets under "other long-term liabilities" and "accrued liabilities".

~~5. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS~~

~~Accounts receivable, net:~~

(in thousands) September 26, 2020 March 28, 2020
Accounts receivable $ 326,062 $ 350,642
Provisions for promotions, rebates, and other (84,823) (101,666)
Provisions for doubtful accounts and sales allowances (1,760) (2,141)
Accounts receivable, net $ 239,479 $ 246,835

The Company maintains a provision for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company regularly performs credit evaluations of its customers’ financial conditions and considers factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks, and economic conditions that may affect a customer’s ability to pay, including any reasonable and supportable forecasts of the future.

For the three months ended September 26, 2020, our assessment considered business and market disruptions caused by COVID-19 and estimates of credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict, causing variability and volatility that may impact our allowance for credit losses in future periods.

As a result of the Polycom Acquisition (the "Acquisition"), the Company assumed a financing agreement with an unrelated third-party financing company (the "Financing Agreement") whereby the Company offers distributors and resellers direct or indirect financing on their purchases of Polycom's products and services. In return, the Company agrees to pay the financing company a fee based on a pre-defined percentage of the transaction amount financed. In certain instances, these financing arrangements result in a transfer of the Company's receivables, without recourse, to the financing company. If the transaction meets the applicable criteria under Topic 860 and is accounted for as a sale of financial assets, the related accounts receivable is excluded from the balance sheet upon receipt of the third-party financing company's payment remittance. In certain legal jurisdictions, the arrangements that involve maintenance services or products bundled with maintenance at one price do not qualify as a sale of financial assets in accordance with the authoritative guidance. Accordingly, accounts receivable related to these arrangements are accounted for as a secured borrowing in accordance with Topic 860, and the Company records a liability for any cash received, while maintaining the associated accounts receivable balance until the distributor or reseller remits payment to the third-party financing company.

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~~During the quarter ended September 26, 2020, total transactions entered pursuant to the terms of the Financing Agreement were approximately~~ ~~$23.6 million, of which~~ ~~$23.6 million~~ was related to the transfer of the financial asset. During the quarter ended September 28, 2019, total transactions entered pursuant to the terms of the Financing Agreement were approximately $44.9 million, of which $27.9 million was related to the transfer of the financial assets. The financing of these receivables accelerated the collection of cash and reduced the Company's credit exposure. Included in "Accounts receivables, net" in the Company's condensed consolidated balance sheets as of September 26, 2020 and March 28, 2020 was approximately ~~$13.0 million~~ ~~and $22.5 million, respectively due from the financing company, of which~~ ~~$13.0 million~~ and $16.5 million, respectively was related to accounts receivable transferred. Total fees incurred pursuant to the Financing Agreement were immaterial for the quarters ended September 26, 2020 and September 28, 2019. These fees are recorded as a reduction to revenue on the Company's condensed consolidated statements of operations.

~~Inventory, net:~~

(in thousands) September 26, 2020 March 28, 2020
Raw materials $ 75,440 $ 97,371
Work in process 4,790 459
Finished goods 103,406 66,697
Inventory, net $ 183,636 $ 164,527

~~Accrued Liabilities:~~

(in thousands) September 26, 2020 March 28, 2020
Short term deferred revenue $ 144,383 $ 144,040
Employee compensation and benefits 61,956 48,153
Operating lease liabilities, current 21,032 22,517
Warranty obligation 16,006 12,772
Provision for returns 14,211 20,146
Accrued interest 14,099 14,617
Marketing incentives liabilities 13,430 9,708
Derivative liabilities 12,541 12,840
Income tax payable 10,839 20,725
VAT/Sales tax payable 10,223 9,673
Accrued other 54,738 58,475
Accrued liabilities $ 373,458 $ 373,666

The Company's warranty obligation is included as a component of accrued liabilities on the condensed consolidated balance sheets. Changes in the warranty obligation during the six months ended September 26, 2020 and September 28, 2019 were as follows:

Six Months Ended
(in thousands) September 26, 2020 September 28, 2019
Warranty obligation at beginning of period $ 15,261 $ 17,984
Warranty provision related to products shipped 13,488 9,573
Deductions for warranty claims processed (7,981) (9,841)
Adjustments related to preexisting warranties (2,365) (1,916)
Warranty obligation at end of period(1)
$ 18,403 $ 15,800

(1) Includes both short-term and long-term portion of warranty obligation; the prior table shows only the short-term portion included in accrued liabilities on the Company's condensed consolidated balance sheet. The long-term portion is included in other long-term liabilities.

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~~6. GOODWILL AND PURCHASED INTANGIBLE ASSETS~~

~~Goodwill~~

~~The changes in the carrying amount of goodwill allocated to the Company's reporting segments for the periods ended September 26, 2020 and March 28, 2020 are as follows:~~

(in thousands) Poly Reportable Segment Products Reportable Segment Services Reportable Segment Total Consolidated
Balance as of March 30, 2019 $ 1,278,380 $ 0 $ 0 $ 1,278,380
Adjustments(1)
1,517 1,517
Impairment prior to re-segmentation (323,088) 0 0 (323,088)
Allocation due to re-segmentation (956,809) 789,561 167,248 0
Impairment after re-segmentation 0 (160,593) (160,593)
Balance as of March 28, 2020 $ 0 $ 628,968 $ 167,248 $ 796,216
Balance as of September 26, 2020 $ 0 $ 628,968 $ 167,248 $ 796,216

~~(1)~~ ~~Represents measurement period adjustments.~~

During the fourth quarter of Fiscal Year 2020, the Company experienced a sustained decrease in its stock price and determined that it was more likely than not that the carrying value of the Company's reporting units exceeded their fair value. Additionally, during the fourth quarter of Fiscal Year 2020, the Company made key changes to its executive management, which ultimately resulted in a change to the composition of its reportable segments and consequently a change from 1 to 4 reporting units – Headsets, Voice, Video, and Services. These changes resulted in an impairment charge of $483.7 million in the fourth quarter of Fiscal Year 2020.

~~Other Intangible Assets~~

~~As of September 26, 2020, and March 28, 2020, the carrying value of other intangibles, is as follows:~~

As of September 26, 2020 March 28, 2020
(in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life
Amortizing Assets
Existing technology $ 427,123 $ (244,263) $ 182,860 $ 427,123 $ (208,848) $ 218,275 2.8 years
Customer relationships 240,024 (106,474) 133,550 240,024 (84,506) 155,518 3.6 years
Trade name/Trademarks 115,600 (28,900) 86,700 115,600 (22,478) 93,122 6.8 years
Total intangible assets $ 782,747 $ (379,637) $ 403,110 $ 782,747 $ (315,832) $ 466,915 3.9 years

~~During the three and six months ended September 26, 2020, the Company recognized~~ ~~$31.4 million and $63.8 million,~~ ~~respectively, in amortization expense. During the three and six months ended September 28, 2019 the Company recognized $46.0 million and $91.3 million, respectively, in amortization expense.~~

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~~As of~~ ~~September 26, 2020, expected amortization expense for other intangible assets for each of the next five years and thereafter is as follows:~~

in thousands Amount
2021 (remaining six months) $ 61,088
2022 113,858
2023 111,232
2024 65,936
2025 21,688
Thereafter 29,308
$ 403,110

~~7. COMMITMENTS AND CONTINGENCIES~~

~~Future Minimum Rental Payments~~

~~Future minimum lease payments under non-cancelable operating leases as of September 26, 2020 were as follows:~~

(in thousands)
Operating Leases(1)
2021 (remaining six months) $ 12,014
2022 21,022
2023 8,559
2024 6,845
2025 5,572
Thereafter 16,215
Total lease payments $ 70,227
Less: Imputed interest(2)
(8,036)
Present value of lease liabilities $ 62,191

~~(1)~~ ~~The weighted average remaining lease term was 4.4 years as of September 26, 2020.~~

~~(2)~~ ~~The weighted average discount rate was 4.8% as of September 26, 2020.~~

~~Unconditional Purchase Obligations~~

The Company purchases materials and services from a variety of suppliers and manufacturers. During the normal course of business and to manage manufacturing operations, ~~and general and administrative activities,~~ the Company may enter into firm, non-cancelable, and unconditional purchase obligations for inventory, including electronic components, such as semiconductor chips, in addition to service, capital expenditure, and general and administrative activities, for which amounts are not recorded on the condensed consolidated balance sheets. As of ~~September 26, 2020,~~July 3, 2021, the Company had outstanding off-balance sheet third-party manufacturing, component purchase, and other general and administrative commitments of ~~$420.4 million.~~$599.5 million.

Other Guarantees and Obligations

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets of a subsidiary, matters related to the Company's conduct of business and tax matters prior to the sale. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various triggering events relating to the sale and use of its products and services.

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In addition, the Company also provides indemnification to customers against claims related to undiscovered liabilities, additional product liability, or environmental obligations. The Company has also entered into indemnification agreements with its directors, officers, and certain other personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers of the Company or certain of its affiliated entities. The Company maintains director and officer liability insurance, which may cover certain liabilities arising from its obligation to indemnify its directors, officers, and certain other personnel in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these agreements due to the limited history of prior claims and the unique facts and circumstances involved in each particular claim. Such indemnification obligations might not be subject to maximum loss clauses. Historically, the Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in the condensed consolidated financial statements.

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Claims and Litigation

On October 12, 2012, GN Netcom, Inc. (“GN”) filed a complaint against the Company in the United States District Court for the District of Delaware (“Court”), alleging violations of Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, and tortious interference with business relations in connection with the Company’s distribution of corded and wireless headsets. On July 13, 2020 the parties resolved the dispute and the matter was dismissed.

On January 23, 2018, FullView, Inc. filed a complaint in the United States District Court of the Northern District of California against Polycom, Inc. alleging infringement of two patents and thereafter filed a similar complaint in connection with the same patents in Canada. Polycom thereafter filed an inter partes reexamination ("IPR") of one of the patents, which was then appealed to Federal Circuit Court and denied. Litigation in both matters in the United States and Canada, respectively, were stayed pending the results of that appeal. Polycom also filed an IPR of the second patent and the ~~PTAB~~U.S. Patent Trial and Appeal Board (“PTAB”) denied institution of the IPR petition. FullView had also initiated arbitration proceedings under a terminated license agreement with Polycom alleging that Polycom had failed to pay certain royalties due under that agreement. The arbitration panel awarded an immaterial amount to FullView. FullView filed a First and Second Amended Complaint and Polycom filed a motion to dismiss. The Court granted Polycom's partial motion to dismiss without prejudice and invalidated one of the patents in suit. Litigation on the remaining patent is ongoing.

On June 21, 2018, directPacket Research Inc. filed a complaint alleging patent infringement by Polycom, Inc. in the United States District Court for the Eastern District of Virginia, Norfolk Division. The Court granted Polycom’s Motion to Transfer Venue to the Northern District of California. Polycom filed petitions for Inter Partes Review of the asserted patents which were granted by the ~~U.S. Patent Trial and Appeal Board.~~PTAB. The District Court matter iswas stayed pending resolution of the IPRs. Oral argument was heard on the IPRs on October 20, ~~2020~~2020. On January 11, 2021, the PTAB issued final written decisions invalidating two of the asserted patents. The remaining claims of the third patent were unasserted against the Company. On February 12, 2021, directPacket filed a notice of appeal to the United States Court of Appeals for the Federal Circuit with ~~ruling expected on or around January 2021.~~respect to the PTAB’s final written decision regarding the ’588 patent. On March 15, 2021, Polycom filed a notice of appeal to the United States Court of Appeals for the Federal Circuit with respect to the PTAB’s final written decision regarding the ’978 patent. Both parties have filed their respective appellate briefs and litigation is ongoing.

On November 15, 2019, Felice Bassuk, individually and on behalf of others similarly situated, filed a complaint against ~~Plantronics,~~the Company, its former CEO, Joseph Burton, its CFO, Charles Boynton, and its former CFO, Pamela Strayer, alleging various securities law violations. The Company disputes the allegations. The Court appointed lead plaintiff and lead counsel and renamed the action “In re Plantronics, Inc. Securities Litigation” on February 13, 2020. Plaintiffs filed the amended complaint on June 5, 2020 and the Company’s Motion to Dismiss the Amended Complaint ~~was filed~~ on August 7, 2020. Plaintiffs filed their ~~Opposition~~opposition on October 2, 2020 ~~with Plantronics’ reply due~~and the Company replied on November 16, 2020.The hearing scheduled for January 13, 2021 was vacated and on March 29, 2021, the Court issued its order granting the Company’s motion to dismiss, but allowing the Plaintiffs leave to amend their complaint. On April 13, 2021, pursuant to the parties’ mutual agreement, the Court issued its order granting a stipulation and scheduling order which provides the plaintiffs until June 15, 2021 (subsequently extended to June 22, 2021) to consider whether or not to file a second amended complaint, and if filed, allowing defendants until August 16, 2021 to file a motion to dismiss, with plaintiffs’ opposition to such motion due on or before September 30, 2021, and with defendants’ reply to be filed on or before November 1, 2021. The Plaintiff filed an amended complaint on June 22, 2021 and the Company expects to file its Motion to Dismiss ~~currently is scheduled to occur on January 13, 2021.~~by the applicable deadline.

On December 17, 2019, Cisco Systems, Inc. filed a First Amended Complaint for Trade Secret Misappropriation against Plantronics, Inc. and certain individuals which amends a previously filed complaint against certain other individuals. The Company disputes the allegations. The Company filed a Motion to ~~Dismiss. The~~Dismiss and the Court granted the such Motion ~~to Dismiss~~ with leave to amend as to ~~Defendants~~defendants He, Chung and Williams, granted the Motion to Compel Arbitration for ~~Defendant~~defendant Williams and granted in part and denied in part the Motion to Dismiss by ~~Defendants~~defendants Puorro and ~~Poly.~~the Company. Cisco filed an Amended Complaint and the ~~Defendants have~~defendants moved to dismiss or strike portions of the Amended Complaint. The Court granted in part and denied in part the Motion to Dismiss. On September 10, 2020, the Company filed a Motion for Protective Order and a Motion to Strike and Challenge the Sufficiency of Cisco’s Trade Secret Disclosure. On December 21, 2020, the Court granted in part and denied in part such Motions. On December 30, 2020, Cisco filed a motion for leave to file a Motion for Reconsideration. On January 11, 2021 the Company filed its opposition. The ~~matter~~Court issued its Case Management and Pretrial order setting a settlement conference which occurred on April 1, 2021. During such mediation conference, the parties agreed to stay the District Court case for 30 days to pursue settlement of pending claims. This 30 day period has run, and the parties were unable to reach settlement. The litigation is ~~ongoing.~~ongoing and discovery continues.

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On July 22, 2020, Koss Corporation ~~sued Plantronics~~filed a complaint alleging patent infringement by the Company and Polycom, Inc. in the United States District Court for the Western District of Texas, Waco ~~division alleging patent infringement with respect to four Koss patents.~~Division. The Company answered the Complaint on October 1, 2020 disputing the claims. ~~The matter~~On December 18, 2020, the Company filed a Motion to Transfer Venue to the Northern District of California, which remains pending. On January 29, 2021, the plaintiff amended its infringement contentions to add new accused products. On February 12, 2021, the plaintiff filed its opposition to the Motion to Transfer. Claim construction exchanges have begun, and a claim construction hearing was scheduled for April 22, 2021. Trial is ~~ongoing.~~ scheduled for April 18, 2022. On May 20, 2021, the judge granted the Company’s Motion to Transfer Venue to the Northern District of California. Discovery continues.

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In addition to the specific matters discussed above, the Company is involved in various legal proceedings and investigations arising in the normal course of conducting business. Where applicable, in relation to the ~~on-going~~ matters described above, the Company has accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to the Company's financial condition, results of operations, or cash flows. The Company is not able to estimate an amount or range of any reasonably possible loss, including in excess of any amount accrued, because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings.

However, based upon the Company's historical experience, the resolution of these proceedings is not expected to have a material effect on the Company's financial condition, results of operations or cash flows. The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.

8. DEBT

The carrying value and estimated fair value ~~and carrying value~~measured on a recurring basis of the Company's outstanding debt as of ~~September 26, 2020~~July 3, 2021 and ~~March 28, 2020 were~~April 3, 2021 was as follows:


		September 26, 2020				March 28, 2020					July 3, 2021				April 3, 2021
(in thousands)	(in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value		(in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
4.75% Senior Notes										4.75% Senior Notes	$	496,475	$	494,173	$	492,580	$	493,985
5.50% Senior Notes	5.50% Senior Notes	$	441,455	$	488,830	$	359,140	$	495,409	5.50% Senior Notes	0		0		482,669		478,807
Term loan facility	Term loan facility	$	1,053,992	$	1,098,726	$	852,942	$	1,126,285	Term loan facility	999,659		1,002,946		1,004,743		1,002,079

As of ~~September 26, 2020,~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, the net unamortized discount, premium, and debt issuance costs on the Company's outstanding debt were ~~$21.9~~ $19.7 million and ~~$25.1~~$22.6 million, respectively.

4.75% Senior Notes

On March 4, 2021, the Company issued $500.0 million aggregate principal amount of 4.75% Senior Notes. The 4.75% Senior Notes mature on March 1, 2029 and bear interest at a rate of 4.75% per annum, payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2021. The Company received proceeds of $493.9 million from issuance of the 4.75% Senior Notes, net of issuance costs of $6.1 million, which are presented in the condensed consolidated balance sheets as a reduction to the outstanding amount payable and are being amortized to interest expense using the straight-line method, which approximates the effective interest method for this debt, over the term of the 4.75% Senior Notes. A portion of the proceeds was used to repay the outstanding principal of the 5.50% Senior Notes on May 17, 2021.

The fair value of the 4.75% Senior Notes was determined based on inputs that were observable in the market, including the trading price of the 4.75% Senior Notes, when available (Level 2).

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The Company may redeem all or part of the 4.75% Senior Notes, upon not less than a 15-day or more than a 60-day notice, however, the applicable redemption price will be determined as follows:

Redemption Period Requiring Payment of:

Redemption Up To 40% Using Cash Proceeds From An Equity Offering (3)

Make-Whole (1)

Premium (2)

Date

Specific Price

4.75% Senior Notes

Prior to March 1, 2024

On or after March 1, 2024

Prior to March 1, 2024

104.75%

(1) If the Company redeems the notes prior to the applicable date, the price is principal plus a make-whole premium, which means, the greater of (i) 1.0% of the principal or (ii) the excess of the present value of the redemption price at March 1, 2024 plus interest through March 1, 2024 over the principal amount.

(2) If the Company redeems the notes on or after the applicable date, the price is principal plus a premium which declines over time, as specified in the applicable indenture, together with accrued and unpaid interest.

(3) If the Company redeems the notes prior to the applicable date with net cash proceeds of one or more equity offerings, the price is equal to the amount specified above, together with accrued and unpaid interest, subject to a maximum redemption of 40% of the aggregate principal amount of the respective note being redeemed and at least 50% of the aggregate principal amount remains outstanding immediately after any such redemption (unless the notes are redeemed or repurchased substantially concurrently).

In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 4.75% Senior Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 4.75% Senior Notes contain restrictive covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments and other restricted payments, transfer and sell assets, create liens, enter into transactions with affiliates, and engage in mergers, consolidations, or sales of assets.

5.50% Senior Notes

In May 2015, the Company issued $500.0 million aggregate principal amount of 5.50% ~~senior notes (the “5.50%~~ Senior ~~Notes”).~~Notes. The 5.50% Senior Notes mature on May 31, 2023, and bear interest at a rate of 5.50% per annum, payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2015. The Company received net proceeds of $488.4 million from ~~the~~ issuance of the 5.50% Senior Notes, net of issuance costs of $11.6 million, which are being amortized to interest expense over the term of the 5.50% Senior Notes using the straight-line method, which approximates the effective interest ~~method.~~method for this debt. A portion of the proceeds was used to repay all then-outstanding amounts under the Company's revolving line of credit agreement with Wells Fargo Bank and the remaining proceeds were used primarily for share repurchases.

The fair value of the 5.50% Senior Notes was determined based on inputs that were observable in the market, including the trading price of the 5.50% Senior Notes when available (Level 2).

~~The~~On May 17, 2021, the Company ~~may~~used a portion of the proceeds from the 4.75% Senior Notes to redeem ~~all or a part~~the outstanding principal and accrued interest of the 5.50% Senior Notes upon not less than 30 or more than a 60-day notice; however, the applicable redemption price is the principal plus a premium which declines over time as specified in the applicable indenture, together with accrued and unpaid interest.of $493.9 million.

In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 5.50% Senior Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 5.50% Senior Notes contain restrictive covenants that, among other things, limit the Company's ability to create certain liens and enter into sale and lease-back transactions; create, assume, incur, or guarantee additional indebtedness of its subsidiaries without such subsidiary guaranteeing the 5.50% Senior Notes on an unsecured unsubordinated basis; and consolidate or merge with, or convey, transfer or lease all or substantially all of the assets of the Company and its subsidiaries, to another person. During the three months ended September 26, 2020, the Company repurchase~~d $7.4 million aggregate principal amount of the 5.50% Senior Notes. The Company recorded an immaterial gain on~~ ~~the repurchase, which is included in interest expense of the Company's condensed consolidated statements of operations.~~

~~Credit~~Term Loan Facility ~~Agreement~~

In connection with the acquisition of Polycom ~~Acquisition~~ completed on July 2, 2018, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (the “Credit Agreement”). The Credit Agreement replaced the Company’s prior revolving credit facility in its entirety. The Credit Agreement provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100 million that matures in July 2023 and (ii) a $1.275 billion term loan facility priced at LIBOR plus ~~250bps~~2.50% due in quarterly principal installments commencing on the

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last business day of March, June, September and December beginning with the first full fiscal quarter ending after the ~~Closing Date~~closing date under the Credit Agreement for the aggregate principal amount funded on the ~~Closing Date~~closing date under the Credit Agreement multiplied by 0.25% (subject to prepayments outlined in the Credit Agreement) and all remaining outstanding principal due at maturity in July 2025. The Company has paid the full amount of term debt principal due prior to maturity. The Company borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs which are being amortized to interest expense over the term of the ~~agreement~~Credit Agreement using the straight-line method which approximates the effective interest method for this debt. The proceeds from the initial borrowing under the Credit Agreement were used to finance the ~~Acquisition,~~acquisition of Polycom, to refinance certain debt of Polycom, and to pay related fees, commissions and transaction costs. The Company has additional borrowing capacity under the Credit Agreement through the revolving credit facility, which could be used to provide ongoing working capital and capital for other general corporate

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purposes of the Company and its subsidiaries. The Company’s obligations under the Credit Agreement are currently guaranteed by Polycom and will from time to time be guaranteed by, subject to certain exceptions, any domestic subsidiaries that may become material in the future. Subject to certain exceptions, the Credit Agreement is secured by first-priority perfected ~~liens~~lien on, and security interests in, substantially all of the personal property of the Company and each subsidiary guarantor and will from time to time also be secured by certain material real property that the Company or any subsidiary guarantor may acquire. Borrowings under the Credit Agreement bear interest due on a quarterly basis at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) the prime rate publicly announced from time to time by Wells Fargo Bank, National Association, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin. The Company must also pay (i) an unused commitment fee ranging from 0.200% to 0.300% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement, and (ii) a per annum fee equal to (a) for each performance standby letter of credit outstanding under the Credit Agreement with respect to non-financial contractual obligations, 50% of the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit, and (b) for each other letter of credit outstanding under the Credit Agreement, the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit.

On February 20, 2020, the Company entered into an Amendment No. 2 to Credit Agreement (the “Amendment”) by and among the Company, the financial institutions party thereto as lenders and Wells Fargo Bank, National Association, as administrative ~~agent (in such capacity, the “Agent”).~~agent. The Amendment amended the Credit Agreement, as previously amended to (i) increase the maximum Secured Net Leverage Ratio (as defined in the Credit Agreement) permitted under the Credit Agreement to 3.75 to 1.00 through December 26, 2020 and 3.00 to 1.00 thereafter and (ii) decrease the minimum Interest Coverage Ratio (as defined in the Credit Agreement) required under the Credit Agreement to 2.25 to 1.00 through December 26, 2020 and 2.75 to 1.00 thereafter.

Additionally, the Amendment modified the calculation of the Secured Net Leverage Ratio and the Interest Coverage Ratio solely for purposes of compliance with Sections 7.11(a) and 7.11(b) of the Credit Agreement to (i) calculate the Secured Net Leverage Ratio net of the aggregate amount of unrestricted ~~cash~~Cash and Cash Equivalents (as defined in the Credit Agreement) on the condensed consolidated balance ~~sheet~~sheets of the Company and its Restricted Subsidiaries (as defined in the Credit Agreement) as of the date of calculation up to an amount equal to $150,000,000 and (ii) solely for purposes of any fiscal quarter ending from December 29, 2019 through December 26, 2020, increase the cap on Expected Cost Savings (as defined in the Credit Agreement) in determining Consolidated EBITDA (as defined in the Credit Agreement) to the greater of (A) 20% of Consolidated EBITDA for such Measurement Period (as defined in the Credit Agreement) (calculated before giving effect to any such Expected Cost Savings to be added back pursuant to clause (a)(ix) of the definition of Consolidated EBITDA) and (B)(x) for the period from December 29, 2019 through March 28, 2020, $121,000,000, (y) for the period from March 29, 2020 through June 27, 2020, $107,000,000 and (z) for the period from June 28, 2020 through December 26, 2020, $88,000,000.

The financial covenants under the Credit Agreement described above are for the benefit of the revolving credit lenders only and do not apply to any other debt of the Company. The Credit Agreement also contains various other restrictions and covenants, some of which have become more stringent over time, including restrictions on our, and certain of our subsidiaries, ability to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, consummate acquisitions, make investments and pay dividends and other distributions. The Company has the unilateral ability to terminate the revolving line of credit such that the financial covenants described above are no longer applicable. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if the Company, any subsidiary guarantor or, with certain exceptions, any other subsidiary becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans

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outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while a payment or bankruptcy event of default exists or (ii) upon the lenders’ request, during the continuance of any other event of default. As of ~~September 26, 2020,~~July 3, 2021, the Company was in compliance with ~~the~~all financial covenants.

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The Company may prepay the loans and terminate the commitments under the Credit ~~Facility~~ Agreement at any time without penalty. Additionally, the Company is subject to mandatory debt repayments five business days after the filing of its consolidated financial statements for any annual period in which the Company generates ~~excess cash as~~Excess Cash (as defined byin the Credit ~~Agreement.~~Agreement). In accordance with the terms of the Credit ~~Agreement,~~Agreement, the Company did not generate ~~excess cash~~Excess Cash during Fiscal Year ~~2020~~2021 and therefore is not required to make any debt repayments in Fiscal Year ~~2021. During~~2022. During the three months ended ~~September 26, 2020,~~July 3, 2021, the ~~Company repurchas~~Compa~~ed $30.0 million~~ny did not prepay any aggregate principal amount of the term loan facility. ~~The Company recorded an immaterial gain on~~ ~~the repurchase, which is included in interest expense on the Company's condensed consolidated statements of operations.~~ As of ~~September 26, 2020,~~July 3, 2021, the ~~Company has~~Company had 5 o~~utstanding~~ letters of credit onoutstanding under the revolving credit facility for a total of $1.4 million. The fair value of the term loan facility was determined based on inputs that were observable in the market (Level 2).

9. RESTRUCTURING AND OTHER RELATED CHARGES

Summary of Restructuring Plans

Fiscal Year ~~2021~~2022 restructuring plan

During the ~~six~~three months ended ~~September 26, 2020,~~July 3, 2021, the Company committed to ~~additional~~ actions to reduce expenses ~~and right size its overall cost structure~~ to ~~better align with projected~~enable strategic investments in revenue ~~levels.~~growth. The costs incurred to date under this plan include severance benefits related to headcount reductions in the Company's global workforce and facility related charges due to the closure or consolidation of ~~leased~~ offices.

Fiscal Year ~~2020~~2021 restructuring ~~plans~~plan

During ~~the~~ Fiscal Year ~~2020,~~2021, the Company committed to additional actions to ~~rationalize post-Acquisition operations~~reduce expenses and ~~costs to~~ align ~~the Company's~~its overall cost structure to ~~current~~better align with projected revenue ~~expectations.~~levels as well as reorganize its executive management to align to its new Chief Executive Officer's management structure. The costs incurred to date under ~~these plans~~this plan include severance benefits related to headcount reductions in the Company's global workforce and facility related charges due to the closure or consolidation of leased offices.

Legacy restructuring plans

In connection with the ~~Company's~~Polycom acquisition, in Fiscal Years 2019 and 2020 the Company initiated actions to rationalize post-acquisition operations and realign its cost structure. These actions included streamlining the global workforce, closure or consolidation of leased offices ~~asset impairments associated with~~and distribution centers, consumer product portfolio optimization efforts, ~~and other costs associated with legal entity rationalization.~~

~~Fiscal Year 2019 restructuring plans~~

During the Fiscal Year 2019, the Company initiated post-Acquisition restructuring plans to realign the Company's cost structure, including streamlining the global workforce, consolidation of certain distribution centers in North America, and reduction of redundant legal entities, in order to take advantage of operational efficiencies following the Acquisition. The costs incurred to date under these plans have primarily comprised of severance benefits from reduction in force actions, facilities related actions initiated by management, and legal entity rationalization.

The following table summarizes the restructuring and other related charges recognized in the Company's condensed consolidated statements of operations:


		Three Months Ended				Six Months Ended					Three Months Ended
(in thousands)	(in thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019		(in thousands)	July 3, 2021		June 27, 2020
Severance	Severance	$	881	$	77	$	23,192	$	13,772	Severance	$	19,301	$	22,311
Facility	Facility	(156)		0		1,642		0		Facility	(472)		1,798
Other (1)	Other (1)	867		1,037		2,308		6,867		Other (1)	4,103		1,441
Total cash charges										Total cash charges	22,932		25,550
Non-cash charges (2)	Non-cash charges (2)	4,578		4,733		8,358		4,733		Non-cash charges (2)	6,040		3,780
Total restructuring and other related charges	Total restructuring and other related charges	$	6,170	$	5,847	$	35,500	$	25,372	Total restructuring and other related charges	$	28,972	$	29,330

(1) Other costs primarily represent associated legal and advisory services.

(2) Non-cash charges primarily represent ~~asset impairment~~accelerated depreciation due to the closure or consolidation of facilities.

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The Company's restructuring liabilities as of ~~September 26, 2020~~July 3, 2021 is as ~~follows (amounts~~follows:


(in thousands)	As of April 3, 2021		Accruals (1)		Cash Payments		As of July 3, 2021
FY 2022 Plan
Severance	$	0	$	20,110	$	(4,875)	$	15,235
Facility	0		0		0		0
Other	0		4,103		(3,959)		144
Total FY 2022 Plan	$	0	$	24,213	$	(8,834)	$	15,379

FY 2021 Plans
Severance	$	6,039	$	(801)	$	(2,449)	$	2,789
Facility	913		50		(134)		829
Other	186		0		(150)		36
Total FY 2021 Plans	$	7,138	$	(751)	$	(2,733)	$	3,654

Legacy Plans
Severance	$	1,222	$	(8)	$	(217)	$	997
Facility	3,281		(522)		(446)		2,313
Other	0		0		0		0
Total Legacy Plans	$	4,503	$	(530)	$	(663)	$	3,310

Severance	$	7,261	$	19,301	$	(7,541)	$	19,021
Facility	4,194		(472)		(580)		3,142
Other	186		4,103		(4,109)		180
Grand Total	$	11,641	$	22,932	$	(12,230)	$	22,343

(1)Excludes non-cash charges of $6.0 million recorded in ~~thousands):~~

As of March 28, 2020 Accruals Cash Payments As of September 26, 2020
FY 2021 Plans
Severance $ 0 $ 23,808 $ (15,922) $ 7,886
Facility 0 69 (59) 10
Other 0 2,307 (1,651) 656
Total FY2021 Plans $ 0 $ 26,184 $ (17,632) $ 8,552
FY 2020 Plans
Severance $ 7,475 $ (859) $ (4,499) $ 2,117
Facility 2,501 1,573 (852) 3,222
Other 1,621 0 (1,621) 0
Total FY2020 Plans $ 11,597 $ 714 $ (6,972) $ 5,339
FY 2019 Plans
Severance $ 147 $ 243 $ (325) $ 65
Facility 0 0 0 0
Other 117 0 (117) 0
Total FY2019 Plans $ 264 $ 243 $ (442) $ 65
Severance $ 7,622 $ 23,192 $ (20,746) $ 10,068
Facility 2,501 1,642 (911) 3,232
Other 1,738 2,307 (3,389) 656
Grand Total $ 11,861 $ 27,141 $ (25,046) $ 13,956
restructuring and other related charges on the Company's condensed consolidated statements of operations for the three months ended July 3, 2021.

10. ~~STOCK-BASED COMPENSATION~~

~~Stock-based Compensation~~

The Company recognizes the grant-date fair value of stock-based compensation as compensation expense using the straight-line attribution approach over the service period for which the stock-based compensation is expected to vest. The following table summarizes the amount of stock-based compensation included in the condensed consolidated statements of operations:

Three Months Ended Six Months Ended
(in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Cost of revenues $ 742 $ 997 $ 1,575 $ 1,975
Research, development, and engineering 4,068 4,213 7,299 7,932
Selling, general, and administrative 5,453 9,483 10,749 17,690
Stock-based compensation included in operating expenses 9,521 13,696 18,048 25,622
Total stock-based compensation 10,263 14,693 19,623 27,597
Income tax benefit (3,197) (3,147) (8,170) (3,143)
Total stock-based compensation, net of tax $ 7,066 $ 11,546 $ 11,453 $ 24,454

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~~11. COMMON STOCK REPURCHASES~~

From time to time, the Company's Board of Directors (the "Board") has authorized programs under which the Company may repurchase shares of its common stock, depending on market conditions, in the open market or through privately negotiated transactions. Repurchased shares are held as treasury stock until they are retired or re-issued. On November 28, 2018, the Board approved a 1 million share repurchase program expanding its capacity to repurchase shares to approximately 1.7 million shares. As of September 26, 2020, there remained 1,369,014 shares authorized for repurchase under the repurchase program approved by the Board.

~~For the periods ended September 26, 2020 and September 28, 2019, the Company did not repurchase any shares of its common stock.~~

The total value of shares withheld in satisfaction of employee tax obligations on the vesting of equity awards for the three months ended September 26, 2020 and September 28, 2019 were $0.3 million and ~~$0.7 million~~, respectively. The amounts withheld were equivalent to the employees' minimum statutory tax withholding requirements and are reflected as a financing activity within the Company's condensed consolidated statements of cash flows. These share withholdings have the same effect as share repurchases by the Company as they reduce the number of shares that would have otherwise been issued in connection with the vesting of shares subject to the restricted stock grants.

~~12.~~ ACCUMULATED OTHER COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

The components of accumulated other comprehensive income ~~("AOCI")~~(loss), net of ~~immaterial~~ tax, ~~effects, are~~were as follows:

(in thousands) September 26, 2020 March 28, 2020
Accumulated unrealized loss on cash flow hedges (1)
$ (14,265) $ (18,197)
Accumulated foreign currency translation adjustments 4,615 4,615
Accumulated other comprehensive loss $ (9,650) $ (13,582)

~~(1)~~ ~~Refer to Note 13, Derivatives, which discloses the nature of the Company's derivative assets and liabilities as of September 26, 2020and March 28, 2020.~~


(in thousands)	July 3, 2021		April 3, 2021
Accumulated unrealized loss on cash flow hedges	$	(3,013)	$	(7,836)
Accumulated foreign currency translation adjustments	4,615		4,615

Accumulated other comprehensive income (loss)	$	1,602	$	(3,221)

~~13.~~11. DERIVATIVES

Foreign Currency Derivatives

The Company's foreign currency derivatives consist primarily of foreign currency forward ~~exchange contracts~~ and option contracts. The Company does not purchase derivative financial instruments for speculative trading purposes. The derivatives expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the derivative instrument. The Company's maximum exposure to loss ~~that it would incur due to~~as a result of credit risk ~~if parties to derivative contracts failed completely to perform according to the terms of the contracts~~ was equal to the carrying value of the Company's derivative assets as of ~~September 26, 2020~~July 3, 2021 and ~~March 28, 2020.~~April 3, 2021. The Company seeks to mitigate such risk by limiting its counterparties to large financial institutions. In addition, the Company monitors the potential risk of loss with any one counterparty resulting from this type of credit risk on an ongoing basis.

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The Company enters into master netting arrangements with counterparties ~~when possible~~ to mitigate credit risk in derivative ~~transactions.~~transactions, when possible. A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. As of ~~September 26, 2020,~~July 3, 2021, the Company had International Swaps and Derivatives Association ("ISDA") agreements with 45 applicable banks and financial institutions which contained netting provisions. The Company has elected to present the fair value of derivative assets and liabilities within the Company's condensed consolidated balance ~~sheet~~sheets on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. ~~For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period.~~ Derivatives not subject to master netting agreements are not eligible for net presentation. As of ~~September 26, 2020,~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, no cash collateral had been received or pledged related to these derivative instruments.

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The Company's derivative instruments are measured using Level 2 fair value inputs. The gross fair value of the Company's outstanding derivative contracts measured on a recurring basis at the end of each period was as follows:


(in thousands)	(in thousands)	September 26, 2020		March 28, 2020		(in thousands)	July 3, 2021		April 3, 2021
Derivative Assets(1)
Derivative assets(1)						Derivative assets(1)
Non-designated hedges	Non-designated hedges	$	698	$	266	Non-designated hedges	$	1,218	$	2,864
Cash flow hedges	Cash flow hedges	654		3,283		Cash flow hedges	1,917		2,242

Interest rate swap						Interest rate swap	2,549		0
Total derivative assets	Total derivative assets	$	1,352	$	3,549	Total derivative assets	$	5,684	$	5,106

Derivative Liabilities(2)
Derivative liabilities(2)						Derivative liabilities(2)
Non-designated hedges	Non-designated hedges	$	16	$	668	Non-designated hedges	$	19	$	18
Cash flow hedges	Cash flow hedges	2,060		811		Cash flow hedges	891		1,819
Interest rate swap	Interest rate swap	15,920		21,411		Interest rate swap	8,294		9,863
Accrued interest	Accrued interest	965		631		Accrued interest	102		102
Total derivative liabilities	Total derivative liabilities	$	18,961	$	23,521	Total derivative liabilities	$	9,306	$	11,802

(1) Short-term derivative assets are recorded in ~~"other~~other current ~~assets"~~assets and long-term derivative assets are recorded in ~~"deferred tax and~~ other ~~assets".~~non-current assets on the condensed consolidated balance sheets. As of ~~September 26, 2020,~~July 3, 2021, the portion of derivative assets classified as long-term was ~~immaterial.~~$2.7 million.

(2) Short-term derivative liabilities are recorded in ~~"accrued liabilities"~~accrued liabilities and long-term derivative liabilities are recorded in ~~"other long-term liabilities".~~other non-current liabilities on the condensed consolidated balance sheets. As of ~~September 26, 2020,~~July 3, 2021, the portion of derivative liabilities classified as long-term was ~~$5.5~~ $0.6 million.

Non-Designated Hedges

As of ~~September 26, 2020,~~July 3, 2021, the Company had foreign currency forward contracts denominated in ~~Euros~~Euro ("EUR") and ~~British~~Great Britain Pound Sterling ("GBP"). The Company does not elect to obtain hedge accounting for these forward contracts. These forward contracts hedge against a portion of the Company’s foreign currency-denominated cash balances, accounts receivables, and accounts payables. The following table summarizes the notional value of the Company’s outstanding foreign exchange currency contracts and approximate ~~U.S. Dollar ("USD")~~USD equivalent at ~~September 26, 2020:~~July 3, 2021:

(in thousands)

Local Currency

USD Equivalent

Position

Maturity

(in thousands)

Local Currency

USD Equivalent

Position

Maturity

EUR

€

50,800

59,059

Sell EUR

1 month

EUR

€

36,000

42,674

Sell EUR

1 month

GBP

3,600

4,574

Sell GBP

1 month

GBP

9,500

13,100

Sell GBP

1 month

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations

The effect of non-designated derivative contracts on results of operations recognized in other non-operating income, ~~and (expense),~~ net in the condensed consolidated statements of operations was as follows:


		Three Months Ended				Six Months Ended				Three Months Ended
(in thousands)	(in thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019			(in thousands)	July 3, 2021		June 27, 2020
Gain (loss) on foreign exchange contracts		$	(1,815)	$	3,610	$	(2,733)	$	3,321
Loss on foreign exchange contracts											Loss on foreign exchange contracts	$	(486)	$	(918)

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Cash Flow Hedges

Costless Collars

The Company hedges a portion of the ~~forecasted~~forecasted EUR and GBP denominated revenues with costless collars. On a monthly basis, the Company enters into option contracts with a six to ~~eleven-month~~twelve-month term. Collar contracts are scheduled to mature at the beginning of each fiscal quarter, at which time the instruments convert to ~~forward~~forward contracts. The Company also enters into cash flow forwards with a ~~three-mon~~three-month term. Once the hedged revenues are recognized, the forward contracts become non-designated hedges to protect the resulting foreign monetary asset position for the Company.

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The notional value of the Company's outstanding EUR and GBP option and forward contracts at the end of each period was as follows:

July 3, 2021

April 3, 2021

(in millions)

~~September 26, 2020~~

~~March 28, 2020~~

EUR

GBP

EUR

GBP

Option contracts

€~~60.7~~100.3

£~~12.3~~20.9

€~~67.0~~91.4

£~~18.4~~18.1

Forward contracts

€~~51.8~~84.2

£~~11.0~~16.1

€~~50.2~~76.0

£~~18.5~~15.6

The Company will reclassify all related amounts in accumulated other comprehensive income into earnings within the next twelve months.

Cross-currency Swaps

The Company hedges a portion of the forecasted Mexican Peso (“MXN”) denominated expenditures with a cross-currency swap. As of July 3, 2021, and April 3, 2021, the Company had foreign currency swap contracts of approximately MXN 369.9 million and MXN 564.3 million, respectively.

The following table summarizes the notional value of the Company's outstanding MXN currency swaps and approximate USD Equivalent at July 3, 2021:

(in thousands)

Local Currency

USD Equivalent

Position

Maturity

MXN

369,888

17,813

Buy MXN

Monthly over a twelve month period

The Company will reclassify all related amounts in accumulated other comprehensive income into earnings within the next twelve months.

Interest Rate Swap

On June 15, 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. The swap involves the receipt of floating-rate interest payments for fixed interest rate payments at a rate of 0.39% over the life of the agreement. Additionally, on July 30, 2018, the Company entered into a ~~4-year~~four-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022. The swap involves the receipt of floating-rate interest payments for fixed interest rate payments at a rate of 2.78% over the life of the agreement.

The Company has designated ~~this~~the interest rate ~~swap~~swaps as a cash flow ~~hedge.~~hedges. The purpose of ~~this swap~~the swaps is to hedge against changes in cash flows (interest payments) attributable to fluctuations in the Company's variable rate debt. The ~~derivative is~~swaps are valued based on prevailing LIBOR rate curves on the date of measurement. The Company also evaluates counterparty credit risk when it calculates the fair value of the ~~swap. The effective portion of changes~~swaps. Changes in the fair value of the ~~derivative is~~interest rate swaps are recorded to other ~~comprehensive~~comprehensive income ~~(loss) on the accompanying balance sheets and~~and reclassified ~~into~~to interest expense over the life of the underlying debt as interest ~~on the Company's floating rate debt~~ is accrued. ~~The Company reviews~~During the ~~effectiveness of this instrument on a quarterly basis, recognize current period hedge ineffectiveness immediately in earnings and will discontinue hedge accounting if~~three months ended July 3, 2021, the Company no longer considers hedging to be highly effective. This hedge was fully effective at inception on July 30, 2018 and as of the six months ended September 26, 2020. During the six months ended September 26, 2020, the Company reclassified into interest expense ~~$7.3~~$3.1 million and had a ~~$15.9~~$5.7 million unrealized loss on its interest rate swap ~~derivative designated~~derivatives designated as a cash flow ~~hedge.~~hedges.

The Company will reclassify approximately $8.0 million in accumulated other comprehensive income into earnings within the next twelve months.

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Effect of Designated Derivative Contracts on ~~AOCI~~Accumulated Other Comprehensive Income (Loss) and Condensed Consolidated Statements of Operations

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three ~~and six~~ months ended ~~September 26, 2020~~July 3, 2021 and ~~September 28, 2019:~~June 27, 2020:

Three Months Ended Six Months Ended
(in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Gain (loss) included in AOCI as of beginning of period $ (18,921) $ (14,995) $ (20,156) $ (7,480)
Amount of gain (loss) recognized in other comprehensive income (“OCI”) (effective portion) (3,006) 2,369 (4,585) (4,335)
Amount of (gain) loss reclassified from OCI into net revenues (effective portion) 1,652 (1,568) 743 (2,927)
Amount of (gain) loss reclassified from OCI into cost of revenues (effective portion) 0 (62) 0 (166)
Amount of (gain) loss reclassified from OCI into interest expense (effective portion) 3,528 945 7,251 1,597
Total amount of (gain) loss reclassified from AOCI to income (loss) (effective portion) 5,180 (685) 7,994 (1,496)
Gain (loss) included in AOCI as of end of period $ (16,747) $ (13,311) $ (16,747) $ (13,311)


	Three Months Ended
(in thousands)	July 3, 2021		June 27, 2020
Loss included in accumulated other comprehensive income (loss), as of beginning of period	$	(10,062)	$	(20,156)

Gain (loss) recognized in other comprehensive income (loss)	440		(1,579)

Amount of (gain)/loss reclassified from accumulated other comprehensive income (loss) into net revenues	1,772		(909)
Amount of loss reclassified from accumulated other comprehensive income (loss) into cost of revenues	(236)		0
Amount of gain reclassified from accumulated other comprehensive income (loss) into interest expense	3,089		3,723
Total amount of gain reclassified from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations	4,625		2,814



Loss included in accumulated other comprehensive income (loss), as of end of period	$	(4,997)	$	(18,921)

As a result of adopting ASU 2017-12, beginning in the first quarter of fiscal year 2020, the excluded portion of such amounts is included in the same line item in which the underlying transactions affect earnings and the ineffective portion of the realized and unrealized gains or losses on derivatives is included as a component of accumulated other comprehensive income. During the three and six months ended September 26, 2020 and September 28, 2019, the Company did not have an ineffective portion of its cash flow hedges.

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~~14.~~12. INCOME TAXES

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions. The Company's income tax benefit is determined using an estimate of its annual effective tax rate and adjusted for discrete items that are taken into account in the relevant period. The effective tax rates for the three months ended ~~September 26,~~July 3, 2021 and June 27, 2020 were 10.4% and ~~September 28, 2019 were (29.0)%~~4.1%, respectively.

Income tax benefit was $(4.3) million and ~~13.7%,~~$(3.2) million for the three months ended July 3, 2021 and June 27, 2020, respectively. The ~~effective tax rates~~provision for income taxes for the ~~six~~three months ended ~~September 26,~~July 3, 2021 consisted primarily of federal, state, and foreign income taxes. For the three months ended July 3, 2021 and June 27, 2020, the income tax benefit differed from the U.S. federal statutory rate primarily due the valuation allowance on the U.S. federal and ~~September 28, 2019 were 0.2% and 14.2%. respectively.~~state deferred tax assets.

As of ~~September 26, 2020,~~July 3, 2021, the Company ~~had approximately $86.3 million in non-US net deferred tax assets ("DTAs") after valuation allowance, and~~ continued to maintain a ~~100%~~full valuation allowance against its U.S. federal and state deferred tax ~~assets.~~assets ("DTAs.") A significant portion of the Company's DTAs relate to internal intangible property restructuring between wholly-owned subsidiaries. At this time, based on evidence currently available, the Company considers it more likely than not that it will have sufficient taxable income in the future that will allow the Company to realize the DTAs; however, failure to generate sufficient future taxable income could result in some or all DTAs not being utilized in the future. If the Company is unable to generate sufficient future taxable income, a substantial valuation allowance to reduce the Company's DTAs may be required.

The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. Significant judgment is required in evaluating our uncertain tax positions and determining the Company's provision for income taxes. AsDuring the three months ended July 3, 2021, there were no material changes to the total amount of ~~September 26, 2020,~~unrecognized tax benefits. Within the ~~Company had~~next twelve months, we believe that the resolution of certain U.S. and foreign tax examinations and negotiations is reasonably possible and that a ~~total gross~~change in estimate, reducing unrecognized tax benefits, ~~of $28.8 million compared with $37.2 million as of September 28, 2019. The reduction in gross unrecognized tax benefits~~may occur. It is ~~primarily attributed~~not possible to ~~examination closure and settlement by the IRS relating to our 2017 Fiscal Year income tax return related to reversal~~provide a range of the ~~United States Tax Court’s holding in Altera Corp. v. Commissioner that upheld~~potential change until the ~~portion~~tax examinations and negotiations progress further or the related statutes of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. If recognized, the gross unrecognized tax benefits would reduce the effective tax rate in the period of recognition.limitations expire.

~~15.~~

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13. COMPUTATION OF ~~EARNINGS (LOSS)~~LOSS PER COMMON SHARE

Basic ~~earnings (loss)~~loss per share is calculated by dividing net ~~income (loss) associated with common shareholders~~loss by the weighted-average number of common shares outstanding during the period. Diluted ~~earnings (loss)~~loss per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and vesting of restricted stock, if the effect is dilutive, in accordance with the treasury stock ~~method or two-class method (whichever~~method. The potentially dilutive effect of outstanding stock options and restricted stock has been excluded from the computation of diluted loss per share in all periods presented, as their effect is ~~more dilutive).~~anti-dilutive.

The following table sets forth the computation of basic and diluted loss per common share for the three ~~and six~~ months ended ~~September 26, 2020,~~July 3, 2021 and ~~September 28, 2019:~~June 27, 2020:


		Three Months Ended				Six Months Ended					Three Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019		(in thousands, except per share data)	July 3, 2021		June 27, 2020
Basic loss per common share:
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(13,405)	$	(25,910)	$	(88,420)	$	(70,781)	Net loss	$	(36,811)	$	(75,015)

Denominator:	Denominator:									Denominator:
Weighted average common shares, basic		40,970		39,584		40,715		39,411
Weighted-average common shares outstanding										Weighted-average common shares outstanding	42,061		40,460

Weighted average common shares-diluted		40,970		39,584		40,715		39,411

Basic loss per common share		$	(0.33)	$	(0.65)	$	(2.17)	$	(1.80)
Diluted loss per common share		$	(0.33)	$	(0.65)	$	(2.17)	$	(1.80)
Basic and diluted loss per common share										Basic and diluted loss per common share	$	(0.88)	$	(1.85)

Potentially dilutive securities excluded from diluted loss per common share because their effect is anti-dilutive	Potentially dilutive securities excluded from diluted loss per common share because their effect is anti-dilutive	1,153		1,758		1,337		912		Potentially dilutive securities excluded from diluted loss per common share because their effect is anti-dilutive	405		1,546

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~~16.~~14. REVENUE AND MAJOR CUSTOMERS

The Company designs, ~~manufactures,~~builds, and markets ~~and sells integrated communications and~~ collaboration solutions which combine legendary audio expertise and powerful video and conferencing capabilities to create endpoints that ~~span headsets, open Session Initiation Protocol ("SIP")~~power meaningful human connections and ~~native ecosystem desktop phones, conference room phones, video conferencing~~provide solutions that make life easier when they work together and ~~peripherals, including cameras, speakers, and microphones, cloud management and analytics software solutions, and~~with our partner's services.

~~Major~~The Company’s major product categories are Headsets, ~~which includes~~Video, Voice, and Services. Headsets include wired and wireless communication headsets; Voice ~~Video, and Content Sharing Solutions, which~~ includes open ~~Session Initiation Protocol (“SIP”)~~SIP and native ecosystem desktop phones as well as conference room ~~phones, and~~phones; Video includes video conferencing solutions and peripherals, ~~including~~such as cameras, speakers, and microphones. The broad portfolio of Services include video interoperability, hardware and support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping customers achieve their goals for collaboration. The Company's cloud management and analytics software enables IT administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior. All of the Company's solutions are designed to integrate seamlessly with the platform and services of our customers choice in a wide range of Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), and Video as a Service ("VaaS") environments. The Company's ~~cloud management~~RealPresence collaboration solutions range from infrastructure to endpoints and ~~analytics software enables IT administrators~~allow people to ~~configure~~connect and ~~update firmware, monitor device usage, troubleshoot,~~collaborate globally, naturally, and gain a deep understanding of user behavior. In addition, the Company has a broad portfolio of Services including video interoperability, support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping customers achieve their goals for collaboration.seamlessly.

Product revenue is largely comprised of sales of hardware devices, peripherals, and platform software licenses used in communication and collaboration in offices and contact centers, with mobile devices, cordless phones, and computers. Services revenue primarily includes support on hardware devices, professional, hosted and managed services, and solutions to the Company's customers.

The following table disaggregates revenues by major product category for the three ~~and six~~ months ended ~~September 26, 2020~~July 3, 2021 and ~~September 28, 2019:~~

Three Months Ended Six Months Ended
(in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Net revenues from unaffiliated customers:
Headsets1
202,840 206,292 377,590 424,942
   Voice2
49,069 98,453 99,750 202,300
   Video2
95,768 90,392 161,795 150,640
   Services2
63,292 66,572 127,554 131,594
Total net revenues $ 410,969 $ 461,709 $ 766,689 $ 909,476

1 As announced on February 4, 2020, the Company entered into a definitive agreement with Nacon S.A. and closed the transaction on March 19, 2020, completing the sale of the Company's Consumer Gaming assets for a net amount that is not material to the Company's condensed consolidated financial statements. The remaining consumer headsets are included in the Company's Enterprise products and all prior periods have been reclassified to conform to current presentation.

2 ~~Categories were introduced with the acquisition of Polycom on July 2, 2018, and amounts are presented net of purchase accounting adjustments.~~

June 27, 2020:

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	Three Months Ended
(in thousands)	July 3, 2021		June 27, 2020
Net revenues
Headsets	172,194		174,750
Voice	61,298		45,821
Video	137,711		70,887
Services	59,969		64,262
Total net revenues	$	431,172	$	355,720

For reporting purposes, revenue is attributed to each geographic region based on the location of the customer. Other than the U.S., no country accounted for 10% or more of the Company's ~~net revenues for the three and six months ended September 26, 2020 and September 28, 2019. The following table presents net revenues by geography:~~

Three Months Ended Six Months Ended
(in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Products
Net revenues from unaffiliated customers:
U.S. $ 159,532 $ 187,935 $ 303,821 $ 386,716
Europe and Africa 114,875 111,672 192,493 212,778
Asia Pacific 52,548 68,821 97,979 126,073
Americas, excluding U.S. 20,722 26,709 44,842 52,315
Total international net revenues 188,145 207,202 335,314 391,166
Product net revenues $ 347,677 $ 395,137 $ 639,135 $ 777,882
Services
Net revenues from unaffiliated customers:
U.S. $ 24,245 $ 25,192 $ 48,237 $ 51,238
Europe and Africa 15,524 17,301 32,012 33,175
Asia Pacific 19,021 18,632 37,854 36,228
Americas, excluding U.S. 4,502 5,447 9,451 10,953
Total international net revenues 39,047 41,380 79,317 80,356
Service net revenues $ 63,292 $ 66,572 $ 127,554 $ 131,594
Total net revenues $ 410,969 $ 461,709 $ 766,689 $ 909,476

~~NaN customers, ScanSource and Ingram Micro Group, accounted for 25.0% and 18.3%, respectively, of~~total net revenues for the three months ended ~~September 26,~~July 3, 2021 and June 27, 2020. ~~Ingram Micro Group and ScanSource, accounted for 19.7% and 18.3%, res~~pectively, of net revenues for the six months ended September 26, 2020. NaN customers, ScanSource and Ingram Micro Group, accounted for 21.7% and 16.8% of net revenues for the three months ended September 28, 2019, respectively. ScanSource and Ingram Micro Group accounted for 19.6% and 16.8%, respectively, of net revenue for the six months ended September 28, 2019.

~~NaN customers, ScanSource and Ingram Micro Group accounted for 24.9% and 23.3%, respectively, of~~The following table presents total net ~~accounts receivable at September 26, 2020.~~ ~~NaN customers, Ingram Micro Group, ScanSource, and Synnex Group, accounted for 22.2%, 17.3%, and 15.6%, respectively, of total net accounts receivable at March 28, 2020.~~revenues by geography:


	Three Months Ended
(in thousands)	July 3, 2021		June 27, 2020
Net product revenues
U.S.	$	175,970	$	144,289

Europe, Middle East, and Africa	111,460		77,618
Asia Pacific	58,270		45,431
Americas, excluding U.S.	25,503		24,120
Total international net product revenues	195,233		147,169
Total net product revenues	$	371,203	$	291,458

Net service revenues
U.S.	$	22,758	$	23,992

Europe, Middle East, and Africa	14,661		16,488
Asia Pacific	18,488		18,833
Americas, excluding U.S.	4,062		4,949
Total international net service revenues	37,211		40,270
Total net service revenues	$	59,969	$	64,262

Total net revenues	$	431,172	$	355,720

Revenue is recognized when obligations under the terms of a contract with the Company's customer are satisfied; generally, this occurs with the transfer of control of its products or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The majority of the Company's business relates to physical product shipments, for whichDeferred revenue is ~~generally recognized once title and risk~~primarily comprised of loss of the product are transferred to the customer. The Company believes that transfer of title and risk of loss best represent the moment at which the customer’s ability to direct the use of and obtain substantially all the benefits of an asset have been achieved. The Company has elected to account for shipping and handling as fulfillment cost and recognize the related costs when control over products have transferred to the customer as an expense in Cost of Revenues.

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~~The Company's service revenue is recognized either over-time or at a point-in-time depending on the nature of the offering. Revenues associated with~~ non-cancelable maintenance ~~and~~ support ~~contracts comprise approximately 90% of the Company's overall service revenue~~performance obligations on hardware devices which are typically billed in advance and ~~are~~ recognized ratably over the contract term ~~which typically ranges between one and three years. The Company believes this recognition period faithfully depicts the pattern of transfer of control for maintenance and support~~ as the services are a series of distinct services available and delivered daily over the term. For certain products, support is provided free of charge without the purchase of a separate maintenance contract. If the support is determined to rise to the level of a performance obligation, the Company allocates a portion of the transaction price to the implied support obligation and recognizes service revenue over the estimated implied support period which can range between one month to several years, depending on the circumstances. Revenues associated with Professional Services are recognized when the Company has objectively determined that the obligation has been satisfied, which is usually upon customer acceptance.

The Company's contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company allocates the transaction price of a contract, to each identified performance obligation based on stand-alone selling price (“SSP”). The Company determines if variable consideration is associated with one or many, but not all of the performance obligations and allocates accordingly. Judgment is also required to determine the SSP for each distinct performance obligation. The Company derives SSP for its performance obligations through a stratification methodology and considers a few characteristics including consideration related to different service types, customer and geography characteristics. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

On occasion, the Company will fulfill only part of a purchase order due to lack of current availability for one or more items requested on an order. Its practice is to ship what is on hand, with the remaining goods shipped once the product is in stock. Shipment generally occurs less than one year from the date of the order. Depending on the terms of the contract or operationally, undelivered or backordered items may be canceled by either party at their discretion.

delivered. As of ~~September 26, 2020,~~July 3, 2021, the Company's deferred revenue balance was ~~$212.8 million~~.$207.6 million. As of ~~March 28, 2020,~~April 3, 2021, the Company's deferred revenue balance was ~~$208.5~~$213.8 million. During the three months ended ~~September 26, 2020,~~July 3, 2021, the Company recognized ~~$50.9~~$47.6 million in total net revenues that were ~~reflected~~recorded in deferred revenue at the beginning of the period.

The table below represents aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of ~~September 26, 2020:~~July 3, 2021:

September 26, 2020
(in millions) Current Noncurrent Total
Performance obligations $ 146.6 $ 68.4 $ 215.0

Upon establishment of creditworthiness, the Company may extend credit terms to its customers which typically ranges between 30 and 90 days from the date of invoice depending on geographic region and type of customer. The Company typically bills upon product hardware shipment, at time of software activation or upon completion of services. Revenue is not generally recognized in advance of billings. The balance of contract assets as of September 26, 2020 was ~~$4.3 million. As of March 28, 2020, the Company's contract assets balance was $3.7 million. None of the Company's contracts are deemed to have significant financing components.~~


	July 3, 2021
(in millions)	Current		Noncurrent		Total
Unsatisfied (or partially unsatisfied) performance obligations	$	136.4	$	71.2	$	207.6

Sales, value add, and other taxes collected ~~concurrent~~concurrently with revenue producing activities are excluded from revenue.

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The Company's indirect channel model includes both a two-tiered distribution structure, where the Company sells to distributors that subsequently sell to resellers, and a one-tiered structure where the Company sells directly to resellers. For these arrangements, transfer of control begins at the time access to the Company's services is made available to the end customer and entitlements have been contractually established, provided all other criteria for revenue recognition are met.

Commercial distributors and retailers represent the Company's largest sources of net revenues. Sales through its distribution and retail channels are made primarily under agreements allowing for rights of return and include various sales incentive programs, such as back end rebates, discounts, marketing development funds, price protection, and other sales incentives. The Company has an established sales history for these arrangements and the Company records the estimated reserves at the inception of the contract as a reflection of the reduced transaction price. Customer sales returns are estimated based on historical data, relevant current data, and the monitoring of inventory build-up in the distribution channel. Revenue reserves represent a reasonable estimation made by management and are subject to significant judgment. Estimated reserves may differ from actual returns or incentives provided, due to unforeseen customer return or claim patterns or changes in circumstances. For certain customer contracts which have historically demonstrated variability, the Company has considered the likelihood of being under-reserved and has considered a constraint accordingly. Provisions for ~~Sales Returns~~sales returns are presented within accrued liabilities in the Company's condensed consolidated balance sheets. Provisions for promotions, rebates, and other sales incentives are presented as a reduction of accounts receivable unless there is no identifiable right offset, in which case they are presented within accrued liabilities on its condensed consolidated balance sheets. See Note 5, Details of Certain Balance Sheet Accounts, ~~above~~ for additional details.

For certain arrangements, the Company pays commissions, bonuses and taxes associated with obtaining the contracts. The Company capitalizes such costs if they are deemed to be incremental and recoverable. The Company has elected to use the practical expedient to record the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Determining the amortization period of costs related to obtaining a contract involves judgment. Capitalized commissions and related expenses on hardware sales and services recognized at a point in time generally have an amortization period of less than one year. Maintenance-related performance obligations generally have an amortization period greater than one year when considering renewals. Capitalized commissions are amortized to ~~Sales~~selling, general, and ~~Marketing Expense~~administrative expense on a straight-line basis. The capitalized amount of incremental and recoverable costs of obtaining contracts with ana related amortization period of greater than one year are ~~$4.7 million~~was not material as of ~~September 26, 2020. Amortization of capitalized contract costs~~and for the three ~~and six~~ months ended ~~September 26, 2020 was immaterial.~~July 3, 2021.

~~17.~~15. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

The Company's Chief Executive Officer is identified as its Chief Operating Decision Maker ("CODM"). The CODM has organized the Company, manages resource allocations and measures performance among its 2 operating ~~segments —~~segments: Products and Services.

The Products reportable segment includes the Company's Headsets, Voice and Video product lines. The Services reportable segment includes maintenance support on hardware devices as well as professional, managed and cloud services and solutions.

In managing the 2 operating segments the CODM uses information about their revenue and gross margin after adjustments to exclude certain non-cash transactions and activities that are not reflective of the Company's ongoing or core operations as further described below. The CODM does not review asset information by segment.

Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the ~~Acquisition~~acquisition of Polycom.

Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the Acquisition of Polycom. The Company's deferred revenue primarily relates to ~~Service~~service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines.

~~Acquisition and integration fees:~~ ~~Represents charges incurred in connection with the Acquisition and integration of Polycom such as system implementations, legal and accounting fees.~~

Stock compensation expense: Represents the non-cash expense associated with the Company's issuance of common stock and ~~share-based~~stock-based awards to employees and non-employee directors.

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The following table presents segments results for revenue and gross margin, as reviewed by the CODM, and their reconciliation to the Company's condensed consolidated GAAP results:


		Three Months Ended				Six Months Ended				Three Months Ended
(in thousands)	(in thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019			(in thousands)	July 3, 2021		June 27, 2020
Segment revenues as reviewed by CODM
Segment revenues, as reviewed by CODM											Segment revenues, as reviewed by CODM
Products	Products	$	347,970	$	395,606	$	639,756	$	778,978		Products	$	371,379	$	291,786
Services	Services	67,236		74,627		136,252		151,181			Services	61,053		69,016
Total segment revenues as reviewed by CODM		$	415,206	$	470,233	$	776,008	$	930,159
Total segment revenues, as reviewed by CODM											Total segment revenues, as reviewed by CODM	$	432,432	$	360,802

Segment gross profit as reviewed by CODM
Segment gross profit, as reviewed by CODM											Segment gross profit, as reviewed by CODM
Products	Products	$	156,627	$	198,104	$	290,869	$	404,796		Products	$	153,548	$	134,242
Services	Services	46,274		48,315		92,517		98,364			Services	40,266		46,243
Total segment gross profit as reviewed by CODM		$	202,901	$	246,419	$	383,386	$	503,160
Total segment gross profit, as reviewed by CODM											Total segment gross profit, as reviewed by CODM	$	193,814	$	180,485

Three Months Ended Six Months Ended
(in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019
Total segment revenues as reviewed by CODM $ 415,206 $ 470,233 $ 776,008 $ 930,159
Deferred revenue purchase accounting (4,237) (8,524) (9,319) (20,683)
Consolidated GAAP net revenues $ 410,969 $ 461,709 $ 766,689 $ 909,476
Total segment gross profit as reviewed by CODM (1)
$ 202,901 $ 246,419 $ 383,386 $ 503,160
Purchase accounting amortization (17,176) (30,716) (35,414) (60,716)
Deferred revenue purchase accounting (4,237) (8,524) (9,319) (20,683)
Integration and rebranding costs 0 (111) 0 (1,069)
Stock-based compensation (742) (997) (1,575) (1,975)
Consolidated GAAP gross profit $ 180,746 $ 206,071 $ 337,078 $ 418,717


	Three Months Ended
(in thousands)	July 3, 2021		June 27, 2020
Total segment revenues, as reviewed by CODM	$	432,432	$	360,802
Deferred revenue purchase accounting	(1,260)		(5,082)
GAAP net revenues	$	431,172	$	355,720

Total segment gross profit, as reviewed by CODM (1)	$	193,814	$	180,485
Purchase accounting amortization	(16,238)		(18,238)
Deferred revenue purchase accounting	(1,260)		(5,082)
Stock-based compensation	(1,127)		(833)
GAAP gross profit	$	175,189	$	156,332

(1) Includes depreciation expense of ~~$3.6~~$3.6 million and $3.3 million for ~~both~~ the three months ended ~~September 26,~~July 3, 2021 and June 27, 2020, ~~and September 28, 2019. Includes depreciation expense of $6.9 million and $7.3 million for the six months ended September 26, 2020 and September 28, 2019.~~respectively.

~~18. SUBSEQUENT EVENTS~~

~~None.~~

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~~Quantitative~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTAIN FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and ~~Qualitative Disclosures About Market~~Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our intentions, beliefs, projections, outlook, analyses or current expectations that are subject to many risks and uncertainties. Such forward-looking statements and the associated risks and uncertainties include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 (coronavirus) outbreak, and its impact across our businesses, our operations and global supply chain, including (a) our expectations that the virus has caused, and will continue to cause, a shift to a hybrid work environment and that the elevated demand we have experienced in certain product lines, including our Enterprise Headsets and Video devices, will continue over the long term, (b) our belief that we will continue to experience increased customer and partner demand in collaboration endpoints, and that we will be able to design new product offerings to meet the change in demand due to a global hybrid work environment, (c) our expectations related to our Voice product lines, as well as our services attachment rate for such products, which have been, and may continue to be, negatively impacted as companies have delayed returning their workforces to offices in many countries due to the continued impact of COVID-19; and (d) the impact of the virus on our distribution partners, resellers, end-user customers and our production facilities, including our ability to obtain alternative sources of supply if our production facility or other suppliers are impacted by future shutdowns; (ii) our expectations related to global supply chain disruptions, including our belief that shortages of key components, including semiconductor chips, have impacted companies worldwide both within and outside of our industry, and that we will continue to experience a shortage of adequate component supply, including integrated circuits and manufacturing capacity, long lead times for raw materials and components, increased costs, increased purchase commitments and a delay in our ability to fulfill orders, which has had, and may continue to have, an adverse impact on our business and operating results; (iii) expectations related to our ability to fulfill the backlog generated by supply constraints and to timely supply the number of products to fulfill current and future customer demand; (iv) risks associated with our dependence on manufacturing operations conducted in our own facility in Tijuana, Mexico and through contract manufacturers, original design manufacturers, and suppliers to manufacture our products, to timely obtain sufficient quantities of materials, as well as finished products of acceptable quality, at acceptable prices, and in the quantities necessary for us to meet critical schedules for the delivery of our own products and services and fulfill our anticipated customer demand; (v) risks associated with our ability to secure critical components from sole source suppliers or identify alternative suppliers and/or buy component parts on the open market or completed goods in quantities sufficient to meet our requirements on a timely basis, affecting our ability to deliver products and services to our customers; (vi) our belief that consolidations of suppliers has occurred, and may continue to occur, which may negatively impact our ability to access certain parts and may result in higher prices which will impact our gross margins; (vii) risks related to increased cost of goods sold, including increased freight and other costs associated with expediting shipment and delivery of high-demand products to key markets in order to meet customer demand; (viii) continued uncertainty and potential impact on future quarters if sourcing constraints continue and/or price volatility occurs, which could continue to negatively affect our profitability and/or market share; (ix) the impact if global or regional economic conditions deteriorate further, on our customers and/or partners, including increased demand for pricing accommodations, delayed payments, delayed deployment plans, insolvency or other issues which may increase credit losses; (x) risks related to restrictions or delays in global return to worksites as a result of COVID-19, which continues to impact our employees and our customers worldwide, which has negatively impacted our voice product lines, and restricted customer engagement; (xi) expectations related to our ability to supply products in a timely manner to satisfy perishable demand; (xii) expectations related to our customers’ purchasing decisions and our ability to pivot quickly enough and/or match product production to demand, particularly given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges; (xiii) risks associated with significant and/or abrupt changes in product demand which increases the complexity of management’s evaluation of potential excess or obsolete inventory; (xiv) risks associated with the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; (xv) expectations related to our Services segment revenues, particularly as we introduce new generation, less complex, product solutions, or as companies shift from on premises to work from home options for their workforce, which have resulted and may continue to result in decreased demand for our professional, installation and/or managed service offerings; (xvii) expectations that our current cash on hand, additional cash generated from operations, together with sources of cash through our credit facility, either alone or in combination with our election to suspend our dividend payments, will meet our liquidity needs; (xviii) expectations relating to our ability to generate sufficient cash flow from operations to meet our debt covenants, and timely repay all principal and interest amounts drawn under our credit facility as they become due; (xix) risks associated with our channel partners’ sales reporting, product inventories and product sell through since we sell a significant amount of products to channel partners who maintain their own inventory of our products; (xx) expectations related to our efforts to drive sales and sustainable profitable revenue growth, to improve our profitability and cash flow, and accelerate debt reduction and de-levering; (xxi) our expectations regarding growth objectives related to our strategic initiatives designed to expand our

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product and service offerings, including our expectations related to building strategic alliances and key partnerships with providers of collaboration tools and platforms to drive revenue growth and market share, our expectations for new products launches, the timing of their releases and their expected impact on future growth and on our existing products, and our belief that our product management and personal device services, including Poly Lens and/or Poly+, will drive growth and profitability for both us and our partners through the sale of our product, services and solutions; (xxii) risks associated with forecasting sales and procurement demands, which are inherently difficult, particularly with continuing uncertainty in regional and global economic conditions; (xxv) our expectations regarding our ability to control costs, streamline operations and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; (xxvi) expectations relating to our earnings guidance, particularly as economic uncertainty, including, without limitation, uncertainty related to the continued impact of COVID-19, the current constraints in our ability to source key components for our products, continued uncertainty in the macro-economic climate and other external factors, puts further pressure on management judgments used to develop forward-looking financial guidance and other prospective financial information; (xxvii) expectations related to GAAP and non-GAAP financial results for the second quarter and full Fiscal Year 2022, including net revenues, adjusted EBITDA, tax rates, intangibles amortization, diluted weighted average shares outstanding and diluted EPS; (xxviii) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our position in the market, including risks associated with the potential failure of our UC&C solutions to be adopted with the breadth and speed we anticipate; (xxix) uncertainties attributable to currency fluctuations, including fluctuations in foreign exchange rates and/or new or greater tariffs on our products; (xxx) our belief that the increased adoption of certain technologies and our open architecture approach has and will continue to increase demand for our solutions; (xxxi) expectations related to the micro and macro-economic conditions in our domestic and international markets and their impact on our future business; (xxxii) our forecast and estimates with respect to tax matters, including expectations with respect to utilizing our deferred tax assets; and (xxxiii) our expectations regarding pending and potential future litigation, in addition to other matters discussed in this Annual Report on Form 10-K that are not purely historical data. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, those discussed in this Quarterly Report on Form 10-Q; in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, filed with the Securities and Exchange Commission ("SEC") on May 18, 2021; and other documents we have filed with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

OVERVIEW

Plantronics, Inc. (“Poly,” “Company,” “we,” “our,” or “us”) is a leading global communications technology company that designs, manufactures, and markets integrated communications and collaboration solutions for professionals. We offer premium audio and video products designed to work in an era where work is no longer a place and enterprise work forces are increasingly distributed. Our products and services are designed and engineered to connect people with high fidelity and incredible clarity. They are professional-grade, easy to use, and work seamlessly with major video- and audio-conferencing platforms.

Our major product categories are Headsets, Video, Voice, and Services. Headsets include wired and wireless communication headsets; Voice includes open Session Initiation Protocol ("SIP") and native ecosystem desktop phones, as well as conference room phones; Video includes conferencing solutions and peripherals, such as cameras, speakers, and microphones.All of our solutions are designed to integrate seamlessly with the platform and services of our customers’ choice in a wide range of Unified Communications & Collaboration (“UC&C”), Unified Communication as a Service (“UCaaS”), and Video as a Service (“VaaS”) environments.

Additionally, our cloud management and analytics software enables Information Technology ("IT") administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior. We offer a broad portfolio of services including video interoperability, support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping our customers achieve their goals for collaboration.

We sell our products through a well-developed global network of distributors and channel partners, including value-added resellers, integrators, direct marketing resellers, and service providers, as well as through both traditional and online retailers, office supply distributors, and e-commerce channels. We have well-established distribution channels in the Americas, Europe, Middle East, Africa, and Asia Pacific, where use of our products is widespread.

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Our fiscal year ends on the Saturday closest to the last day of March. The year ended April 2, 2022 ("Fiscal Year 2022") has 52 weeks, while the year ended April 3, 2021 ("Fiscal Year 2021") had 53 weeks. The three months ended July 3, 2021 ("first quarter Fiscal Year 2022") and June 27, 2020 ("first quarter Fiscal Year 2021") each had 13 weeks.

Impact of the Current Environment and COVID-19 on Our Business

COVID-19 has continued to spread globally and continues to add uncertainty and influence global economic activity, the global supply chain, and financial markets. The impact of the pandemic on our operations has varied by local conditions, government mandates, and business limitations, including travel bans, remote work, and other restrictions.

Shelter-in-place mandates led to a massive increase in remote work. As a result, during Fiscal Year 2021 we experienced elevated demand for certain enterprise Headsets and Video devices and a decline in demand for our Voice products and associated Services, as companies continued to shift from in-office to work-from-home arrangements for many of their office workers. The acceleration in customer and partner demand for these products to support remote work environments, remote learning, and telemedicine opportunities led to increased sales and operating income. During the fourth quarter of Fiscal Year 2021 and continuing in the first quarter of Fiscal Year 2022, we experienced elevated demand for certain Video and Voice devices as companies began to shift from work-from-home arrangements to hybrid work models.

However, the impact of COVID-19 is fluid and uncertain, and it has caused, and may continue to cause, various negative effects as we continue to experience periodic constraints in our supply chain, specifically the sourcing of certain components and raw materials, and increased logistics costs and suffer other adverse effects on our gross margins to meet customer demand for specific Headsets and Video products. As a result, the impact of COVID-19 to date has had mixed effects on our results of operations and we expect supply chain constraints to limit our ability to meet demand in the short-term.

We have experienced and continue to monitor limited supply and longer lead times for certain key components, such as semiconductor chips, necessary to complete production and meet customer demand, including fulfillment of our backlog. In particular, we are experiencing long lead times for global semiconductor chips and other key components. We do not manufacture these component parts and currently purchase certain parts, including semiconductor chips and sub-assemblies that require semiconductor chips, from single or limited sources. Additionally, constrained supply has resulted in increased prices for certain components, including semiconductor chips, on the spot market, increased transportation costs, inefficiencies at our owned manufacturing facility in Tijuana, Mexico, and inability to fulfill backlog for certain products timely. We continue to monitor our supply chain and are taking action against limited supply and increasing lead times, including increased spot market purchases, outreach to critical suppliers, and entering into contractual obligations to secure supply. These factors, among others, are affecting and are expected to continue to affect total net revenue and gross margin rates. We are unable to estimate the extent and the period over which these conditions will exist.

In responding to this pandemic, employee safety continues to be a critical concern for Poly and we have taken measures to protect our employees globally by adherence to public safety and shelter in place directives, physical distancing protocols within offices and manufacturing facilities, providing personal protective equipment, including face masks and hand sanitizers, conducting routine sanitation of facilities, requiring health monitoring before entry into Poly facilities and restricting the number of visitors to our sites. The safety protocols implemented globally meet or exceed current regulations, however we continue to monitor employees’ safety and evolving regulatory requirements. Although our manufacturing facility remains open and certain office employees may utilize our offices when necessary, the majority of all non-factory employees continue to work from home, using headsets and other Poly-issued equipment. We provided COVID-19 vaccines to our employees and their immediate families, as well as other workers, at our manufacturing facility on a voluntary basis free of charge.

The full extent and duration of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict and will depend on many factors outside of our control, including the extent and duration of the pandemic, mutations, and variants of the virus, the development and availability of effective treatments, including the availability of vaccines for our global workforce, mandates of protective public safety measures, and the impact of the pandemic on the global economy, global supply chains, and demand for our products. It is not possible at this time to foresee whether the outbreak of COVID-19 or other events beyond our control will be effectively contained, nor can we estimate the entirety of the impact that COVID-19 or such other pandemics or natural or man-made disaster will have on the global economy, our business, customers, suppliers, or other business partners. As such, impacts from such events on Poly are highly uncertain and we will continue to assess the impact from such events on our condensed consolidated financial statements.

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First Quarter Fiscal Year 2022 Highlights

Total net revenues for the first quarter of Fiscal Year 2022 were $431.2 million, an increase of $75.5 million or 21.2%, compared to the first quarter of Fiscal Year 2021, primarily driven by increased sales in our Video and Voice product categories.

Product gross margin rate for the first quarter of Fiscal Year 2022 decreased from 39.4% in the first quarter of Fiscal Year 2021 to 36.6%, primarily driven by increased component, transportation, and manufacturing costs, as well as unfavorable product mix.

We redeemed the outstanding principal and accrued interest on the 5.50% Senior Notes of $493.9 million during the first quarter of Fiscal Year 2022. On June 15, 2021, we entered into a three-year amortizing interest rate swap agreement as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates on our $1.275 billion term loan facility.

During the first quarter of Fiscal Year 2022, we announced the Voyager Focus 2 headset, a next generation USB and Bluetooth headset, designed with Poly's next generation Acoustic Fence Technology and Advanced Digital Hybrid Active Noise Cancellation. This product was available during the first quarter of Fiscal Year 2022 and did not have a material impact on total net revenues.

RESULTS OF OPERATIONS

The Company’s reportable segments are Products and Services. Our Products reportable segment includes the Headsets, Voice, and Video product lines. Our Services reportable segment includes maintenance support on hardware devices as well as, professional, managed and cloud services and solutions.

Total Net Revenues

The following table sets forth total net revenues by reportable segment for the first quarter of Fiscal Years 2022 and 2021:


	Three Months Ended
(in thousands, except percentages)	July 3, 2021		June 27, 2020		Change
Products	$	371,203	$	291,458	$	79,745	27.4	%
Services	59,969		64,262		(4,293)		(6.7)	%
Total net revenues	$	431,172	$	355,720	$	75,452	21.2	%

Products

Total product net revenues increased in the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to the following:

•Video product category net revenues increased, driven by the shift to hybrid work arrangements and the need for office workers to be able to effectively communicate and collaborate regardless of location, as well as remote learning, telemedicine, and the continued ramp of our new video portfolio.

•Voice product category net revenues also increased as companies returned or made plans to return to the office.

Services

Total services net revenues decreased in the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to the Video product mix shift from legacy Platform and Telepresence to recently launched Studio video bars, which are less complex, easier to install and operate, and carry optional service contracts. The decrease was partially offset by the impact of the deferred revenue fair value adjustment resulting from the Polycom acquisition.

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Geographic Region

The following table sets forth total net revenues by geographic region for the first quarter of Fiscal Years 2022 and 2021:


	Three Months Ended
(in thousands, except percentages)	July 3, 2021		June 27, 2020		Change
United States	$	198,728	$	168,281	$	30,447	18.1	%

International net revenues:
Europe, Middle East, and Africa	126,121		94,106		32,015		34.0	%
Asia Pacific	76,758		64,264		12,494		19.4	%
Americas, excluding United States	29,565		29,069		496		1.7	%
Total international net revenues	232,444		187,439		45,005		24.0	%

Total net revenues	$	431,172	$	355,720	$	75,452	21.2	%

United States (U.S.)

U.S. total net revenues increased in the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to increased net sales in the Video and Voice product categories, partially offset by decreased net sales in Headsets. U.S. Services total net revenues were materially unchanged during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021.

International

International total net revenues increased in the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to increased sales in the Video, Headset, and Voice product categories, partially offset by decreased net sales in Services.

During the first quarter of Fiscal Year 2022, changes in foreign exchange rates favorably impacted total net revenues by $9.6 million, net of the effects of hedging, compared to a $2.5 million unfavorable impact on revenue in the first quarter of fiscal year 2021.

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Cost of Revenues and Gross Profit


	Three Months Ended
(in thousands, except percentages)	July 3, 2021			June 27, 2020			Change
Products:
Net revenues	$	371,203		$	291,458		$	79,745	27.4	%
Cost of revenues	235,196			176,615			58,581		33.2	%
Gross profit	$	136,007		$	114,843		$	21,164	18.4	%
Gross profit %	36.6		%	39.4		%
Services:
Net revenues	$	59,969		$	64,262		$	(4,293)	(6.7)	%
Cost of revenues	20,787			22,773			(1,986)		(8.7)	%
Gross profit	$	39,182		$	41,489		$	(2,307)	(5.6)	%
Gross profit %	65.3		%	64.6		%
Total:
Net revenues	$	431,172		$	355,720		$	75,452	21.2	%
Cost of revenues	255,983			199,388			56,595		28.4	%
Gross profit	$	175,189		$	156,332		$	18,857	12.1	%
Gross profit %	40.6		%	43.9		%

Products

Gross profit as a percentage of total product net revenues decreased in the first quarter of Fiscal Year 2022 as compared to the first quarter of Fiscal Year 2021, primarily driven by increased component, transportation, and manufacturing costs, as well as unfavorable product mix. The increase in component costs was primarily driven by increased spot market purchases of certain key components, such as semiconductor chips, due to global supply shortages. Transportation costs increased as a result of high global demand and limited capacity of air freight carriers and increased air freight usage to mitigate longer component lead times to meet our commitments to customers. Additionally, the supply shortages and increased lead times resulted in inefficiencies at our manufacturing facility. These declines were partially offset by the non-recurrence of a one-time provision for inventory excess and obsolescence recorded during the first quarter of Fiscal Year 2021.

Services

Compared to the first quarter of Fiscal Year 2021, gross profit as a percentage of total services net revenues increased in the first quarter of Fiscal Year 2022, primarily due to the decrease in the acquisition-related deferred revenue fair value adjustment.

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Operating Expenses

Operating expenses for the first quarter of Fiscal Years 2022 and 2021 were as follows:


	Three Months Ended
(in thousands, except percentages)	July 3, 2021			June 27, 2020			Change
Research, development, and engineering	$	45,466		$	50,029		$	(4,563)	(9.1)	%
% of total net revenues	10.5		%	14.1		%
Selling, general and administrative	120,734			116,644			4,090		3.5	%
% of total net revenues	28.0		%	32.8		%
Loss, net from litigation settlements	—			17,561			(17,561)		100.0	%
% of total net revenues	—		%	4.9		%
Restructuring and other related charges	28,972			29,330			(358)		(1.2)	%
% of total net revenues	6.7		%	8.2		%
Total Operating Expenses	$	195,172		$	213,564		$	(18,392)	(8.6)	%
% of total net revenues	45.3		%	60.0		%

Research, Development, and Engineering

Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside services, expensed materials, and overhead expenses.

Research, development, and engineering expenses decreased during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to lower compensation expense due to reduction in headcount, cost control efforts, lower incentive compensation, and decreased travel expenses due to COVID-19 restrictions.

Selling, General, and Administrative

Selling, general, and administrative costs are expensed as incurred and consist primarily of compensation costs, marketing costs, travel expenses, professional service fees, and overhead expenses.

Selling, general and administrative expenses increased during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to higher sales commissions due to increased sales and higher advertising and promotional activity. The increases were partially offset by lower compensation expense due to reduced headcount, decreased travel expenses due to COVID-19 restrictions, and other cost control efforts.

Loss, net from Litigation Settlements

Loss, net from litigation settlements decreased during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021 due to the recording of one-time litigation charges for settlements during the prior period.

Restructuring and Other Related Charges

Restructuring and other related charges was materially unchanged during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021. During the first quarter of Fiscal Years 2022 and 2021 we recorded restructuring and other related charges to reduce expenses and optimize our cost structure. These actions consisted of headcount reductions and office closures.

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Interest Expense

Interest expense for the first quarter of Fiscal Years 2022 and 2021 was as follows:


	Three Months Ended
(in thousands, except percentages)	July 3, 2021			June 27, 2020			Change
Interest expense	$	21,782		$	21,184		$	598	(2.8)	%
% of total net revenues	5.1		%	6.0		%

Interest expense increased during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021, primarily due to amortization of the remaining debt issuance costs related to the 2023 Senior Notes, which were redeemed during the first quarter of Fiscal Year 2022, and interest expense related to the 2029 Senior Notes which were issued in the fourth quarter of Fiscal Year 2021, partially offset by lower interest expense related to the 2023 Senior Notes and lower outstanding principal balance on the term loan facility.

Other Non-Operating Income, Net

Other non-operating income, net for the first quarter of Fiscal Years 2022 and 2021 was as follows:


	Three Months Ended
(in thousands, except percentages)	July 3, 2021			June 27, 2020			Change
Other non-operating income, net	$	(692)		$	(224)		$	(468)	208.9	%
% of total net revenues	(0.2)		%	(0.1)		%

Other non-operating income, net increased during the first quarter of Fiscal Year 2022 compared to the first quarter of Fiscal Year 2021 primarily due to lower losses on non-designated foreign currency forward derivatives.

Income Tax Benefit


	Three Months Ended
(in thousands except percentages)	July 3, 2021			June 27, 2020			Change
Income (loss) before income taxes	$	(41,073)		$	(78,192)		$	37,119	47.5	%
Income tax benefit	(4,262)			(3,177)			(1,085)		(34.2)	%
Net income (loss)	$	(36,811)		$	(75,015)		$	38,204	50.9	%
Effective tax rate	10.4		%	4.1		%

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions. The Company's income tax benefit is determined using an estimate of its annual effective tax rate and adjusted for discrete items that are taken into account in the relevant period. The effective tax rates for the first quarter of Fiscal Years 2022 and 2021 were 10.4% and 4.1%, respectively.

Income tax benefit was $(4.3) million and $(3.2) million for the first quarter of Fiscal Years 2022 and 2021, respectively. The provision for income taxes for the three months ended July 3, 2021 consisted primarily of federal, state, and foreign income taxes. For the first quarter of Fiscal Year 2022, the income tax benefit differed from the U.S. federal statutory rate primarily due the valuation allowance on the U.S. federal and state deferred tax assets that continues to be maintained as of July 3, 2021.

A significant portion of the Company's deferred tax assets ("DTAs") relate to internal intangible property restructuring between wholly-owned subsidiaries. At this time, based on evidence currently available, the Company considers it more likely than not that it will have sufficient taxable income in the future that will allow the Company to realize the DTAs; however, failure to generate sufficient future taxable income could result in some or all DTAs not being utilized in the future. If the Company is unable to generate sufficient future taxable income, a substantial valuation allowance to reduce the Company's DTAs may be required.

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FINANCIAL CONDITION

Liquidity and Capital Resources

The following tables present selected financial information and statistics as of July 3, 2021 and April 3, 2021 and for the first quarter of Fiscal Years 2022 and 2021 (in thousands):


	July 3, 2021		April 3, 2021
Cash, cash equivalents, and short-term investments	$	212,714	$	217,119
Property, plant, and equipment, net	131,294		140,875
Current portion of long-term debt	—		478,807
Long-term debt, net	1,497,119		1,496,064
Working capital	207,890		213,975


	Three Months Ended
	July 3, 2021		June 27, 2020
Cash provided by operating activities	$	849	$	41,722
Cash used in investing activities	(10,456)		(3,645)
Cash used in financing activities	(490,905)		(2,734)

Our cash and cash equivalents as of July 3, 2021 consisted of bank deposits with third-party financial institutions. As of July 3, 2021, of our $212.7 million of cash, cash equivalents, and short-term investments, $105.5 million was held domestically while $107.2 million was held by foreign subsidiaries, and approximately 70% was based in USD-denominated instruments. As of July 3, 2021, our short-term investments were composed of mutual funds. An additional source of liquidity is $98.6 million of availability from our revolving credit facility, net of outstanding letters of credit.

Historically, we use cash provided by operating activities as our primary source of liquidity. We expect that cash provided by operating activities will fluctuate in future periods, including the current quarter as a result of a number of factors, including fluctuations in our revenues, the timing of compensation-related payments, such as our annual bonus/variable compensation plan, interest payments on our long-term debt, product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of tax and other payments.

During the first quarter of Fiscal Year 2022, cash provided by operating activities of $0.8 million was a result of non-cash adjustments to net loss of $66.3 million, partially offset by $(36.8) million of net loss and a decrease in the net change in operating assets and liabilities of $(28.7) million. Cash used in investing activities of ($10.4) million consisted primarily of capital expenditures of ($6.1) million and other investing activities of ($4.0) million. Cash used in financing activities consisted primarily of ($480.7) million of repayments of long-term debt and $($10.2) million of employees' tax withheld and paid for restricted stock and restricted stock units.

Capital Expenditures

We anticipate our capital expenditures in Fiscal Year 2022 will be approximately $35 million to $45 million, relating primarily to costs associated in our manufacturing capabilities, including tooling for new products, new information technology investments, and facilities upgrades. We will continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth.

Debt

In July 2018, in connection with the Polycom acquisition, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto and borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs. During the first quarter of Fiscal Year 2022, we did not repurchase any of our outstanding principal. As of July 3, 2021, we had $1.0 billion of principal outstanding.

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On February 20, 2020, the Company entered into an Amendment in order to relax certain financial covenants on the revolving line of credit. The financial covenants under the Credit Agreement are for the benefit of the revolving credit lenders only and do not apply to any other debt of the Company. As of July 3, 2021, the Company has five outstanding letters of credit on the revolving credit facility for a total of $1.4 million and had $98.6 million available under the revolving line of credit. As of July 3, 2021, the Company was in compliance with the financial covenants.

On July 30, 2018, the Company entered into a 4-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022. On June 15, 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. During the three months ended July 3, 2021, the Company reclassified into interest expense $3.1 million and recorded a $5.7 million unrealized loss on its interest rate swap derivative designated as a cash flow hedge.

During the first quarter of Fiscal Year 2022, we redeemed the outstanding principal and accrued interest on the 5.50% Senior Notes of $493.9 million.

We may at any time and from time to time, depending on market conditions and prices, continue to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. In addition, our liquidity, capital resources, and results of operations in any period could be affected by repurchases of our common stock, the payment in the future of cash dividends if the Board determines to reinstate the dividend program, the exercise of outstanding stock options, restricted stock grants under stock plans, and the issuance of common stock under the ESPP. The acquisition of Polycom affected our liquidity and leverage ratios and we are working to reduce our debt leverage ratios by prioritizing the repayment of the debt obtained to finance such acquisition. We receive cash from the exercise of outstanding stock options under our stock plan and the issuance of shares under our ESPP. However, the resulting increase in the number of outstanding shares from these equity grants and issuances could affect our earnings per share. We cannot predict the timing or amount of proceeds from the sale or exercise of these securities or whether they will be exercised, forfeited, canceled, or will expire.

Further information regarding the Company’s debt issuances and related hedging activity can be found in Note 8, Debt, and Note 11, Derivatives, of the accompanying notes to the condensed consolidated financial statements within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

Common Stock Repurchases

From time to time, our Board authorizes programs under which we may repurchase shares of our common stock in the open market or through privately negotiated transactions, including accelerated stock repurchase agreements. On November 28, 2018, the Board approved a 1 million share repurchase program expanding our capacity to repurchase shares to approximately 1.7 million shares. During the first quarter of Fiscal Year 2022, we did not repurchase any shares of our common stock. As of July 3, 2021, there remained 1,369,014 shares authorized for repurchase under the existing stock repurchase program.

We believe that our current cash and cash equivalents, short-term investments, cash provided by operations, and availability of additional funds under the Credit Agreement, as amended from time to time, will be sufficient to fund our operations for one year from the date of issuance of these financial statements. However, any projections of future financial needs and sources of working capital are subject to uncertainty on our financial results. Readers are cautioned to review the risks, uncertainties, and assumptions set forth in this Quarterly Report on Form 10-Q, including the section entitled "Certain Forward-Looking Information" and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021, filed with the SEC on May 18, 2021, and other periodic filings with the SEC, any of which could affect our estimates for future financial needs and sources of working capital.

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OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Consigned Inventory

A substantial portion of the raw materials, components, and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our condensed consolidated balance sheets until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the risk of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results. As of July 3, 2021 and April 3, 2021, we had off-balance sheet consigned inventories of $53.6 million and $57.3 million, respectively.

Unconditional Purchase Obligations

We use several contract manufacturers to manufacture raw materials, components, and subassemblies for our products through our supply and demand information that typically covers periods up to 52 weeks. The contract manufacturers use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers using a combination of purchase orders, supplier contracts, including annual minimum purchase obligations, and open orders based on projected demand information. As of July 3, 2021, we had outstanding off-balance sheet third-party manufacturing, component purchase, and other general and administrative commitments of $599.5 million, including the off-balance sheet consigned inventories of $53.6 million. We expect to consume unconditional purchase obligations in the normal course of business, net of an immaterial purchase commitments reserve. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs in partnering with our suppliers given the current environment.

Except as described above, there have been no material changes in our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021.

CRITICAL ACCOUNTING ESTIMATES

For a complete description of what we believe to be the critical accounting estimates used in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the fiscal year ended April 3, 2021. There have been no material changes to our critical accounting estimates during the first quarter of Fiscal Year 2022.

Recent Accounting Pronouncements

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The discussion of our exposure to market risk related to changes in interest rates and foreign currency exchange rates contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors, including those discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended ~~March 28, 2020, filed with the SEC on June 8, 2020,~~April 3, 2021, which could materially affect our business, financial position, or future results of operations.

~~Except as described below, there have been no material changes in our market risk as described in our Annual Report on Form 10-K for the fiscal year ended March 28, 2020.~~

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to our floating-rate interest payments under our $1.275 billion term loan facility. ~~In connection with the Acquisition, we entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (the “Credit Agreement”).~~ Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) the prime rate publicly announced from time to time by Wells Fargo Bank, National Association, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR plus a specified margin.

On July 30, 2018, we entered into a ~~4-year~~four-year amortizing interest rate swap agreement, and on June 15, 2021, we entered into a three-year amortizing interest rate swap agreement, both with Bank of America, N.A., as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates on the $1.275 billion term loan facility. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk and we do not use derivatives for trading or speculative purposes. Our objective is to mitigate the impact of interest expense fluctuations on our profitability related to interest rate changes by minimizing movements in future debt payments with this interest rate swap.

The first swap has an initial notional amount of $831 million and ~~matures~~mature on July 31, 2022. The second swap ~~involves~~has an initial notional amount of $680 million and matures on July 31, 2024. The swaps involve the receipt of floating-rate interest payments for fixed interest rate payments over the life of the agreement. We have designated ~~this~~these interest rate ~~swap~~swaps as a cash flow ~~hedge, the effective portion of changes~~hedges. Changes in the fair value of the ~~derivative is~~derivatives are recorded to other comprehensive income ~~(loss)~~ on the ~~accompanying balance sheets~~condensed consolidated statements of comprehensive loss and are reclassified ~~into~~to interest expense over the life of the agreement. We will review the effectiveness of this instrument on a quarterly basis, recognize current period hedge ineffectiveness immediately in earnings and will discontinue hedge accounting if we no longer consider hedging to be highly effective. agreements. For additional details, refer to Note ~~13,~~11, Derivatives, of the accompanying notes to the condensed consolidated financial ~~statements.~~statements within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. During the ~~six~~three months ended ~~September 26, 2020,~~July 3, 2021, we made payments of approximately ~~$6.9~~$3.1 million on our interest rate ~~swap~~swaps and recognized ~~$7.3~~$3.1 million within interest expense on the condensed consolidated statement of operations. As of ~~September 26, 2020,~~July 3, 2021, we had ~~$1.0~~$0.1 million of interest accrued within accrued liabilities on the condensed consolidated balance sheet. ~~We had an unrealized pre-tax loss of approximately $15.9 million recorded within accumulated other comprehensive income (loss) as of September 26, 2020.~~ A hypothetical 10% increase or decrease on market interest rates ~~related to our outstanding term loan facility~~ could result in a corresponding increase or decrease in annual interest expense of approximately ~~$0.1 million.~~$0.1 million.

Interest rates were lower inin the three ~~and six~~ months ended ~~September 26, 2020~~July 3, 2021 compared to the same period in the prior year. In the three ~~and six~~ months ended ~~September 26,~~July 3, 2021 and June 27, 2020 ~~and September 28, 2019~~ we generated interest income of $0.2 million and ~~$0.2~~$0.0 million, ~~and $0.2 million and $0.5 million,~~ respectively.

FOREIGN CURRENCY EXCHANGE RATE RISK

We are a net receiver of currencies other than the United States Dollar ("USD.") Accordingly, changes in exchange rates, and in particular a strengthening of the USD, could negatively affect our total net revenues and gross margins, as expressed in USD. There is a risk that we will have to adjust local currency product pricing due to competitive pressures if there is significant volatility in foreign currency exchange rates.

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The primary currency fluctuations to which we are exposed are the Euro ("EUR"), ~~British~~Great Britain Pound Sterling ("GBP"), and ~~the Chinese Renminbi~~Mexican Peso ("~~RMB"~~MXN"). We use a hedging strategy to diminish, and make more predictable, the effect of currency fluctuations. All of our hedging activities are entered into with large financial institutions, which we periodically evaluate for credit risks. We hedge our balance sheet exposure by hedging EUR and GBP denominated cash, accounts receivable, and accounts payable balances, and our economic exposure by hedging a portion of anticipated EUR and GBP denominated ~~sales.~~sales and our MXN denominated expenditures. We can provide no assurance that our strategy will be successful in the future orand that exchange rate fluctuations will not materially adversely affect our business. We do not hold or issue derivative financial instruments for speculative trading purposes. While our existing hedges cover a certain amount of exposure for the upcoming fiscal year, long-term strengthening of the USD relative to the currencies of other countries in which we sell may have a material adverse impact on our financial results. In addition, our results may be adversely impacted by future changes in foreign currency exchange rates relative to original hedging contracts.

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The impact of changes in foreign currency rates recognized in other non-operating income, ~~and (expense),~~ net was immaterial in ~~both~~ the ~~three and six months ended September 26, 2020 and September 28, 2019.~~first quarter of Fiscal Year 2022. Although we hedge a portion of our foreign currency exchange exposure, the weakening of certain foreign currencies, particularly the EUR and GBP in comparison to the USD, could result in material foreign exchange losses in future periods.

Non-designated Hedges

We hedge our EUR and GBP denominated cash, accounts receivable, and accounts payable balances by entering into foreign exchange forward contracts. The table below presents the impact on the foreign exchange gain (loss) of a hypothetical 10% appreciation and a 10% depreciation of the USD against the forward currency contracts as of ~~September 26, 2020~~July 3, 2021 (in millions):


Currency - forward contracts	Currency - forward contracts	Position	USD Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange Loss From 10% Depreciation of USD		Currency - forward contracts	Position	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD
EUR	EUR	Sell EUR	$	59.1	$	5.9	$	(5.9)	EUR	Sell EUR	$	42.7	$	4.3	$	(4.3)
GBP	GBP	Sell GBP	$	4.6	$	0.5	$	(0.5)	GBP	Sell GBP	13.1		1.3		(1.3)

Cash Flow Hedges

In the ~~six~~three months ended ~~September 26, 2020,~~July 3, 2021, approximately ~~50%~~54% of our total net revenues were derived from sales outside of the U.S. and denominated primarily in EUR and GBP.

As of ~~September 26, 2020,~~July 3, 2021, we had foreign currency put and call option contracts with notional amounts of approximately ~~€60.7~~€100.3 million and ~~£12.3~~£20.9 million denominated in EUR and GBP, respectively. ~~Collectively,~~Collectively, our option contracts hedge against a portion of our forecasted foreign currency denominated sales. If the USD is subjected to either a 10% appreciation or 10% depreciation versus these net exposed currency positions, we could realize a gain of ~~$4.1~~ $10.5 million or incur a loss of ~~$7.0~~$7.9 million, respectively.

The table below presents the impact on the Black-Scholes valuation of our currency option contracts of a hypothetical 10% appreciation and a 10% depreciation of the USD against the indicated ~~open~~ option contract type for cash flow hedges as of ~~September 26, 2020~~July 3, 2021 (in millions):


Currency - option contracts		USD Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange Loss From 10% Depreciation of USD
Derivative								Derivative	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD
Call options	Call options	$	88.5	$	1.2	$	(5.8)	Call options	$	155.5	$	0.4	$	(7.4)
Put options	Put options	$	81.4	$	3.6	$	(0.5)	Put options	143.8		9.6		(0.9)
Forwards	Forwards	$	73.6	$	7.4	$	(7.4)	Forwards	122.1		12.1		(12.1)

Collectively, our swap contracts hedge against a portion of our forecasted MXN denominated expenditures. As of July 3, 2021, we had cross-currency swap contracts with notional amounts of approximately MXN 369.9 million.

The table below presents the impact on the valuation of our cross-currency swap contracts of a hypothetical 10% appreciation and a 10% depreciation of the USD as of July 3, 2021 (in millions):


Derivative	USD Notional Value of Cross-Currency Swap Contracts		Foreign Exchange (Loss) From 10% Appreciation of USD		Foreign Exchange Gain From 10% Depreciation of USD
Position: Buy MXN	$	17.8	$	(1.8)	$	1.8

Except as described above, there have been no material changes in our market risk as described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021.

Table of Contents

~~Controls and Procedures~~ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II --– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are presently engaged in various legal actions arising in the normal course of business. We believe that it is unlikely that any of these actions will have a material adverse impact on our operating results; however, because of the inherent uncertainties of litigation, the outcome of any of these actions could be unfavorable and could have a material adverse effect on our financial condition, results of operations or cash flows. For additional information about our material legal proceedings, please see Note 7, Commitments and Contingencies, of the accompanying notes to the condensed consolidated financial ~~statements.~~statements within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q..

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended ~~March 28, 2020, filed with the SEC on June 8, 2020 (the "Form~~April 3, 2021 ("Form 10-K"), each of which could materially affect our business, financial position, or future results of operations. ~~Except as described below, there have been no material changes to the risk factors included in the Form 10-K.~~

The risks described ~~here~~within this Quarterly Report on Form 10-Q and in the Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations.

4341

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter of Fiscal Year 2022, we did not repurchase any shares of our common stock. As of July 3, 2021, there remained 1,369,014 shares authorized for repurchase under the existing stock repurchase program. The following table presents information with respect to ~~repurchases~~shares that were tendered to us in satisfaction of employee tax withholding obligations upon the vesting of restricted stock grants under our ~~common~~ stock ~~made by us during the second quarter of fiscal year 2021:~~plans:

Total Number of Shares Purchased 1

Average Price Paid per Share 2
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs 3
June 28, 2020 to July 25, 2020 3,170 4 N/A — 1,369,014
July 26, 2020 to August 22, 2020 3,800 4 N/A — 1,369,014
August 23, 2020 to September 26, 2020 15,201 4 N/A — 1,369,014


	Total Number of Shares Purchased (4)	Average Price Paid per Share (2)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3)
April 4, 2021 to May 1, 2021	—	N/A	—	1,369,014
May 2, 2021 to May 29, 2021	308,359	N/A	—	1,369,014
May 30, 2021 to July 3, 2021	8,219	N/A	—	1,369,014


1(1)		On November 28, 2018, our Board of Directors approved a 1 million shares repurchase program expanding our capacity to repurchase shares to approximately 1.7 million shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions. There is no expiration date associated with the repurchase activity.

2(2)	"Average Price Paid per Share" reflects open market repurchases of common stock only.

3(3)	These shares reflect the available shares authorized for repurchase under the expanded program approved by the Board on November 28, 2018.

4(4)	Represents only shares that were tendered to us in satisfaction of employee tax withholding obligations upon the vesting of restricted stock grants under our stock plans.

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~~MINE SAFETY DISCLOSURES~~

~~Not applicable.~~

~~OTHER INFORMATION~~

~~None.~~

ITEM 6. EXHIBITS

We have filed the following documents as Exhibits to this Quarterly Report on Form 10-Q:

EXHIBITS INDEX

Exhibit Number

Incorporation by Reference

Filed Herewith

Exhibit Description

Form

File No.

Exhibit

Filing Date

~~10.1~~10.1**

~~Severance Agreement and Release~~Offer letter dated as of ~~August~~June 14, ~~2020~~2021 between Registrant and ~~Mary Huser~~Warren Schlichting

~~10.2~~10.2*

~~Offer letter~~Executive Severance Agreement and Change of Control Severance Agreement dated as of ~~August 15, 2020~~June 14, 2021 between Registrant and ~~Dave Shull~~Warren Schlichting

~~10.3~~

~~Change of Control Severance Agreement dated September 9, 2020 between Registrant and Dave Shull~~

31.1

Certification of the President and CEO Pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification of Executive Vice President and CFO Pursuant to Rule 13a-14(a)/15d-14(a).

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

101.INS

XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Definition Linkbase Document

104

Cover Page Interactive Data File, (formatted as Inline XBRL and contained in Exhibit 101)

Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates.

Confidential treatment has been granted with respect to certain portions of this Exhibit.

4543

Table ~~of Contents~~

~~Plantronics, Inc.~~

~~FORM 10-Q~~

~~CROSS REFERENCE TABLE~~

Item Number Page(s)
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
15
-
40
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
4
-
14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
41
-
43
Item 4. Control and Procedures
43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
43
Item 1A. Risk Factors
43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
44
Item 5. Other Information
45
Item 6. Exhibits
45
Signatures
47

~~Table~~ of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PLANTRONICS, INC.

Date:	~~October 29, 2020~~July 30, 2021	By:	/s/ Charles D. Boynton
		Name:	Charles D. Boynton
		Title:	Executive Vice President and Chief Financial Officer

4744


	September 26, 2020		March 28, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	213,901	$	213,879
Short-term investments	13,975		11,841
Accounts receivable, net	239,479		246,835
Inventory, net	183,636		164,527
Other current assets	51,987		47,946
Total current assets	702,978		685,028

Property, plant, and equipment, net	150,348		165,858
Goodwill	796,216		796,216
Purchased intangibles, net	403,110		466,915
Deferred tax assets	86,790		82,496
Other assets	62,101		60,661
Total assets	$	2,201,543	$	2,257,174

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	136,463	$	102,159
Accrued liabilities	373,458		373,666
Total current liabilities	509,921		475,825
Long term debt, net of issuance costs	1,587,556		1,621,694

Long-term income taxes payable	91,235		98,319

Other long-term liabilities	157,836		144,152
Total liabilities	2,346,548		2,339,990
Commitments and contingencies (Note 7)
Stockholders' deficit:
Common stock	907		896
Additional paid-in capital	1,526,677		1,501,340
Accumulated other comprehensive loss	(9,650)		(13,582)
Accumulated deficit	(796,324)		(707,904)
Total stockholders' equity before treasury stock	721,610		780,750
Less: Treasury stock, at cost	(866,615)		(863,566)
Total stockholders' deficit	(145,005)		(82,816)
Total liabilities and stockholders' deficit	$	2,201,543	$	2,257,174


	Three Months Ended September 26, 2020
	Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury		Total Stockholders'
	Shares	Amount		Capital		Loss		Earnings		Stock		Deficit
Balances at June 27, 2020	40,682	$	901	$	1,510,695	$	(12,083)	$	(782,919)	$	(866,305)	$	(149,711)
Net loss	—	—		—		—		(13,405)		—		(13,405)

Net unrealized gains (losses) on cash flow hedges, net of tax	—	—		—		2,433		—		—		2,433

Proceeds from issuances under stock-based compensation plans	129	1		0		—		—		—		1



Stock-based compensation	—	—		10,263		—		—		—		10,263


Employees' tax withheld and paid for restricted stock and restricted stock units	(22)	—		—		—		—		(310)		(310)

Proceeds from ESPP	457	5		5,719		—		—		—		5,724

Other equity changes	—	—		—		—		—		—		—
Balances at September 26, 2020	41,246	$	907	$	1,526,677	$	(9,650)	$	(796,324)	$	(866,615)	$	(145,005)


	Three Months Ended September 28, 2019
	Common Stock			Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury		Total Stockholders'
	Shares	Amount		Capital		Loss		Earnings		Stock		Equity
Balances at June 29, 2019	39,578	$	887	$	1,445,097	$	(6,628)	$	92,437	$	(862,295)	$	669,498
Net loss	—	—		—		—		(25,910)		—		(25,910)

Net unrealized gains (losses) on cash flow hedges, net of tax	—	—		—		1,277		—		—		1,277

Proceeds from issuances under stock-based compensation plans	101	1		165		—		—		—		166
Repurchase of restricted common stock	(9)	—		—		—		—		—		—

Cash dividends	—	—		—		—		(5,982)		—		(5,982)
Stock-based compensation	—	—		14,693		—		—		—		14,693


Employees' tax withheld and paid for restricted stock and restricted stock units	(21)	—		—		—		—		(660)		(660)

Proceeds from ESPP	268	2		6,023		—		—		—		6,025


Balances at September 28, 2019	39,917	$	890	$	1,465,978	$	(5,351)	$	60,545	$	(862,955)	$	659,107


	Six Months Ended September 26, 2020
	Common Stock				Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury		Total Stockholders'
	Shares		Amount		Capital		Loss		Earnings		Stock		Deficit
Balances at March 28, 2020	$	40,406	$	896	$	1,501,340	$	(13,582)	$	(707,904)	$	(863,566)	$	(82,816)
Net loss	—		—		—		—		(88,420)		—		(88,420)

Net unrealized gains (losses) on cash flow hedges, net of tax	—		—		—		3,932		—		—		3,932

Proceeds from issuances under stock-based compensation plans	648		6		0		—		—		—		6
Repurchase of restricted common stock	(10)		—		—		—		—		—		—


Stock-based compensation	—		—		19,618		—		—		—		19,618


Employees' tax withheld and paid for restricted stock and restricted stock units	(255)		—		—		—		—		(3,049)		(3,049)

Proceeds from ESPP	457		5		5,719		—		—		—		5,724

Other equity changes	—		—		—		—		—		—		—
Balances at September 26, 2020	$	41,246	$	907	$	1,526,677	$	(9,650)	$	(796,324)	$	(866,615)	$	(145,005)


	Six Months Ended September 28, 2019
	Common Stock				Additional Paid-In		Accumulated Other Comprehensive		Retained		Treasury		Total Stockholders'
	Shares		Amount		Capital		Loss		Earnings		Stock		Equity
Balances at March 30, 2019	$	39,518	$	884	$	1,431,607	$	(475)	$	143,344	$	(853,673)	$	721,687
Net loss	—		—		—		—		(70,781)		—		(70,781)
Foreign currency translation adjustments	—		—		—		(219)		—		—		(219)
Net unrealized gains (losses) on cash flow hedges, net of tax	—		—		—		(4,657)		—		—		(4,657)

Proceeds from issuances under stock-based compensation plans	372		4		751		—		—		—		755
Repurchase of restricted common stock	(29)		—		—		—		—		—		—

Cash dividends	—		—		—		—		(11,922)		—		(11,922)
Stock-based compensation	—		—		27,597		—		—		—		27,597


Employees' tax withheld and paid for restricted stock and restricted stock units	(212)		—		—		—		—		(9,282)		(9,282)

Proceeds from ESPP	268		2		6,023		—		—		—		6,025
Impact of new accounting standards adoption	—		—		—		—		(89)		—		(89)
Other equity changes	—		—		—		—		(7)		—		(7)
Balances at September 28, 2019	$	39,917	$	890	$	1,465,978	$	(5,351)	$	60,545	$	(862,955)	$	659,107


(in thousands)	Poly Reportable Segment		Products Reportable Segment		Services Reportable Segment		Total Consolidated
Balance as of March 30, 2019	$	1,278,380	$	0	$	0	$	1,278,380
Adjustments(1)	1,517						1,517
Impairment prior to re-segmentation	(323,088)		0		0		(323,088)
Allocation due to re-segmentation	(956,809)		789,561		167,248		0
Impairment after re-segmentation	0		(160,593)				(160,593)
Balance as of March 28, 2020	$	0	$	628,968	$	167,248	$	796,216
Balance as of September 26, 2020	$	0	$	628,968	$	167,248	$	796,216


As of	September 26, 2020						March 28, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life
Amortizing Assets
Existing technology	$	427,123	$	(244,263)	$	182,860	$	427,123	$	(208,848)	$	218,275	2.8 years
Customer relationships	240,024		(106,474)		133,550		240,024		(84,506)		155,518		3.6 years
Trade name/Trademarks	115,600		(28,900)		86,700		115,600		(22,478)		93,122		6.8 years
Total intangible assets	$	782,747	$	(379,637)	$	403,110	$	782,747	$	(315,832)	$	466,915	3.9 years


in thousands	Amount
2021 (remaining six months)	$	61,088
2022	113,858
2023	111,232
2024	65,936
2025	21,688
Thereafter	29,308
	$	403,110


	As of March 28, 2020		Accruals		Cash Payments		As of September 26, 2020
FY 2021 Plans
Severance	$	0	$	23,808	$	(15,922)	$	7,886
Facility	0		69		(59)		10
Other	0		2,307		(1,651)		656
Total FY2021 Plans	$	0	$	26,184	$	(17,632)	$	8,552
FY 2020 Plans
Severance	$	7,475	$	(859)	$	(4,499)	$	2,117
Facility	2,501		1,573		(852)		3,222
Other	1,621		0		(1,621)		0
Total FY2020 Plans	$	11,597	$	714	$	(6,972)	$	5,339
FY 2019 Plans
Severance	$	147	$	243	$	(325)	$	65
Facility	0		0		0		0
Other	117		0		(117)		0
Total FY2019 Plans	$	264	$	243	$	(442)	$	65
Severance	$	7,622	$	23,192	$	(20,746)	$	10,068
Facility	2,501		1,642		(911)		3,232
Other	1,738		2,307		(3,389)		656
Grand Total	$	11,861	$	27,141	$	(25,046)	$	13,956


	Total Number of Shares Purchased 1		Average Price Paid per Share 2	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs 3
June 28, 2020 to July 25, 2020	3,170	4	N/A	—	1,369,014
July 26, 2020 to August 22, 2020	3,800	4	N/A	—	1,369,014
August 23, 2020 to September 26, 2020	15,201	4	N/A	—	1,369,014


Item Number	Page(s)
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	15	-	40

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	4	-	14

Item 3. Quantitative and Qualitative Disclosures about Market Risk	41	-	43

Item 4. Control and Procedures	43

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	43

Item 1A. Risk Factors	43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 5. Other Information	45

Item 6. Exhibits	45

Signatures	47