Plantronics (POLY) 8-K Plantronics Reports Record Revenues for Fourth Quarter and for the Fiscal Year

PRESS RELEASE

Plantronics Reports Record Revenues for Fourth Quarter and for the Fiscal Year

FOR INFORMATION, CONTACT:
Debbie Peterson
Investor Relations Manager
(831) 458-7533 FOR IMMEDIATE RELEASE
April 27, 2004

SANTA CRUZ, CA. – April 27, 2004 - Plantronics, Inc., (NYSE: PLT) today announced record revenues for its fourth quarter and full fiscal year 2004.Fourth quarter revenues increased 38% to $121.4 million to a new quarterly record, in comparison to $88.1 million in the fourth quarter of fiscal 2003. The absolute levels of revenue benefited from the extra week in the quarter, adding 7% from a normal 13-week quarter. Operating income increased from $14.6 million in the year-ago quarter to $27.8 million in the March quarter. Fourth quarter net income was $20.9 million compared to net income of $10.6 million in the fourth quarter of fiscal 2003. Plantronics' diluted earnings per share were $0.42 for the fourth quarter in comparison to $0.23 in the fourth quarter of fiscal 2003. Earnings per sha re benefited from a lower tax rate in the fourth quarter; without this benefit, earnings per share would have been $0.39 for the quarter.

For the year as a whole, revenues were $417 million in comparison to $337.5 million in fiscal 2003. For the year as a whole, operating income was $84.8 million in comparison to $54.5 million in fiscal 2003, and operating margin was 20.3%. Earnings per share were $1.31 in comparison to $0.89 in fiscal 2003.

Ken Kannappan, President and Chief Executive Officer, noted, "Our results were above the guidance we issued on January 13th, which called for revenues of $104 to $108 million, and earnings per share of $0.30 to $0.34. Revenues from mobile headsets and wireless headsets were better than we expected. Revenues from mobile headsets were $25.9 million, down from $29.5 million in the December quarter, and up from $12 million in the March year-ago quarter. Seasonality contributed to the sequential decline while the stronger performance than expectations reflected market share staying at levels that we continue to believe are unsustainable over the long run.”

“Revenues from our Office and Contact Center products were $80.8 million, up 25% vs. the year-ago quarter and up 21% sequentially. The stronger growth resulted from the adoption of our wireless products for the office as well as some evidence of a modest rebound in revenues of contact center products,” Kannappan continued.

“There is much more we need to do to realize fully the opportunities we have. In particular, we are beginning to increase the level of investment in design with the goal of creating products that are truly compelling for people. I believe we are well positioned for success in the coming year and am excited about our ability to lead as headsets become mainstream and wireless headsets offer an entirely new level of benefits to people,” Kannappan concluded.

Barbara Scherer, SVP and CFO, said, "We exceeded the 20% target for operating margins that we have been working to achieve, ending the year at 20.3% with a fourth quarter level of 22.9%. We remain comfortable with an operating margin target for fiscal 2005 as a whole at 21% or better.”

“Working capital management was solid in a quarter with ramping demand, as inventory turns were 5.2 and DSO was 52 days. During the quarter, we generated $24.4 million in cash flow from operations and year to date, have generated $72.4 million. We did not repurchase any shares during the quarter and continue to have 142,600 shares remaining authorized for repurchase.”

“Our cash balance increased from $107.3 million as of the end of the December quarter to $180.6 million at the end of the fiscal year. The unusually large increase in our cash position was the result of the exercise of stock options. We received $49 million in proceeds from the exercise of approximately 2.6 million options by 657 of our associates. Also, as a result of the option exercises, we have approximately $14 million in tax benefits available as a credit against income taxes which will also help our cash flow during fiscal 2005,” Scherer explained.

“Finally, with the strong growth in our international business and the higher profitability of that business given the weakness of the dollar relative to last year, our natural tax rate for the year came in at 28% vs. the 30% level that we had been anticipating. As a result, we needed to book a tax rate of 23.7% for the fourth quarter to bring the full year rate down to 28%. While it is difficult to predict the rate for fiscal 2005 given the mix of tax jurisdictions in which we operate, we are currently estimating that the rate is likely to remain at 28% in fiscal 2005,” Scherer concluded.

Business Outlook

The following statements are based on current expectations. Many of these statements are forward-looking, and actual results may differ materially.

PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098

We are cautiously optimistic about the overall economic environment and demand for our products. We feel that caution remains warranted given concern about the level of unemployment in the U.S., the level of budget and trade deficits in the U.S., the impact of a weak dollar on the Euro region recovery and the increased violence in Iraq. Given these and other factors, we remain uncertain concerning the strength and sustainability of the economic environment and the related demand outlook for headsets.

We consider the trends in sell-through of our U.S. commercial distributors of office and contact center products an important indicator of demand. For the March quarter, this group of distributors reported to us an increase in sell-through of 23% in comparison to the March quarter last year, and 20% growth sequentially. Our analysis indicates that the largest driver in the increased sell-through was demand for the CS50, our wireless headset solution for the office market, although we also saw increased sell-through in products and channel partners that primarily use and serve the contact center market. Our level of revenues to this channel closely matched their level of reported sell-through with channel inventory levels therefore remaining largely unchanged.

We have a “book and ship” business model whereby we ship most orders to our customers within 48 hours of our receipt of those orders, and we thus cannot rely on the level of backlog to provide visibility into potential future revenues.

Based on all of the foregoing, we are currently expecting:

• Revenues for the first quarter of fiscal 2005 to be in the range of $120-$125 million.Assuming we achieve $120 to $125 million in revenues, the growth vs. Q1 fiscal 2004 will be 29% to 35%. We note that the fourth quarter of fiscal 2004 contained 14 weeks. In fiscal 2005, each quarter will contain 13 weeks.
  
  We currently believe that revenues of mobile products will be fairly strong in the June quarter and that we are benefiting from an unusually large share of “bundling” programs at certain wireless carriers. However, we doubt this level of share is sustainable over the long run and thus would expect more moderate revenues from mobile products in subsequent quarters than might otherwise be expected based on a simple extrapol ation of recent run rates. We also believe that the ramp in revenues from wireless headsets for the office market is likely to moderate in the future.
  
• Earnings per share for the first quarter of fiscal 2005 to be in the range of $0.37 - $0.41.

Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its next press release announcing its first quarter fiscal year 2005 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the first quarter of the fiscal year will not be based on internal Company information and should be assessed accordingly by investors. The statements do not reflect the potential impact of any mergers or acquisitions that may be completed after the date of this release.

Conference Call Scheduled to Discuss Financial Results
Plantronics has scheduled a conference call to discuss the contents of this release. The conference call will take place today, Tuesday, April 27 at 2:00 PM (PDT). All interested investors and potential investors in Plantronics stock are invited to participate. To listen please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." Participants from North America should call (888) 301-8736 and other participants should call (706) 634-7260.

A replay of the call with the conference ID #6644940 will be available for 72 hours at (800) 642-1687 for callers from North America and at (706) 645-9291 for all other callers. The conference call will also be simultaneously web cast at www.plantronics.com under Investor Relations, and the web cast of the conference call will remain available at the Plantronics Web site for thirty days.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

Certain statements in this press release, including our target for fiscal 2005 operating margins, the estimated tax rate for fiscal 2005, our current expectations and projections for revenues and earnings for the June quarter, and other statements under the caption "Business Outlook" above, are forward-looking statements based on current information and expectations. Achievement of the results projected above is subject to a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those projected are:

• A slowing in national or international economic growth, resulting in a reduction in the overall level of demand for our products;
• As the national and international economies recover, employment opportunities in the contact center or office markets may not increase commensurately but may remain flat or even decrease, lessening the future demand for our products;
• A softening of the level of market demand for our products within our core contact center market and/or in the newer office, mobile, computer and residential markets;
• The inability to successfully develop, manufacture and market new products.
• The demand for new wireless headset products may not develop as we anticipate and may lead to excess inventory and the inability to recover the associated development costs.
• A decrease in the liquidity of our customers caused by general economic conditions that may impact their ability to pay amounts due us;
• The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;
• The entry of new competitors which could be spurred by changes in the regulatory environment, particularly laws requiring the use of hands-free devices by drivers when using cellular telephones;
• Variations in sales and profits in higher tax, as compared to lower tax, jurisdictions;
• Fluctuations in foreign exchange rates; and
• Changes in the regulatory environment either as to headsets directly or as to the products, such as mobile phones, with which our products are used.

Additional risk factors include: changes in the timing and size of orders from our customers, price erosion, increased requirements from retail customers for marketing and advertising funding, failure to match production to demand, interruption in the supply of sole-sourced critical components, continuity of component supply at costs consistent with our plans, failure of our distribution channels to operate as we expect, failure to develop products that keep pace with technological changes, the inherent risks of our substantial foreign operations, problems which might affect our principal manufacturing facility in Mexico, further terrorist acts, our nation's response to terrorist attacks and the effects of these activities on capital and consumer spending, and the loss of the services of key executives and employees. For more information concerning thes e and other possible risks, please refer to the Company's Form 10-K filed on June 2, 2003, filings on Form 10-Q and other filings with the Securities and Exchange Commission as well as recent press releases. These filings can be accessed over the Internet athttp://www.sec.gov/edgar/searchedgar/companysearch.html

Financial Summaries

The following related charts are provided:

• Summary of Consolidated Financial Statements
• Summary of Unaudited Income Statements and Related Data

About Plantronics
Plantronics introduced the first lightweight communications headset in 1962 and is recognized as the world leader in communications headsets. A publicly held company with approximately 3,350 employees, Plantronics is the leading provider of headsets to telephone companies and the business community worldwide. Plantronics headsets are also used widely in many Fortune 500 corporations and have been featured in numerous motion pictures and high-profile events, including Neil Armstrong's historic "One small step for man" transmission from the moon in 1969. Plantronics, Inc., headquartered in Santa Cruz, California, was founded in 1961 and maintains offices in 20 countries. Plantronics products are sold and supported through a worldwide network of authorized Plantronics marketin g partners. Information about the Company and its products can be found at www.plantronics.com or by calling (800) 544-4660.

Plantronics is a registered trademark of Plantronics, Inc. Bluetooth is a trademark owned by Bluetooth SIG Inc., and is used by Plantronics under license. All other products or service names mentioned herein are trademarks of their respective owners

PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098

PLANTRONICS, INC.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
	Quarter Ended						Year Ended
	March 31,			March 31,			March 31,			March 31,
	2003			2004			2003			2004
Net sales	$	88,059		$	121,440		$	337,508		$	416,965
Cost of sales		44,730			55,944			168,565			200,995
Gross profit		43,329			65,496			168,943			215,970
Gross profit %		49.2	%		53.9	%		50.1	%		51.8	%
Research, development and engineering		8,459			9,774			33,877			35,460
Selling, general and administrative		20,297			27,970			80,605			95,756
Total operating expenses		28,756			37,744			114,482			131,216
Operating income		14,573			27,752			54,461			84,754
Operating income % to sales		16.5	%		22.9	%		16.1	%		20.3	%
Interest and other income (expense), net		528			(300	)		2,299			1,745
Income before income taxes		15,101			27,452			56,760			86,499
Income tax expense		4,530			6,506			15,284			24,220
Net income	$	10,571		$	20,946		$	41,476		$	62,279
Net income % to Sales		12.0	%		17.3	%		12.3	%		14.9	%
Diluted earnings per common share	$	0.23		$	0.42		$	0.89		$	1.31
Shares used in diluted per share calculations		45,190			50,068			46,584			47,492

UNAUDITED CONSOLIDATED BALANCE SHEETS
	March 31,		March 31,
	2003		2004
ASSETS
Cash and cash equivalents	$	54,704	$	180,616
Marketable securities		5,021		-
Total cash and marketable securities		59,725		180,616
Accounts receivable, net		50,503		64,999
Inventory, net		33,758		40,762
Deferred income taxes		6,357		13,967
Other current assets		2,674		10,283
Total current assets		153,017		310,627
Property, plant and equipment, net		36,957		42,124
Intangibles, net		3,682		3,440
Goodwill, net		9,386		9,386
Other assets		2,167		2,675
	$	205,209	$	368,252
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	13,596	$	19,075
Accrued liabilities		27,235		36,469
Income taxes payable		8,581		5,686
Total current liabilities		49,412		61,230
Deferred tax liability		8,867		7,719
Total liabilities		58,279		68,949
Stockholders' equity		146,930		299,303
	$	205,209	$	368,252

Summary of Unaudited Income Statements and Related Data
	FY02			Q103			Q203			Q303			Q403			FY03			Q104			Q204			Q304			Q404			FY04
Net sales		311,181			80,268			82,370			86,811			88,059			337,508			92,786			95,117			107,622			121,440			416,965
Cost of sales		163,336			38,810			40,735			44,290			44,730			168,565			47,319			46,351			51,381			55,944			200,995
Gross profit		147,845			41,458			41,635			42,521			43,329			168,943			45,467			48,766			56,241			65,496			215,970
Gross profit %		47.5	%		51.6	%		50.5	%		49.0	%		49.2	%		50.1	%		49.0	%		51.3	%		52.3	%		53.9	%		51.8	%
Research, development and engineering		30,303			8,250			8,164			9,004			8,459			33,877			8,605			8,247			8,834			9,774			35,460
Selling, general and administrative		76,273			19,606			19,763			20,939			20,297			80,605			21,153			22,984			23,649			27,970			95,756
Operating expenses		106,576			27,856			27,927			29,943			28,756			114,482			29,758			31,231			32,483			37,744			131,216
Operating income		41,269			13,602			13,708			12,578			14,573			54,461			15,709			17,535			23,758			27,752			84,754
Operating income %		13.3	%		16.9	%		16.6	%		14.5	%		16.5	%		16.1	%		16.9	%		18.4	%		22.1	%		22.9	%		20.3	%
Income before income taxes		43,200			14,535			13,980			13,144			15,101			56,760			16,201			17,676			25,170			27,452			86,499
Income tax expense		6,952			4,361			2,450			3,943			4,530			15,284			4,860			5,303			7,551			6,506			24,220
Income tax expense as a percent
of income before taxes		16.1	%		30.0	%		17.5	%		30.0	%		30.0	%		26.9	%		30.0	%		30.0	%		30.0	%		23.7	%		28.0	%
Net income after taxes		36,248			10,174			11,530			9,201			10,571			41,476			11,341			12,373			17,619			20,946			62,279
Diluted shares outstanding		49,238			47,722			47,298			46,197			45,190			46,584			45,077			46,372			47,501			50,068			47,492
EPS		0.74			0.21			0.24			0.20			0.23			0.89			0.25			0.27			0.37			0.42			1.31
Net revenues from unaffiliated customers:
Office and contact center		237,505			61,568			59,742			58,644			64,404			244,358			62,080			64,192			66,776			80,839			273,887
Mobile and computer		61,387			12,730			16,208			21,824			17,820			68,582			23,981			24,049			35,335			32,667			116,032
Other specialty products		12,289			5,970			6,420			6,343			5,835			24,568			6,725			6,876			5,511			7,934			27,046
Net revenues by geographical area
from unaffiliated customers:
Domestic		213,655			55,614			57,426			57,013			58,889			228,942			64,924			64,929			66,484			80,880			277,217
International		97,526			24,654			24,944			29,798			29,170			108,566			27,862			30,188			41,138			40,560			139,748
Balance Sheet accounts and metrics:
Accounts receivable, net		43,838			44,714			51,303			51,927			50,503			50,503			49,852			52,033			64,425			64,999			64,999
Days Sales Outstanding					50			56			54			52						48			49			54			52
Inventory, net		36,103			37,695			35,659			34,884			33,758			33,758			37,510			37,764			39,178			40,762			40,762
Inventory turns					4.1			4.6			5.1			5.3						5.0			4.9			5.2			5.2