PRESS RELEASE
Plantronics Reports Record Earnings for the Second Quarter of Fiscal Year 2005
FOR INFORMATION, CONTACT: Debbie Peterson Investor Relations Manager (831) 458-7533 | FOR IMMEDIATE RELEASE October 19, 2004 |
SANTA CRUZ, CA. - October 19, 2004 -Plantronics, Inc., (NYSE: PLT) today announced record earnings for its second quarter of fiscal year 2005.Second quarter revenues increased approximately 37% to $130.2 million, in comparison to $95.1 million in the second quarter of fiscal 2004. Operating income increased to $33.4 million from $17.5 million, net income increased to $24.7 million from $12.4 million, and diluted earnings per share improved to $0.49 from $0.27, in each case from the year-earlier quarter.
Net income for the quarter was inclusive of an after tax benefit of $1.6 million or approximately $0.03 per share from a court decision fully upholding Plantronics’ position which ended a lawsuit filed by a competitor. Ken Kannappan, President and CEO, commented, "Our results, inclusive of the $1.6 million after tax benefit, were above the high end of the guidance we provided on July 20, which called for revenues of $124 to $130 million, and earnings per share of $0.42 to $0.46. As anticipated, revenues from mobile products were lower sequentially and were offset by higher revenues from our Office and Contact Center products as well as growth in our Computer Audio and Gaming products."
"Revenues from our Office and Contact Center products were $86.2 million, up 34% vs. the year-earlier quarter and up approximately 4%, or $3.4 million, sequentially. This was a new all-time record for quarterly revenues in this product group," noted Kannappan. In comparison to the year-earlier quarter, the growth was geographically broad-based and resulted primarily from the adoption of our wireless headsets for business professionals as well as the success of the SupraPlus™ headset launched in March. In comparison to the June quarter, growth was concentrated in North America with the EMEA region down sequentially.
Barbara Scherer, SVP and CFO, said, "Our inventories increased significantly in the quarter and our turns fell to 3.7, below our goal of 5.0. The largest single reason for the increase in inventories is to support the increased revenue level we are anticipating for the December quarter. However, approximately $4 million of the increase was the result of upside revenue opportunities that we thought were likely to occur in the second quarter, but which did not materialize. Finally, we have also increased our safety stocks on certain key components. We currently expect our inventory turns to improve in the December quarter in comparison to the September quarter. Our DSO increased to 51 days, in comparison to 49 days in the September quarter a year ago, and from 47 days in the June quarter. We generated $8.1 million in cash flow from operations in the second quarter and have generated $41.5 million on a year to date basis."
Business Outlook
The following statements are based on current expectations. Many of these statements are forward-looking, and actual results may differ materially.
We remain cautiously optimistic about the overall economic environment and demand for our products. We feel that caution remains warranted given concern about recent signs of a slowdown in the rate of U.S. GDP growth, the level of unemployment in the United States, the level of budget and trade deficits in the United States, the impact of a weak dollar on the U.K. and Euro region economies and ongoing tensions in the Mid-East. Given these and other factors, we remain uncertain concerning the strength and sustainability of the economic environment and the related outlook for headset demand.
We also 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 September quarter, this group of distributors reported to us an increase in sell-through of over 25% in comparison to the September quarter last year, and a 10% increase sequentially.We believe the number of weeks on hand of inventory that this channel is carrying increased slightly.
We have a "book and ship" business model whereby we ship most orders to our customers within 48 hours of our receipt of those orders, and we thus cannot rely on the level of backlog to provide visibility into potential future revenues.
Our current expectations for the third quarter of fiscal 2005 are:
- Revenues to be in the range of $147-$152 million.Our current revenue expectations translate into revenue growth of approximately 37% to 41% versus the year-earlier period and approximately 13% to 17% sequentially.
We currently believe that revenues from our new gaming products will be a significant portion of the increase together with increased shipments of wireless headsets for mobile and office applications. If our anticipated revenue mix is realized, we believe the percent of revenues contributed from our Office and Contact Center product group will decline from 66% of revenues in the second quarter, but rise in absolute dollars. We are also planning for a $1 million reduction to revenue in comparison to the second fiscal quarter for payments to ch annel partners for catalog placements and other market development funds. That incremental $1 million directly reduces revenue and gross profit, in accordance with Emerging Issues Task Force 01-09. As a result of the above factors, we are therefore expecting gross margins to decline in the December quarter and to be approximately 49% - 50%. - Operating expenses to increase in dollars and potentially as a percent of revenuein comparison to the second quarter as a result of several factors including that operating expenses were $2 million lower in the second quarter as a result of the litigation benefit. Beyond that, our market opportunities are expanding and we are preparing for that growth by expanding the range and depth of our new product pipeline, increasing our marketing programs and sales presence, and growing our operations and administrative capacity.
- Operating margins to be in the range of 21% - 22%.
- Earnings per diluted share to be in the range of $0.45 to $0.48.
Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its next press release announcing its third quarter fiscal year 2005 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the third quarter of the fiscal year will not be based on information endorsed or supported by Plantronics, 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, October 19 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 #6645196 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.
PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802 831-426-6060 / Fax 831-426-6098 | ||
SAFE HARBOR
This release contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include our outlook for revenues, gross margins, operating expenses, operating margins, and earnings for the third quarter of fiscal 2005; that revenues from gaming and mobile products are expected to increase in the December quarter; that inventory turns will improve; and that we are cautiously optimistic about the overall economic environment and the demand for our products. These forward-looking statements involve a number of risks and uncertainties, and are based on current expectations, forecasts and assumptions.
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;
- The demand for our wireless headset products may not develop as we anticipate and may lead to excess inventory and the inability to recover the associated development costs;
- The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;
- Variations in sales and profits in higher tax, as compared to lower tax, jurisdictions and/or the results of tax planning strategies, tax audits, reassessment of tax reserves, and tax refunds on our effective tax rate;
- 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 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;
- The inability to successfully develop, manufacture and market new products;
- 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 e mployees. For more information concerning these and other possible risks, please refer to the Company's Form 10-K filed on May 26, 2004, 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 at http://www.sec.gov/edgar/searchedgar/companysearch.html
Financial Summaries
The following related charts are provided:
- Summary of Unaudited Consolidated Financial Statements
- Summary of Unaudited Statements of Operations 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 4,400 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 marketing 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 | Six Months Ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
2003 | 2004 | 2003 | 2004 | ||||||||||
Net sales | $ | 95,117 | $ | 130,220 | $ | 187,903 | $ | 261,590 | |||||
Cost of sales | 46,351 | 60,719 | 93,670 | 122,422 | |||||||||
Gross profit | 48,766 | 69,501 | 94,233 | 139,168 | |||||||||
Gross profit % | 51.3 | % | 53.4 | % | 50.1 | % | 53.2 | % | |||||
Research, development and engineering | 8,247 | 10,838 | 16,852 | 20,882 | |||||||||
Selling, general and administrative | 22,984 | 25,305 | 44,137 | 54,225 | |||||||||
Total operating expenses | 31,231 | 36,143 | 60,989 | 75,107 | |||||||||
Operating income | 17,535 | 33,358 | 33,244 | 64,061 | |||||||||
Operating income % | 18.4 | % | 25.6 | % | 17.7 | % | 24.5 | % | |||||
Interest and other income, net | 141 | 913 | 633 | 1,248 | |||||||||
Income before income taxes | 17,676 | 34,271 | 33,877 | 65,309 | |||||||||
Income tax expense | 5,303 | 9,596 | 10,163 | 18,287 | |||||||||
Net income | $ | 12,373 | $ | 24,675 | $ | 23,714 | $ | 47,022 | |||||
% to Sales | 13.0 | % | 18.9 | % | 12.6 | % | 18.0 | % | |||||
Diluted earnings per common share | $ | 0.27 | $ | 0.49 | $ | 0.52 | $ | 0.93 | |||||
Shares used in diluted per share calculations | 46,372 | 50,638 | 45,672 | 50,532 | |||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | |||||||||||||
March 31, | September 30, | ||||||||||||
2004 | 2004 | ||||||||||||
ASSETS | |||||||||||||
Cash and cash equivalents | $ | 180,616 | $ | 210,283 | |||||||||
Marketable securities | - | 4,000 | |||||||||||
Total cash and marketable securities | 180,616 | 214,283 | |||||||||||
Accounts receivable, net | 64,999 | 73,892 | |||||||||||
Inventory, net | 40,762 | 65,940 | |||||||||||
Deferred income taxes | 13,967 | 8,046 | |||||||||||
Other current assets | 10,283 | 10,750 | |||||||||||
Total current assets | 310,627 | 372,911 | |||||||||||
Property, plant and equipment, net | 42,124 | 49,959 | |||||||||||
Intangibles, net | 3,440 | 3,326 | |||||||||||
Goodwill, net | 9,386 | 9,386 | |||||||||||
Other assets | 2,675 | 2,683 | |||||||||||
$ | 368,252 | $ | 438,265 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
Accounts payable | $ | 19,075 | $ | 29,206 | |||||||||
Accrued liabilities | 36,469 | 38,292 | |||||||||||
Income taxes payable | 5,686 | 6,484 | |||||||||||
Total current liabilities | 61,230 | 73,982 | |||||||||||
Deferred tax liability | 7,719 | 8,121 | |||||||||||
Long-term debt | - | - | |||||||||||
Total liabilities | 68,949 | 82,103 | |||||||||||
Stockholders' equity | 299,303 | 356,162 | |||||||||||
$ | 368,252 | $ | 438,265 |
Summary of Unaudited Statements of Operations and Related Data | ||||||||||||||||||||||||||||||||||||||||
Q103 | Q203 | Q303 | Q403 | FY03 | Q104 | Q204 | Q304 | Q404 | FY04 | Q105 | Q205 | FY05 YTD | ||||||||||||||||||||||||||||
Net sales | $ | 80,268 | $ | 82,370 | $ | 86,811 | $ | 88,059 | $ | 337,508 | $ | 92,786 | $ | 95,117 | $ | 107,622 | $ | 121,440 | $ | 416,965 | $ | 131,370 | $ | 130,220 | $ | 261,590 | ||||||||||||||
Cost of sales | 38,810 | 40,735 | 44,290 | 44,730 | 168,565 | 47,319 | 46,351 | 51,381 | 55,944 | 200,995 | 61,703 | 60,719 | 122,422 | |||||||||||||||||||||||||||
Gross profit | 41,458 | 41,635 | 42,521 | 43,329 | 168,943 | 45,467 | 48,766 | 56,241 | 65,496 | 215,970 | 69,667 | 69,501 | 139,168 | |||||||||||||||||||||||||||
Gross profit % | 51.6 | % | 50.5 | % | 49.0 | % | 49.2 | % | 50.1 | % | 49.0 | % | 51.3 | % | 52.3 | % | 53.9 | % | 51.8 | % | 53.0 | % | 53.4 | % | 53.2 | % | ||||||||||||||
Research, development and engineering | 8,250 | 8,164 | 9,004 | 8,459 | 33,877 | 8,605 | 8,247 | 8,834 | 9,774 | 35,460 | 10,044 | 10,838 | 20,882 | |||||||||||||||||||||||||||
Selling, general and administrative | 19,606 | 19,763 | 20,939 | 20,297 | 80,605 | 21,153 | 22,984 | 23,649 | 27,970 | 95,756 | 28,920 | 25,305 | 54,225 | |||||||||||||||||||||||||||
Operating expenses | 27,856 | 27,927 | 29,943 | 28,756 | 114,482 | 29,758 | 31,231 | 32,483 | 37,744 | 131,216 | 38,964 | 36,143 | 75,107 | |||||||||||||||||||||||||||
Operating income | 13,602 | 13,708 | 12,578 | 14,573 | 54,461 | 15,709 | 17,535 | 23,758 | 27,752 | 84,754 | 30,703 | 33,358 | 64,061 | |||||||||||||||||||||||||||
Operating income % | 16.9 | % | 16.6 | % | 14.5 | % | 16.5 | % | 16.1 | % | 16.9 | % | 18.4 | % | 22.1 | % | 22.9 | % | 20.3 | % | 23.4 | % | 25.6 | % | 24.5 | % | ||||||||||||||
Income before income taxes | 14,535 | 13,980 | 13,144 | 15,101 | 56,760 | 16,201 | 17,676 | 25,170 | 27,452 | 86,499 | 31,038 | 34,271 | 65,309 | |||||||||||||||||||||||||||
Income tax expense | 4,361 | 2,450 | 3,943 | 4,530 | 15,284 | 4,860 | 5,303 | 7,551 | 6,506 | 24,220 | 8,691 | 9,596 | 18,287 | |||||||||||||||||||||||||||
Income tax expense as a percent | ||||||||||||||||||||||||||||||||||||||||
of income before taxes | 30.0 | % | 17.5 | % | 30.0 | % | 30.0 | % | 26.9 | % | 30.0 | % | 30.0 | % | 30.0 | % | 23.7 | % | 28.0 | % | 28.0 | % | 28.0 | % | 28.0 | % | ||||||||||||||
Net income after taxes | 10,174 | 11,530 | 9,201 | 10,571 | 41,476 | 11,341 | 12,373 | 17,619 | 20,946 | 62,279 | 22,347 | 24,675 | 47,022 | |||||||||||||||||||||||||||
Diluted shares outstanding | 47,722 | 47,298 | 46,197 | 45,190 | 46,584 | 45,077 | 46,372 | 47,501 | 50,068 | 47,492 | 50,428 | 50,638 | 50,532 | |||||||||||||||||||||||||||
EPS | $ | 0.21 | $ | 0.24 | $ | 0.20 | $ | 0.23 | $ | 0.89 | $ | 0.25 | $ | 0.27 | $ | 0.37 | $ | 0.42 | $ | 1.31 | $ | 0.44 | $ | 0.49 | $ | 0.93 | ||||||||||||||
Net revenues from unaffiliated customers: | ||||||||||||||||||||||||||||||||||||||||
Office and contact center | 61,568 | 59,742 | 58,644 | 64,404 | 244,358 | 62,080 | 64,192 | 66,776 | 80,840 | 273,888 | 82,815 | 86,204 | 169,019 | |||||||||||||||||||||||||||
Mobile | 10,125 | 11,779 | 16,145 | 12,039 | 50,088 | 18,518 | 18,370 | 29,528 | 25,914 | 92,330 | 34,458 | 28,815 | 63,273 | |||||||||||||||||||||||||||
Computer audio | 2,605 | 4,429 | 5,679 | 5,781 | 18,494 | 5,463 | 5,679 | 5,807 | 6,752 | 23,701 | 6,992 | 8,515 | 15,507 | |||||||||||||||||||||||||||
Other specialty products | 5,970 | 6,420 | 6,343 | 5,835 | 24,568 | 6,725 | 6,876 | 5,511 | 7,934 | 27,046 | 7,105 | 6,686 | 13,791 | |||||||||||||||||||||||||||
Net revenues by geographical area | ||||||||||||||||||||||||||||||||||||||||
from unaffiliated customers: | ||||||||||||||||||||||||||||||||||||||||
Domestic | 55,614 | 57,426 | 57,013 | 58,889 | 228,942 | 64,924 | 64,929 | 66,484 | 80,880 | 277,217 | 89,088 | 89,375 | 178,463 | |||||||||||||||||||||||||||
International | 24,654 | 24,944 | 29,798 | 29,170 | 108,566 | 27,862 | 30,188 | 41,138 | 40,560 | 139,748 | 42,282 | 40,845 | 83,127 | |||||||||||||||||||||||||||
Balance Sheet accounts and metrics: | ||||||||||||||||||||||||||||||||||||||||
Accounts receivable, net | 44,714 | 51,303 | 51,927 | 50,503 | 50,503 | 49,852 | 52,033 | 64,425 | 64,999 | 64,999 | 68,521 | 73,892 | 73,892 | |||||||||||||||||||||||||||
Days sales outstanding | 50 | 56 | 54 | 52 | 48 | 49 | 54 | 52 | 47 | 51 | ||||||||||||||||||||||||||||||
Inventory, net | 37,695 | 35,659 | 34,884 | 33,758 | 33,758 | 37,510 | 37,764 | 39,178 | 40,762 | 40,762 | 47,418 | 65,940 | 65,940 | |||||||||||||||||||||||||||
Inventory turns | 4.1 | 4.6 | 5.1 | 5.3 | 5.0 | 4.9 | 5.2 | 5.2 | 5.2 | 3.7 | ||||||||||||||||||||||||||||||