(Mark One) | ||||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
For the quarterly period ended December 31, 2003 | ||||
OR | ||||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
For the transition period from ________to _________ |
Delaware | 77-0207692 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
345 Encinal Street | ||
Santa Cruz, California 95060 | ||
(Address of principal executive offices) (Zip Code) | ||
(831) 426-5858 | ||
(Registrant's telephone number, including area code) | ||
N/A | ||
(Former name, former address and former fiscal year, if changed since last report) |
1 | ||
PART I. FINANCIAL INFORMATION | Page No. |
13 | |
30 | |
32 | |
33 | |
2 | ||
March 31, | December 31, | ||||||
2003 | 2003 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash, cash equivalents and marketable securities | $ | 59,725 | $ | 107,329 | |||
Accounts receivable, net | 50,503 | 64,425 | |||||
Inventory, net | 33,758 | 39,178 | |||||
Deferred income taxes | 6,357 | 5,974 | |||||
Other current assets | 2,674 | 2,230 | |||||
Total current assets | 153,017 | 219,136 | |||||
Property, plant and equipment, net | 36,957 | 41,109 | |||||
Intangibles, net | 3,682 | 3,191 | |||||
Goodwill, net | 9,386 | 9,386 | |||||
Other assets, net | 2,167 | 2,642 | |||||
Total assets | $ | 205,209 | $ | 275,464 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,596 | $ | 16,985 | |||
Accrued liabilities | 27,235 | 38,686 | |||||
Income taxes payable | 8,581 | 4,947 | |||||
Total current liabilities | 49,412 | 60,618 | |||||
Deferred tax liability | 8,867 | 8,076 | |||||
Total liabilities | 58,279 | 68,694 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.01 par value per share; 1,000 shares authorized, no shares outstanding | - | - | |||||
Common stock, $0.01 par value per share; 100,000 shares authorized, 59,728 and 61,022 shares outstandingat March 31, 2003 and December 31, 2003, respectively | 597 | 610 | |||||
Additional paid-in capital | 158,160 | 179,411 | |||||
Accumulated other comprehensive income (loss) | 209 | (1,433 | ) | ||||
Retained earnings | 285,350 | 326,683 | |||||
444,316 | 505,271 | ||||||
Less: Treasury stock (common: 16,090 and 16,091 shares at March 31, 2003 and December 31, 2003,respectively) at cost | (297,386 | ) | (298,501 | ) | |||
Total stockholders' equity | 146,930 | 206,770 | |||||
Total liabilities and stockholders' equity | $ | 205,209 | $ | 275,464 | |||
3 | ||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net sales | $ | 86,811 | $ | 107,622 | $ | 249,449 | $ | 295,525 | |||||
Cost of sales | 44,290 | 51,381 | 123,835 | 145,051 | |||||||||
Gross profit | 42,521 | 56,241 | 125,614 | 150,474 | |||||||||
Operating expenses: | |||||||||||||
Research, development and engineering | 9,004 | 8,834 | 25,418 | 25,686 | |||||||||
Selling, general and administrative | 20,939 | 23,649 | 60,308 | 67,786 | |||||||||
Total operating expenses | 29,943 | 32,483 | 85,726 | 93,472 | |||||||||
Operating income | 12,578 | 23,758 | 39,888 | 57,002 | |||||||||
Interest and other income, net | 566 | 1,412 | 1,771 | 2,045 | |||||||||
Income before income taxes | 13,144 | 25,170 | 41,659 | 59,047 | |||||||||
Income tax expense | 3,943 | 7,551 | 10,754 | 17,714 | |||||||||
Net income | $ | 9,201 | $ | 17,619 | $ | 30,905 | $ | 41,333 | |||||
Basic earnings per common share (Note 5) | $ | 0.20 | $ | 0.39 | $ | 0.68 | $ | 0.94 | |||||
Shares used in basic per share calculations | 44,939 | 44,628 | 45,531 | 44,116 | |||||||||
Diluted earnings per common share (Note 5) | $ | 0.20 | $ | 0.37 | $ | 0.66 | $ | 0.89 | |||||
Shares used in diluted per share calculations | 46,197 | $ | 47,501 | $ | 47,096 | 46,305 | |||||||
4 | ||
Nine Months Ended | |||||||
December 31, | |||||||
2002 | 2003 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 30,905 | $ | 41,333 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 8,425 | 9,519 | |||||
Deferred income taxes | (55 | ) | (408 | ) | |||
Income tax benefit associated with stock options | 1,296 | 5,232 | |||||
Loss on disposal of fixed assets | 17 | 148 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable, net | (8,089 | ) | (13,922 | ) | |||
Inventory, net | 1,219 | (5,420 | ) | ||||
Other current assets | (22 | ) | 444 | ||||
Other assets | 551 | (138 | ) | ||||
Accounts payable | (1,614 | ) | 3,389 | ||||
Accrued liabilities | 3,036 | 11,451 | |||||
Income taxes payable | (1,589 | ) | (3,634 | ) | |||
Cash provided by operating activities | 34,080 | 47,994 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Proceeds from maturities of marketable securities | 22,500 | 5,020 | |||||
Purchase of marketable securities | (13,020 | ) | - | ||||
Purchase of equity investment | - | (450 | ) | ||||
Capital expenditures | (9,513 | ) | (13,217 | ) | |||
Cash used in investing activities | (33 | ) | (8,647 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Purchase of treasury stock | (25,306 | ) | (1,833 | ) | |||
Proceeds from sale of treasury stock | 1,102 | 1,889 | |||||
Proceeds from exercise of stock options | 1,647 | 14,864 | |||||
Cash (used in) provided by financing activities | (22,557 | ) | 14,920 | ||||
Effect of exchange rate changes on cash and cash equivalents | 1,492 | (1,642 | ) | ||||
Net increase in cash and cash equivalents | 12,982 | 52,625 | |||||
Cash and cash equivalents at beginning of period | 43,048 | 54,704 | |||||
Cash and cash equivalents at end of period | $ | 56,030 | $ | 107,329 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for: | |||||||
Interest | $ | 100 | $ | 93 | |||
Income taxes | $ | 11,339 | $ | 16,679 | |||
5 | ||
March 31, | December 31, | ||||||
2003 | 2003 | ||||||
Cash, cash equivalents and marketable securities: | |||||||
Cash and cash equivalents | $ | 54,704 | $ | 107,329 | |||
Marketable securities | 5,021 | - | |||||
$ | 59,725 | $ | 107,329 | ||||
Accounts receivable, net: | |||||||
Accounts receivable from customers | $ | 65,931 | $ | 83,148 | |||
Less: sales returns, promotions and rebates | (12,067 | ) | (14,996 | ) | |||
Less: allowance for doubtful accounts | (3,361 | ) | (3,727 | ) | |||
$ | 50,503 | $ | 64,425 | ||||
Inventory, net: | |||||||
Finished goods | $ | 14,712 | $ | 17,397 | |||
Work in process | 1,229 | 1,271 | |||||
Purchased parts | 17,817 | 20,510 | |||||
$ | 33,758 | $ | 39,178 | ||||
6 | ||
March 31, | December 31, | ||||||
2003 | 2003 | ||||||
Property, plant and equipment, net: | |||||||
Land | $ | 4,693 | $ | 6,031 | |||
Buildings and improvements (useful lives: 7-30 years) | 19,189 | 25,575 | |||||
Machinery and equipment (useful lives: 2-10 years) | 61,496 | 62,671 | |||||
85,378 | 94,277 | ||||||
Less: accumulated depreciation | (48,421 | ) | (53,168 | ) | |||
$ | 36,957 | $ | 41,109 | ||||
Accrued liabilities: | |||||||
Employee benefits | $ | 12,283 | $ | 14,767 | |||
Accrued advertising and sales and marketing | 2,150 | 3,476 | |||||
Warranty accrual | 5,905 | 6,560 | |||||
Accrued losses on hedging instruments | - | 5,230 | |||||
Accrued other | 6,897 | 8,653 | |||||
$ | 27,235 | $ | 38,686 | ||||
Local | U.S. Dollar | ||||||
Currency | Equivalent | Position | Maturity | ||||
Euro | € | 5,057 | $ | 6,300 | Sell | 1 month | |
Great British Pound | £ | 733 | $ | 1,300 | Sell | 1 month |
7 | ||
Plantronics periodically hedges foreign currency forecasted transactions related to sales with currency options. These transactions are designated as cash flow hedges. The effective portion of the hedge gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings when the hedged exposure affects earnings. Any ineffective portions of related gains or losses are recorded in the statements of operations immediately. On a monthly basis, Plantronics enters into monthly option contracts with a one-year term. Plantronics does not purchase options for trading purposes. As of December 31, 2003, we had foreign currency call option contracts of approximately€21.6 million and£8.4million denominated in Euros and Great British Pounds, respectively. As of December 31, 2003, we also had foreign currency put option contracts of approximately€21.6 million and£8.4 million denominated in Euros and Great British Pounds, respectively . Collectively our option contracts hedge a portion of our forecasted foreign denominated sales. The following table summarizes option positions at December 31, 2003 (in thousands):
Balance Sheet | Income Statement | |||||||||
December 31, 2003 | ||||||||||
As of December 31, 2003 | Three Months | Nine Months | ||||||||
Accumulated Other | Ended | Ended | ||||||||
Comprehensive Income/(Loss) | Net Sales | Net Sales | ||||||||
Realized loss on closed transactions | $ | - | $ | (1,255 | ) | $ | (1,764 | ) | ||
Recognized but unrealized loss on open transactions | (3,693 | ) | - | - | ||||||
$ | (3,693 | ) | $ | (1,255 | ) | $ | (1,764 | ) | ||
8 | ||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net income | $ | 9,201 | $ | 17,619 | $ | 30,905 | $ | 41,333 | |||||
Weighted average shares outstanding: | |||||||||||||
Weighted average shares - basic | 44,939 | 44,628 | 45,531 | 44,116 | |||||||||
Effect of dilutive securities - employee stock options | 1,258 | 2,873 | 1,565 | 2,189 | |||||||||
Weighted average shares - diluted | 46,197 | 47,501 | 47,096 | 46,305 | |||||||||
Earnings per common share-basic | $ | 0.20 | $ | 0.39 | $ | 0.68 | $ | 0.94 | |||||
Earnings per common share-diluted | $ | 0.20 | $ | 0.37 | $ | 0.66 | $ | 0.89 |
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net income - as reported | $ | 9,201 | $ | 17,619 | $ | 30,905 | $ | 41,333 | |||||
Less stock based employee compensation determined under fair value based method, net of tax | (3,699 | ) | (3,919 | ) | (10,419 | ) | (10,573 | ) | |||||
Net income - pro forma | $ | 5,502 | $ | 13,700 | $ | 20,486 | $ | 30,760 | |||||
Earnings per common share: | |||||||||||||
Basic net income per share - as reported | $ | 0.20 | $ | 0.39 | $ | 0.68 | $ | 0.94 | |||||
Basic net income per share - pro forma | $ | 0.12 | $ | 0.31 | $ | 0.45 | $ | 0.70 | |||||
Diluted net income per share - as reported | $ | 0.20 | $ | 0.37 | $ | 0.66 | $ | 0.89 | |||||
Diluted net income per share - proforma | $ | 0.12 | $ | 0.29 | $ | 0.43 | $ | 0.66 |
9 | ||
Stock Option Plans | Stock Option Plans | Employee Stock Purchase Plan | Employee Stock Purchase Plan | ||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2002 | 2003 | 2002 | 2003 | 2002 | 2003 | 2002 | 2003 | ||||||||||||||||||
Expected dividend yield | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||||||||
Expected life (in years) | 6.0 | 6.0 | 6.0 | 6.0 | 0.5 | 0.5 | 0.5 | 0.5 | |||||||||||||||||
Expected volatility | 59.4 | % | 55.5 | % | 59.4 | % | 55.7 | % | 46.2 | % | 31.7 | % | 46.2 | % | 31.7 | % | |||||||||
Risk-free interest rate | 2.8 | % | 3.3 | % | 3.5 | % | 3.2 | % | 1.2 | % | 1.0 | % | 1.2 | % | 1.0 | % | |||||||||
Weighted-average fair value | $ | 9.85 | $ | 16.55 | $ | 9.97 | $ | 14.31 | $ | 3.02 | $ | 2.58 | $ | 3.02 | $ | 2.58 |
7. PRODUCT WARRANTY OBLIGATIONS
For the Three Months Ended December 31, 2003 | ||||
$ | 6,590 | |||
Warranty provision relating to product shipped during the quarter | 2,053 | |||
Deductions for warranty claims processed | (2,083 | ) | ||
Adjustments | - | |||
Warranty liability at December 31, 2003 | $ | 6,560 | ||
For the Nine Months Ended December 31, 2003 | ||||
Warranty liability at March 31, 2003 | $ | 5,905 | ||
Warranty provision relating to products shipped during the nine month period | 7,262 | |||
Deductions for warranty claims processed | (6,276 | ) | ||
Adjustments | (331 | ) | ||
Warranty liability at December 31, 2003 | $ | 6,560 | ||
10 | ||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net income | $ | 9,201 | $ | 17,619 | $ | 30,905 | $ | 41,333 | |||||
Unrealized (loss) on hedges, for the three and nine months ended December 31, 2002 and 2003, net of tax of $0 and ($623), $0 and ($1,108), respectively | - | (1,453 | ) | - | (2,585 | ) | |||||||
Foreign currency translation, for the three and nine months ended December 31, 2002 and 2003, net of tax of $138 and $359, $448 and $616 , respectively | 321 | 837 | 1,044 | 1,436 | |||||||||
Other comprehensive income | $ | 9,522 | $ | 17,003 | $ | 31,949 | $ | 40,184 | |||||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net revenues from unaffiliated customers: | |||||||||||||
Office and contact center | $ | 58,644 | $ | 66,776 | $ | 179,954 | $ | 193,048 | |||||
Mobile | 16,145 | 29,528 | 38,049 | 66,416 | |||||||||
Computer audio | 5,679 | 5,807 | 12,713 | 16,949 | |||||||||
Other specialty products | 6,343 | 5,511 | 18,733 | 19,112 | |||||||||
$ | 86,811 | $ | 107,622 | $ | 249,449 | $ | 295,525 | ||||||
11 | ||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net revenues from unaffiliated customers: | |||||||||||||
United States | $ | 57,013 | $ | 66,484 | $ | 170,053 | $ | 196,337 | |||||
Europe, Middle East and Africa | 21,852 | 31,688 | 56,287 | 72,697 | |||||||||
Asia Pacific and Latin America | 4,927 | 5,679 | 14,514 | 17,084 | |||||||||
Canada and Other International | 3,019 | 3,771 | 8,595 | 9,407 | |||||||||
Total International | 29,798 | 41,138 | 79,396 | 99,188 | |||||||||
$ | 86,811 | $ | 107,622 | $ | 249,449 | $ | 295,525 | ||||||
March 31, | December 31, | |||||
2003 | 2003 | |||||
Long-lived assets: | ||||||
United States | $ | 23,907 | $ | 23,540 | ||
International | 13,050 | 17,569 | ||||
$ | 36,957 | $ | 41,109 | |||
March 31, 2003 | December 31, 2003 | ||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | ||||||||||
Intangible assets | Amount | Amortization | Amount | Amortization | |||||||||
Technology | $ | 2,460 | $ | (817 | ) | $ | 2,460 | $ | (1,032 | ) | |||
State contracts | 1,300 | (232 | ) | 1,300 | (371 | ) | |||||||
Patents | 700 | (125 | ) | 700 | (200 | ) | |||||||
Trademarks | 300 | (54 | ) | 300 | (86 | ) | |||||||
Non-compete agreements | 200 | (50 | ) | 200 | (80 | ) | |||||||
Total | $ | 4,960 | $ | (1,278 | ) | $ | 4,960 | $ | (1,769 | ) | |||
12 | ||
13 | ||
Three Months Ended | Nine Months Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2002 | 2003 | 2002 | 2003 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Cost of sales | 51.0 | 47.7 | 49.6 | 49.1 | |||||||||
Gross profit | 49.0 | 52.3 | 50.4 | 50.9 | |||||||||
Operating expenses: | |||||||||||||
Research, development and engineering | 10.4 | 8.2 | 10.2 | 8.7 | |||||||||
Selling, general and administrative | 24.1 | 22.0 | 24.2 | 22.9 | |||||||||
Total operating expenses | 34.5 | 30.2 | 34.4 | 31.6 | |||||||||
Operating income | 14.5 | 22.1 | 16.0 | 19.3 | |||||||||
Interest and other income, net | 0.6 | 1.2 | 0.7 | 0.7 | |||||||||
Income before income taxes | 15.1 | 23.3 | 16.7 | 20.0 | |||||||||
Income tax expense | 4.5 | 6.9 | 4.3 | 6.0 | |||||||||
Net income | 10.6 | % | 16.4 | % | 12.4 | % | 14.0 | % | |||||
14 | ||
15 | ||
16 | ||
17 | ||
18 | ||
19 | ||
· | general economic conditions, compounded by the events on and following September 11, 2001; | ||
· | changes in demand for our products, including order cancellation by customers; | ||
· | impact of acquired businesses and technologies; | ||
· | insolvency of purchasers of our products or failure of purchasers of our products to pay amounts due to us; | ||
· | timing and size of orders from customers; | ||
· | price erosion; | ||
· | inability to ramp production or delays in deliveries of components and subassemblies by our suppliers; | ||
· | inability to compete with the pricing pressures in the mobile headset category; | ||
· | penalties for cancellation or inability to cancel custom components; | ||
· | changes in the mix of products sold by us; | ||
· | variances in the timing and amount of engineering and operating expenses; |
20 | ||
· | distribution channel mix variations; | ||
· | changes in the levels of cooperative advertising or market development funding required by retail resellers of our products; | ||
· | delays in shipments of our products; | ||
· | material product returns and customer credits; | ||
· | new product introductions by us or our competitors; | ||
· | entrance of new competitors; | ||
· | changes in actual or target inventory levels of our channel partners; | ||
· | changes in the costs of our raw materials, components and subassemblies; | ||
· | seasonal fluctuations in demand and linearity of sales within the quarter; and | ||
· | the impact on the U.S. economy due to the continued presence of U.S. troops in Iraq and geopolitical risk factors in Africa, the Middle East and North Korea. |
21 | ||
22 | ||
· | price; | ||
· | product reliability; | ||
· | product features; | ||
· | product mix; | ||
· | customer service and support; | ||
· | marketing; | ||
· | reputation; | ||
· | distribution; | ||
· | ability to meet delivery schedules; and | ||
· | warranty terms and product life. |
· | If forecasted demand does not develop, we could have excess production or excess capacity. Excess production could result in higher inventories of finished products, components and subassemblies. If we were unable to sell these inventories, we would have to write off some or all of our inventories of excess products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins. | ||
· | Significant reduction in production levels to address decreases in demand may leave us unprepared to meet a rapid increase in demand for our products. | ||
· | If demand increases beyond that forecasted, we would have to rapidly increase production. We depend on suppliers to provide additional volumes of components and subassemblies, and are experiencing greater dependencies on single source suppliers. Therefore, we might not be able to increase production rapidly enough to meet unexpected demand. This could cause us to fail to meet customer expectations. There could be short-term losses of sales while we are trying to increase production. If customers turn to competitive sources of supply to meet their needs, there could be a long-term impact on our revenues. | ||
· | Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and subassemblies, increased expenditures for freight to expedite delivery of required materials, and higher overtime costs and other expenses. These higher expenditures could lower our profit margins. Further, if production is increased rapidly, there may be decreased manufacturing yields, which may also lower our margins. |
23 | ||
· | The introduction of Bluetooth and other wireless headsets presents many significant manufacturing, marketing and other operational risks and uncertainties, including: developing and marketing these wireless headset products; unforeseen delays or difficulties in introducing and achieving volume production of such products; our dependence on third parties to supply key components, many of which have long lead times; and our ability to forecast demand and customer return rates accurately for this new product category for which relevant data is incomplete or not available. We have longer lead times with certain suppliers than commitments from some of our customers. In particular, a major customer only provides us with a 45 day commitment while we commit to inventory purchases beyond this time period. As this inventory is unique to this customer and we have no alternative means of selling any finished products, this could potentially result in significant write-downs of excess inve ntories. |
· | cultural differences in the conduct of business; | ||
· | difficulties in integration of the operations, technologies, and products of the acquired company; | ||
· | the risk that the consolidation of the specialty product group in Chattanooga, Tennessee may not produce the enhanced efficiencies or be as successful as we expect; | ||
· | the risk of diverting management's attention from normal daily operations of the business; | ||
· | potential difficulties in completing projects associated with purchased in-process research and development; | ||
· | risks of entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; | ||
· | the abilities of representatives, distributors, OEM customers and other resellers which are retained by the acquired company or customers of the acquired company; | ||
· | differences in the business information systems of the companies; | ||
· | difficulties in integrating the transactions and business information systems of the acquired company; and | ||
· | the potential loss of key employees of the acquired company. |
24 | ||
· | We obtain certain raw materials, subassemblies, components and products from single suppliers, and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these raw materials, subassemblies, components and products, none of which has significantly affected our results of operations. Current adverse economic conditions could lead to a higher risk of failure of our suppliers to remain in business or to be able to purchase the raw materials, subcomponents and parts required by them to produce and provide to us the parts we need. An interruption in supply from any of our single source suppliers in the future would materially adversely affect our business, financial condition and results of operations. | ||
· | Prices of raw materials, components and subassemblies may rise. If this occurs and we are not able to pass these increases on to our customers or to achieve operating efficiencies that would offset the increases, it would have a material adverse effect on our business, financial condition and results of operations. | ||
· | Due to the lead times required to obtain certain raw materials, subassemblies, components and products from certain foreign suppliers, we may not be able to react quickly to changes in demand, potentially resulting in either excess inventories of such goods or shortages of the raw materials, subassemblies, components and products. Lead times are particularly long on silicon-based components incorporating radio frequency and digital signal processing technologies and such components are an increasingly important part of our product costs. Failure in the future to match the timing of purchases of raw materials, subassemblies, components and products to demand could increase our inventories and/or decrease our revenues, consequently materially adversely affecting our business, financial condition and results of operations. | ||
· | Most of our suppliers are not obligated to continue to provide us with raw materials, components and subassemblies. Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience increased demand or shortages, it could affect deliveries to us. In turn, this would affect our ability to manufacture and sell products that are dependent on those raw materials, components and subassemblies. This would materially adversely affect our business, financial condition and results of operations. | ||
· | Although we generally use standard raw materials, parts and components for our products, the high development costs associated with emerging wireless technologies permits us to work with only a single source of silicon chip-sets on any particular new product. We, or our chosen supplier of chip-sets, may experience challenges in designing, developing and manufacturing components in these new technologies which could affect our ability to meet time to market schedules. Due to our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in development of the chip-set, and/or the inability to meet our customer demand for these new products. Our business, operating results and financial condition could therefore be materially adversely affected as a result of these factors. |
25 | ||
· | uncertain economic conditions and the decline in investor confidence in the market place; | |
· | the announcement of new products or product enhancements by us or our competitors; | |
· | the loss of services of one or more of our executive officers or other key employees; | |
· | quarterly variations in our or our competitors' results of operations; | |
· | changes in our published forecasts of future results of operations; | |
· | changes in earnings estimates or recommendations by securities analysts; | |
· | developments in our industry; | |
· | sales of substantial numbers of shares of our common stock in the public market; | |
· | general market conditions; and | |
· | other factors unrelated to our operating performance or the operating performance of our competitors. |
26 | ||
· | cultural differences in the conduct of business; | ||
· | greater difficulty in accounts receivable collection; | ||
· | unexpected changes in regulatory requirements; | ||
· | tariffs and other trade barriers; | ||
· | economic and political conditions in each country; | ||
· | management and operation of an enterprise spread over various countries; and | ||
· | the burden of complying with a wide variety of foreign laws. |
27 | ||
28 | ||
29 | ||
30 | ||
(in millions) | Net | |||||||||||||||
Underlying | Net | FX | FX | |||||||||||||
Foreign | Exposed | Gain (Loss) | Gain (Loss) | |||||||||||||
USD Value | Currency | Long (Short) | From 10% | From 10% | ||||||||||||
of Net FX | Transaction | Currency | Appreciation | Depreciation | ||||||||||||
Currency - forward contracts | Contracts | Exposures | Position | of USD | of USD | |||||||||||
Euro | $ | 6.3 | $ | 13.5 | $ | 7.2 | $ | (0.8 | ) | $ | 0.7 | |||||
Great British Pound | 1.3 | 10.1 | 8.8 | (1.0 | ) | 0.8 | ||||||||||
Net position | $ | 7.6 | $ | 23.6 | $ | 16.0 | $ | (1.8 | ) | $ | 1.5 | |||||
December 31, 2003 | ||||||||||
(in millions) | ||||||||||
FX | FX | |||||||||
Gain (Loss) | Gain (Loss) | |||||||||
USD Value | From 10% | From 10% | ||||||||
of Net FX | Appreciation | Depreciation | ||||||||
Currency - option contracts | Contracts | of USD | of USD | |||||||
Call options | $ | (38.5 | ) | $ | 2.9 | $ | (3.9 | ) | ||
Put options | 37.0 | 0.8 | (0.1 | ) | ||||||
Net position | $ | (1.5 | ) | $ | 3.7 | $ | (4.0 | ) | ||
31 | ||
ExhibitNumber | Description of Document | |
31.1 | ||
31.2 | ||
32 | ||
99.1 | ||
32 | ||
PLANTRONICS, INC. | |||
(Registrant) | |||
Date: February 6, 2004 | By: | /s/ Barbara V. Scherer | |
Barbara V. Scherer | |||
Senior Vice President - Finance and Administration and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of the Registrant) |
33 | ||
ExhibitNumber | Description of Document | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | |
32 | Section 1350 Certifications. | |
99.1 | Audit Committee Charter, as amended on January 9, 2004 | |
34 |