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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 27, 1997 or
[ ] 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 1-12696
PLANTRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0207692
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
337 Encinal Street, P.O. Box 1802
Santa Cruz, California 95061-1802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 426-6060
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 27, 1997
----- ---------------------------------
Common Stock, $.01 par value 17,192,096
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PLANTRONICS, INC.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 27, MARCH 29,
1997 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 56,218 $ 42,262
Accounts receivable 40,504 36,981
Inventory 23,507 20,042
Deferred income taxes 2,840 2,840
Other current assets 608 909
--------- ---------
Total current assets 123,677 103,034
Property, plant and equipment, net 21,263 18,970
Other assets 4,619 5,237
========= =========
$ 149,559 $ 127,241
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,878 $ 9,578
Accrued liabilities 22,146 20,441
Income taxes payable 10,239 9,674
--------- ---------
Total current liabilities 43,263 39,693
Deferred income taxes 1,616 1,616
Long-term debt 65,050 65,050
--------- ---------
Total liabilities 109,929 106,359
--------- ---------
Stockholders' equity:
Common stock; $0.01 par value,
16,520,990 shares as of September 27,1997 and 16,366,212 shares
as of March 29, 1997 issued and outstanding 172 164
Additional paid-in capital 58,841 58,224
Cumulative translation adjustment (891) (891)
Accumulated deficit (6,163) (23,834)
--------- ---------
51,959 33,663
Less: Treasury stock
(common: 671,106 shares in fiscal year 1998 and
696,142 shares in fiscal 1997) at cost (12,329) (12,781)
--------- ---------
Total stockholders' equity 39,630 20,882
--------- ---------
$ 149,559 $ 127,241
========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements
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PLANTRONICS, INC.
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Net sales $ 56,539 $ 47,120 $ 110,562 $ 92,704
Cost of sales 26,003 21,787 50,959 42,871
--------- --------- --------- ---------
Gross profit 30,536 25,333 59,603 49,833
--------- --------- --------- ---------
Operating expense:
Research, development and engineering 4,395 3,270 8,384 6,733
Selling, general and administrative 11,375 9,833 22,842 19,353
--------- --------- --------- ---------
Total operating expenses 15,770 13,103 31,226 26,086
--------- --------- --------- ---------
Operating income 14,766 12,230 28,377 23,747
Interest expense, including amortization
of debt issuance costs 1,737 1,760 3,493 3,550
Interest income and other income, net (744) (366) (1,102) (674)
--------- --------- --------- ---------
Income before income taxes 13,773 10,836 25,986 20,871
Income tax expense 4,407 3,684 8,315 7,096
--------- --------- --------- ---------
Net income attributable to holders
of common stock $ 9,366 $ 7,152 $ 17,671 $ 13,775
========= ========= ========= =========
Net income per common share
attributable to holders of common stock $ 0.51 $ 0.40 $ 0.98 $ 0.77
========= ========= ========= =========
Shares used in per share calculations
(See Note 2) 18,356 17,720 18,086 17,898
========= ========= ========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements
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PLANTRONICS, INC.
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,671 $ 13,775
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property and
intangible assets 1,772 1,194
Other non-cash charges, net
-- 342
Changes in assets and liabilities:
Accounts receivable (3,633) 253
Provision for doubtful accounts 110 300
Inventory (3,465) (1,840)
Other current assets 301 412
Other assets 499 3
Accounts payable 1,300 (34)
Accrued liabilities 1,705 (201)
Income taxes payable 565 651
-------- --------
Cash provided by operating activities 16,825 14,855
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,946) (4,695)
-------- --------
Cash used by investing activities (3,946) (4,695)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 625 737
Purchase of treasury stock (116) --
Sale of treasury stock 567 (12,014)
-------- --------
Cash used for and provided by financing
activities 1,076 (11,277)
-------- --------
Net increase (decrease) in cash and
cash equivalents 13,955 (1,117)
Cash and cash equivalents at beginning
of period 42,262 26,787
======== ========
Cash and cash equivalents at end of period $ 56,217 $ 25,670
======== ========
Supplemental disclosures:
Cash paid for:
Interest $ 3,267 $ 3,281
======== ========
Income taxes $ 8,850 $ 4,047
======== ========
See Notes to Unaudited Condensed Consolidated Financial Statements
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PLANTRONICS, INC.
ITEM 1. FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION. The accompanying interim consolidated condensed
financial statements of Plantronics, Inc. ("Plantronics," the "Company" or the
"Registrant") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements have been
prepared in conformity with generally accepted accounting principles, consistent
in all material respects with those applied in the Annual Report on Form 10-K
for the year ended March 29, 1997. The interim financial information is
unaudited, but reflects all normal recurring adjustments which are, in the
opinion of management, necessary to provide a fair statement of results for the
interim periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The interim financial
statements should be read in connection with the financial statements in the
Company's Annual Report on Form 10-K for the fiscal year ended March 29, 1997.
NOTE 2. EFFECT OF INCREASE IN STOCK AND STOCK SPLIT. In July 1997, the Company's
stockholders approved an increase in the authorized shares of Common Stock of
Plantronics, Inc., to 40,000,000. On September 2, 1997, the Company effected a
two-for-one stock split in the form of a stock dividend to stockholders of
record as of August 18, 1997. All share, per share, Common Stock, and capital in
excess of par value amounts herein have been restated to reflect the effect of
this split.
NOTE 3. PERIODS PRESENTED. The Company's fiscal year-end is the Saturday closest
to March 31st (i.e. March 29, 1997) and the second fiscal quarter-end is the
Saturday closest to September 30 (i.e. September 27, 1997 or September 28, 1996,
as applicable). Plantronics' fiscal quarters ended September 27, 1997 and
September 28, 1996 consisted of thirteen weeks each.
NOTE 4. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS (IN THOUSANDS):
September 27, March 29,
1997 1997
------- -------
Inventories:
Finished goods $10,072 $11,056
Work in process 4,101 1,647
Purchased parts 9,334 7,339
------- -------
$23,507 $20,042
======= =======
Property, plant and equipment:
Land $ 4,693 $ 4,693
Buildings and improvements (useful lives: 10-40 years) 9,401 9,104
Machinery and equipment (useful lives: 4-8 years) 29,598 25,949
-------- --------
43,692 39,746
Less accumulated depreciation (22,429) (20,776)
-------- --------
$ 21,263 $ 18,970
======== ========
NOTE 5. FOREIGN CURRENCY TRANSACTIONS. The Company's functional currency for all
operations is the US dollar. Accordingly, gains and losses resulting from the
remeasurement of the financial statements of foreign subsidiaries into U.S.
dollars are included in other income (expense) in the consolidated statements of
operations. Gains and losses resulting from foreign currency transactions are
also included in other income (expense). Aggregate exchange losses in the fiscal
quarter ended September 27, 1997 were $0.1 million. There was a $0.1 million
exchange gain in the comparable period ending September 28, 1996. Through the
two fiscal quarters ended
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September 27, 1997 aggregate exchange losses equaled $0.3 million and for the
comparable period ended September 28, 1996 exchange gains equaled exchange
losses.
NOTE 6. NET INCOME PER SHARE. Net income per share is based on the weighted
average common shares outstanding and dilutive common equivalent shares (using
the treasury stock method). Common equivalent shares include stock options.
NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS.
Effective December 27, 1997 the Company will adopt Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." At that time, the
Company will be required to change the method currently used to calculate
earnings per share and to restate all prior periods. The new requirements will
include a calculation of basic earnings per share, from which the dilutive
effect of stock options will be excluded. The basic earnings per share are
expected to reflect an increase of $0.06 and $0.05 per share for the quarters
ended September 27,1997 and September 28,1996, respectively, over the primary
earnings per share reported for these quarters. For the six month periods then
ended, the increases are expected to be $0.10 and $0.09 per share, respectively.
A calculation of diluted earnings per share will also be required. This amount
is not expected to differ materially from the Company's reported primary
earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). This statement is effective for the Company's fiscal year ending March
27, 1999. The statement establishes presentation and disclosure requirements for
reporting comprehensive income. Comprehensive income includes charges or credits
to equity that are not the result of transactions with owners. The Company plans
to adopt the disclosure requirements and report comprehensive income as part of
the Consolidated Statements of Shareholders' Equity as required under SFAS 130,
and expects there to be no material impact on the Company's financial position
and results of operations as a result of the adoption of this new accounting
standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises the required
information regarding the reporting of operating segments. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. The Company will adopt SFAS 131 beginning in fiscal 1999
and does not expect such adoption to have a material effect on the consolidated
financial statements.
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PLANTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
1. RESULTS OF OPERATIONS
The following table sets forth items from the Condensed Consolidated Statements
of Operations as a percentage of net sales. The Company's fiscal year 1998 runs
from March 30, 1997 through March 28, 1998. The Company's fiscal year 1997 ran
from March 31, 1996 through March 29, 1997. The second quarter of the Company's
fiscal 1998 commenced June 29, 1997 and ended September 27, 1997.
Three Months Ended Six Months Ended
-------------------- --------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
----- ----- ----- -----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 46.0 46.2 46.1 46.2
----- ----- ----- -----
Gross profit 54.0 53.8 53.9 53.8
Research and development 7.8 6.9 7.6 7.3
Selling, general and admin 20.1 20.9 20.6 20.9
----- ----- ----- -----
Operating income 26.1 26.0 25.7 25.6
Other (income) expense 1.8 3.0 2.2 3.1
----- ----- ----- -----
Income before income taxes 24.4 23.0 23.5 22.5
Income tax expense 7.8 7.8 7.5 7.7
----- ----- ----- -----
Net Income 16.6% 15.2% 16.0% 14.9%
----- ----- ----- -----
NET SALES. Net sales for the quarter ended September 27, 1997 were $56.5
million, an increase of 20% over net sales of $47.1 million for the quarter
ended September 28, 1996. Domestic sales increased 19% in the second quarter to
$38.8 million. International revenues for the second quarter of fiscal 1998 were
$17.7 million, an increase of 22% over the comparable period in fiscal 1997.
Consolidated net sales for the first two quarters of fiscal 1998, commencing
March 30, 1997 and ended September 27, 1997, were $110.6 million, an increase of
19% over net sales of $92.7 million in the same period in fiscal 1997. Domestic
sales in the first two quarters of fiscal 1998 were $78.0 million, an increase
of 20% over the comparable period of fiscal 1997. International net sales in the
first half of fiscal 1998 totaled $32.6 million, up 17% over the same period in
fiscal 1997.
GROSS PROFIT. Gross profit of $30.5 million for the quarter ended September 27,
1997 increased by $5.2 million over the same period in fiscal 1997, a 21%
increase. Gross profit of $59.6 million for the first two quarters of fiscal
1998 grew by $9.8 million, an increase of 20% over the comparable period of
fiscal 1997. The increases in gross profits principally reflect the increase in
revenues, with continuing benefits from manufacturing efficiencies and cost
reduction programs.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and engineering
expenses for the quarter ended September 27, 1997 were $4.4 million compared to
$3.3 million for the quarter ended September 28, 1996, an increase of $1.1
million. Expenses for the first half of fiscal year 1998 grew $1.7 million over
the first half of fiscal 1997. Increased staff and costs associated with new
product development account for the increase.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal 1998 quarter ended September 27, 1997
were $11.4 million compared to $9.8 million for the fiscal 1997 quarter ended
September 28, 1996. Expenses in the first half of fiscal 1998 were $3.5 million
higher than the expenses in the
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PLANTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
first half of fiscal 1997. The overall increases in selling, general and
administrative expenses in the second quarter and first half of fiscal 1998 were
the result of additional staffing of sales and marketing positions worldwide,
increased spending in market research programs, costs associated with higher
sales volume worldwide and costs due to introductions of new products.
OTHER INCOME / EXPENSE. Interest expense, interest income and other income for
the second quarter of fiscal 1998 resulted in a net expense of $1.0 million,
down from the net expense of $1.4 million for the same period in fiscal 1997.
The total of other income/expense for the first half of fiscal 1998 was a net
expense of $2.4 million, down from the net expense of $2.9 million for the
comparable period in fiscal 1997. The reduction in interest expense, net of
interest income and other income, is primarily attributable to interest income
derived from increases in cash and cash equivalents.
FOREIGN CURRENCY. The Company's cash flows are substantially US dollar
denominated. However, the Company is exposed to certain foreign currency
fluctuations, primarily in Europe and Mexico. The source of currency risk in
Europe is due to receivables denominated in local currency, although this has
been largely offset by payables denominated in local currency. This natural
hedging approach has substantially limited the Company's net exposure to the
effect of currency fluctuations and management believes additional hedging has
not been merited. As the Company's sales in Europe grow, this strategy will
require review and the Company may experience greater exposure to currency
fluctuations as a result of its increasing international activities. In the
fourth quarter of fiscal 1996, the company formed Plantronics B.V., a wholly
owned subsidiary incorporated in the Netherlands. Administrative functions,
particularly with respect to the Company's international sales, were transferred
to Plantronics B.V. The Company now incurs local expenses in its Plantronics,
B.V. subsidiary in Dutch guilders and a small proportion of expenses in pounds
sterling, while recording no revenue in Dutch guilders.
The Company's peso transaction exposure at its manufacturing subsidiary in
Tijuana, Mexico is limited mostly to payroll. The favorable effects to the
Company on the devaluation of the peso in the years reported was somewhat offset
by local currency pay raises to its employees in Mexico. Because of these
factors, management does not believe the devaluation has had a material effect
on the Company.
INCOME TAX EXPENSE. The Company's effective tax rate is 32% in the quarter ended
September 27, 1997, down from 34% in the quarter ended June 30, 1996, due to the
increased recognition of revenues in countries with tax rates lower than the
United States.
LIQUIDITY AND CAPITAL RESOURCES. The Company's principal source of liquidity in
the six-month period ended September 27, 1997 was $16.8 million of cash
generated from operating activities. In the six-month period ended September 28,
1996, liquidity was principally provided by $14.9 million of cash generated from
operating activities. Cash and cash equivalents increased to $56.2 million at
September 27, 1997, from $25.7 million at September 28, 1996, primarily due to
cash provided by operating activities. The Company has a $20.0 million credit
facility, including a $10.0 million letter-of-credit subfacility, with a major
bank. As of September 27, 1997, the Company had no cash borrowings under the
revolving credit facility and $2.7 million outstanding under the
letter-of-credit subfacility. The terms of the credit facility contain covenants
which materially limit the Company's ability to incur debt, make capital
expenditures and pay dividends, among other matters. These covenants may
adversely affect the Company to the extent it cannot comply with them or it must
limit its ordinary course of activities.
OPERATING ACTIVITIES. In the six-month period ended September 27, 1997 the
Company generated $16.8 million in net cash from operating activities, primarily
as a result of $17.7 million in net income. Depreciation and amortization grew
to $1.8 million. The increase in accrued liabilities and accounts payable of
$1.7 million and $1.3 million was offset by an increase in inventory and
accounts receivable of $3.5 million and $3.6 million respectively, due to the
increased volume of sales. Work in process increased $2.5 million in the first
six months of fiscal 1997, as production increased to meet increased sales
volumes. Despite the increases in production, customer order backlog increased
in the fiscal quarter ended September 27, 1997. The Company will continue to
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PLANTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
evaluate order receipts and backlog throughout the year and work to balance
production with demand as appropriate.
INVESTING ACTIVITIES. Capital expenditures were $3.9 million in the six-month
period ended September 27, 1997, compared to $4.7 million in the six-month
period ended September 28, 1996. Capital expenditures were incurred principally
in the continued upgrade of the Company's business information systems, and
tooling to expand manufacturing capacity.
FINANCING ACTIVITIES. In the six-month period ended September 27, 1997, the
Company sold 30,636 shares of its Treasury Stock for $0.6 million, repurchased
5,600 shares of its Common Stock for $0.1 million and received $0.6 million in
proceeds from the exercise of stock options. The Company repurchased 655,894
shares of its Common Stock for $12.0 million during the six-month period ended
September 28, 1996 and received $0.7 million in stock option exercise proceeds.
The Company has Senior Notes in a principal amount of $65.1 million outstanding
that bear interest, payable semiannually, at a rate of 10% per annum and mature
on January 15, 2001. The Senior Notes are redeemable, at the Company's option,
in whole or in part, any time after January 15, 1999. The Senior Note Indenture
contains certain covenants that, among other things, materially limit the
ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, issue preferred stock of subsidiaries, engage in transactions with
affiliates, create liens, engage in mergers and consolidations, make certain
asset sales or make certain investments. The Senior Note Indenture also provides
that holders of the Senior Notes have the right to require the Company to
repurchase the Senior Notes in the event of a "change in control" and certain
various defined events of default.
The Company believes that current balances and cash provided by operations,
together with available borrowing capacity under the revolving credit facility,
will be sufficient to make required interest payments under the Senior Notes and
to fund operations at least through fiscal 1998. Subject to the terms and
conditions of the 10% Senior Note Indenture and the Company's revolving credit
facility, the Company may use available cash for such purposes as paying down
the line of credit, repurchasing Senior Notes or acquiring complementary
businesses, products or technologies.
2. FORWARD LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE OPERATING RESULTS
The statements in the last sentence of the paragraph captioned "Operating
Activities," and the first sentence in the paragraph immediately above are
forward looking statements which involve risks and uncertainties. In addition,
the Company may from time to time make oral forward looking statements. The
Company's actual results could differ materially from those anticipated in these
forward looking statements as a result of a number of factors, including the
following:
NEED TO SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS. The Company's net sales
to date have been derived principally from the sale of lightweight
communications headsets ("tops") and associated telephone adapter bases
("bottoms"). Historically, a substantial amount of the Company's sales have been
made through distributors to call center users such as telemarketing personnel,
reservation agents, telephone operators and air traffic controllers. The Company
has recently expanded its marketing efforts to sell lightweight headsets to the
business, computer, mobile and home office user market segments. The Company's
product development efforts historically have been directed toward incremental
enhancements of existing products. The Company intends to both continue
enhancement of its existing products and develop new products that capitalize on
its core technologies and thus expand the Company's product offerings to new
user market segments. The success of new product introductions is dependent on
several factors, including proper new product selection, timely completion and
introduction of new product designs, cost-effective manufacture of such
products, quality of new products and market acceptance. To be successful in the
future, the Company's must be able to develop new products, qualify these new
products with its customers, successfully introduce these products to the market
on a timely basis, and commence and sustain volume production to meet customer
demands. Although the Company has attempted to determine the potential market
segments where its present and potential future products can be sold, there can
be no assurance that the
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PLANTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
market segments identified will in fact materialize
with significant sales volumes. Although the Company has attempted to determine
the specific needs of these new market segments, there is no assurance that the
Company's present and future products designed for these market segments will
gain substantial market acceptance. As set forth below, there is no assurance
that new products can be manufactured cost-effectively to meet the potential
demand if the market segments develop and the Company's products meet the needs
of users within those potential market segments.
COMPETITION. As the Company develops new generations of products and enters new
market segments, including the developing business, computer, mobile and home
office user segments of the market, the Company anticipates that it may face
additional competition from companies which currently do not offer
communications headsets. Such companies may be larger, offer broader product
lines and have substantially greater financial and other resources than the
Company. Such competition could negatively affect pricing and gross margins.
Although the Company has historically competed very successfully in the call
center segment of the market, there can be no assurance that it will be able to
continue its leadership position in that segment of the market or that the
Company will be able to compete successfully in the previously defined new
market segments.
DEMAND OF CHANGING TECHNOLOGIES. The technology of telephone headsets, both
"tops" and "bottoms," has traditionally evolved slowly. Products have
traditionally exhibited life cycles of three to five years before introduction
of the next generation of products. Next generation products usually included
stylistic changes and quality improvements but were based on similar technology.
The Company believes that future changes in technology may come at a faster
pace, particularly in the telephone, cellular telephone and computer uses in the
business and home office market segments. In addition, in order to avoid product
obsolescence, the Company will have to monitor technological changes in
telephony and computer technologies, as well as users' demands for new
technologies. The Company may experience fluctuations in manufacturing yields
that can materially affect the Company's operations, particularly in the
start-up phase of new products or new manufacturing processes. The Company's
future success will be dependent in part on its ability to successfully develop
and manufacture products that utilize new technologies and introduce them to the
marketplace. Failure by the Company to keep pace with future technological
changes could materially adversely affect the Company's revenues and operating
results.
NEED TO MATCH PRODUCTION TO DEMAND. Historically, the Company has seen steady
increases in customer demand for its products and has generally been able to
increase production to meet that demand. However, there is no assurance that the
Company will continue to be able to balance production with demand. Demand for
the Company's products is dependent on many factors and such demand is
inherently difficult to forecast. Rapid increases in production levels could
require expenditures that may negatively affect gross margins and may result in
decreased manufacturing yields. Failure to balance demand and production could
result in excesses or shortages of components and parts and excesses or
shortages of manufacturing capacity. Failure to meet demand could result in the
inability to meet customer expectations and adversely affect its operations.
UTILIZATION OF SINGLE SOURCE SUPPLIERS. The Company's manufacturing operations
primarily consist of assembly of components and subassemblies that Plantronics
manufactures or purchases from a variety of sources. The cost, quality and
availability of such components are essential to the successful production of
the Company's communications products. Most components and subassemblies used in
the Company's manufacturing operations are obtained, or are reasonably
available, from numerous sources. However, certain of its subassemblies and
components are currently obtained only from single suppliers. The Company
currently purchases those goods on a purchase order basis and does not intend to
enter into master purchase agreements with any of its single source suppliers.
The Company has to date experienced only minor interruptions in the supply of
these components, none of which has adversely affected its operations. However,
an interruption in supply from any of the Company's single source suppliers in
the future could temporarily result in the Company's inability to deliver
products on a timely basis, which in turn could adversely affect its operations.
IMPORTANCE OF PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS. The Company's
success will depend in part on its ability to obtain patents and preserve other
intellectual property rights covering the design and operation of its products.
The Company currently holds certain patents and intends to continue to seek
patents on its inventions
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PLANTRONICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
when appropriate. The process of seeking patent
protection can be lengthy and expensive, and there can be no assurance that
patents will issue from currently pending or future applications or that the
Company's existing patents or any new patents issued will be of sufficient scope
or strength or provide meaningful protection or any commercial advantage to the
Company. The Company may be subjected to, or may initiate, litigation or patent
office interference proceedings, which may require significant financial and
management resources. The failure to obtain necessary licenses or other rights
or the advent of litigation arising out of any such claims could have a material
adverse effect on the Company's operations.
RISK ASSOCIATED WITH FOREIGN OPERATIONS AND SALES. The Company's net sales were
derived from United States and foreign customers. In addition, the Company
conducts the majority of its headset assembly operations outside the United
States and obtains components from various foreign suppliers. Offshore
operations are subject to certain inherent risks, including delays in
transportation, changes in governmental policies, taxes, tariffs and
import/export regulations, political unrest, fluctuations in currency exchange
rates and geographic limitations on management controls and reporting. There can
be no assurance that the inherent risks of offshore operations, particularly in
Mexico, will not adversely affect the Company's business, operating results and
financial condition in the future.
Although the Company generally transacts business internationally in United
States currency, declines in the values of local currencies relative to the
United States dollar in countries in which the Company sells its products could
adversely affect the Company by resulting in less competitive pricing for the
Company's products. The Company does not currently engage in any hedging
activities to mitigate exchange rate risks and to date has not been adversely
affected by fluctuating currencies. To the extent that the Company is successful
in increasing its sales to foreign customers, or to the extent that the Company
increases its transactions in foreign currencies, the Company's results of
operations could be adversely affected by exchange rate fluctuations.
DEPENDENCE UPON SENIOR MANAGEMENT. The Company believes that it has benefited
substantially from the leadership of Robert S. Cecil, the Chairman of the Board,
President and Chief Executive Officer of the Company, and the other current
members of senior management, and that the loss of their services could have a
material adverse effect on the Company's business and future operations.
Although the Company has an employment agreement with Mr. Cecil, such agreement
permits him to voluntarily terminate his employment at any time. In addition,
although Mr. Cecil's agreement contains a five-year non-compete covenant which
takes effect upon termination of his employment, such covenants are generally
not enforceable under California law.
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PLANTRONICS, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The 1997 Annual Meeting of Stockholders of Plantronics, Inc. (the
"Company") was held at the Corporate offices of Plantronics, Inc., 337
Encinal St., Santa Cruz, CA 95060, on July 30, 1997 (the "Annual
Meeting").
(b) At the Annual Meeting, the following seven individuals were elected to
the Company's Board of Directors, constituting all members of the Board
of Directors:
Nominee Votes Cast For Withheld or Against
- ------- -------------- -------------------
Robert S. Cecil 7,662,444 29,973
Robert F.B. Logan 7,662,499 29,918
M. Saleem Muqaddam 7,662,899 29,518
John Mowbray O'Mara 7,660,999 31,418
Trude C. Taylor 7,660,999 31,418
J. Sidney Webb 7,660,999 31,418
David A. Wegmann 7,650,499 41,918
(c) The following additional proposals were considered at the Annual Meeting
and were approved by the vote of the Stockholders, in accordance with
the tabulation shown below.
(1) Proposal to increase the authorized number of shares of Common
Stock from 25,000,000 to 40,000,000 shares.
Votes For Votes Against Abstain
--------- ------------- -------
6,610,117 1,079,598 2,702
(2) Proposal to ratify the appointment of Price Waterhouse LLP as the
independent public accountants of the Company for the fiscal year
ending March 28, 1998.
Votes For Votes Against Abstain
--------- ------------- -------
7,676,602 13,753 2,062
ITEM 5. OTHER INFORMATION
The registrant's Chief Financial Officer, Barbara Scherer, joined the
Company in April 1997, having last been employed as Chief Financial Officer of
Streamlogic Corporation. Streamlogic Corporation filed voluntarily for
protection under Chapter 11 of the federal Bankruptcy Code on June 26, 1997.
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K
(a) Exhibits. The following exhibit is filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
------ -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant
during the fiscal quarter ended September 27, 1997.
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PLANTRONICS, INC.
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 hereunto duly authorized.
PLANTRONICS, INC.
(Registrant)
NOVEMBER 10, 1997 /s/ Barbara V. Scherer
- ------------------------------- -------------------------------
(Date) (Signature)
Barbara V. Scherer
Vice President
NOVEMBER 10, 1997 /s/ Barbara V. Scherer
- ------------------------------- -------------------------------
(Date) (Signature)
Barbara V. Scherer
Vice President - Finance and
Administration and Chief Financial
Officer
(Principal Financial Officer)
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PLANTRONICS, INC.
EXHIBIT INDEX
Exhibit Number
- --------------
27.1 Financial Data Schedule