Revenues & Profits Increase on Continued Strength in all Major Businesses; Earnings per Share Exceed Guidance
Plantronics, Inc., (NYSE: PLT) today announced third quarter fiscal 2008
net revenues of $232.8 million compared with $215.4 million in the third
quarter of fiscal 2007. Revenues were within the guidance range of $230
to $235 million. Plantronics’ GAAP diluted earnings per share were $0.39
in the third quarter of fiscal 2008, which includes $2.9 million in
restructuring and other charges related to the consolidation of
manufacturing operations, compared with $0.32 in the same quarter of the
prior year. This compares to the GAAP EPS guidance we issued on October
23, 2007 of $.32 to $0.37 and the subsequent announcement on November
28, 2007 that we expected to incur approximately $2.8 million in
restructuring and other related charges during the quarter ending
December 31, 2007 and that those charges would be expected to reduce
GAAP EPS by $0.06 per share in comparison to the previously provided
guidance from October 23rd.
Non-GAAP diluted earnings per share for the current quarter were $0.50
compared with $0.38 in the third quarter of fiscal 2007. Earnings per
share were greater than the previously provided non-GAAP guidance of
$0.37 to $0.42. The differences between GAAP and non-GAAP earnings per
share for the current period are the cost of equity-based compensation
and the restructuring charges.
“Our December quarter results reflect continued strength in our major
product categories, with increased demand for our office wireless and
consumer Bluetooth products; partially the result of robust market
acceptance of our recently introduced Voyager 520, 815 and 855 models.
We are making progress to return our Audio Entertainment Group to
profitability as evidenced by the consolidation and restructuring
announced in November and substantially completed this quarter, and by
the reduction in the non-GAAP operating expenses compared to the
year-ago quarter,” stated Ken Kannappan, President & CEO of Plantronics.
“Our Office and CallCenter product group performed well with net
revenues up by 10.8%, driven by continued strength in markets outside of
the U.S. While the U.S. portion of this product group grew by 6.2% from
the same quarter in the prior year, it declined 6.1% from the September
quarter to the December quarter,” Kannappan concluded.
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Computer, Clarity)
Third quarter net revenues of $196.0 million were up 11.0% compared with
$176.5 million in the year-ago quarter. Revenue growth compared to the
year-ago quarter was driven by demand for wireless products, with office
wireless and mobile Bluetooth each up approximately 15%. In addition,
certain PC headsets formerly classified in AEG are now included in ACG.
Gross margin in the third quarter of fiscal 2008 was 46.1% compared with
44.2% in the year-ago quarter. Among the factors contributing to the
higher gross margin were cost reduction on our office wireless and
Bluetooth mobile products and the impact of a weaker dollar. Operating
income increased approximately 30% and operating margin was 17.8%
compared with 15.2% in the year-ago quarter, primarily on the strength
of the higher gross margin, though operating expenses as a percent of
net revenue also decreased.
Audio Entertainment Group (AEG) Non-GAAP Results
(Altec Lansing)
Third quarter net revenues of $36.9 million were down 5.3% from $38.9
million in the year-ago quarter, primarily as a result of the PC headset
line now being managed and reported as part of the ACG segment. During
the quarter, we were pleased with the continued growth and acceptance of
the iM600 docking station. Gross margin was 11.1% compared with 9.3% in
the year-ago quarter and the division’s operating loss was $4.8 million
compared with $5.8 million. In the third quarter of fiscal 2007, we
incurred significant supplier claims which were not a factor in the
current quarter.
While the turn-around of this division remains heavily dependent on a
refreshed product portfolio, other steps are being taken to return to
profitability, including the consolidation of manufacturing operations
and other cost reductions. The focus on cost reduction enabled the
division to operate on expenses 6.1% lower than the year-ago period.
Plantronics continues to target profitability for the division by the
December quarter of this calendar year.
During the quarter, Plantronics closed AEG’s manufacturing facility in
Dongguan, China; initiated plans to shut down a related Hong Kong
research and development, sales and procurement office; and consolidated
procurement, research and development activities for AEG in a new
Shenzhen, China site which we expect to begin using this quarter. The
selling, general and administrative functions of AEG are being
consolidated with those of ACG throughout the Asia-Pacific region. These
steps are part of a strategic initiative designed to reduce fixed costs
by outsourcing AEG manufacturing to the network of qualified contract
manufacturers already in place.
Balance Sheet and Cash Flow
Our balance sheet is strong with $170 million in cash, cash equivalents
and marketable securities compared to $103 million at the end of our
last fiscal year in March 2007. Year to date cash flow from operations
is over $74 million with key metrics such as inventory turns up slightly
to 4.2 compared to 4.0 in the December year-ago quarter and days sales
outstanding at 53 days compared to 55 days in the year-ago period.
Business Outlook
The following statements are based on current expectations. Many of
these statements are forward-looking, and actual results may differ
materially from the forward-looking statements.
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 business is inherently difficult to
forecast, and there can be no assurance that the incoming orders we
expect to receive over the balance of the quarter will materialize. Our
incoming order rate tends to be low during the last two weeks of
December and the first half of January in the ACG business and then
rises significantly into February and March. This historical pattern has
recurred thus far this quarter and we therefore must realize an
increased incoming order flow for the balance of the quarter in order to
achieve the revenue range we are projecting. In addition, we believe the
order rate in January compared to the most comparable year-ago periods
for our U.S. Office and Contact Center business is running below that of
a year ago and that this is attributable to deteriorating economic
conditions. With increased economic uncertainty, our business is even
more difficult to forecast than usual. We are currently expecting
revenues for ACG and AEG to decrease sequentially in the fourth quarter
and for the non-GAAP AEG operating loss to be higher than the third
quarter. Subject to the foregoing, we are currently expecting the
following financial results for the fourth quarter of fiscal 2008:
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Net revenues for the fourth quarter of fiscal 2008 to be in the range
of $195 - $205 million;
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Non-GAAP consolidated tax rate to be approximately 24%;
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Non-GAAP earnings per share for the fourth quarter of fiscal 2008 to
be in the range of $0.24 - $0.32; and
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The EPS cost of equity compensation pursuant to FAS 123(R) to be
approximately $0.05 - $0.06 and the EPS cost of AEG restructuring and
related to be approximately $0.02, resulting in
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GAAP earnings per share of $0.17 to $0.24.
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 fourth quarter fiscal year 2008 results or
by other public disclosure. Any statements by persons outside
Plantronics speculating on the progress of the fourth quarter fiscal
year 2008 will not be based on internal Company information and should
be assessed accordingly by investors.
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,
January 22 at 2:00 PM (PST). All interested investors and potential
investors in Plantronics stock are invited to participate. To listen to
the call, 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 #20283787 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.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses
such as stock-based compensation related to stock options, awards and
employee stock purchases from non-GAAP net income, non-GAAP earnings per
diluted share, non-GAAP operating income, non-GAAP operating margin and
non-GAAP effective tax rate. Plantronics excludes these expenses from
its non-GAAP measures primarily because Plantronics does not believe
they are reflective of ongoing operating results and are not part of its
target operating model. Plantronics believes that the use of non-GAAP
financial measures provides meaningful supplemental information
regarding its performance and liquidity, and helps investors compare
actual results to its long-term target operating model goals.
Plantronics believes that both management and investors benefit from
referring to these non-GAAP financial measures in assessing its
performance and when planning, forecasting and analyzing future periods.
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 profitability target of December
2008 for our AEG business, the timing of the opening and successful
consolidation of our AEG procurement, research and development
activities in Shenzhen , China, the timing and successful ramp of
outsourcing AEG manufacturing to the contract manufacturers and that the
return to profitability of the AEG business can be achieved in great
part based upon a refreshed product offering, and our estimates of net
revenues, margins, operating expenses, tax rate and earnings for the
fourth quarter of fiscal 2008. These forward-looking statements involve
a number of risks and uncertainties, and are based on current
information and management judgment.
Among the factors that could cause actual results to differ materially
from those projected are:
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Our operating results are difficult to predict, particularly in light
of the current economic conditions in the U.S.;
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Factors that could cause demand to be different from Plantronics’
expectations include changes in business and economic conditions;
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We do not know how the market for office wireless headsets and
products from our other product groups may be affected in the event of
a recession in the United Statesor global economy;
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The ability to achieve the turnaround of AEG is uncertain because:
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it is dependent upon our ability to more effectively research and
implement features in our AEG products that consumers want and are
willing to purchase;
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we must be able to meet the market windows for these products;
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we must be able to retain or obtain the shelf space for these
products in our sales channel;
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we must retain or improve the brand recognition associated with
the Altec Lansing brand during the turnaround;
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our ability to successfully complete the restructuring and
consolidation activities and the financial impact that such
actions may have is difficult to predict;
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there is a risk that the consolidation may cost more than we
currently expect. There is also a risk that the savings that we
currently predict may not materialize and that the timing of costs
and benefits may be different than what we currently expect. If
the cost of consolidation is more than we currently anticipate or
the savings that we currently anticipate from these activities do
not materialize, our future financial results may be adversely
affected;
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Failure to achieve any of these objectives may adversely affect
our financial results;
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We have significant intangible assets and goodwill recorded on our
balance sheet. If the carrying value of our intangible assets and
goodwill is not recoverable, an impairment loss must be recognized
which would adversely affect our financial results;
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The market for our products is characterized by rapidly changing
technology, short product life cycles, and frequent new product
introductions, and we may not be able to develop, manufacture or
market new products in response to changing customer requirements and
new technologies;
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The actions of existing and/or new competitors, especially with regard
to pricing and promotional programs;
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Product mix is difficult to estimate and standard margin varies
considerably by product;
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Failure to match production to demand given long lead times and the
difficulty of forecasting unit volumes and acquiring the component
parts to meet demand without having excess inventory or incurring
cancellation charges;
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The inability to successfully develop, manufacture and market new
products and achieve volume shipment schedules to meet demand;
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A softening of the level of market demand for our products;
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Variations in sales and profits in higher tax, as compared to lower
tax, jurisdictions;
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Fluctuations in foreign exchange rates;
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Class action lawsuits are being brought against us and other Bluetooth
headset manufacturers claiming “noise induced hearing loss”. While we
believe these suits are without merit, the costs to defend against
them could be high and the results of litigation are not predictable
in any event;
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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; and
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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, 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
manufacturing facilities in Mexico or in China, and the loss of the
services of key executives and employees.
For more information concerning these and other possible risks, please
refer to the Company’s Annual Report on Form 10-K filed May 29, 2007,
quarterly reports filed 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:
About Plantronics
In 1969, a Plantronics headset carried the historic first words from the
moon: “That’s one small step for man, one giant leap for mankind.” Since
then, Plantronics has become the headset of choice for mission-critical
applications such as air traffic control, 911 dispatch, and the New York
Stock Exchange. Today, this history of Sound Innovation® is the basis
for every product we build for the office, contact center, personal
mobile, entertainment and residential markets. The Plantronics family of
brands includes Plantronics, Altec Lansing, Clarity, and Volume Logic.
For more information, go to www.plantronics.com
or call (800) 544-4660.
Altec Lansing, Clarity, Plantronics, Sound Innovation, Volume Logic and
AudioIQ are trademarks or registered trademarks of Plantronics, Inc. All
other trademarks are the property of their respective owners.
