Plantronics, Inc. (NYSE: PLT) today announced plans to outsource
production of Bluetooth headsets to an existing supplier in China to
improve profitability of its Bluetooth headset product line. The Company
will also reduce costs in related R&D functions and take other measures
to improve overall corporate profitability, resource allocation and
return on capital. In total, approximately 670 positions, primarily in
China, will be affected by today’s announcement. The plan will proceed
in phases and is expected to be complete by October 2009.
“Our primary objectives are to remain profitable and cash flow positive
through this economic downturn, while continuing to invest in Unified
Communications which is the key to our long-term profitable growth,”
said Ken Kannappan, President & CEO. “Mobile phones, smartphones and PCs
are important platforms for Unified Communications and we have developed
an excellent product line and strong market position around these
platforms. However, our cost structure has been challenging,
particularly in the current economic environment. We have carefully
evaluated our alternatives and have decided to outsource production to
GoerTek, Inc., an existing partner with capacity and a strong track
record in Bluetooth products. Not only will this action improve
profitability in the critical Bluetooth headset market, it will increase
our return on capital significantly by decreasing our fixed asset base
and increasing inventory turns.”
As a result of these initiatives, our manufacturing plant in Suzhou,
China will be closed. Bluetooth R&D, supply chain management as well as
sales, marketing and administrative support functions that are part of
our Asia-Pacific hub will continue to be led from our Suzhou site until
our facilities there can be sold and our associates relocated to nearby
facilities better suited to their continuing responsibilities.
“I also want to acknowledge the outstanding quality, responsiveness and
overall track record of our entire Suzhou team. The move to an ODM model
now is driven by a critical need for economies of scale and is not in
the least related to the performance of our plant or our team. In fact,
they have performed excellently and helped us achieve the strong market
position we have today,” Kannappan concluded.
Consistent with our goal to remain profitable through the economic
downturn, we have scrutinized virtually every line item in our P&L. The
measures announced in January coupled with additional expense reductions
since then plus the initiatives announced today are targeted to bring
our total operating expenses down to approximately $195 million in FY10.
This compares to an annualized run rate of approximately $250 million in
Q2 FY09. The transition of our Bluetooth headset manufacturing to an
existing ODM partner with sufficient capacity is expected to reduce our
product costs and take capital out of the business. Higher gross margins
combined with operating expense reductions and a lower capital base are
expected to set the stage for solid profitability for our Bluetooth
headset product line. To achieve this level of future benefits, we
expect to record incremental restructuring and other related charges of
approximately $11 - $13 million in total consisting of approximately $6
- $7 million in non-cash charges for accelerated depreciation and asset
impairments and $5 - $6 million in cash charges primarily related to
employee termination benefits, VAT and duty recapture. We also expect to
incur approximately $2 - $2.5 million of higher tax expense as a result
of the changes in our China operations. Finally, we expect to receive
cash proceeds from the sale of various assets but the timing and amount
of such future proceeds is uncertain.
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,
including statements relating to (i) our intent to outsource production
of Bluetooth headset to an existing supplier in China, (ii) our plan to
close our existing manufacturing facility in Suzhou; (iii) our
expectation that we will eventually sell the facilities we own for cash
proceeds, and relocate to smaller facilities better suited to the
ongoing roles and responsibilities of our Suzhou team; (iv) our
expectation that we will eliminate 670 positions globally and that this
plan will be complete by October 2009; (v) our plan to increase return
on capital; (vi) our expectation that we will incur approximately $11 -
$13 million in related restructuring expenses, (vii) our expectation
that we will obtain higher gross margins and achieve operating expenses
of approximately $195 million in FY10 , (viii) our expectation that we
will incur approximately $2 - 2.5 million of higher tax expenses; and
(ix) our goal to retain our profitability and be cash flow positive
generally and to attain profitability for the Bluetooth headset line.
Plantronics does not assume any obligation to update or revise any such
forward-looking statements, whether as the result of new developments or
otherwise.
Forward-looking statements involve risks and uncertainties that may
cause actual results to differ materially from those contemplated by
such statements. These risks and uncertainties include, but are not
limited to, unexpected delays and uncertainties affecting our ability to
realize targeted expense reductions and annualized savings through
implementation of our outsourcing plan, our ability to sell the
facilities that we currently own and the amount of money that we may
receive from any such sale, our inability to sufficiently reduce our
operational expenses, obtain higher gross margins and maintain our
profitability levels, and our inability to accurately predict global
economic conditions and its affect upon our performance, as well as
other risks indicated in our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K filed May 27, 2008,
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.
About Plantronics
In 1969, a Plantronics headset carried the historic second 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.
