Plantronics, Inc. (NYSE: PLT) today announced third quarter fiscal 2009
net revenues of $182.8 million compared with $232.8 million in the third
quarter of fiscal 2008. Plantronics’ GAAP diluted loss per share was
$1.90 in the third quarter of fiscal 2009 compared with earnings per
share of $0.39 in the same quarter of the prior year. Non-GAAP diluted
earnings per share for the current quarter was $0.08 compared with $0.53
in the third quarter of fiscal 2008. The Company took a $117.5 million
non-cash asset impairment charge on the carrying value of some of its
goodwill and long-lived assets exclusive of the $23.9 million related
tax benefit. The difference between GAAP and non-GAAP earnings per share
for the current quarter includes goodwill and asset impairment charges,
purchase accounting amortization, restructuring and other related costs,
the cost of stock-based compensation, and the release of tax reserves
due to expiration of certain statutes of limitation.
“Worsening economic conditions affected all parts of our business and
make us cautious about the outlook for fiscal 2010. As announced on
January 14th, we have taken significant steps to reduce our cost
structure with the objective of being profitable and cash flow positive
through this economic cycle while continuing to focus on core strategic
initiatives such as Unified Communications. Our focus on inventory
reduction in the December quarter resulted in a reduction of more than
$25 million or approximately 16%, and enabled us to remain cash flow
positive in the quarter,” said Ken Kannappan, President and CEO. “We’ve
made progress in our consumer businesses by introducing competitive
products, gaining market share and reducing costs. However, it’s clear
that this economic cycle will require further actions to improve
profitability and we are actively evaluating our alternatives,”
Kannappan concluded.
Audio Communications Group (ACG) Non-GAAP Results
(Office &
Contact Center, Mobile, Gaming and Computer, Other)
Comparisons
are to the Same Quarter in the Prior Year
Third quarter fiscal 2009 net revenues of $152.6 million were down 22.1%
compared with $196.0 million, with weakness in all geographies and
product groups other than our Clarity products. Office and Contact
Center revenue of $101.7 million declined 22.4%, with office corded
products revenue declining 21% while office cordless products revenue
declined 24%. Bluetooth headset revenue was $33.6 million, down 22%, and
Gaming & Computer products revenue was $8.5 million, down 18%.
Gross margin in the third quarter of fiscal 2009 was 40.1% compared with
46.2% in the year-ago quarter. The lower gross margin was due to poor
overall factory utilization and lower Bluetooth gross margin as the
result of higher warranty costs. Operating income decreased to $9.0
million from $35.4 million, and the operating margin was 5.9% compared
with 18.1%. Operating expenses declined by 5.4% from $55.2 million to
$52.2 million.
The Company continues to believe that the implementation of Unified
Communications (UC) technologies by large corporations will be a
significant long-term driver of office headset adoption, and as a
result, a key long-term driver of revenue and profit growth. “Despite
weak economic conditions, trial deployments of UC solutions and headsets
continue to grow, with some evidence that the cost savings and
productivity enhancements derived from UC are driving the expansion of
existing deployments in both in the U.S. and Europe. This is
encouraging, but further growth during the recession may be unlikely,”
stated Kannappan.
Audio Entertainment Group (AEG) Non-GAAP Results
(Docking
Audio, PC Audio, Other)
Comparisons are to the Same Quarter in
the Prior Year
Gross margin declined from $5.0 million to $1.1 million or 13.5% to 3.6%
as a result of higher requirements for inventory provisions and makers’
claims, foreign exchange, and the overall composition of revenue.
Relative to our internal plans and the related guidance for the quarter,
the principal factors which caused the shortfall in gross profit were
rework and expediting costs on a key product line, the negative impact
of foreign exchange movements and the composition of revenue.
Operating expenses declined 28.5% from $8.3 million to $5.9 million.
Despite the progress on the cost structure, the operating loss increased
from $3.3 million to $4.8 million as a result of the lower gross margin.
Business Outlook
The following statements are based on current expectations. As described
in “Safe Harbor” below, many of these statements are forward-looking.
Actual results are subject to a variety of risks and uncertainties and
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. With
increasing economic uncertainty, our business is even more difficult to
forecast than usual. On January 14, 2009, we announced a series of
actions to lower our cost structure and improve efficiencies. These
actions include a restructuring plan to reduce our worldwide workforce
by approximately 18% in comparison to September 30, 2008, along with
other cost cutting measures including management salary reductions and
decreases in other operating expenses. As a result of the reduction in
the worldwide workforce, we expect to record restructuring and other
related charges, primarily for employee termination benefits, of
approximately $7.7 to $8.2 million in total, of which $1 million was
recognized in the third quarter. We expect the balance of $6.7 million
to $7.2 million to be recognized in the fourth quarter of fiscal 2009.
Annualized savings from the cost reductions are expected to be over $50
million in fiscal 2010 compared with our annualized expenditure level in
the second quarter of fiscal 2009. In addition, the Company plans an
approximate 50% reduction in capital expenditures for fiscal year 2010.
Revenues in all portions of our business are expected to decline in the
fourth quarter. Gross margins are expected to be under pressure due to
lower production, a weak demand environment and competitive pricing in
the Bluetooth segment. Non-GAAP operating expenses are expected to
decline further in the fourth quarter as a result of the restructuring
activities announced on January 14, 2009. In addition the company
remains committed to managing expenses in line with its goal of
remaining profitable and positive cash flow generation.
Subject to the foregoing, we are currently expecting the following
financial results for the fourth quarter of fiscal 2009:
-
Net revenues for the fourth quarter of fiscal 2009 to be in the range
of $125 - $135 million;
-
A Non-GAAP operating loss of $4 - $10 million;
-
A GAAP loss.
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 2009 results or
by other public disclosure. Any statements by persons outside
Plantronics speculating on the progress of the fourth quarter fiscal
year 2009 will not be based on internal company information and should
be assessed accordingly by investors.
Plantronics has scheduled a conference call to discuss third quarter
results. The conference call will take place Tuesday, January 27 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 #60282103 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.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses
and charges such as restructuring and other related charges, certain tax
credits and the release of certain tax reserves, stock-based
compensation expenses related to stock options, awards and employee
stock purchases, purchase accounting amortization and goodwill and
long-lived asset impairment charges 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,
including statements relating to (i) our restructuring plan, (ii) our
expectation that we will incur approximately $7.7 to $8.2 million in
related restructuring charges and the timing of such charges, (iii) our
expectation that we will realize annualized savings from cost reductions
of over $50 million, (iv) our expectations regarding our capital
expenditures, (v) our objective to maintain our profitability, be cash
flow positive and increase our competitive position, (vi) our ability to
continue to focus on certain strategic initiatives, (vii) further
actions we may take to improve profitability, (viii) the future of
Unified Communications technologies, including their implementation,
growth in deployments and the effect on headset adoption, (ix) our
position in the Unified Communications market, (x) our estimate of
revenue for the fourth quarter of fiscal 2009, and (xi) our estimate of
GAAP and Non-GAAP financial results for the fourth quarter of fiscal
2009 and related components of earnings per share, as well as other
matters discussed in this press release that are not purely historical
data. 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.
Among the factors that could cause actual results to differ materially
from those contemplated are:
-
All aspects of our business are difficult to predict, particularly in
light of the current economic conditions in both the domestic and
international markets;
-
We do not know how the market for each of our product groups will
continue to be negatively affected as a result of the recession in the
United States or global economy;
-
Fluctuations in foreign exchange rates;
-
The bankruptcy of additional distributors or key customers or the
bankruptcy of or reduction in capacity of our key suppliers;
-
Additional actions we take may affect GAAP results;
-
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;
-
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, additional impairment losses must be
recognized which would adversely affect our financial results;
-
We have experienced volatility in prices from our suppliers, including
our manufacturers located in China, and in light of the uncertainties
of the economy in the United States and around the world, which could
negatively affect profitability and/or market share; and
-
Additional risk factors include: interruption in the supply of
sole-sourced critical components, continuity of component supply at
costs consistent with our plans, the inherent risks of our substantial
foreign operations, and problems which might affect our manufacturing
facilities in Mexico or in China.
For more information concerning these and other possible risks, please
refer to the Company’s 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.
Financial Summaries
The following related charts are provided:
About Plantronics
In 1969, a Plantronics headset carried the historic third 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
