Plantronics, Inc. (NYSE: PLT) today announced that it has entered into a
definitive agreement to sell Altec Lansing, the Audio Entertainment
Group of Plantronics, to Prophet Equity LP, a Southlake, Texas - based
private equity firm, for consideration of approximately $18 million in
cash, net of liabilities assumed, and subject to certain adjustments.
The transaction, which was approved by Plantronics’ Board of Directors
on October 1, 2009, is expected to close by the end of October.
In concert with the sale of Altec Lansing assets, Plantronics also
announced a streamlined functional corporate structure, replacing the
matrix it had operated with, to best target the Unified Communications
opportunity.
“Unified Communications represents the greatest revenue and profit
opportunity in the Company’s history. The reorganization and asset sale
represent further steps to focus on our core market, improve the
Company’s return on invested capital and enhance time to market and
profitability through a simpler organizational structure,” stated Ken
Kannappan, President & CEO.
Under the terms of the agreement, Plantronics will retain certain Altec
Lansing assets and liabilities as of the closing date, including
accounts receivable, accounts payable and certain other liabilities. As
a result, the Company expects these net assets to result in additional
operating cash flow once the retained working capital assets are
monetized in fiscal 2010. Plantronics will also retain assets and/or use
of certain assets with strategic value to Plantronics, including the
right to use the Altec Lansing brand for specific music applications for
three years. As a result of the sale of Altec Lansing, we expect all
future and historical AEG segment results to be reported as discontinued
operations in Plantronics financial statements beginning in the third
quarter of fiscal 2009.
In the quarter ended September 26, 2009, Plantronics has determined that
it will be required to record an impairment charge related to its AEG
long-lived assets which includes the remaining intangible assets from
the Altec Lansing acquisition in 2005 along with potential other
long-lived assets within the AEG segment. The impairment analysis is
being performed and we currently estimate the non-cash impairment
charge, net of the tax benefit, to be in the range of $13 to $16 million.
“Capital freed up by the sale of Altec Lansing will be redeployed to its
highest and best use. Our philosophy is to use excess cash to drive
stockholder value and the primary vehicle we have used to accomplish
this is through stock repurchase programs. Throughout our history, we
have bought back over $425 million of stock and are currently executing
on our 19th stock repurchase program. We intend to continue to buy back
stock on a regular basis with cash beyond domestic requirements,” stated
Barbara Scherer, Senior Vice President of Finance and Administration &
CFO.
“Altec Lansing contributed to our success in the consumer market, where
we are today a Bluetooth headset market leader and we will work hard to
ensure a smooth transition for Altec Lansing’s partners and customers.
We are confident that Prophet Equity LP will continue to manage the
business effectively,” Kannappan concluded.
“Prophet Equity is delighted to be partnering with Altec Lansing at this
time in its history, as we believe it is an influential and dynamic
company with a bright future in many portable digital audio platforms,”
commented Ross Gatlin, CEO at Prophet Equity. “This transaction
leverages our operational and strategic toolkit as well as underscores
our internal capabilities to execute complex carve outs.” Gatlin added.
George Stelling, COO at Prophet Equity, commented further that “Our team
sees Altec Lansing’s compelling audio technologies, its global customer
and supply base, and its top notch management team as strengths that are
unrivaled in the audio market today. We look forward to helping grow the
company, to partnering with Plantronics in the future on new platforms,
and to serving Altec’s enthusiastic and loyal customers for many years
to come.”
Houlihan Lokey is serving as financial advisor, and Wilson Sonsini
Goodrich & Rosati is serving as legal advisor to Plantronics in
connection with the transaction.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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) the proposed sale of the Audio
Entertainment Group to Prophet Equity, (ii) the opportunities provided
by Unified Communications (”UC”); (iii) the effects of the
reorganization of the Company’s corporate structure and the sale of the
Audio Entertainment Group; (iv) the retained working capital assets and
our ability to monetize them; (v) the estimated impairment charge; (vi)
our use of the capital from the sale of Altec Lansing, including the
stock repurchase program; and (vii) the effects of the sale of Altec
Lansing on Altec Lansing, including its effects on Altec Lansing’s
partners and customers. 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:
-
uncertainty as to whether the sale of Altec Lansing to Prophet Equity
will be completed;
-
the failure of either party to meet the closing conditions set forth
in the asset purchase agreement pursuant to which Plantronics will
sell Altec Lansing to Prophet Equity;
-
reaction of Altec Lansing’s customers, suppliers and partners to the
sale of Altec Lansing;
-
economic conditions in both the domestic and international markets;
-
the bankruptcy or financial weakness of distributors or key customers,
or the bankruptcy of or reduction in capacity of our key suppliers;
-
our ability to realize our UC plans and to achieve the financial
results projected to arise from UC adoption could be adversely
affected by the following factors: (i) as UC becomes more widely
adopted, the risk that competitors will offer solutions that will
effectively commoditize our headsets which, in turn, will reduce the
sales prices for our headsets; (ii) our plans are dependent upon
adoption of our UC solution by major platform providers such as
Microsoft, Avaya, IBM and Cisco, and we have a limited ability to
influence such providers with respect to the functionality of their
platforms, their rate of deployment, and their willingness to
integrate their platforms with our solutions; (iii) the development of
UC solutions is technically complex and this may delay or obstruct our
ability to introduce solutions to the market on a timely basis and
that are cost effective, feature rich, stable and attractive to our
customers; (iv) as UC becomes more widely adopted we anticipate that
competition for market share will increase, and some competitors may
have superior technical and economic resources, and (v) UC solutions
may not be adopted with the breadth and speed in the marketplace that
we currently anticipate;
-
further impairment losses on the carrying value of our intangible
assets and goodwill could be recognized if it is determined the value
is not recoverable which would adversely affect our financial results;
and
-
additional risk factors including: 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, and unexpected delays and uncertainties
affecting our ability to realize targeted expense reductions and
annualized savings through implementation of our plan to outsource the
manufacturing of our Bluetooth products in China to GoerTek, Inc.
For more information concerning these and other possible risks, please
refer to the Company’s Annual Report on Form 10-K filed May 26, 2009,
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
Plantronics is a world leader in personal audio communications for
professionals and consumers. From unified communication solutions to
Bluetooth headsets, Plantronics delivers unparalleled audio experiences
and quality that reflect our nearly 50 years of innovation and customer
commitment. Plantronics is used by every company in the Fortune 100 and
is the headset of choice for air traffic control, 911 dispatch and the
New York Stock Exchange. For more information, please visit www.plantronics.com
or call (800) 544-4660.
About Prophet Equity
Prophet Equity is a private equity firm that uses proven, data-driven
analytical techniques coupled with over 100 years of investment and
management experience to invest in, unlock and realize future value
today. Partnering with owners and management teams, Prophet Equity’s
team utilizes a toolkit that is Fortune 500 tested and private equity
proven to diagnose and drive dramatic value creation. Portfolio company
management teams are highly motivated with clear, uncapped incentives
based on realized business performance.
Over the last decade alone, Prophet’s Principals have invested and
managed approximately $300 million of control equity in entities with
over $2.5 billion in revenue. Their control equity investments focus on
lower and middle market companies with strategically strong businesses
with significant value creation potential, such as those found in
partnerships, corporate carve-outs, divestitures and non-strategic
businesses of larger companies. Representative business situations
include special situations, succession planning, recapitalizations,
reorganizations, turnarounds, acquisitions, mergers and bankruptcies.
For more information, please visit www.prophetequity.com
or call us at +1.817.898.1500.
Altec Lansing and Plantronics are trademarks or registered trademarks of
Plantronics, Inc. The Bluetooth® word mark and logos are registered
trademarks of Bluetooth SIG, Inc. and any use of such marks by
Plantronics is under license. All other trademarks are property of their
respective owners
