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Plantronics Announces Third Quarter Fiscal 2011 Results

February 01, 2011

Revenue In-Line with Guidance, Non-GAAP Operating Income and EPS Exceed Guidance

Plantronics, Inc. (NYSE: PLT) today announced third quarter fiscal 2011 net revenues of $181.6 million, a 9% increase compared with net revenues of $165.9 million in the third quarter of fiscal 2010. Net revenues were within the guidance range of $180 million - $185 million provided on November 2, 2010. Plantronics’ GAAP diluted earnings per share from continuing operations was $0.64 in the third quarter of fiscal 2011 compared with $0.47 in the same quarter of the prior year. Non-GAAP diluted earnings per share from continuing operations for the third quarter of fiscal 2011 increased 32% to $0.66 from $0.50 in the same quarter of the prior year. The difference between GAAP and non-GAAP earnings per share from continuing operations for the third quarter of fiscal 2011 includes stock-based compensation charges, restructuring and other related costs, purchase accounting amortization, all net of associated tax impact, and a tax benefit from expiration of certain statutes of limitations.

“We continue to see growth in our core Office and Contact Center market in all geographies as a result of improving global economic conditions,” stated Ken Kannappan, President & CEO. ”We are increasingly well positioned to benefit from expected strong growth in the Unified Communications market over the next several years.”

“We generated approximately $29 million in cash flow from operations in the current quarter and repurchased over 280,000 shares of our common stock while maintaining a strong cash position with over $414 million in cash, cash equivalents and short-term investments. We also had $18.1 million in long-term investments at the end of the quarter,” stated Barbara Scherer, SVP Finance and Administration & CFO.

Improved economic conditions and the trend toward Unified Communications (”UC”) drove a 19% increase in net revenues of Office and Contact Center products compared to the third quarter of fiscal 2010. OCC net revenues were $122.9 million in the third quarter of fiscal 2011, compared with $103.1 million in the third quarter of fiscal 2010. Revenues of UC products were $13.5 million for the quarter ended December 31, 2010 and $36.6 million for the nine months ended December 31, 2010.

Mobile net revenues were $43.2 million in the third quarter of fiscal 2011, a decrease of 8% from $47.0 million in the third quarter of fiscal 2010. Gaming and Computer Audio net revenues were $10.5 million in the third quarter of fiscal 2011, a decrease of 5% from $11.1 million in the third quarter of fiscal 2010.

GAAP operating income in the third quarter of fiscal 2011 was $36.5 million, resulting in an operating margin of 20.1%. This compares to GAAP operating income of $27.8 million and an operating margin of 16.7% in the prior year quarter. Non-GAAP operating income in the third quarter of fiscal 2011 was $40.6 million compared to previously provided guidance of $37.5 million to $40.5 million and resulted in a non-GAAP operating margin of 22.4%. In the prior year quarter, non-GAAP operating income was $31.8 million with a non-GAAP operating margin of 19.2%.

Plantronics completed the sale of Altec Lansing, its Audio Entertainment Group (”AEG”) segment, effective as of December 1, 2009. All results of operations related to AEG (including the loss on the sale) were classified as discontinued operations for all periods presented.

Business Outlook

The following statements are based on our current expectations and many of these statements are forward-looking. Actual results are subject to a variety of risks and uncertainties and may differ materially from our expectations.

Plantronics’ business is inherently difficult to forecast, particularly with continuing uncertainty in global economic conditions, and there can be no assurance that the incoming orders it expects to receive over the balance of the current quarter will materialize.

Plantronics has a “book and ship” business model whereby it ships most orders to customers within 48 hours of its receipt of those orders and, therefore, the level of backlog does not provide reliable visibility into potential future revenues. In addition, our incoming order rate tends to be low during the last two weeks of December and the first half of January and then rises significantly into February and March.

Net revenues in the fourth quarter of fiscal 2011 are expected to be lower than the third quarter of fiscal 2011 due to seasonally lower demand for our consumer products. The March quarter has historically been a weaker quarter for consumer products than the December quarter and we expect that pattern to recur.

Subject to the foregoing, we are currently expecting the following range of financial results for continuing operations for the fourth quarter of fiscal 2011:

  • Net revenues of $167 million - $172 million;
  • Non-GAAP operating income of $40.0 million to $42.0 million inclusive of a $5.1 million gain related to our agreement to dismiss litigation involving the alleged theft of our trade secrets by a competitor and in exchange for a full release and settlement of the claims;
  • Non-GAAP diluted earnings per share of $0.58 - $0.62;
  • EPS cost of stock-based compensation to be approximately $0.06; and
  • GAAP diluted earnings per share of $0.52 to $0.56.

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 press release announcing its fourth quarter fiscal 2011 results or by other public disclosure. Any other statements speculating on the progress of the fourth quarter fiscal 2011 will not be based on internal information and should be assessed accordingly by investors.

Dividend Announcement

Plantronics also announced that its Board of Directors declared a quarterly dividend of $0.05 per share. The dividend will be payable on March 10, 2011 to stockholders of record at the close of business on February 22, 2011.

Conference Call Scheduled to Discuss Financial Results

Plantronics has scheduled a conference call to discuss third quarter fiscal 2011 results. The conference call will take place on Tuesday, February 1, 2011 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 #23921083 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 website 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, the release of tax reserves due to the expiration of certain statutes of limitations, stock-based compensation expenses related to stock options, restricted stock and employee stock purchases, purchase accounting amortization and impairment of goodwill and long-lived assets from non-GAAP income from continuing operations, non-GAAP earnings per diluted share from continuing operations, non-GAAP operating income, non-GAAP gross margin, non-GAAP operating margin and non-GAAP effective tax rate on continuing operations. 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 considered by management as part of Plantronics’ 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, but non-GAAP financial measures are not meant to be considered in isolation or as a substitute for, or superior to, income from operations, net income or earnings per share prepared in accordance with GAAP.

Safe Harbor

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to (i) the UC market, including our position in the UC market, (ii) our estimates of GAAP and non-GAAP financial results for the fourth quarter of fiscal 2011, including revenue, operating income and earnings per share; (iii) our estimated stock-based compensation expense for the fourth quarter of fiscal 2011; (iv) trends and our predictions regarding ordering patterns for the fourth quarter of fiscal 2011, 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:

  • economic conditions in both the domestic and international markets;
  • 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) UC solutions may not be adopted with the breadth and speed in the marketplace that we currently anticipate; (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) our plans are dependent upon adoption of our UC solution by major platform providers such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc., Alcatel-Lucent, and IBM, 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, and our support expenditures may substantially increase over time due to the complex nature of the platforms developed by the major UC providers as these platforms continue to evolve and become more commonly adopted;
  • 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;
  • volatility in prices from our suppliers, including our manufacturers located in China, have and could negatively affect our profitability and/or market share;
  • fluctuations in foreign exchange rates;
  • the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers;
  • 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
  • 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.

For more information concerning these and other possible risks, please refer to Plantronics Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 1, 2010, 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:

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  • Summary Unaudited Condensed Consolidated Financial Statements
  • Unaudited GAAP to Non-GAAP Statements of Operations Reconciliations for the Three and Nine Months ended December 31, 2010 and December 31, 2009
  • Summary Unaudited Statements of Operations and Related Data on a Non-GAAP Basis for Continuing Operations

About Plantronics

Plantronics is a global leader in audio communications for businesses and consumers. We have pioneered new trends in audio technology for 50 years, creating innovative products that allow people to simply communicate. From Unified Communication solutions to Bluetooth headsets, we deliver uncompromising quality, an ideal experience, and extraordinary service. Plantronics is used by every company in the Fortune 100, as well as 911 dispatch, air traffic control and the New York Stock Exchange. For more information, please visit www.plantronics.com or call (800) 544-4660.

Plantronics, the logo design, and Clarity are trademarks or registered trademarks of Plantronics, Inc. The Bluetooth name and the Bluetooth trademarks are owned by Bluetooth SIG, Inc. and are used by Plantronics, Inc. under license. All other trademarks are the property of their respective owners.

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