EX-99 2 ex99-1.htm EXHIBIT 99.1 EARNINGS PRESS RELEASE Q1 06 Exhibit 99.1 Earnings Press Release Q1 06


Exhibit 99.1


PRESS RELEASE



Plantronics Reports First Quarter Fiscal Year 2006 Financial Results
 
FOR INFORMATION, CONTACT:
Jon Alvarado
Treasurer & Director of Investor Relations
(831) 458-7533
FOR IMMEDIATE RELEASE
July 19, 2005




SANTA CRUZ, CA. - July 19, 2005 - Plantronics, Inc., (NYSE: PLT) today announced first quarter revenues of $148.9 million, an increase of approximately 13% from $131.4 million in the first quarter of fiscal 2005, and earnings per share of $0.44. These results were within the range of guidance the Company provided on April 26, 2005 which was for revenues of $148 - $153 million and earnings per share of $0.43 to $0.46.
Ken Kannappan, President and Chief Executive Officer, noted, "Our foremost strategic objective is increasing adoption of headsets in the office. Customer satisfaction with wireless freedom remains outstanding and virtually all of our channel partners have now fully engaged in this opportunity.  Revenues from wireless headsets in the office continued to grow reaching an annual run rate in the June quarter of over $120 million with shipments up about 9% sequentially.  As we expected, the sequential rate of growth moderated, due to the near-100% participation of our channel.  The potential for further growth lies in expanding customer awareness and driving new customers to our channels and we will launch our national marketing campaign tomorrow in New York, focused squarely on wireless for the office.”

“Other positive developments during the quarter include the 34% growth of our Gaming and Computer product group in comparison to the year ago quarter, aided by a refresh of our product line. Our international business was strong, up 24% versus the year ago quarter with strength in APLA and EMEA, and growth in all product lines,” concluded Kannappan.

Revenues were toward the low end of our guidance, with the shortfall primarily in our Office and Contact Center (OCC) products. Much of this was concentrated in Europe where wireless office revenue growth stalled amid slightly weaker economic conditions and a stronger dollar. For the company as a whole, revenues were also limited by delays in achieving volume shipment schedules on our new products. Gross margins came in at 49.1% versus our estimate of approximately flat in comparison to the 50% gross margin in the fourth quarter. The three principal factors contributing to the difference were the lighter contribution from OCC revenues, costs we incurred to prepare for production ramp on new products, and a return to warranty costs typical of levels a year ago but higher than recent trends had suggested. Despite the lower gross margins, operating margins were 19.8%, close to our target of 20%.

Barbara Scherer, SVP and CFO, said, "We repurchased 1,372,500 shares during the quarter at a total cost of $47.3 million, completing our 15th and 16th share repurchase programs. The cumulative effect of the recent share repurchase programs helped reduce the diluted share count from 50.4 million in the first quarter of fiscal 2005 to 49.3 million during the first quarter of fiscal 2006. Inventory management improved to 5.4 turns from 4.9 turns in the March quarter and 5.2 in the June quarter last year. However, our DSO increased to 54 days from 53 in the March quarter. We generated $35.9 million in cash flow from operations but our total cash and marketable securities balance decreased from $242.8 million at the end of fiscal 2005 to $212.2 million at the end of the June quarter, primarily due to cash used for stock repurchase of $47.3 million and capital expenditures of $10.4 million.”

Business Outlook 

The following statements are based on current expectations. Many of these statements are forward-looking, subject to risks and uncertainties, and actual results may differ materially. The statements do not reflect the potential impact of our recently announced definitive agreement to acquire Altec Lansing.

We consider the trends in sell-through of our U.S. commercial distributors of office and contact center products an important indicator of demand. For the June quarter, this group of distributors reported to us an increase in sell-through of 32% in comparison to the June quarter last year, and a 4% increase sequentially. In comparison to a year ago, our analysis indicates that the largest driver in the increased sell-through was demand for the CS50, our wireless headset solution for the North American office market. Our level of revenues to this channel closely matched their level of reported sell-through, resulting in channel inventory levels remaining largely unchanged.

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 current expectations are:

·
Revenues for the second quarter of fiscal 2006 to be in the range of $160-$165 million. Assuming we achieve $160 to $165 million in revenues, the growth vs. Q2 fiscal 2005 will be approximately 23% to 27%. In comparison to the first quarter of fiscal 2006, this level of revenues would result in a 7% to 11% sequential increase.

The risks and uncertainties in this revenue forecast are larger than we typically experience due to 1) uncertainties with respect to completing development and ramping new products in a timely manner to meet demand; 2) the inherent uncertainty with respect to the level of incremental demand which may be generated by our advertising campaign for wireless office headsets, especially since the media schedule begins August 29;  and 3) a greater percentage of the total order flow in the September quarter historically comes in the third month. In particular, we have an unusually high number of important new products which we are planning to begin shipping in volume in August and September. Due to the combination of the marketing campaign and the timing of new product volume ship schedules in the second half of the quarter, we anticipate a revenue pattern in this quarter which will be unusually back end loaded.
 
·
Gross margins are expected to decline about 2 points sequentially. The primary factors driving this are 1) the impact of a stronger dollar on our Euro and GBP denominated revenues, 2) our current anticipation of relatively flat corded OCC business, and 3) absolute and relative growth in Bluetooth mobile and wireless office business.

·
Our advertising program is on schedule to launch this quarter and we anticipate that our total S,G&A expense will increase by an estimated $5.5 million in the September quarter. Most, but not all, of the anticipated increase is attributable to the marketing campaign.

·
As a result, we currently anticipate operating margins for the September quarter will be below our target model of 20%, and will likely be in the 16% to 17% range.

·
Earnings per share for the second quarter of fiscal 2006 to be in the range of $0.39 - $0.43. 

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 second quarter fiscal year 2006 results which we plan to do on Tuesday, November 1, or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the second quarter of the fiscal year 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, July 19 at 2:00 PM (PDT). All interested investors and potential investors in Plantronics stock are invited to participate. To listen 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 #6459983 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.

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 outlook for revenues, gross margin, S,G&A expense, operating margins and earnings for the second quarter of fiscal 2006; we expect the advertising campaign to increase demand for wireless products; we expect an unusually high number of important new products to begin shipping in volume in August and September; and we anticipate a revenue pattern in this quarter which will be unusually back end loaded. These forward-looking statements involve a number of risks and uncertainties, and are based on current expectations, forecasts and assumptions.

Among the factors that could cause actual results to differ materially from those projected are:

 
·
The advertising campaign may not increase demand for our products or may not increase demand as much as we anticipate, or may increase demand for products that we are not prepared to produce within the lead-time required by customers;

 
·
The inability to successfully develop, manufacture and market new products and achieve volume shipment schedules to meet demand;

 
·
The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;

 
·
A softening of the level of market demand for our products within our core contact center market and/or in the newer office, mobile, computer and residential markets;

 
·
The entry of new competitors which could be spurred by changes in the regulatory environment, particularly laws requiring the use of hands-free devices by drivers when using cellular telephones;

 
·
The demand for our wireless headset products may not develop as we anticipate and may lead to excess inventory and the inability to recover the associated development costs;

 
·
Variations in sales and profits in higher tax, as compared to lower tax, jurisdictions;

 
·
Fluctuations in foreign exchange rates; and

 
·
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.
 
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, failure to match production to demand, 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 principal manufacturing facility in Mexico, further terrorist acts, our nation's response to terrorist attacks and the effects of these activities on capital and consumer spending, 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 Form 10-K filed on May 31, 2005, filings 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:
  • Summary of Unaudited Condensed Consolidated Financial Statements
  • Summary of Unaudited Statements of Operations and Related Data
About Plantronics
Plantronics introduced the first lightweight communications headset in 1962 and is recognized as the world leader in communications headsets. A publicly held company with approximately 4,500 employees, Plantronics is the leading provider of headsets to telephone companies and the business community worldwide. Plantronics headsets are also used widely in many Fortune 500 corporations and have been featured in numerous motion pictures and high-profile events, including Neil Armstrong's historic "One small step for man" transmission from the moon in 1969. Plantronics, Inc., headquartered in Santa Cruz, California, was founded in 1961 and maintains offices in 18 countries. Plantronics products are sold and supported through a worldwide network of authorized Plantronics marketing partners. Information about the Company and its products can be found at www.plantronics.com or by calling (800) 544-4660.

Plantronics is a registered trademark of Plantronics, Inc. Bluetooth is a trademark owned by Bluetooth SIG Inc., and is used by Plantronics under license. All other products or service names mentioned herein are trademarks of their respective owners


PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098


               
PLANTRONICS, INC.
 
SUMMARY OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(in thousands, except per share data)      
 
               
               
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Quarter Ended
 
     
 
 
 
 
 
 
 
 
June 30, 
 
 
June 30,
 
 
 
 
2004
 
 
2005
 
               
Net sales
 
$
131,370
 
$
148,909
 
Cost of sales
   
61,703
   
75,760
 
Gross profit
   
69,667
   
73,149
 
Gross profit %
   
53.0
%
 
49.1
%
               
Research, development and engineering
   
10,044
   
13,766
 
Selling, general and administrative
   
28,920
   
29,892
 
Total operating expenses
   
38,964
   
43,658
 
Operating income 
   
30,703
   
29,491
 
Operating income % 
   
23.4
%
 
19.8
%
               
Interest and other income (expense), net
   
335
   
232
 
Income before income taxes
   
31,038
   
29,723
 
Income tax expense
   
8,691
   
8,025
 
Net income 
 
$
22,347
 
$
21,698
 
               
% to Sales 
   
17.0
%
 
14.6
%
               
Diluted earnings per common share
 
$
0.44
 
$
0.44
 
Shares used in diluted per share calculations
   
50,428
   
49,335
 
               
               
               
UNAUDITED CONSOLIDATED BALANCE SHEETS
             
 
   
March 31 
 
 
June 30,
 
 
 
 
2005
 
 
2005
 
ASSETS
             
Cash and cash equivalents
 
$
78,398
 
$
87,505
 
Marketable securities
   
164,416
   
124,723
 
Total cash and marketable securities 
   
242,814
   
212,228
 
Accounts receivable, net
   
87,558
   
88,576
 
Inventory, net
   
60,201
   
56,441
 
Deferred income taxes
   
8,675
   
9,915
 
Other current assets
   
7,446
   
11,196
 
 Total current assets
   
406,694
   
378,356
 
Property, plant and equipment, net
   
59,745
   
66,445
 
Intangibles, net
   
2,948
   
7,146
 
Goodwill
   
9,386
   
11,562
 
Other assets
   
9,156
   
8,969
 
   
$
487,929
 
$
472,478
 
LIABILITIES AND STOCKHOLDERS' EQUITY
             
Accounts payable
 
$
20,316
 
$
25,926
 
Accrued liabilities
   
39,775
   
34,826
 
Income taxes payable
   
11,080
   
15,561
 
 Total current liabilities
   
71,171
   
76,313
 
Deferred tax liability
   
8,109
   
9,230
 
Long-term liability
   
2,930
   
2,344
 
 Total liabilities
   
82,210
   
87,887
 
Stockholders' equity
   
405,719
   
384,591
 
   
$
487,929
 
$
472,478
 




Summary of Unaudited Statements of Operations and Related Data
                         
 
FY03
Q104
Q204
Q304
Q404
FY04
Q105
Q205
Q305
Q405
FY05
Q106
Net sales
$ 337,508
$ 92,786
$ 95,117
$ 107,622
$ 121,440
$ 416,965
$ 131,370
$ 130,220
$ 150,583
$ 147,822
$ 559,995
$ 148,909
Cost of sales
168,565
47,319
46,351
51,381
55,944
200,995
61,703
60,719
75,150
73,965
271,537
75,760
Gross profit
168,943
45,467
48,766
56,241
65,496
215,970
69,667
69,501
75,433
73,857
288,458
73,149
Gross profit %
50.1%
49.0%
51.3%
52.3%
53.9%
51.8%
53.0%
53.4%
50.1%
50.0%
51.5%
49.1%
                         
Research, development and engineering
33,877
8,605
8,247
8,834
9,774
35,460
10,044
10,838
11,989
12,345
45,216
13,766
Selling, general and administrative
80,605
21,153
22,984
23,649
27,970
95,756
28,920
25,305
31,642
30,754
116,621
29,892
Operating expenses
114,482
29,758
31,231
32,483
37,744
131,216
38,964
36,143
43,631
43,099
161,837
43,658
                         
Operating income
54,461
15,709
17,535
23,758
27,752
84,754
30,703
33,358
31,802
30,758
126,621
29,491
Operating income %
16.1%
16.9%
18.4%
22.1%
22.9%
20.3%
23.4%
25.6%
21.1%
20.8%
22.6%
19.8%
                         
Income before income taxes
56,760
16,201
17,676
25,170
27,452
86,499
31,038
34,271
33,947
31,104
130,360
29,723
Income tax expense
15,284
4,860
5,303
7,551
6,506
24,220
8,691
9,596
9,505
5,048
32,840
8,025
Income tax expense as a percent of income before taxes
26.9%
30.0%
30.0%
30.0%
23.7%
28.0%
28.0%
28.0%
28.0%
16.2%
25.2%
27.0%
                         
Net income
41,476
11,341
12,373
17,619
20,946
62,279
22,347
24,675
24,442
26,056
97,520
21,698
Diluted shares outstanding
46,584
45,077
46,372
47,501
50,068
47,492
50,428
50,638
51,365
51,026
50,821
49,335
EPS
$ 0.89
$ 0.25
$ 0.27
$ 0.37
$ 0.42
$ 1.31
$ 0.44
$ 0.49
$ 0.48
$ 0.51
$ 1.92
$ 0.44
                         
Net revenues from unaffiliated customers:
                       
Office and contact center
244,358
62,080
64,192
66,776
80,840
273,888
82,815
86,204
92,469
104,847
366,335
105,425
Mobile
50,088
18,518
18,370
29,528
25,914
92,330
34,458
28,815
35,469
26,520
125,262
26,868
Gaming and Computer
18,494
5,463
5,679
5,807
6,752
23,701
6,992
8,515
15,259
9,038
39,804
9,344
Other specialty products
24,568
6,725
6,876
5,511
7,934
27,046
7,105
6,686
7,386
7,417
28,594
7,272
                         
Net revenues by geographical area from unaffiliated customers:
                       
Domestic
228,942
64,924
64,929
66,484
80,880
277,217
89,088
89,375
100,587
96,480
375,530
96,685
International
108,566
27,862
30,188
41,138
40,560
139,748
42,282
40,845
49,996
51,342
184,465
52,224
                         
Balance Sheet accounts and metrics:
                       
Accounts receivable, net **
49,605
49,285
51,364
63,612
64,344
64,344
68,039
73,345
89,178
87,558
87,558
88,576
Days sales outstanding
 
48
49
53
52
 
47
51
53
53
 
54
Inventory, net
33,758
37,510
37,764
39,178
40,762
40,762
47,418
65,940
75,074
60,201
60,201
56,441
Inventory turns
 
5.0
4.9
5.2
5.2
 
5.2
3.7
4.0
4.9
 
5.4
                         
** Certain balances related to other receivables have been reclassified from accounts receivable, net to other current assets, to represent March 2005 classifications