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Plantronics Reports Record Revenues28 January 2006
Plantronics, Inc., (NYSE: PLT) today reported third quarter revenues of $222.5 million and earnings per share of $0.46, above the guidance it provided on November 1, 2005. Record revenues of $161.5 million were achieved by the Audio Communications Group ("ACG") and revenues from the Audio Entertainment Group added $61 million to the total.
Audio Communications Group
ACG's record revenues of $161.5 million were up approximately 7% from $150.6 million in the year ago quarter. Revenue growth was driven by our wireless office headsets, which represented about 25% of total ACG revenues in comparison to approximately 13% a year ago. Demand for our office wireless headsets was up both in North America and also in EMEA. The Voyager 510S contributed to the increase, but the CS50 and CS60 product families also continued to grow and accounted for the majority of the growth, even in comparison to the September quarter.
On the strength of our new Bluetooth consumer headset line, revenues from Bluetooth headsets for cell phone applications were up sharply versus a year ago, though revenues from corded mobile headsets were down resulting in lower overall revenues from mobile headsets in comparison to the third quarter a year ago. Our line of Bluetooth headsets has enjoyed a good reception in the market and the Pulsar 590 and the Explorer 320 were both Best of Innovations award honorees at the International Consumer Electronics show. In addition, the Discovery 640 received the prestigious Industry Forum (iF) Design Award, a competition that critiques more than 2,000 products from 37 countries.
Finally, in comparison to a year ago, gaming and computer product revenues were down in comparison to the all-time high reached in the third quarter of 2005, which had been primarily driven by the exclusive promotion of a gaming headset for use with Halo 2.
Ken Kannappan, President and Chief Executive Officer, noted, "The benefits of freedom and mobility continue to be validated, both by the growth in wireless office products, and the reception to our Bluetooth line of mobile headsets. Our branding and advertising campaign has increased awareness and consideration of Plantronics and we are cautiously optimistic about the results to date."
Gross margins for the Audio Communications Group were approximately 46.4%, down from 50.1% a year ago but up from 45.5% in the September quarter and in line with our expectations. Relative to the year ago quarter, the principal reason for the decline was higher manufacturing costs, in part the result of expanding capacity for anticipated future growth and in part the result of yields and unit cost on new products not yet at target levels. Higher warranty costs and larger provisions for excess and obsolete inventory were the other key factors for the decline relative to a year ago, though warranty costs were stable relative to the September quarter and requirements for E&O were lower than the September quarter. Finally, in comparison to the September quarter, progress was made on improving yields and reducing manufacturing costs.
Operating expenses were up $5.5 million versus the year ago quarter with the principal drivers being the $3.3 million spent during the quarter on our national advertising campaign partially offset by reductions in other marketing programs, and expansion of R&D. As a result of higher revenues and improved efficiencies in some areas, our total operating expenses increased by just 1.4 points to 30.4% of revenues despite the substantial increase in branding, advertising and demand generation activities and the $2 million increase in spending for new product development.
Audio Entertainment Group
Driven by strong sales of the inMotion(TM) portable audio line of products, Altec Lansing achieved record revenues of $61 million. (Revenues of Altec Lansing products account for all the revenues of the Audio Entertainment Group.) In accordance with purchase accounting, we recorded non-cash charges of approximately $4.2 million, including $3.3 million to cost of goods sold, and $0.9 million in S, G&A principally for amortization of intangible assets acquired. Including these non-cash charges associated with purchase accounting, the acquisition was accretive to earnings per share by $0.05 in the quarter.
"The transition to digital media, a key element of our Audio Entertainment strategy, continues to accelerate at a rapid pace. Digital music downloads grew 146% in 2005 vs. 2004. Apple sold 14 million iPods in the 4th quarter, 2-3 million more than the most optimistic forecasts, and demand for speakers for these digital players continues to grow with consumers choosing the Altec Lansing line in record numbers," said Ken Kannappan.
Balance Sheet and Cash Flow
Our balance sheet is presented on a consolidated basis, including the assets and liabilities of both our principal business segments. Highlights for the quarter include that we repurchased 798,500 shares of stock for a total of $22.4 million, paid down $9 million on our line of credit and generated $8.5 million in cash flow from operations. Principally as a result of these factors, our cash and short term investments amounted to $58.2 million in comparison to $91.2 million as of September 30, 2005. We had strong cash collections, a full quarter of Altec Lansing revenues, and reduced our days sales outstanding to 51 in comparison to 60 for the September quarter. Inventory performance also improved from 4 turns in the September quarter to 4.8 turns in the December quarter as a result of a full quarter of Altec Lansing and a reduction of Altec Lansing inventory after a seasonally strong quarter for which they had built inventory in September.
Business Outlook
The following statements are based on current information and expectations. For the fourth quarter, we currently estimate that: Revenues for the fourth quarter of fiscal 2006 will be approximately $200 to $210 million in total bringing fiscal year revenues to approximately $744 to $754 million. We expect ACG revenues to increase modestly and AEG revenues to decline sharply. (AEG's revenues are almost entirely derived from retail channels and the consumer audio business is highly seasonal with the December quarter being the strongest historically.)
Earnings per share for the fourth quarter of fiscal 2006 will be in a range of $0.39 to $0.44. We expect earnings from ACG to increase but to be offset by decreases within AEG. Included in these estimates is our expectation that we will incur $1.8 million in purchase accounting related charges for amortization of intangible assets acquired, against which no tax benefit is available. Based on our estimated range for the fourth quarter, full year EPS are expected to be in the range of $1.56 to $1.61.
Plantronics does not intend to update these estimates except by its next press release announcing its fourth quarter and fiscal year 2006 results, which we plan to release on Tuesday, May 2, 2006. Any statements by persons outside Plantronics speculating on the final outcome of the fourth quarter and the fiscal year will not be based on internal Company information and should be assessed accordingly by investors.
We have been evaluating the potential to repatriate cash from offshore earnings and profits under the American Jobs Creation Act, and also evaluating borrowing offshore within that same context. Our analysis is now complete and we have decided not to repatriate cash under this program.
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, January 24, 2006 at 2:00 PM (PST). 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 #4413105 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 http://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 estimates of revenues and earnings for the fourth quarter of fiscal 2006. These forward-looking statements involve a number of risks and uncertainties, and are based on current information and management judgment.
Among the factors that could cause actual results to differ materially from those projected are:
-- Our operating results are difficult to predict;
-- The market for our products is characterized by rapidly changing technology, short product life cycles, and frequent new product introductions, and we may not be able to develop, manufacture or market new products in response to changing customer requirements and new technologies;
-- The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;
-- The inability to successfully develop, manufacture and market new products and achieve volume shipment schedules to meet demand;
-- If demand for iPod products decreases, demand for certain of our portable products could be negatively affected;
-- If Apple does not renew or cancels our licensing agreement, our products may not be compatible with iPods, resulting in loss of revenues and excess inventories, which would negatively impact our financial results;
-- 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;
-- 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 manufacturing facilities in Mexico or in China, 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 Annual Report on Form 10-K filed on May 31, 2005, 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:
-- Summary Unaudited Condensed Consolidated Financial Statements
-- Summary Unaudited Condensed Statements of Operations by Segment
-- Summary Unaudited Statements of Operations and Related Data
About Plantronics
In 1969, a Plantronics headset carried the historic first words from the moon: "That's one small step for man, one giant leap for mankind." Since then, we've 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(TM) 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 http://www.plantronics.com or call 800-544-4660.
NOTE: Plantronics, Altec Lansing, Clarity, VolumeLogic and Sound Innovation are either registered trademarks or trademarks 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.
CONTACT: Jon Alvarado, Treasurer and Director, Investor Relations, +1-831-458-7533.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended Nine Months Ended
December December December December
31, 31, 31, 31,
2004 2005 2004 2005
Net revenues $150,583 $222,512 $412,173 $543,646
Cost of revenues 75,150 128,486 197,572 302,469
Gross profit 75,433 94,026 214,601 241,177
Gross profit % 50.1% 42.3% 52.1% 44.4%
Research, development and
engineering 11,989 15,980 32,871 45,868
Selling, general and
administrative 31,642 43,130 85,867 110,845
Total operating expenses 43,631 59,110 118,738 156,713
Operating income 31,802 34,916 95,863 84,464
Operating income % 21.1% 15.7% 23.3% 15.5%
Interest and other income
(expense), net 2,145 (596) 3,393 667
Income before income taxes 33,947 34,320 99,256 85,131
Income tax expense 9,505 12,307 27,792 27,713
Net income $24,442 $22,013 $71,464 $57,418
% of Net revenues 16.2% 9.9% 17.3% 10.6%
Diluted earnings per common
share $0.48 $0.46 $1.41 $1.18
Shares used in diluted per share
calculations 51,365 48,165 50,811 48,768
UNAUDITED CONSOLIDATED BALANCE SHEETS
March December
31, 31,
2005 2005
ASSETS
Cash and cash equivalents $78,398 $58,191
Short term investments 164,416 --
Total cash, cash
equivalents, and
short term investments 242,814 58,191
Accounts receivable, net 87,558 126,169
Inventory, net 60,201 106,573
Deferred income taxes 8,675 14,130
Other current assets 7,446 15,604
Total current assets 406,694 320,667
Property, plant and equipment,
net 59,745 86,792
Intangibles, net 2,948 111,283
Goodwill 9,386 54,003
Other assets 9,156 8,828
$487,929 $581,573
LIABILITIES AND STOCKHOLDERS'
EQUITY
Line of credit $-- $32,057
Accounts payable 20,316 50,568
Accrued liabilities 39,775 49,691
Income taxes payable 11,080 14,687
Total current liabilities 71,171 147,003
Deferred tax liability 8,109 28,913
Long-term liability 2,930 1,866
Total liabilities 82,210 177,782
Stockholders' equity 405,719 403,791
$487,929 $581,573
AUDIO COMMUNICATIONS GROUP
SUMMARY CONDENSED FINANCIAL STATEMENTS
(in thousands, except per share data)
UNAUDITED STATEMENTS OF OPERATIONS
Quarter Ended Nine Months Ended
December December December December
31, 31, 31, 31,
2004 2005 2004 2005
Net revenues $150,583 $161,519 $412,173 $460,728
Cost of revenues 75,150 86,598 197,572 244,217
Gross profit 75,433 74,921 214,601 216,511
Gross profit % 50.1% 46.4% 52.1% 47.0%
Research, development and
engineering 11,989 13,936 32,871 41,873
Selling, general and
administrative 31,642 35,193 85,867 98,969
Total operating expenses 43,631 49,129 118,738 140,842
Operating income 31,802 25,792 95,863 75,669
Operating income % 21.1% 16.0% 23.3% 16.4%
Interest and other income
(expense), net 2,145 858 3,393 2,841
Income before income taxes 33,947 26,650 99,256 78,510
Income tax expense 9,505 7,195 27,792 21,197
Net income $24,442 $19,455 $71,464 $57,313
% of Net revenues 16.2% 12.0% 17.3% 12.4%
Diluted earnings per common
share $0.48 $0.40 $1.41 $1.18
Shares used in diluted per share
calculations 51,365 48,165 50,811 48,768
AUDIO ENTERTAINMENT GROUP
SUMMARY CONDENSED FINANCIAL STATEMENTS
(in thousands, except per share data)
UNAUDITED STATEMENTS OF OPERATIONS
Quarter Nine Months
Ended Ended
December 31, December 31,
2005 2005
Net revenues $60,993 $82,918
Cost of revenues 41,888 58,252
Gross profit 19,105 24,666
Gross profit % 31.3% 29.7%
Research, development and
engineering 2,044 3,995
Selling, general and administrative 7,937 11,876
Total operating expenses 9,981 15,871
Operating income 9,124 8,795
Operating income % 15.0% 10.6%
Interest and other income
(expense), net (1,454) (2,174)
Income before income taxes 7,670 6,621
Income tax expense 5,112 6,516
Net income $2,558 $105
% of Net revenues 4.2% 0.1%
Diluted earnings per common share $0.05 $0.00
Shares used in diluted per share
calculations 48,165 48,768
Summary of Unaudited Statements of Operations and Related Data
Q104 Q204 Q304 Q404 FY04
Net revenues $92,786 $95,117 $107,622 $121,440 $416,965
Cost of revenues 47,319 46,351 51,381 55,944 200,995
Gross profit 45,467 48,766 56,241 65,496 215,970
Gross profit % 49.0% 51.3% 52.3% 53.9% 51.8%
Research, development and
engineering 8,605 8,247 8,834 9,774 35,460
Selling, general and
administrative 21,153 22,984 23,649 27,970 95,756
Operating expenses 29,758 31,231 32,483 37,744 131,216
Operating income 15,709 17,535 23,758 27,752 84,754
Operating income % 16.9% 18.4% 22.1% 22.9% 20.3%
Income before income taxes 16,201 17,676 25,170 27,452 86,499
Income tax expense 4,860 5,303 7,551 6,506 24,220
Income tax expense as a
percent
of income before taxes 30.0% 30.0% 30.0% 23.7% 28.0%
Net income 11,341 12,373 17,619 20,946 62,279
Diluted shares outstanding 45,077 46,372 47,501 50,068 47,492
EPS $0.25 $0.27 $0.37 $0.42 $1.31
Net revenues from
unaffiliated customers:
Audio Communication Group
Office and Contact
Center 62,080 64,192 66,776 80,840 273,888
Mobile 18,518 18,370 29,528 25,914 92,330
Gaming and Computer 5,463 5,679 5,807 6,752 23,701
Other specialty products 6,725 6,876 5,511 7,934 27,046
Audio Entertainment Group -- -- -- -- --
Net revenues by
geographical area
from unaffiliated
customers:
Domestic 64,924 64,929 66,484 80,880 277,217
International 27,862 30,188 41,138 40,560 139,748
Balance Sheet accounts and
metrics:
Accounts receivable, net
** 49,285 51,364 63,612 64,344 64,344
Days sales outstanding 48 49 53 52
Inventory, net 37,510 37,764 39,178 40,762 40,762
Inventory turns 5.0 4.9 5.2 5.2
Q105 Q205 Q305 Q405 FY05
Net revenues $131,370 $130,220 $150,583 $147,822 $559,995
Cost of revenues 61,703 60,719 75,150 73,965 271,537
Gross profit 69,667 69,501 75,433 73,857 288,458
Gross profit % 53.0% 53.4% 50.1% 50.0% 51.5%
Research, development
and engineering 10,044 10,838 11,989 12,345 45,216
Selling, general and
administrative 28,920 25,305 31,642 30,754 116,621
Operating expenses 38,964 36,143 43,631 43,099 161,837
Operating income 30,703 33,358 31,802 30,758 126,621
Operating income % 23.4% 25.6% 21.1% 20.8% 22.6%
Income before income
taxes 31,038 34,271 33,947 31,104 130,360
Income tax expense 8,691 9,596 9,505 5,048 32,840
Income tax expense as a
percent
of income before taxes 28.0% 28.0% 28.0% 16.2% 25.2%
Net income 22,347 24,675 24,442 26,056 97,520
Diluted shares
outstanding 50,428 50,638 51,365 51,026 50,821
EPS $0.44 $0.49 $0.48 $0.51 $1.92
Net revenues from
unaffiliated customers:
Audio Communication
Group
Office and Contact
Center 82,815 86,204 92,470 104,846 366,335
Mobile 34,458 28,815 35,469 26,520 125,262
Gaming and Computer 6,992 8,515 15,259 9,038 39,804
Other specialty
products 7,105 6,686 7,385 7,418 28,594
Audio Entertainment
Group -- -- -- -- --
Net revenues by
geographical area
from unaffiliated
customers:
Domestic 89,088 89,375 100,587 96,480 375,530
International 42,282 40,845 49,996 51,342 184,465
Balance Sheet accounts
and metrics:
Accounts receivable, net
** 68,039 73,345 89,178 87,558 87,558
Days sales outstanding 47 51 53 53
Inventory, net 47,418 65,940 75,074 60,201 60,201
Inventory turns 5.2 3.7 4.0 4.9
Q106 Q206 * Q306 FY06*
Net revenues $148,909 $172,225 $222,512 $543,646
Cost of revenues 75,760 98,223 128,486 302,469
Gross profit 73,149 74,002 94,026 241,177
Gross profit % 49.1% 43.0% 42.3% 44.4%
Research, development and
engineering 13,766 16,122 15,980 45,868
Selling, general and
administrative 29,892 37,823 43,130 110,845
Operating expenses 43,658 53,945 59,110 156,713
Operating income 29,491 20,057 34,916 84,464
Operating income % 19.8% 11.6% 15.7% 15.5%
Income before income taxes 29,723 21,088 34,320 85,131
Income tax expense 8,025 7,381 12,307 27,713
Income tax expense as a percent
of income before taxes 27.0% 35.0% 35.9% 32.6%
Net income 21,698 13,707 22,013 57,418
Diluted shares outstanding 49,335 49,007 48,165 48,768
EPS $0.44 $0.28 $0.46 $1.18
Net revenues from unaffiliated
customers:
Audio Communication Group
Office and Contact Center 105,425 107,475 114,290 327,190
Mobile 26,868 26,682 29,973 83,523
Gaming and Computer 9,344 8,906 9,419 27,669
Other specialty products 7,272 7,237 7,837 22,346
Audio Entertainment Group -- 21,925 60,993 82,918
Net revenues by geographical area
from unaffiliated customers:
Domestic 96,685 113,431 139,033 349,149
International 52,224 58,794 83,479 194,497
Balance Sheet accounts and metrics:
Accounts receivable, net ** 88,576 115,078 126,169 126,169
Days sales outstanding 54 60 51
Inventory, net 56,441 99,167 106,573 106,573
Inventory turns 5.4 4.0 4.8
* Includes Altec Lansing since the acquisition as of August 18, 2005
** Certain balances related to other receivables have been
reclassified from accounts receivable, net to other current assets, to
represent March 31, 2005 classifications
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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