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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 
FORM 10-Q
 
 
 
 (Mark One)

 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended June 30, 2004

 OR

 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from ________to _________

 Commission file number 1-12696

 Plantronics, Inc.

 (Exact name of registrant as specified in its charter)

 

Delaware
77-0207692
  (State or other jurisdiction of incorporation or organization) 
(I.R.S. Employer Identification Number)
345 Encinal Street
Santa Cruz, California   95060
(Address of principal executive offices) 
(Zip Code)

(831) 426-5858
(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes x  No ¨    
 
The number of shares outstanding of Plantronics’ common stock as of July 30, 2004 was 47,934,018.
 
     
 
 

Plantronics, Inc.
FORM 10-Q
TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Page No.
  
  
Item 1. Financial Statements (unaudited):
 
           Notes to Financial Statements
PART II. OTHER INFORMATION
 
 
 


 


 


 
2  
 

Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements
PLANTRONICS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)

 
March 31,
June 30,
 
2004
2004
ASSETS
 
 
Current assets:
  
 
    
 
  
Cash and cash equivalents
$
180,616
  
$
210,959
  
Marketable securities
  
-
   
-
 
Accounts receivable, net
  
64,999
   
68,521
 
Inventories
  
40,762
   
47,418
 
Deferred income taxes
  
13,967
   
13,964
 
Other current assets
  
10,283
   
3,237
 
 
 
 
Total current assets
  
310,627
   
344,099
 
Property, plant and equipment, net
  
42,124
   
48,610
 
Intangibles, net
  
3,440
   
3,241
 
Goodwill
  
9,386
   
9,386
 
Other assets
  
2,675
   
2,683
 
 
 
 
Total assets
$
368,252
  
$
408,019
  
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
  
 
    
 
  
Current liabilities:
  
 
    
 
  
Accounts payable
$
19,075
  
$
26,208
  
Accrued liabilities
  
36,469
   
33,434
 
Income taxes payable
  
5,686
   
11,844
 
 
 
 
Total current liabilities
  
61,230
   
71,486
 
Deferred tax liability
  
7,719
   
7,719
 
 
 
 
Total liabilities
  
68,949
   
79,205
 
 
 
 
Stockholders' equity:
  
 
    
 
  
Preferred stock, $0.01 par value per share; 1,000 shares authorized, no shares outstanding
  
-
   
-
 
Common stock, $0.01 par value per share; 100,000 shares authorized, 63,635 shares and 63,890 shares issued at March 31, 2004 and June 30, 2004, respectively
  
636
   
639
 
Additional paid-in capital
  
248,495
   
255,240
 
Accumulated other comprehensive income
 
681
   
1,023
 
Retained earnings
  
347,629
   
369,976
 
 
 
 
 
  
597,441
   
626,878
 
Less: Treasury stock (common: 16,029 and 16,017 shares at March 31, 2004 and June 30, 2004, respectively) at cost
  
(298,138
)
  
(298,064
)
 
 
 
Total stockholders' equity
  
299,303
   
328,814
 
 
 
 
Total liabilities and stockholders' equity
$
368,252
  
$
408,019
  
 
 		  
  		  

See Notes to Unaudited Condensed Consolidated Financial Statements
 
3  
 
 
PLANTRONICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) 

 
  
 
 
 
  
Three Months Ended
 
  
June 30,
   
 
  
2003
2004
   
Net sales
 
$
92,786
  
$
131,370
  
Cost of sales
   
47,319
    
61,703
 
   
 
 
Gross profit
   
45,467
    
69,667
 
   
 
 
 
    
 
    
 
  
Operating expenses:
    
 
    
 
  
Research, development and engineering
   
8,605
    
10,044
 
Selling, general and administrative
   
21,153
    
28,920
 
   
 
 
Total operating expenses
   
29,758
    
38,964
 
   
 
 
Operating income
   
15,709
    
30,703
 
Interest and other income, net
   
492
    
335
 
   
 
 
Income before income taxes
   
16,201
    
31,038
 
Income tax expense
   
4,860
    
8,691
 
   
 
 
Net income
 
$
11,341
  
$
22,347
  
   
 
 
Basic earnings per common share (Note 5)
 
$
0.26
  
$
0.47
  
Shares used in basic per share calculations
    
43,669
    
47,725
  
 
    
 
    
 
  
Diluted earnings per common share (Note 5)
 
$
0.25
  
$
0.44
  
Shares used in diluted per share calculations
    
45,077
    
50,428
  
 
    
 
    
 
  



See Notes to Unaudited Condensed Consolidated Financial Statements


 






 
4  
 

PLANTRONICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
  

 Three Months Ended

  
 
  

 June 30,

  
   
 
 
 
    
2003
    
2004
  
   
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
    
 
    
 
  
Net income
  
$
11,341
  
$
22,347
  
Adjustments to reconcile net income to net cash provided by operating activities:
    
 
    
 
  
Depreciation and amortization
    
3,619
   
2,759
 
Deferred income taxes
    
-
   
3
 
Income tax benefit associated with stock options
    
1,342
   
870
 
Loss on disposal of fixed assets
    
8
   
262
 
Changes in assets and liabilities
    
 
    
 
  
Accounts receivable, net
    
651
   
(3,522
)
Inventories
    
(3,752
)
  
(6,656
)
Other current assets
    
851
   
7,046
 
Other assets
    
53
   
(31
)
Accounts payable
    
1,475
   
7,133
 
Accrued liabilities
    
2,084
   
(3,035
)
Income taxes payable
    
57
   
6,158
 
   
 
 
Cash provided by operating activities
    
17,729
   
33,334
 
   
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
    
 
    
 
  
Proceeds from maturities of marketable securities
    
5,021
   
-
 
Capital expenditures and other assets
    
(2,720
)
  
(9,285
)
   
 
 
Cash provided by (used for) investing activities
    
2,301
   
(9,285
)
   
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
    
 
    
 
  
Purchase of treasury stock
    
(1,833
)
  
-
 
Proceeds from sale of treasury stock
    
469
   
407
 
Proceeds from exercise of stock options
    
802
   
5,545
 
   
 
 
Cash (used for) provided by financing activities
    
(562
)
  
5,952
 
   
 
 
Effect of exchange rate changes on cash and cash equivalents
    
(558
)
  
342
 
   
 
 
Net increase in cash and cash equivalents
    
18,910
   
30,343
 
Cash and cash equivalents at beginning of the period
    
54,704
   
180,616
 
   
 
 
Cash and cash equivalents at end of the period
  
$
73,614
  
$
210,959
  
   
 
 
SUPPLEMENTAL DISCLOSURES
    
 
    
 
  
Cash paid for:
    
 
    
 
  
Interest
  
$
33
  
$
37
  
Income taxes
  
$
5,822
  
$
1,901
  
 
See Notes to Unaudited Condensed Consolidated Financial Statements
 
5  
 
 
PLANTRONICS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
 
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Plantronics, Inc. ("Plantronics," "we," or "our") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, consistent in all material respects with those applied in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004. The interim financial information is unaudited, but reflects all normal recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omi tted pursuant to the rules and regulations of the Securities and Exchange Commission. Certain prior period balances have been reclassified to conform to the current period presentation. The interim financial statements should be read in connection with the financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.
 
2. PERIODS PRESENTED
Our fiscal year-end was April 3, 2004 and the first fiscal quarter-end was July 3, 2004. For purposes of presentation, we have indicated our accounting year as ending on March 31, and our interim quarterly periods as ending on the applicable month-end. Our fiscal quarters ended June 30, 2003 and June 30, 2004 each consisted of thirteen weeks.
 
 

 
6  
 
3. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS (IN THOUSANDS)

 
    
March 31, 
    
June 30,
  
 
    
2004
    
2004
  
   
 
 
Accounts receivable, net:
    
 
    
 
  
Accounts receivable
  
$
82,562
  
$
88,640
  
Less: sales returns, promotions and rebates
    
(14,027
)
  
(15,499
)
Less: allowance for doubtful accounts
    
(3,536
)
  
(4,620
)
   
 
 
   
$
64,999
  
$
68,521
  
   
 
 
Inventories
    
 
    
 
  
Finished goods
  
$
23,543
  
$
28,838
  
Work in process
    
1,349
   
1,434
 
Purchased parts
    
15,870
   
17,146
 
   
 
 
   
$
40,762
  
$
47,418
  
   
 
 
Property, plant and equipment, net:
    
 
    
 
  
Land
  
$
6,039
  
$
6,027
  
Buildings and improvements (useful life 7-30 years)
    
25,952
   
31,001
 
Machinery and equipment (useful life 2-10 years)
    
61,462
   
64,847
 
   
 
 
 
    
93,453
   
101,875
 
Less: accumulated depreciation
    
(51,329
)
  
(53,265
)
   
 
 
   
$
42,124
  
$
48,610
  
   
 
 
Accrued liabilities:
    
 
    
 
  
Employee benefits
  
$
16,373
  
$
13,040
  
Accrued advertising and sales and marketing
    
3,101
   
3,755
 
Warranty accrual
    
6,795
   
6,988
 
Accrued losses on hedging instruments
    
1,937
   
1,656
 
Accrued other
    
8,263
   
7,995
 
   
 
 
   
$
36,469
  
$
33,434
  
   
 
 
4. FOREIGN CURRENCY TRANSACTIONS
The functional currency of our foreign sales and marketing offices, and our foreign research and development facilities is the local currency of the respective operations. For these foreign operations, we translate assets and liabilities into United States dollars using period-end exchange rates in effect as of the balance sheet date and translate revenues and expenses using average monthly exchange rates. The resulting cumulative translation adjustments are included in "Accumulated Other Comprehensive Income" and as a separate component of stockholders' equity in the Consolidated Balance Sheets (see Note 8).

The functional currency of our Mexican manufacturing operations and design center, and our European sales and logistics headquarters is the United States dollar. For these foreign operations, assets and liabilities are remeasured at the period-end or historical rates as appropriate. Revenues and expenses are remeasured at average monthly rates. Currency transaction gains and losses are recognized in current operations.
 
7  
 
Plantronics has entered into foreign currency forward contracts, which typically mature in one month, to hedge a portion of our exposure to foreign currency fluctuations in expected foreign currency-denominated receivables, payables and cash balances. We record on the balance sheet at each reporting period the fair value of our forward contracts and record any fair value adjustments in results of operations. Gains and losses associated with currency rate changes on the contracts are recorded in results of operations, as other income (expense), offsetting transaction gains and losses on the related assets and liabilities. Plantronics does not enter into foreign currency forward contracts for trading purposes.
 
As of June 30, 2004, we had foreign currency forward contracts of approximately €6.2 and £1.8 million denominated in Euros and Great British Pounds, respectively. These forward contracts hedge against a portion of our expected foreign currency-denominated receivables, payables and cash balances. The following table summarizes our net currency position, and approximate U.S. dollar equivalent, at June 30, 2004 (local currency and dollar amounts in thousands):

 
    
Local Currency
    
USD Equivalent
    
Position
    
Maturity
  
   
 
 
 
 
EUR
    
6,178
 
$
7,500
    
Sell
    
1 month
  
GBP
    
1,767
 
$
3,200
    
Sell
    
1 month
  

Foreign currency transactions, net of the effect of hedging activity on forward contracts, resulted in a net loss of approximately $0.1 mil