Plantronics Announces Second Quarter Fiscal Year 2013 Results

Plantronics Announces Second Quarter Fiscal Year 2013 Results

Earnings per Share Exceeds Guidance, Unified Communications Net Revenues Grow 35% Year-over-Year

SANTA CRUZ, Calif.--(BUSINESS WIRE)-- Plantronics, Inc. (NYS: PLT) today announced second quarter fiscal year 2013 results. The following comparisons are to the second quarter of fiscal year 2012:

  • Net revenues were $179.3 million, an increase of 1% compared with $176.9 million.

  • GAAP gross margin was 54.2% compared with 55.9%; non-GAAP gross margin was 54.7% compared with 56.3%.

  • GAAP operating income was $34.5 million; non-GAAP operating income was $39.9 million.

  • GAAP diluted earnings per share ("EPS") was $0.61, an increase of $0.01 and 2%.

    • Guidance provided on August 6, 2012 was $0.54 to $0.59.

  • Non-GAAP diluted EPS was $0.70, an increase of $0.03 per share and 4%.

    • Guidance provided on August 6, 2012 was $0.63 to $0.68.

Q2 GAAP Results

Q2 2013

Q2 2012

Change (%)

Net revenues

$179.3 million

$176.9 million

1.3%

Operating income

$34.5 million

$36.9 million

-6.5%

Operating Margin

19.3%

20.9%

Diluted EPS

$0.61

$0.60

1.7%

Q2 Non-GAAP Results

Q2 2013

Q2 2012

Change (%)

Operating income

$39.9 million

$41.5 million

-3.9%

Operating Margin

22.3%

23.5%

Diluted EPS

$0.70

$0.67

4.5%


A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.

"We achieved another strong quarter of growth in Unified Communications ("UC") net revenues, despite a challenging economic environment," said Ken Kannappan, President & CEO. "Our innovation in the UC market continues to yield new partnerships, applications and products which deliver on our brand promise to simplify communications while increasing organizational productivity."

"Our second quarter non-GAAP operating margin was towards the high end of our long-term target range of 20% to 23%," said Pam Strayer, Senior Vice President and Chief Financial Officer. "We will continue to manage expenses for an uncertain economic environment and will strive to maintain our long-term operating margin target."

Office and Contact Center ("OCC") weakness in Asia Pacific and Europe was offset by stronger OCC net revenues in the U.S., resulting in a 2% decrease in OCC net revenues to $133.1 million in the second quarter of fiscal year 2013 compared with $136.4 million in the second quarter of fiscal year 2012. Net revenues from UC products, a subset of OCC, grew by 35% to $30.1 million in the second quarter of fiscal year 2013 compared with $22.4 million in the second quarter of fiscal year 2012.

Mobile net revenues were $33.3 million in the second quarter of fiscal year 2013, an increase of $5.0 million, or 18%, from $28.3 million in the second quarter of fiscal year 2012 primarily as a result of an increase in the overall Bluetooth category at U.S. Retail, driven by an increase in stereo headsets.

Dividend Announcement

We also announced that our Board of Directors declared a quarterly dividend of $0.10 per share. The dividend will be payable on December 10, 2012 to stockholders of record at the close of business on November 20, 2012.

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.

We have a "book and ship" business model whereby we ship most orders to customers within 48 hours of receipt of those orders, and, therefore, the level of backlog does not provide reliable visibility into potential future revenues.

Our December quarter has historically been a stronger quarter than the September quarter, and the current bookings trend supports our belief that net revenues will be in the ranges below. Our business is inherently difficult to forecast, particularly with continuing uncertainty in global economic conditions, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize.

Subject to the foregoing, we currently expect the following range of financial results for the third quarter of fiscal year 2013:

  • Net revenues of $183 million to $190 million;

  • GAAP operating income of $31 million to $35 million;

  • Non-GAAP operating income of $37 million to $41 million, excluding the impact of $6 million from both stock-based compensation and accelerated depreciation from GAAP operating income;

  • Assuming approximately 42.9 million diluted average weighted shares outstanding:

    • GAAP diluted EPS of $0.54 to $0.61;

    • Non-GAAP diluted EPS of $0.63 to $0.70; and

    • Cost of stock-based compensation and accelerated depreciation to be approximately $0.09 per diluted share.

Please see our new Investor Relations Presentation available on our corporate website at www.plantronics.com/ir.

Conference Call Scheduled to Discuss Financial Results

We have scheduled a conference call to discuss second quarter fiscal year 2013 results. The conference call will take place today, October 30, 2012, at 2:00 PM (Pacific Time). All interested investors and potential investors in our 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 # 23793037 will be available until November 30, 2012 at (855) 859-2056 for callers from North America and at (404) 537-3406 for all other callers. The conference call will also be simultaneously webcast in the Investor Relations section of our corporate website at www.plantronics.com/ir, and the webcast of the conference call will remain available on our website for 30 days.

Use of Non-GAAP Financial Information

For the periods presented, we have excluded certain non-cash expenses and charges, net of tax, including stock-based compensation related to stock options, restricted stock and employee stock purchases, purchase accounting amortization and accelerated depreciation from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS. We exclude these expenses from our non-GAAP measures primarily because management does not consider them as part of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results to our long-term target operating model goals. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation or as a substitute for, or superior to, gross margin, operating income, operating margin, the effective tax rate, net income or EPS 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) our expenses and our long-term operating margin target, (ii) our estimates of GAAP and non-GAAP financial results for the third quarter of fiscal year 2013, including net revenues, operating income and diluted EPS; (iii) our estimates of stock-based compensation and accelerated depreciation for the third quarter of fiscal year 2013, as well as the impact of these non-cash expenses on Non-GAAP operating income and diluted EPS; and (iv) our estimate of weighted average shares outstanding for the third quarter of fiscal year 2013, in addition to other matters discussed in this press release that are not purely historical data. We do 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:

  • Micro and macro economic conditions in our 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 inhibit 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 and materials 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;

  • with respect to our stock repurchase program, prevailing stock market conditions generally, and the price of our stock specifically;

  • the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; 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 that might affect our manufacturing facilities in Mexico.

For more information concerning these and other possible risks, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 25, 2012 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

  • Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures

  • Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and Other Unaudited GAAP Data

About Plantronics

Plantronics is a global leader in audio communications for businesses and consumers. We have pioneered new trends in audio technology for over 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 and the logo design 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.

PLANTRONICS, INC.

SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
September 30,

Six Months Ended
September 30,

2012

2011

2012

2011

Net revenues

$

179,280

$

176,948

$

360,645

$

352,548

Cost of revenues

82,052

77,982

165,721

159,524

Gross profit

97,228

98,966

194,924

193,024

Gross profit %

54.2

%

55.9

%

54.0

%

54.8

%

Research, development and engineering

19,581

17,651

39,277

34,557

Selling, general and administrative

43,130

44,418

89,034

86,534

Total operating expenses

62,711

62,069

128,311

121,091

Operating income

34,517

36,897

66,613

71,933

Operating income %

19.3

%

20.9

%

18.5

%

20.4

%

Interest and other income (expense), net

275

(58

)

287

583

Income before income taxes

34,792

36,839

66,900

72,516

Income tax expense

8,868

9,318

17,413

18,264

Net income

$

25,924

$

27,521

$

49,487

$

54,252

% of net revenues

14.5

%

15.6

%

13.7

%

15.4

%

Earnings per common share:

Basic

$

0.62

$

0.62

$

1.19

$

1.19

Diluted

$

0.61

$

0.60

$

1.16

$

1.16

Shares used in computing earnings per common share:

Basic

41,482

44,556

41,571

45,664

Diluted

42,403

45,717

42,521

46,950

Effective tax rate

25.5

%

25.3

%

26.0

%

25.2

%

PLANTRONICS, INC.

SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED BALANCE SHEETS

September 30,
2012

March 31,
2012

ASSETS

Cash and cash equivalents

$

207,929

$

209,335

Short-term investments

152,500

125,177

Total cash, cash equivalents and short-term investments

360,429

334,512

Accounts receivable, net

108,070

111,771

Inventory, net

61,639

53,713

Deferred tax assets

11,218

11,090

Other current assets

13,131

13,088

Total current assets

554,487

524,174

Long-term investments

38,775

55,347

Property, plant and equipment, net

89,766

76,159

Goodwill and purchased intangibles, net

16,692

14,388

Other assets

2,694

2,402

Total assets

$

702,414

$

672,470

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

30,435

$

34,126

Accrued liabilities

53,449

52,067

Total current liabilities

83,884

86,193

Deferred tax liabilities

2,494

8,673

Long-term income taxes payable

13,115

12,150

Revolving line of credit

29,000

37,000

Other long-term liabilities

1,141

1,210

Total liabilities

129,634

145,226

Stockholders' equity

572,780

527,244

Total liabilities and stockholders' equity

$

702,414

$

672,470

PLANTRONICS, INC.

UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA

Three Months Ended
September 30,

Six Months Ended
September 30,

2012

2011

2012

2011

GAAP Gross profit

$

97,228

$

98,966

$

194,924

$

193,024

Stock-based compensation

526

559

1,122

1,105

Accelerated depreciation

318

-

442

-

Purchase accounting amortization

-

62

-

187

Non-GAAP Gross profit

$

98,072

$

99,587

$

196,488

$

194,316

Non-GAAP Gross profit %

54.7%

56.3%

54.5%

55.1%

GAAP Research, development and engineering

$

19,581

$

17,651

$

39,277

$

34,557

Stock-based compensation

(1,256)