EX-99.1 4 q2fy04pr.htm EXHIBIT 99.1 (FINANCIAL PRESS RELEASE) PRESS RELEASE

Plantronics Reports Second Quarter Fiscal 2004 Financial Results
28% Increase in Operating Income

FOR INFORMATION, CONTACT:
Jon Alvarado
Treasury and Investor Relations Manager
(831) 458-7533

FOR IMMEDIATE RELEASE
October 15, 2003

SANTA CRUZ, CA - October 15, 2003 - Plantronics, Inc. (NYSE: PLT) today announced revenues and earnings for its second quarter of fiscal 2004. Second quarter revenues increased approximately 15.5% to $95.1 million, in comparison to $82.4 million in the second quarter of fiscal 2003, and operating income increased from $13.7 million to $17.5 million. Second quarter net income was $12.4 million compared to net income in the second quarter of fiscal 2003 of $11.5 million. Plantronics' diluted earnings per share increased 12.5% to $0.27 in comparison to $0.24 in the second quarter of fiscal 2003. The growth in net income and EPS was less than the growth in operating income because the tax rate in the second quarter of fiscal 2004 was 30% in comparison to 17.5% in the second quarter of fiscal 2003. The rate in the second quarter of fiscal 2003 was unusually low and reflected a $1.7 million tax reserve release.

Ken Kannappan, President and Chief Executive Officer, noted, "Our results were in line with the guidance we issued on July 15, which called for revenues of $92 to $97 million, and earnings per share of $0.24 to $0.27. In comparison to that guidance, earnings were on the high end although revenue was roughly in the middle of the range. Gross margin increased as a result of better product mix and improved manufacturing efficiency."

"In comparison to the September quarter last year, revenues in all product groups grew with the largest increase coming from new headsets for mobile phones. Revenues in this product group were up 56% in comparison to the year-ago quarter, but were essentially flat sequentially. The launch of the M3000, a wireless Bluetooth headset with 8-hour average talk time, and continued growth in demand for the MX150, were the key drivers of the mobile products growth versus a year ago. Growth from these new products was offset sequentially as a result of declines in OEM volumes of Bluetooth products. Of note, our Office and Contact Center products business grew 7% versus the year ago quarter. This growth was primarily international and was fueled by the successful introduction of the CS60, a wireless headset for DECT-based office phones."

Barbara Scherer, SVP and CFO, said, "I'm pleased with our financial performance and the continued progress we made in improving our operating margin. On a year-to-date basis, our operating margin increased to 17.7% from 16.8%, and was 18.4% in the second quarter. Our working capital management also continues to be solid with cash flow from operations amounting to $14.2 million in the second quarter. Cash collections on accounts receivable and the related DSO were better than what we anticipated at the outset of the quarter. As a result, DSO increased just one day to 49 days for the September quarter and this compares to 56 days in the year ago quarter. Net inventory increased by about $250k sequentially, and second quarter inventory turns were 4.9."

During the quarter, we did not repurchase shares of our common stock and thus had 142,600 shares remaining authorized for repurchase as of the end of the quarter. Although we intend to continue to repurchase stock, the stock continued to trade above the levels authorized for repurchase by our Board. A price cap on stock repurchase is set to help ensure that purchases of stock by the Company are reasonably strongly accretive to earnings per share. The level of stock repurchase by the Company has fluctuated in the past, and is likely to fluctuate substantially in the future as well. We continue to view stock repurchase programs as an important long-term use of excess cash flow.

Business Outlook

The following statements are based on current expectations. Many of these statements are forward-looking, and actual results may differ materially.

We recognize that although certain economic indicators have improved, the overall economic and geopolitical environment remain challenging and highly uncertain. Although we are cautiously optimistic about our own outlook primarily on the basis of expected demand for new products, we remain uncertain about the overall level of demand for our products and consequently, our level of future profitability. In particular, employment levels have not yet risen and we believe our business is heavily influenced by the level of employment and the percentage of workers unemployed. Related to this, our U.S. commercial distributors reported a 7% increase in the sell-through for the September quarter in comparison to the June quarter, but a 3% decrease compared to the year-ago comparable quarter. This group of distributors focuses primarily on our Office and Contact Center products.

Although we remain uncertain about the economic environment and see no signs of a pick-up in the contact center market, we are currently expecting:

Revenues for the third quarter of fiscal 2004 to be in the range of $95 - $100 million.
Earnings per share for the third quarter of fiscal 2004 to be in the range of $0.27 - $0.30.

Plantronics does not intend to update these targets and estimates during the quarter or to report on its progress toward these estimated results. Plantronics will not comment on these targets to analysts or investors except through publicly announced conference calls, press releases or other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the quarter will not be based on internal Company information and should be assessed accordingly by investors. The statements do not reflect the potential impact of any mergers or acquisitions that may be completed after the date of this release.

It has been our practice to provide guidance for the upcoming quarter only and we intend to continue this practice. However, there are certain aspects about the fourth quarter that we feel investors should be informed about and we are thus providing an additional level of disclosure at this time. Our fiscal 2004 year contains 53 weeks in comparison to 52 in fiscal 2003 and the fourth quarter will have 14 weeks instead of the usual 13, and will end on April 3, 2004. Fiscal 2000 was the last such year that had 53 instead of 52 weeks. The extra week in the fourth quarter of fiscal 2004 will affect the comparability with the third quarter of fiscal 2004 and the fourth quarter of fiscal 2003. The extra week in the fourth quarter is also likely to negatively affect the comparison between the fourth quarter of fiscal 2004 and the first quarter of fiscal 2005.

In addition, there is some risk that third fiscal quarter revenues from one of our major customers could exceed the customer's end-user demand during the period. If this is true, it could lead to a decrease in orders in future periods as the customer seeks to reduce its inventory position. This phenomenon occurred last year when we experienced a 25% drop in our mobile revenues between the third and fourth fiscal quarters. If this recurs, the impact could be larger this year as our current order level for shipment in the third fiscal quarter is larger than a year ago.

Finally, the U.K. recently passed a hands-free initiative which is anticipated to cause a rise in our revenues from resellers in that market. If the level of demand does not materialize and/or does not hold up into the fourth quarter, we could also see a marked drop in revenues to customers in that region in the March quarter. In general, our exposure to seasonal retail and consumer driven channels is larger than it has been in the past, and we are uncertain how significant the seasonality effect will be.

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, Wednesday, October 15 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 international participants should call (706) 634-7260.

A replay of the call with the conference ID #2396100 will be available for 72 hours at (800) 642-1687 and at (706) 645-9291 for international 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 30 days.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

Certain statements in this press release, including projections of revenues and earnings for the December quarter, our comments on our fourth fiscal quarter, our anticipation of a rise in revenues from U.K. resellers and other statements under the caption "Business Outlook" above, are forward-looking statements based on current information and expectations. Achievement of the results projected above is subject to a number of risks and uncertainties. In addition to the factors cited above, among the factors that could cause actual results to differ materially from those projected are:

A slowing in international economic growth, or a "double-dip" recession in the U.S., resulting in a reduction in the overall level of demand for our products;
A lessening of the level of market demand for our products within our core contact center market and/or in the office, mobile, computer and residential markets;
As the national/international economy recovers, employment opportunities in the contact center or office markets may not increase commensurately but may remain flat or even decrease lessening the future demand for our products;
The inability to successfully develop, manufacture and market new products;
The demand for new wireless headset products may not develop as we anticipate and may lead to excess inventory and the inability to recover the associated development costs;
A decrease in the liquidity of our customers caused by general economic conditions that may impact their ability to pay amounts due us;
The actions of existing and/or new competitors, especially with regard to pricing and promotional programs;
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;
Greater sales in higher tax jurisdictions as compared to lower tax jurisdictions;
Fluctuations in foreign exchange rates;
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 support 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 or our contract manufacturing operations in China, further terrorist acts, our nations' response to terrorist attacks and the effects of these activities on capital and consumer spending, the effects of the "do not call" legislation may have a greater impact than we currently anticipate, and the loss of 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 June 2, 2003, 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 Condensed Consolidated Financial Statements
Summary of Unaudited Income Statements 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 2,850 employees, Plantronics is the leading provider of headsets to telephone companies and the business community worldwide. Plantronics headsets are 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 20 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

PLANTRONICS, INC. SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended Six Months Ended ___________________________ __________________________ September 30, September 30, September 30, September 30, 2002 2003 2002 2003 ____________ ____________ ____________ ____________ Net sales $ 82,370 $ 95,117 $ 162,638 $ 187,903 Cost of sales 40,735 46,351 79,545 93,670 ____________ ____________ ____________ ____________ Gross profit 41,635 48,766 83,093 94,233 Gross profit % 50.5% 51.3% 51.1% 50.1% Research, development and engineering 8,164 8,247 16,414 16,852 Selling, general and administrative 19,763 22,984 39,369 44,137 ____________ ____________ ____________ ____________ Total operating expenses 27,927 31,231 55,783 60,989 ____________ ____________ ____________ ____________ Operating income 13,708 17,535 27,310 33,244 Operating income % 16.6% 18.4% 16.8% 17.7% Interest and other income, net 272 141 1,205 633 ____________ ____________ ____________ ____________ Income before income taxes 13,980 17,676 28,515 33,877 Income tax expense 2,450 5,303 6,811 10,163 ____________ ____________ ____________ ____________ Net income $ 11,530 $ 12,373 $ 21,704 $ 23,714 ============ ============ ============ ============ % to Sales 14.0% 13.0% 13.3% 12.6% Diluted earnings per common share $ 0.24 $ 0.27 $ 0.46 $ 0.52 Shares used in diluted per share calculations 47,298 46,372 47,522 45,672 UNAUDITED CONSOLIDATED BALANCE SHEETS March 31, September 30, 2003 2003 ASSETS Cash and cash equivalents $ 54,704 $ 92,105 Marketable securities 5,021 -- ____________ ____________ Total cash and marketable securities 59,725 92,105 Accounts receivable, net 50,503 52,033 Inventory, net 33,758 37,764 Deferred income taxes 6,357 6,357 Other current assets 2,674 2,536 ____________ ____________ Total current assets 153,017 190,795 Property, plant and equipment, net 36,957 35,815 Intangibles, net 3,682 3,355 Goodwill, net 9,386 9,386 Other assets 2,167 2,617 ____________ ____________ $ 205,209 $ 241,968 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 13,596 $ 18,243 Accrued liabilities 27,235 32,540 Income taxes payable 8,581 2,752 ____________ ____________ Total current liabilities 49,412 53,535 Deferred tax liability 8,867 8,867 ____________ ____________ Total liabilities 58,279 62,402 Stockholders' equity 146,930 179,566 ____________ ____________ $ 205,209 $ 241,968 ============ ============
Summary of Unaudited Income Statements and Related Data
____________________________________________________________________________________________________________________________ FY02 Q103 Q203 Q303 Q403 FY03 Q104 Q204 YTD04 Net sales 311,181 80,268 82,370 86,811 88,059 337,508 92,786 95,117 187,903 Cost of sales 163,336 38,810 40,735 44,290 44,730 168,565 47,319 46,351 93,670 Gross profit 147,845 41,458 41,635 42,521 43,329 168,943 45,467 48,766 94,233 Gross profit % 47.5% 51.6% 50.5% 49.0% 49.2% 50.1% 49.0% 51.3% 50.1% Research, development and engineering 30,303 8,250 8,164 9,004 8,459 33,877 8,605 8,247 16,852 Selling, general and administrative 76,273 19,606 19,763 20,939 20,297 80,605 21,153 22,984 44,137 Operating expenses 106,576 27,856 27,927 29,943 28,756 114,482 29,758 31,231 60,989 Operating income 41,269 13,602 13,708 12,578 14,573 54,461 15,709 17,535 33,244 Operating income % 13.3% 16.9% 16.6% 14.5% 16.5% 16.1% 16.9% 18.4% 17.7% Income before income taxes 43,200 14,535 13,980 13,144 15,101 56,760 16,201 17,676 33,877 Income tax expense 6,952 4,361 2,450 3,943 4,530 15,284 4,860 5,303 10,163 Income tax expense as a percent of income before taxes 16.1% 30.0% 17.5% 30.0% 30.0% 26.9% 30.0% 30.0% 30.0% Net income after taxes 36,248 10,174 11,530 9,201 10,571 41,476 11,341 12,373 23,714 Diluted shares outstanding 49,238 47,722 47,298 46,197 45,190 46,584 45,077 46,372 45,672 EPS 0.74 0.21 0.24 0.20 0.23 0.89 0.25 0.27 0.52 Net revenues from unaffiliated customers: Office and contact center 237,505 61,568 59,742 58,644 64,404 244,358 62,080 64,192 126,272 Mobile and computer 61,387 12,730 16,208 21,824 17,820 68,582 23,981 24,049 48,030 Other specialty products 12,289 5,970 6,420 6,343 5,835 24,568 6,725 6,876 13,601 Net revenues by geographical area from unaffiliated customers: Domestic 213,655 55,614 57,426 57,013 58,889 228,942 64,924 64,929 129,853 International 97,526 24,654 24,944 29,798 29,170 108,566 27,862 30,188 58,050 Balance Sheet accounts affected: Accounts receivable, net 43,838 44,714 51,303 51,927 50,503 50,503 49,852 52,033 52,033 Days Sales Outstanding 50 56 54 52 48 49 Inventory, net 36,103 37,695 35,659 34,884 33,758 33,758 37,510 37,764 37,764 Inventory turns 4.1 4.6 5.1 5.3 5.0 4.9