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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. (NYSE: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) (1,028) (2,380) (1,975)
      Accelerated depreciation (226) - (283) -
      Non-GAAP Research, development and engineering $ 18,099 $ 16,623 $ 36,614 $ 32,582
      GAAP Selling, general and administrative $ 43,130 $ 44,418 $ 89,034 $ 86,534
      Stock-based compensation (3,080) (2,921) (5,980) (5,607)
      Purchase accounting amortization - (71) - (142)
      Non-GAAP Selling, general and administrative $ 40,050 $ 41,426 $ 83,054 $ 80,785
      GAAP Operating expenses $ 62,711 $ 62,069 $ 128,311 $ 121,091
      Stock-based compensation (4,336) (3,949) (8,360) (7,582)
      Accelerated depreciation (226) - (283) -
      Purchase accounting amortization - (71) - (142)
      Non-GAAP Operating expenses $ 58,149 $ 58,049 $ 119,668 $ 113,367
      PLANTRONICS, INC.
      UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
      ($ in thousands, except per share data)
      UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONTINUED)
      Three Months Ended
      September 30,
      Six Months Ended
      September 30,
      2012 2011 2012 2011
      GAAP Operating income $ 34,517 $ 36,897 $ 66,613 $ 71,933
      Stock-based compensation 4,862 4,508 9,482 8,687
      Accelerated depreciation 544 - 725 -
      Purchase accounting amortization - 133 - 329
      Non-GAAP Operating income $ 39,923 $ 41,538 $ 76,820 $ 80,949
      GAAP Net income $ 25,924 $ 27,521 $ 49,487 $ 54,252
      Stock-based compensation 4,862 4,508 9,482 8,687
      Accelerated depreciation 544 - 725 -
      Purchase accounting amortization - 133 - 329
      Income tax effect (1,648)

      (1)

      (1,491)

      (2)

      (3,069)

      (1)

      (2,847)

      (2)

      Non-GAAP Net income $ 29,682 $ 30,671 $ 56,625 $ 60,421
      GAAP Diluted earnings per common share $ 0.61 $ 0.60 $ 1.16 $ 1.16
      Stock-based compensation 0.11 0.10 0.22 0.19
      Accelerated depreciation 0.01 - 0.01 -
      Income tax effect (0.03) (0.03) (0.06) (0.06)
      Non-GAAP Diluted earnings per common share $ 0.70 $ 0.67 $ 1.33 $ 1.29
      Shares used in diluted earnings per common share calculation 42,403 45,717 42,521 46,950

      (1)Excluded amount represents tax benefits from stock-based compensation and accelerated depreciation.

      (2) Excluded amount represents tax benefits from stock-based compensation and purchase accounting amortization.

      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.

      Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and other Unaudited GAAP Data
      ($ in thousands, except per share data)
      Q112 Q212 Q312 Q412 Q113 Q213
      GAAP Gross profit $ 94,058 $ 98,966 $ 96,212 $ 95,115 $ 97,696 $ 97,228
      Stock-based compensation 546 559 559 548 596 526
      Accelerated depreciation - - - - 124 318
      Purchase accounting amortization 125 62 - - - -
      Non-GAAP Gross profit $ 94,729 $ 99,587 $ 96,771 $ 95,663 $ 98,416 $ 98,072
      Non-GAAP Gross profit % 53.9 % 56.3 % 52.8 % 53.9 % 54.3 % 54.7 %
      GAAP Operating expenses $ 59,022 $ 62,069 $ 58,805 $ 63,102 $ 65,600 $ 62,711
      Stock-based compensation (3,633 ) (3,949 ) (4,020 ) (3,667 ) (4,024 ) (4,336 )
      Accelerated depreciation - - - - (57 ) (226 )
      Purchase accounting amortization (71 ) (71 ) - - - -
      Non-GAAP Operating expenses $ 55,318 $ 58,049 $ 54,785 $ 59,435 $ 61,519 $ 58,149
      GAAP Operating income $ 35,036 $ 36,897 $ 37,407 $ 32,013 $ 32,096 $ 34,517
      Stock-based compensation 4,179 4,508 4,579 4,215 4,620 4,862
      Accelerated depreciation - - - - 181 544
      Purchase accounting amortization 196 133 - - - -
      Non-GAAP Operating income $ 39,411 $ 41,538 $ 41,986 $ 36,228 $ 36,897 $ 39,923
      Non-GAAP Operating income % 22.4 % 23.5 % 22.9 % 20.4 % 20.3 % 22.3 %
      GAAP Income before income taxes $ 35,677 $ 36,839 $ 37,813 $ 32,273 $ 32,108 $ 34,792
      Stock-based compensation 4,179 4,508 4,579 4,215 4,620 4,862
      Accelerated depreciation - - - - 181 544
      Purchase accounting amortization 196 133 - - - -
      Non-GAAP Income before income taxes $ 40,052 $ 41,480 $ 42,392 $ 36,488 $ 36,909 $ 40,198
      GAAP Income tax expense $ 8,946 $ 9,318 $ 6,915 $ 8,387 $ 8,545 $ 8,868
      Income tax effect of stock-based compensation 1,282 1,441 1,448 1,292 1,382 1,532
      Income tax effect of accelerated depreciation - - - - 39 116
      Income tax effect of purchase accounting amortization 74 50 - - - -
      Tax benefit from the expiration of certain statutes of limitations - - 1,507 - - -
      Non-GAAP Income tax expense $ 10,302 $ 10,809 $ 9,870 $ 9,679 $ 9,966 $ 10,516
      Non-GAAP Income tax expense as a % of Non-GAAP Income before income taxes 25.7 % 26.1 % 23.3 % 26.5 % 27.0 % 26.2 %
      Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and other Unaudited GAAP Data (Continued)
      ($ in thousands, except per share data)
      Q112 Q212 Q312 Q412 Q113 Q213
      GAAP Net income $ 26,731 $ 27,521 $ 30,898 $ 23,886 $ 23,563 $ 25,924
      Stock-based compensation 4,179 4,508 4,579 4,215 4,620 4,862
      Accelerated depreciation - - - - 181 544
      Purchase accounting amortization 196 133 - - - -
      Income tax effect (1,356 ) (1,491 ) (2,955 ) (1,292 ) (1,421 ) (1,648 )
      Non-GAAP Net income $ 29,750 $ 30,671 $ 32,522 $ 26,809 $ 26,943 $ 29,682
      GAAP Diluted earnings per common share $ 0.56 $ 0.60 $ 0.71 $ 0.55 $ 0.55 $ 0.61
      Stock-based compensation 0.09 0.10 0.11 0.10 0.11 0.11
      Accelerated depreciation - - - - - 0.01
      Income tax effect (0.03 ) (0.03 ) (0.07 ) (0.03 ) (0.03 ) (0.03 )
      Non-GAAP Diluted earnings per common share $ 0.62 $ 0.67 $ 0.75 $ 0.62 $ 0.63 $ 0.70
      Shares used in diluted earnings per common share calculation 48,060 45,717 43,640 43,329 42,570 42,403
      SUMMARY OF UNAUDITED GAAP DATA
      ($ in thousands)
      Net revenues from unaffiliated customers:
      Office and Contact Center $ 130,999 $ 136,395 $ 133,335 $ 130,980 $ 134,033 $ 133,119
      Mobile 32,164 28,341 36,024 35,296 36,157 33,305
      Gaming and Computer Audio 7,395 8,381 9,209 6,870 6,789 7,797
      Clarity 5,042 3,831 4,668 4,438 4,386 5,059
      Total net revenues $ 175,600 $ 176,948 $ 183,236 $ 177,584 $ 181,365 $ 179,280
      Net revenues by geographic area from unaffiliated customers:
      Domestic $ 100,291 $ 101,196 $ 99,070 $ 105,676 $ 104,078 $ 107,513
      International 75,309 75,752 84,166 71,908 77,287 71,767
      Total net revenues $ 175,600 $ 176,948 $ 183,236 $ 177,584 $ 181,365 $ 179,280
      Balance Sheet accounts and metrics:
      Accounts receivable, net $ 108,516 $ 103,026 $ 109,677 $ 111,771 $ 108,300 $ 108,070
      Days sales outstanding (DSO) 56 52 54 57 54 54
      Inventory, net $ 57,697 $ 60,717 $ 57,799 $ 53,713 $ 58,932 $ 61,639
      Inventory turns 5.7 5.1 6.0 6.1 5.7 5.3

      Plantronics, Inc.
      INVESTOR CONTACT:
      Greg Klaben, 831-458-7533
      Vice President of Investor Relations
      MEDIA CONTACT:
      Karen Auby, 831-458-7814
      Senior Manager of Public Relations

      Source: Plantronics, Inc.