Delaware
|
77-0207692
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
Large
accelerated filer S
|
Accelerated
filer £
|
Non
accelerated filer £
|
PART
I. FINANCIAL INFORMATION
|
Page
No.
|
Item
1. Financial Statements (unaudited):
|
|
3
|
|
4
|
|
5
|
|
6
|
|
24
|
|
46
|
|
47
|
|
PART
II. OTHER INFORMATION
|
|
48
|
|
48
|
|
61
|
|
61
|
|
62
|
March
31,
2006
|
December
31,
2006
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
68,703
|
$
|
68,743
|
|||
Short-term
investments
|
8,029
|
--
|
|||||
Total
cash, cash equivalents, and short-term investments
|
76,732
|
68,743
|
|||||
Accounts
receivable, net
|
118,008
|
131,735
|
|||||
Inventory
|
105,882
|
134,263
|
|||||
Deferred
income taxes
|
12,409
|
12,590
|
|||||
Other
current assets
|
15,318
|
13,870
|
|||||
Total
current assets
|
328,349
|
361,201
|
|||||
Property,
plant and equipment, net
|
93,874
|
97,227
|
|||||
Intangibles,
net
|
109,208
|
102,984
|
|||||
Goodwill
|
75,077
|
74,250
|
|||||
Other
assets
|
5,741
|
6,190
|
|||||
Total
assets
|
$
|
612,249
|
$
|
641,852
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Line
of credit
|
$
|
22,043
|
$
|
6,011
|
|||
Accounts
payable
|
48,574
|
45,975
|
|||||
Accrued
liabilities
|
43,081
|
59,129
|
|||||
Income
taxes payable
|
13,231
|
7,224
|
|||||
Total
current liabilities
|
126,929
|
118,339
|
|||||
Deferred
income taxes
|
48,246
|
41,137
|
|||||
Long-term
liabilities
|
1,453
|
1,263
|
|||||
Total
liabilities
|
176,628
|
160,739
|
|||||
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,
66,270 and
66,617 shares issued at March, 31, 2006 and December 31,
2006,
respectively
|
663
|
666
|
|||||
Additional
paid-in capital
|
316,863
|
334,303
|
|||||
Accumulated
other comprehensive income
|
3,934
|
2,041
|
|||||
Retained
earnings
|
509,563
|
542,429
|
|||||
831,023
|
879,439
|
||||||
Less:
Treasury stock (common: 18,732 shares at March 31, 2006 and
December 31,
2006) at cost
|
(395,402
|
)
|
(398,326
|
)
|
|||
Total
stockholders' equity
|
435,621
|
481,113
|
|||||
Total
liabilities and stockholders' equity
|
$
|
612,249
|
$
|
641,852
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
||||||||||||
2005
|
2006
|
2005
|
2006
|
||||||||||
Net
revenues
|
$
|
222,512
|
$
|
215,435
|
$
|
543,646
|
$
|
605,438
|
|||||
Cost
of revenues
|
128,486
|
134,099
|
302,469
|
370,741
|
|||||||||
Gross
profit
|
94,026
|
81,336
|
241,177
|
234,697
|
|||||||||
Operating
expenses:
|
|||||||||||||
Research,
development and engineering
|
15,980
|
17,709
|
45,868
|
53,113
|
|||||||||
Selling,
general and administrative
|
43,130
|
46,809
|
110,845
|
136,256
|
|||||||||
Gain
on sale of land
|
-
|
-
|
-
|
(2,637
|
)
|
||||||||
Total
operating expenses
|
59,110
|
64,518
|
156,713
|
186,732
|
|||||||||
Operating
income
|
34,916
|
16,818
|
84,464
|
47,965
|
|||||||||
Interest
and other income (expense), net
|
(596
|
)
|
1,493
|
667
|
2,745
|
||||||||
Income
before income taxes
|
34,320
|
18,311
|
85,131
|
50,710
|
|||||||||
Income
tax expense
|
9,279
|
3,121
|
24,685
|
10,704
|
|||||||||
Net
income
|
$
|
25,041
|
$
|
15,190
|
$
|
60,446
|
$
|
40,006
|
|||||
Net
income per share - basic
|
$
|
0.53
|
$
|
0.32
|
$
|
1.29
|
$
|
0.85
|
|||||
Shares
used in basic per share calculations
|
46,834
|
47,409
|
46,968
|
47,256
|
|||||||||
Net
income per share - diluted
|
$
|
0.52
|
$
|
0.32
|
$
|
1.24
|
$
|
0.83
|
|||||
Shares
used in diluted per share calculations
|
48,165
|
47,922
|
48,768
|
47,940
|
|||||||||
Cash
dividends declared per common share
|
$
|
0.05
|
$
|
0.05
|
$
|
0.15
|
$
|
0.15
|
Nine
Months Ended
December
31,
|
|||||||
2005
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income
|
$
|
60,446
|
$
|
40,006
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||
provided
by operating activities:
|
|||||||
Depreciation
and amortization
|
16,118
|
21,824
|
|||||
Stock-based
compensation
|
665
|
12,617
|
|||||
Provision
for doubtful accounts
|
938
|
618
|
|||||
Provision
for excess and obsolete inventories
|
4,353
|
11,149
|
|||||
Deferred
income taxes
|
(1,716
|
)
|
(5,939
|
)
|
|||
Income
tax benefit associated with stock option exercises
|
1,401
|
519
|
|||||
Excess
tax benefits from stock-based compensation
|
-
|
(637
|
)
|
||||
Loss
(gain) on sale or disposal of property, plant and
equipment
|
46
|
(2,571
|
)
|
||||
Changes
in assets and liabilities, net of effect of acquisitions:
|
|||||||
Accounts
receivable
|
(23,684
|
)
|
(14,345
|
)
|
|||
Inventory
|
(23,135
|
)
|
(39,396
|
)
|
|||
Other
current assets
|
(468
|
)
|
31
|
||||
Other
assets
|
1,114
|
(448
|
)
|
||||
Accounts
payable
|
7,343
|
(2,599
|
)
|
||||
Accrued
liabilities
|
1,472
|
13,301
|
|||||
Income
taxes payable
|
1,632
|
(5,966
|
)
|
||||
Cash
provided by operating activities
|
46,525
|
28,164
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Proceeds
from maturities of short-term investments
|
517,760
|
222,424
|
|||||
Purchase
of short-term investments
|
(353,344
|
)
|
(214,395
|
)
|
|||
Acquisitions
of Altec Lansing and Octiv, net of cash acquired
|
(165,020
|
)
|
-
|
||||
Proceeds
from the sale of land
|
-
|
2,667
|
|||||
Capital
expenditures and other assets
|
(31,350
|
)
|
(18,739
|
)
|
|||
Cash
used for investing activities
|
(31,954
|
)
|
(8,043
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Purchase
of treasury stock
|
(69,631
|
)
|
(4,021
|
)
|
|||
Proceeds
from sale of treasury stock
|
2,507
|
2,723
|
|||||
Proceeds
from exercise of stock options
|
8,408
|
2,676
|
|||||
Proceeds
from line of credit
|
45,000
|
-
|
|||||
Repayment
of line of credit
|
(12,943
|
)
|
(16,032
|
)
|
|||
Payment
of cash dividends
|
(7,089
|
)
|
(7,140
|
)
|
|||
Excess
tax benefits from stock-based compensation
|
-
|
637
|
|||||
Cash
used for financing activities
|
(33,748
|
)
|
(21,157
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
(1,030
|
)
|
1,076
|
||||
Net
(decrease) increase in cash and cash equivalents
|
(20,207
|
)
|
40
|
||||
Cash
and cash equivalents at beginning of period
|
78,398
|
68,703
|
|||||
Cash
and cash equivalents at end of period
|
$
|
58,191
|
$
|
68,743
|
|||
SUPPLEMENTAL
DISCLOSURES
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
701
|
$
|
366
|
|||
Income
taxes
|
$
|
24,341
|
$
|
22,681
|
($
in thousands, except per share data)
|
Three
Months Ended
December
31, 2006
|
Nine
Months Ended
December
31, 2006
|
|||||
|
|
|
|||||
Cost
of revenues
|
$
|
730
|
$
|
2,210
|
|||
|
|||||||
Research,
development and engineering
|
935
|
2,843
|
|||||
Selling,
general and administrative
|
2,576
|
7,564
|
|||||
Stock-based
compensation expense included in operating expenses
|
3,511
|
10,407
|
|||||
|
|||||||
Total
stock-based compensation (1)
|
4,241
|
12,617
|
|||||
|
|||||||
Income
tax benefit
|
(1,358
|
)
|
(4,087
|
)
|
|||
|
|||||||
Total
stock-based compensation expense, net of tax
|
$
|
2,883
|
$
|
8,530
|
|||
|
|||||||
Decrease
in basic and diluted earnings per share
|
$
|
0.06
|
$
|
0.18
|
(1)
|
The
three and nine months ended December 31, 2006 include stock-based
compensation expense associated with restricted stock awards of
$0.6
million and $1.5 million,
respectively.
|
(in
thousands, except per share data)
|
Three
Months Ended
December
31, 2005
|
Nine
Months Ended
December
31, 2005
|
|||||
Net
income - as reported
|
$
|
25,041
|
$
|
60,446
|
|||
Add
stock-based employee compensation expense included in net income,
net of
tax
|
269 | 428 | |||||
Less
stock-based compensation expense determined under fair value-based
method,
net of tax
|
(2,668
|
) |
(8,897
|
)
|
|||
Net
income - pro forma
|
$
|
22,642
|
$
|
51,977
|
|||
Basic
net income per share - as reported
|
$
|
0.53
|
$
|
1.29
|
|||
Basic
net income per share - pro forma
|
$
|
0.48
|
$
|
1.11
|
|||
Diluted
net income per share - as reported
|
$
|
0.52
|
$
|
1.24
|
|||
Diluted
net income per share - pro forma
|
$
|
0.47
|
$
|
1.07
|
Three Months Ended
December 31,
|
Nine Months Ended
December 31,
|
||||||||||||
Stock
Options
|
2005
|
2006
|
2005
|
2006
|
|||||||||
Expected
volatility
|
53.0
|
%
|
42.5
|
%
|
55.3
|
%
|
42.5
|
%
|
|||||
Risk-free
interest rate
|
4.3
|
%
|
4.7
|
%
|
4.1
|
%
|
4.7
|
%
|
|||||
Expected
dividends
|
0.7
|
%
|
1.0
|
%
|
0.6
|
%
|
1.0
|
%
|
|||||
Expected
life (in years)
|
5.0
|
4.2
|
5.0
|
4.2
|
|||||||||
Nine Months Ended
December 31,
|
|||||||||||||
ESPP
|
2005
|
2006
|
|||||||||||
Expected
volatility
|
31.2
|
%
|
52.8
|
%
|
|||||||||
Risk-free
interest rate
|
4.2
|
%
|
5.2
|
%
|
|||||||||
Expected
dividends
|
0.6
|
%
|
1.3
|
%
|
|||||||||
Expected
life (in years)
|
0.5
|
0.5
|
Weighted
|
Weighted
|
||||||||||||
Average
|
Average
|
Aggregate
|
|||||||||||
Number
of
|
Exercise
|
Remaining
|
Intrinsic
|
||||||||||
Shares
|
Price
|
Contractual
Life
|
Value
|
||||||||||
(in
thousands)
|
(in
years)
|
(in
thousands)
|
|||||||||||
Outstanding
at March 31, 2006
|
8,277
|
$
|
26.75
|
||||||||||
Options
granted
|
1,446
|
$
|
20.58
|
||||||||||
Options
exercised
|
274
|
$
|
9.75
|
$ |
3,006
|
||||||||
Options
forfeited or expired
|
313
|
$
|
30.98
|
||||||||||
Outstanding
at December 31, 2006
|
9,136
|
$
|
26.14
|
5.07
|
$
|
11,102
|
|||||||
Vested
and expected to vest at December 31, 2006
|
8,771
|
$
|
26.23
|
5.02
|
$
|
10,849
|
|||||||
Exercisable
at December 31, 2006
|
6,240
|
$
|
27.17
|
4.47
|
$
|
8,791
|
Number
of
Shares
|
Weighted
Average
Grant
Date
Fair
Value
|
||||||
(in
thousands)
|
|||||||
Non-vested
at March 31, 2006
|
316
|
$
|
29.09
|
||||
Granted
|
79
|
$
|
20.43
|
||||
Vested
|
(57
|
)
|
$
|
29.25
|
|||
Forfeited
|
(7
|
)
|
$
|
27.15
|
|||
Non-vested
at December 31, 2006
|
331
|
$
|
27.03
|
(in
thousands)
|
March
31,
2006
|
December
31,
2006
|
|||||
Inventory,
net:
|
|||||||
Purchased
parts
|
$
|
44,750
|
$
|
47,059
|
|||
Work
in process
|
3,786
|
7,504
|
|||||
Finished
goods
|
72,324
|
98,317
|
|||||
Less:
allowance for excess and obsolete inventory
|
(14,978
|
)
|
(18,617
|
)
|
|||
$
|
105,882
|
$
|
134,263
|
Accrued
liabilities:
|
|||||||
Employee
compensation and benefits
|
$
|
19,670
|
$
|
22,029
|
|||
Accrued
advertising and sales and marketing
|
5,084
|
6,219
|
|||||
Warranty
accrual
|
6,276
|
6,685
|
|||||
Accrued
other
|
12,051
|
24,196
|
|||||
$
|
43,081
|
$
|
59,129
|
(in
thousands)
|
2005
|
2006
|
|||||
Warranty
obligation at March 31
|
$
|
5,970
|
$
|
6,276
|
|||
Warranty
provision relating to product shipped during the quarter
|
3,060
|
3,833
|
|||||
Deductions
for warranty claims processed
|
(2,834
|
)
|
(3,605
|
)
|
|||
Warranty
obligation at June 30
|
$
|
6,196
|
$
|
6,504
|
|||
Warranty
provision relating to product shipped during the quarter
|
4,242
|
3,654
|
|||||
Deductions
for warranty claims processed
|
(4,260
|
)
|
(3,594
|
)
|
|||
Warranty
obligation at September 30
|
$
|
6,178
|
$
|
6,564
|
|||
Warranty
provision relating to product shipped during the quarter
|
3,236
|
3,186
|
|||||
Deductions
for warranty claims processed
|
(2,705
|
)
|
(3,065
|
)
|
|||
Warranty
liability at December 31
|
$
|
6,709
|
$
|
6,685
|
(in
thousands)
|
||||
Paid
to Octiv
|
$
|
7,430
|
||
Direct
acquisition costs
|
388
|
|||
Total
cash consideration
|
$
|
7,818
|
(in
thousands)
|
Fair
Value at
April
4, 2005
|
|||
Total
cash consideration
|
$
|
7,818
|
||
Less
cash balance acquired
|
42
|
|||
7,776
|
||||
Allocated
to:
|
||||
Current
assets, excluding cash acquired
|
102
|
|||
Property,
plant and equipment
|
72
|
|||
Existing
technologies
|
4,500
|
|||
Deferred
tax assets
|
2,970
|
|||
Current
liabilities assumed
|
(334
|
)
|
||
Deferred
tax liability
|
(1,710
|
)
|
||
Goodwill
|
$
|
2,176
|
(in
thousands)
|
||||
Paid
to Altec Lansing
|
$
|
154,273
|
||
Payment
of Altec Lansing pre-existing debt
|
9,906
|
|||
Direct
acquisition costs
|
977
|
|||
Total
cash consideration
|
$
|
165,156
|
(in
thousands)
|
Fair
Value at
August
18, 2005
|
|||
Total
cash consideration
|
$
|
165,156
|
||
Less
cash balance acquired
|
7,577
|
|||
157,579
|
||||
Allocated
to:
|
||||
Prepaid
compensation
|
1,067
|
|||
Inventory
|
27,524
|
|||
Other
current assets
|
17,630
|
|||
Property,
plant, and equipment, net
|
8,290
|
|||
Identifiable
intangible assets
|
108,300
|
|||
Deferred
tax assets
|
4,424
|
|||
Current
liabilities assumed
|
(29,368
|
)
|
||
Deferred
tax liability
|
(22,691
|
)
|
||
Goodwill
|
$
|
42,403
|
(in
thousands)
|
Fair
Value
|
Amortization
Period
|
|||||
Existing
technology
|
$
|
25,000
|
6
years
|
||||
OEM
relationships
|
700
|
7
years
|
|||||
Customer
relationships
|
17,600
|
8
years
|
|||||
Trade
name - inMotion
|
5,000
|
8
years
|
|||||
Trade
name - Altec Lansing
|
59,100
|
Not
amortized
|
|||||
In-process
technology
|
900
|
Fully
expensed in the second quarter of Fiscal 2006
|
|||||
Total
|
$
|
108,300
|
(in
thousands)
|
Audio
Communications
Group
|
Audio
Entertainment
Group
|
Consolidated
|
|||||||
Balance
at March 31, 2006
|
$
|
11,214
|
$
|
63,863
|
$
|
75,077
|
||||
Carrying
value adjustments
|
- |
(827
|
)
|
(827
|
)
|
|||||
Balance
at December 31, 2006
|
$
|
11,214
|
$
|
63,036
|
$
|
74,250
|
(in
thousands)
|
March
31, 2006
|
||||||||||||
Intangible
assets
|
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Amortization
Period
|
|||||||||
Technology
|
$
|
31,500
|
$
|
(4,268
|
)
|
$
|
27,232
|
6-10
years
|
|||||
State
contracts
|
1,300
|
(789
|
)
|
511
|
7
years
|
||||||||
Patents
|
1,420
|
(674
|
)
|
746
|
7
years
|
||||||||
Customer
relationships
|
17,600
|
(1,375
|
)
|
16,225
|
8
years
|
||||||||
Trademarks
|
300
|
(182
|
)
|
118
|
7
years
|
||||||||
Tradename
- inMotion
|
5,000
|
(391
|
)
|
4,609
|
8
years
|
||||||||
Tradename
- Altec Lansing
|
59,100
|
-
|
59,100
|
Indefinite
|
|||||||||
OEM
relationships
|
700
|
(63
|
)
|
637
|
7
years
|
||||||||
Non-compete
agreements
|
200
|
(170
|
)
|
30
|
5
years
|
||||||||
Total
|
$
|
117,120
|
$
|
(7,912
|
)
|
$
|
109,208
|
(in
thousands)
|
December
31, 2006
|
||||||||||||
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Amortization
Period
|
||||||||||
Technology
|
$
|
31,500
|
$
|
(7,945
|
)
|
$
|
23,555
|
6-10
years
|
|||||
State
contracts
|
1,300
|
(929
|
)
|
371
|
7
years
|
||||||||
Patents
|
1,420
|
(826
|
)
|
594
|
7
years
|
||||||||
Customer
relationships
|
17,600
|
(3,025
|
)
|
14,575
|
8
years
|
||||||||
Trademarks
|
300
|
(214
|
)
|
86
|
7
years
|
||||||||
Tradename
- inMotion
|
5,000
|
(859
|
)
|
4,141
|
8
years
|
||||||||
Tradename
- Altec Lansing
|
59,100
|
-
|
59,100
|
Indefinite
|
|||||||||
OEM
relationships
|
700
|
(138
|
)
|
562
|
7
years
|
||||||||
Non-compete
agreements
|
200
|
(200
|
)
|
-
|
5
years
|
||||||||
Total
|
$
|
117,120
|
$
|
(14,136
|
)
|
$
|
102,984
|
Fiscal
year ending March 31,
|
Amount
|
|||
Remainder
of 2007
|
$
|
2,064
|
||
2008
|
8,259
|
|||
2009
|
8,105
|
|||
2010
|
7,645
|
|||
2011
|
7,602
|
|||
Thereafter
|
10,209
|
|||
Total
|
$
|
43,884
|
Local
Currency
|
USD
Equivalent
|
Position
|
Maturity
|
||||||||||
EUR
|
19,300
|
$
|
25,742
|
Sell
Euro
|
1
month
|
||||||||
GBP
|
3,100
|
$
|
6,136
|
Sell
GBP
|
1
month
|
(in
thousands)
|
Balance
Sheets
Accumulated
Other
Comprehensive
Income (Loss)
|
Statements
of Operations
Net
Revenues
Three
Months Ended December 31,
|
Statements
of Operations
Net
Revenues
Nine
Months Ended December 31,
|
||||||||||||||||
|
March
31, 2006
|
December
31, 2006
|
2005
|
2006
|
2005
|
2006
|
|||||||||||||
Realized
gain (loss) on closed transactions
|
$
|
--
|
$
|
--
|
$
|
(121
|
)
|
$
|
(1,316
|
)
|
$
|
(537
|
)
|
$
|
(1,730
|
)
|
|||
Recognized
but unrealized gain (loss) on open transactions
|
1,567
|
(2,256
|
)
|
-
|
- |
-
|
- | ||||||||||||
$
|
1,567
|
$
|
(2,256
|
)
|
$
|
(121
|
)
|
$
|
(1,316
|
)
|
$
|
(537
|
)
|
$
|
(1,730
|
)
|
(in
thousands, except per share data)
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
|||||||||||
2005
|
2006
|
2005
|
2006
|
||||||||||
Net
income
|
$
|
25,041
|
$
|
15,190
|
$
|
60,446
|
$
|
40,006
|
|||||
Weighted
average shares-basic
|
46,834
|
47,409
|
46,968
|
47,256
|
|||||||||
Effect
of unvested restricted stock awards
|
123
|
8
|
152
|
8
|
|||||||||
Effect
of dilutive securities
|
1,208
|
505
|
1,648
|
676
|
|||||||||
Weighted
average shares-diluted
|
48,165
|
47,922
|
48,768
|
47,940
|
|||||||||
Earnings
per share-basic
|
$
|
0.53
|
$
|
0.32
|
$
|
1.29
|
$
|
0.85
|
|||||
Earnings
per share-diluted
|
$
|
0.52
|
$
|
0.32
|
$
|
1.24
|
$
|
0.83
|
(in
thousands)
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
|||||||||||
2005
|
2006
|
2005
|
2006
|
||||||||||
Net
income
|
$
|
25,041
|
$
|
15,190
|
$
|
60,446
|
$
|
40,006
|
|||||
Unrealized
gain (loss) on cash flow hedges, for the three and nine months
ended
December 31, 2005 and 2006, net of tax
|
86
|
(1,579
|
)
|
5,983
|
(3,823
|
)
|
|||||||
Foreign
currency translation gain (loss), for the three and nine months
ended
December 31, 2005 and 2006
|
(380
|
)
|
614
|
(1,638
|
)
|
1,930
|
|||||||
Unrealized
gain on investments, for the three and nine months ended December
31, 2005
and 2006, net of tax
|
12
|
-
|
28
|
-
|
|||||||||
Comprehensive
income
|
$
|
24,759
|
$
|
14,225
|
$
|
64,819
|
$
|
38,113
|
(in
thousands)
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
|||||||||||
2005
|
2006
|
2005
|
2006
|
||||||||||
Net
revenues from unaffiliated customers:
|
|||||||||||||
Office
and Contact Center
|
$
|
114,290
|
$
|
118,280
|
$
|
327,190
|
$
|
348,360
|
|||||
Mobile
|
29,973
|
43,080
|
83,523
|
112,085
|
|||||||||
Gaming
and Computer Audio
|
9,419
|
8,364
|
27,669
|
23,380
|
|||||||||
Other
Specialty Products
|
7,837
|
6,787
|
22,346
|
19,456
|
|||||||||
$
|
161,519
|
$
|
176,511
|
$
|
460,728
|
$
|
503,281
|
(in
thousands)
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
|||||||||||
2005
|
2006
|
2005
|
2006
|
||||||||||
Revenues
from unaffiliated customers:
|
|||||||||||||
Portable
audio
|
$
|
45,904
|
$
|
24,656
|
$
|
58,727
|
$
|
65,095
|
|||||
Powered
audio
|
20,564
|
17,911
|
30,182
|
48,068
|
|||||||||
Other
|
3,901
|
3,195
|
5,989
|
8,888
|
|||||||||
Less
revenue reserves
|
(9,376
|
)
|
(6,838
|
)
|
(11,980
|
)
|
(19,894
|
)
|
|||||
$
|
60,993
|
$
|
38,924
|
$
|
82,918
|
$
|
102,157
|
Revenues
by Segment
|
|||||||||||||
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
||||||||||||
(in
thousands)
|
2005
|
2006
|
2005
|
2006
|
|||||||||
Audio
Communications Group
|
$
|
161,519
|
$
|
176,511
|
$
|
460,728
|
$
|
503,281
|
|||||
Audio
Entertainment Group
|
60,993
|
38,924
|
82,918
|
102,157
|
|||||||||
Consolidated
net revenues
|
$
|
222,512
|
$
|
215,435
|
$
|
543,646
|
$
|
605,438
|
Gross
Profit by Segment
|
|||||||||||||
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
||||||||||||
(in
thousands)
|
2005
|
2006
|
2005
|
2006
|
|||||||||
Audio
Communications Group
|
$
|
74,921
|
$
|
77,257
|
$
|
216,511
|
$
|
218,836
|
|||||
Audio
Entertainment Group
|
19,105
|
4,079
|
24,666
|
15,861
|
|||||||||
Consolidated
gross profit
|
$
|
94,026
|
$
|
81,336
|
$
|
241,177
|
$
|
234,697
|
Operating
Income (Loss) by Segment
|
|||||||||||||
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
||||||||||||
(in
thousands)
|
2005
|
2006
|
2005
|
2006
|
|||||||||
Audio
Communications Group
|
$
|
25,792
|
$
|
22,855
|
$
|
75,669
|
$
|
64,436
|
|||||
Audio
Entertainment Group
|
9,124
|
(6,037
|
)
|
8,795
|
(16,471
|
)
|
|||||||
Consolidated
operating income
|
$
|
34,916
|
$
|
16,818
|
$
|
84,464
|
$
|
47,965
|
(in
thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||
Total
operating income of segments
|
$
|
34,916
|
$
|
16,818
|
$
|
84,464
|
$
|
47,965
|
|||||
Interest
and other income (expense), net
|
(596
|
)
|
1,493
|
667
|
2,745
|
||||||||
Income
tax expense
|
(9,279
|
)
|
(3,121
|
)
|
(24,685
|
)
|
(10,704
|
)
|
|||||
Consolidated
net income
|
$
|
25,041
|
$
|
15,190
|
$
|
60,446
|
$
|
40,006
|
Assets
by Segment
|
|||||||
(in
thousands)
|
March
31,
2006
|
December
31,
2006
|
|||||
Audio
Communications Group
|
$
|
370,874
|
$
|
412,190
|
|||
Audio
Entertainment Group
|
241,375
|
229,662
|
|||||
Consolidated
assets
|
$
|
612,249
|
$
|
641,852
|
(in
thousands)
|
Three
Months Ended
December
31,
|
Nine
Months Ended
December
31,
|
|||||||||||
|
2005
|
2006
|
2005
|
2006
|
|||||||||
Net
revenues from unaffiliated customers:
|
|||||||||||||
United
States
|
$
|
139,033
|
$
|
126,177
|
$
|
349,148
|
$
|
375,859
|
|||||
Europe,
Middle East and Africa
|
55,246
|
56,337
|
129,821
|
142,165
|
|||||||||
Asia
Pacific and Latin America
|
18,883
|
20,155
|
45,317
|
58,328
|
|||||||||
Canada
and other international
|
9,350
|
12,766
|
19,360
|
29,086
|
|||||||||
Total
international
|
83,479
|
89,258
|
194,498
|
229,579
|
|||||||||
$
|
222,512
|
$
|
215,435
|
$
|
543,646
|
$
|
605,438
|
(in
thousands)
|
March
31,
2006
|
December
31,
2006
|
|||||
Property,
plant and equipment:
|
|||||||
United
States
|
$
|
47,360
|
$
|
46,343
|
|||
China
|
27,062
|
28,184
|
|||||
Mexico
|
11,314
|
13,493
|
|||||
Other
countries
|
8,138
|
9,207
|
|||||
$
|
93,874
|
$
|
97,227
|
—
|
Bringing
advanced technologies to market. We
expect the trend in which the communications and entertainment spaces
are
converging in the wireless market to result in a demand for technologies
that are simple and intuitive, utilize voice technology, control
noise,
and rely on miniaturization and power management. We intend to expand
our
own core technology group and partner with other innovative companies
to
develop new technologies. Our Volume Logic business provides us with
broader technology expertise, expanding beyond voice communications
DSP
into audio DSP. Our Altec Lansing business manufactures and markets
high
quality computer and home entertainment sound systems and a line
of
headsets, headphones and microphones for personal digital media.
We
believe that bringing our product concepts to market will be more
effective if we have an audio brand to stand alongside our voice
communications brand, and that as a supplier to key channel partners,
we
will become a more important supplier if we can satisfy a broader
set of
audio needs. We expect that the costs related to the expansion of
our own core technology group, including Volume Logic, will increase
our research, development and engineering expenses for the remainder
of
the fiscal year.
|
—
|
Continued
Integration of Altec Lansing.
The Altec Lansing business is complex, with significant overseas
operations. We have evaluated various options in our integration
plan to
preserve the strengths of the Altec Lansing business model and its
success
in the retail markets while creating efficiencies and synergies in
our
combined company, and we are in the process of implementing these
plans.
We successfully completed the first phase of our systems integration
in
the third quarter of fiscal 2007. Altec Lansing, with the exception
of its
manufacturing plant operations, is now on the same ERP system as
the rest
of Plantronics. As a new acquisition in fiscal 2006, Altec Lansing
has
been exempt from many of the requirements associated with Sarbanes-Oxley
compliance. However, the Altec Lansing operations will be required
to be
in compliance with these requirements by the end of fiscal 2007.
We have
been developing and documenting internal controls at Altec Lansing
and are
now testing the effectiveness of these controls. It is still too
early to
determine the overall effectiveness of these
controls.
|
—
|
Development
and launch of new products.
During fiscal 2006 and the first three quarters of fiscal 2007, ACG
launched and shipped several new models in our suite of Bluetooth
products, which included the Discovery 645, Pulsar 260 (in limited
regions), Discovery 655, Discovery 665, and the Explorer series 330,
340,
and 350. These products have had strong market acceptance, and we
expect
to see further growth from these new products in the remainder of
the
fiscal year. Going forward, we plan to continue to develop and enhance
functionality on these platforms. In the third quarter of fiscal
2007, ACG
launched the CS55H, the CS50 adapted for use in the home or home
office;
and a new office base, M22, designed for both standard and wideband
VoIP
phones. AEG launched three new portable products: the iM510, which
is a
portable speaker system designed specifically for the SanDisk Sansa
MP3
player, the M604, a portable speaker system designed specifically
for the
Microsoft Zune MP3 player, and the T515, a speaker system designed
for use
with MP3-enabled cellular phones. AEG also introduced a new powered
5.1
surround sound audio system, the
VS3251.
|
—
|
Building
a consumer product manufacturing infrastructure and reducing manufacturing
costs, particularly for our Bluetooth products. The
consumer products market is characterized by cost competitiveness
resulting in a predominantly China-based manufacturing infrastructure.
We
believe we have a competitive manufacturing infrastructure for our
AEG
products which are either manufactured by our plant in Dongguan,
China or
purchased from predominantly China-based vendors. For our ACG products,
in
order to gain more flexibility in our supply chain, to better manage
inventories and reduce long term costs, we constructed a manufacturing
facility and design center in Suzhou, China which was completed and
began
commercial operations in the fourth quarter of fiscal 2006. We have
not
yet achieved the full benefit associated with this facility. However,
through our expanded presence in China, we were able to negotiate
lower
component prices.
|
($ in thousands) |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||||||||||||||
Net
revenues
|
$
|
222,512
|
100.0
|
%
|
$
|
215,435
|
100.0
|
%
|
$
|
543,646
|
100
|
%
|
$
|
605,438
|
100.0
|
%
|
|||||||||
Cost
of revenues
|
128,486
|
57.7
|
%
|
134,099
|
62.2
|
%
|
302,469
|
55.6
|
%
|
370,741
|
61.2
|
%
|
|||||||||||||
Gross
profit
|
94,026
|
42.3
|
%
|
81,336
|
37.8
|
%
|
241,177
|
44.4
|
%
|
234,697
|
38.8
|
%
|
|||||||||||||
Operating
expense:
|
|||||||||||||||||||||||||
Research,
development and engineering
|
15,980
|
7.2
|
%
|
17,709
|
8.2
|
%
|
45,868
|
8.4
|
%
|
53,113
|
8.9
|
%
|
|||||||||||||
Selling,
general and administrative
|
43,130
|
19.4
|
%
|
46,809
|
21.7
|
%
|
110,845
|
20.4
|
%
|
136,256
|
22.5
|
%
|
|||||||||||||
Gain
on sale of land
|
-
|
-
|
0.0
|
%
|
-
|
(2,637
|
)
|
||||||||||||||||||
Total
operating expenses
|
59,110
|
26.6
|
%
|
64,518
|
29.9
|
%
|
156,713
|
28.8
|
%
|
186,732
|
30.9
|
%
|
|||||||||||||
Operating
income
|
34,916
|
15.7
|
%
|
16,818
|
7.8
|
%
|
84,464
|
15.5
|
%
|
47,965
|
7.9
|
%
|
|||||||||||||
Interest
and other income (expense), net
|
(596
|
)
|
-0.3
|
%
|
1,493
|
0.7
|
%
|
667
|
0.1
|
%
|
2,745
|
0.5
|
%
|
||||||||||||
Income
before income taxes
|
34,320
|
15.4
|
%
|
18,311
|
8.5
|
%
|
85,131
|
15.7
|
%
|
50,710
|
8.4
|
%
|
|||||||||||||
Income
tax expense
|
9,279
|
4.2
|
%
|
3,121
|
1.4
|
%
|
24,685
|
4.5
|
%
|
10,704
|
1.8
|
%
|
|||||||||||||
Net
income
|
$
|
25,041
|
11.3
|
%
|
$
|
15,190
|
7.0
|
%
|
$
|
60,446
|
11.2
|
%
|
$
|
40,006
|
6.6
|
%
|
($
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||
Cost
of revenues
|
$
|
10
|
$
|
730
|
$
|
20
|
$
|
2,210
|
|||||
Research,
development and engineering
|
-
|
935
|
-
|
2,843
|
|||||||||
Selling,
general and administrative
|
115
|
2,576
|
226
|
7,564
|
|||||||||
Stock-based
compensation expense included in operating
expenses
|
115
|
3,511
|
226
|
10,407
|
|||||||||
Total
stock-based compensation expense
|
125
|
4,241
|
246
|
12,617
|
|||||||||
Income
tax benefit on stock-based compensation
|
-
|
(1,358
|
)
|
-
|
(4,087
|
)
|
|||||||
Total
stock-based compensation expense, net of tax
|
$
|
125
|
$
|
2,883
|
$
|
246
|
$
|
8,530
|
($ in thousands) |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||||||||||||||
Net
revenues
|
$
|
161,519
|
100.0
|
%
|
$
|
176,511
|
100.0
|
%
|
$
|
460,728
|
100.0
|
%
|
$
|
503,281
|
100.0
|
%
|
|||||||||
Cost
of revenues
|
86,598
|
53.6
|
%
|
99,254
|
56.2
|
%
|
244,217
|
53.0
|
%
|
284,445
|
56.5
|
%
|
|||||||||||||
Gross
profit
|
74,921
|
46.4
|
%
|
77,257
|
43.8
|
%
|
216,511
|
47.0
|
%
|
218,836
|
43.5
|
%
|
|||||||||||||
Operating
expense:
|
|||||||||||||||||||||||||
Research,
development and engineering
|
13,936
|
8.6
|
%
|
15,137
|
8.6
|
%
|
41,873
|
9.1
|
%
|
45,697
|
9.1
|
%
|
|||||||||||||
Selling,
general and administrative
|
35,193
|
21.8
|
%
|
39,265
|
22.2
|
%
|
98,969
|
21.5
|
%
|
111,340
|
22.1
|
%
|
|||||||||||||
Gain
on sale of land
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
-
|
0.0
|
%
|
(2,637
|
)
|
-0.5
|
%
|
||||||||||||
Total
operating expenses
|
49,129
|
30.4
|
%
|
54,402
|
30.8
|
%
|
140,842
|
30.6
|
%
|
154,400
|
30.7
|
%
|
|||||||||||||
Operating
income
|
$
|
25,792
|
16.0
|
%
|
$
|
22,855
|
12.9
|
%
|
$
|
75,669
|
16.4
|
%
|
$
|
64,436
|
12.8
|
%
|
($
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||
Cost
of revenues
|
$
|
10
|
$
|
713
|
$
|
20
|
$
|
2,176
|
|||||
Research,
development and engineering
|
-
|
916
|
-
|
2,776
|
|||||||||
Selling,
general and administrative
|
82
|
2,383
|
164
|
7,104
|
|||||||||
Stock-based
compensation expense included in operating expenses
|
82
|
3,299
|
164
|
9,880
|
|||||||||
Total
stock-based compensation expense
|
$
|
92
|
$
|
4,012
|
$
|
184
|
$
|
12,056
|
Audio
Entertainment Group
|
|||||||||||||||||||||||||
($
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||||||||||||||
Net
revenues
|
$
|
60,993
|
100.0
|
%
|
$
|
38,924
|
100.0
|
%
|
$
|
82,918
|
100.0
|
%
|
$
|
102,157
|
100.0
|
%
|
|||||||||
Cost
of revenues
|
41,888
|
68.7
|
%
|
34,845
|
89.5
|
%
|
58,252
|
70.3
|
%
|
86,296
|
84.5
|
%
|
|||||||||||||
Gross
profit
|
19,105
|
31.3
|
%
|
4,079
|
10.5
|
%
|
24,666
|
29.7
|
%
|
15,861
|
15.5
|
%
|
|||||||||||||
Operating
expense:
|
|||||||||||||||||||||||||
Research,
development and engineering
|
2,044
|
3.4
|
%
|
2,572
|
6.6
|
%
|
3,995
|
4.8
|
%
|
7,416
|
7.3
|
%
|
|||||||||||||
Selling,
general and administrative
|
7,937
|
13.0
|
%
|
7,544
|
19.4
|
%
|
11,876
|
14.3
|
%
|
24,916
|
24.4
|
%
|
|||||||||||||
Total
operating expenses
|
9,981
|
16.4
|
%
|
10,116
|
26.0
|
%
|
15,871
|
19.1
|
%
|
32,332
|
31.6
|
%
|
|||||||||||||
Operating
income (loss)
|
$
|
9,124
|
15.0
|
%
|
$
|
(6,037
|
)
|
-15.5
|
%
|
$
|
8,795
|
10.6
|
%
|
$
|
(16,471
|
)
|
-16.1
|
%
|
($
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
December
31,
2005
|
December
31,
2006
|
December
31,
2005
|
December
31,
2006
|
||||||||||
Cost
of revenues
|
$
|
-
|
$
|
17
|
$
|
-
|
$
|
33
|
|||||
Research,
development and engineering
|
-
|
19
|
-
|
67
|
|||||||||
Selling,
general and administrative
|
33
|
193
|
62
|
461
|
|||||||||
Stock-based
compersation expense included in operating expenses
|
33
|
212
|
62
|
528
|
|||||||||
Total
stock-based compensation expense
|
$
|
33
|
$
|
229
|
$
|
62
|
$
|
561
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||
($
in thousands)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
|||||||||||||||||||
Audio
Communications Group
|
|||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
|||||||||||||||||||||||||
Office
and Contact Center
|
$
|
114,290
|
$
|
118,280
|
$
|
3,990
|
3.5
|
%
|
$
|
327,190
|
$
|
348,360
|
$
|
21,170
|
6.5
|
%
|
|||||||||
Mobile
|
29,973
|
43,080
|
13,107
|
43.7
|
%
|
83,523
|
112,085
|
28,562
|
34.2
|
%
|
|||||||||||||||
Gaming
and Computer Audio
|
9,419
|
8,364
|
(1,055
|
)
|
-11.2
|
%
|
27,669
|
23,380
|
(4,289
|
)
|
-15.5
|
%
|
|||||||||||||
Other
Specialty Products
|
7,837
|
6,787
|
(1,050
|
)
|
-13.4
|
%
|
22,346
|
19,456
|
(2,890
|
)
|
-12.9
|
%
|
|||||||||||||
Total
segment net revenues
|
$
|
161,519
|
$
|
176,511
|
$
|
14,992
|
9.3
|
%
|
$
|
460,728
|
$
|
503,281
|
$
|
42,553
|
9.2
|
%
|
—
|
office
wireless headsets, particularly our CS50, CS55 and the CS60 for office
phones;
|
—
|
the
Plantronics Voyager 510S, a wireless headset using Bluetooth
technology for use with office phones; and
|
—
|
the
CS70, a wireless headset which was launched in the first quarter
of fiscal
2007 and the Supra Plus Wireless headset, which was launched in the
fourth
quarter of fiscal 2006.
|
—
|
increased
adoption of Bluetooth
products in the market; and
|
—
|
the
introduction of our new suite of Bluetooth
headsets in fiscal 2006 and 2007
including:
|
o
|
Explorer
320, 330, 340, and 350;
|
o
|
Discovery
640, 645, 655, and 665;
|
o
|
Voyager
510; and
|
o
|
the
Pulsar headset family.
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||
($
in thousands)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
|||||||||||||||||||
Audio
Entertainment Group
|
|||||||||||||||||||||||||
Revenues
from unaffiliated customers:
|
|||||||||||||||||||||||||
Portable
audio
|
$
|
45,904
|
$
|
24,656
|
$
|
(21,248
|
)
|
-46.3
|
%
|
$
|
58,727
|
$
|
65,095
|
$
|
6,368
|
10.8
|
%
|
||||||||
Powered
audio
|
20,564
|
17,911
|
(2,653
|
)
|
-12.9
|
%
|
30,182
|
48,068
|
17,886
|
59.3
|
%
|
||||||||||||||
Other
|
3,901
|
3,195
|
(706
|
)
|
-18.1
|
%
|
5,989
|
8,888
|
2,899
|
48.4
|
%
|
||||||||||||||
Less
revenue reserves
|
(9,376
|
)
|
(6,838
|
)
|
2,538
|
-27.1
|
%
|
(11,980
|
)
|
(19,894
|
)
|
(7,914
|
)
|
66.1
|
%
|
||||||||||
Total
segment net revenues
|
$
|
60,993
|
$
|
38,924
|
$
|
(22,069
|
)
|
-36.2
|
%
|
$
|
82,918
|
$
|
102,157
|
$
|
19,239
|
23.2
|
%
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||
($
in thousands)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
December
31,
2005
|
December
31,
2006
|
Increase
(Decrease)
|
|||||||||||||||||||
Consolidated
By Geographic Region
|
|||||||||||||||||||||||||
United
States
|
$
|
139,033
|
$
|
126,177
|
$
|
(12,856
|
)
|
-9.2
|
%
|
$
|
349,148
|
$
|
375,859
|
$
|
26,711
|
7.7
|
%
|
||||||||
|
|||||||||||||||||||||||||
Europe,
Middle East and Africa
|
55,246
|
56,337
|
1,091
|
2.0
|
%
|
129,821
|
142,165
|
12,344
|
9.5
|
%
|
|||||||||||||||
Asia
Pacific and Latin America
|
18,883
|
20,155
|
1,272
|
6.7
|
%
|
45,317
|
58,328
|
13,011
|
28.7
|
%
|
|||||||||||||||
Canada
and other international
|
9,350
|
12,766
|
3,416
|
36.5
|
%
|
19,360
|
29,086
|
9,726
|
50.2
|
%
|
|||||||||||||||
Total
international
|
83,479
|
89,258
|
5,779
|
6.9
|
%
|
194,498
|
229,579
|
35,081
|
18.0
|
%
|
|||||||||||||||
Total
consolidated net revenues
|
$
|
222,512
|
$
|
215,435
|
$
|
(7,077
|
)
|
-3.2
|
%
|
$
|
543,646
|
$
|
605,438
|
$
|
61,792
|
11.4
|
%
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Communications Group
|
|||||||||||||||||||||||||
Net
revenues
|
$
|
161,519
|
$
|
176,511
|
$
|
14,992
|
9.3
|
%
|
$
|
460,728
|
$
|
503,281
|
$
|
42,553
|
9.2
|
%
|
|||||||||
Cost
of revenues
|
86,598
|
99,254
|
12,656
|
14.6
|
%
|
244,217
|
284,445
|
40,228
|
16.5
|
%
|
|||||||||||||||
Segment
gross profit
|
$
|
74,921
|
$
|
77,257
|
$
|
2,336
|
3.1
|
%
|
$
|
216,511
|
$
|
218,836
|
$
|
2,325
|
1.1
|
%
|
|||||||||
Segment
gross profit %
|
46.4
|
%
|
43.8
|
%
|
(2.6
|
)
ppt.
|
47.0
|
%
|
43.5
|
%
|
(3.5
|
)
ppt.
|
|
—
|
a
product mix shift toward consumer products, which have lower gross
margins
than many of our office products, coupled with continued pricing
pressure,
especially on consumer Bluetooth
headsets. However, compared to the year ago periods, gross margins
for
Bluetooth
products have improved.
|
—
|
requirements
for excess and obsolete inventory increased due to unanticipated
shifts in
demand and the cost of our warranty obligation was higher due in
part to
increases in sales and in part to a mix shift toward consumer products
which have a higher rate of return under
warranty.
|
—
|
an
increase in capacity in our production facilities in Suzhou, China
and
Tijuana, Mexico, in preparation for anticipated future demand, especially
for our Bluetooth
products.
|
—
|
stock-based
compensation charges for the three and nine months ended December
31, 2006
of $0.7 million and $2.2 million,
respectively.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Entertainment Group
|
|||||||||||||||||||||||||
Net
revenues
|
$
|
60,993
|
$
|
38,924
|
$
|
(22,069
|
)
|
-36.2
|
%
|
$
|
82,918
|
$
|
102,157
|
$
|
19,239
|
23.2
|
%
|
||||||||
Cost
of revenues
|
41,888
|
34,845
|
(7,043
|
)
|
-16.8
|
%
|
58,252
|
86,296
|
28,044
|
48.1
|
%
|
||||||||||||||
Segment
gross profit
|
$
|
19,105
|
$
|
4,079
|
$
|
(15,026
|
)
|
-78.6
|
%
|
$
|
24,666
|
$
|
15,861
|
$
|
(8,805
|
)
|
-35.7
|
%
|
|||||||
Segment
gross profit %
|
31.3
|
%
|
10.5
|
%
|
(20.8
|
)
ppt.
|
|
29.7
|
%
|
15.5
|
%
|
(14.2
|
)
ppt.
|
|
—
|
competitive
pricing pressures which resulted in significant discounting and price
protection programs, particularly for the Portable product line;
|
—
|
a
shift in product mix. In the third quarter of fiscal 2007, we sold a
higher proportion of Powered products than in the same quarter of
fiscal
2006. Powered products carry lower gross margins than Portable
products;
|
—
|
increased
provisions for excess and obsolete inventory and adverse purchase
commitments due to unanticipated shifts in demand for our products;
and
|
—
|
increased
freight expense, in part due to surcharges related to rising fuel
costs.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Consolidated
|
|||||||||||||||||||||||||
Net
revenues
|
$
|
222,512
|
$
|
215,435
|
$
|
(7,077
|
)
|
-3.2
|
%
|
$
|
543,646
|
$
|
605,438
|
$
|
61,792
|
11.4
|
%
|
||||||||
Cost
of revenues
|
128,486
|
134,099
|
5,613
|
4.4
|
%
|
302,469
|
370,741
|
68,272
|
22.6
|
%
|
|||||||||||||||
Consolidated
gross profit
|
$
|
94,026
|
$
|
81,336
|
$
|
(12,690
|
)
|
-13.5
|
%
|
$
|
241,177
|
$
|
234,697
|
$
|
(6,480
|
)
|
-2.7
|
%
|
|||||||
Consolidated
gross profit %
|
42.3
|
%
|
37.8
|
%
|
(4.5
|
)
ppt.
|
|
44.4
|
%
|
38.8
|
%
|
(5.6
|
)
ppt.
|
|
—
|
decreased
net revenues in AEG due to increased price competition, loss of market
share, and pricing incentives;
|
—
|
a
shift in product mix within both ACG and AEG;
|
—
|
increased
provisions for excess and obsolete inventory and adverse purchase
commitments due to unanticipated shifts in demand for AEG products;
and
|
—
|
the
impact of stock-based compensation charges of $0.7 million and $2.2
million, respectively.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Communications Group
|
|||||||||||||||||||||||||
Research,
development and engineering
|
$
|
13,936
|
$
|
15,137
|
$
|
1,201
|
8.6
|
%
|
$
|
41,873
|
$
|
45,697
|
$
|
3,824
|
9.1
|
%
|
|||||||||
%
of total segment net revenues
|
8.6
|
%
|
8.6
|
%
|
(0.0
|
)
ppt.
|
9.1
|
%
|
9.1
|
%
|
0.0
|
%
ppt.
|
|
—
|
stock-based
compensation charges of approximately $0.9 million and $2.8 million,
respectively; and
|
—
|
incremental
growth in our development activity at our design centers in Mexico
and
China. The costs at these design centers are primarily associated
with
payroll and payroll-related costs due to higher headcount. Our
strategy is to have project execution, build, and verification processes
co-located with the teams that are responsible for the manufacturing
in
order to improve execution, efficiency, and cost effectiveness.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Entertainment Group
|
|||||||||||||||||||||||||
Research,
development and engineering
|
$
|
2,044
|
$
|
2,572
|
$
|
528
|
25.8
|
%
|
$
|
3,995
|
$
|
7,416
|
$
|
3,421
|
85.6
|
%
|
|||||||||
%
of total segment net revenues
|
3.4
|
%
|
6.6
|
%
|
3.3
|
ppt. |
|
4.8
|
%
|
7.3
|
%
|
2.4
|
ppt. |
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Consolidated
|
|||||||||||||||||||||||||
Research,
development and engineering
|
$
|
15,980
|
$
|
17,709
|
$
|
1,729
|
10.8
|
%
|
$
|
45,868
|
$
|
53,113
|
$
|
7,245
|
15.8
|
%
|
|||||||||
%
of total consolidated net revenues
|
7.2
|
%
|
8.2
|
%
|
1.0
|
ppt. |
|
8.4
|
%
|
8.9
|
%
|
0.3
|
ppt. |
|
—
|
continued
expenditures for wireless office and wireless mobile products, gaming
products and the home and home office products;
and
|
—
|
increased
expenditures related to revitalizing our AEG product line
up.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Communications Group
|
|||||||||||||||||||||||||
Selling,
general and administrative
|
$
|
35,193
|
$
|
39,265
|
$
|
4,072
|
11.6
|
%
|
$
|
98,969
|
$
|
111,340
|
$
|
12,371
|
12.5
|
%
|
|||||||||
%
of total segment net revenues
|
21.8
|
%
|
22.2
|
%
|
0.5
|
ppt. |
|
21.5
|
%
|
22.1
|
%
|
0.7
|
ppt. |
|
—
|
stock-based
compensation charges of $2.4 million and $7.1 million,
respectively;
|
—
|
higher
headcount in the marketing
function;
|
—
|
an
increase in sales expenses attributable to a larger global sales
presence
and an increase in sales-related compensation;
and
|
—
|
an
increase in general and administrative expenses due to higher headcount,
depreciation, and cost of outside providers for legal, accounting
and
auditing services.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Entertainment Group
|
|||||||||||||||||||||||||
Selling,
general and administrative
|
$
|
7,937
|
$
|
7,544
|
$
|
(393
|
)
|
-5.0
|
%
|
$
|
11,876
|
$
|
24,916
|
$
|
13,040
|
109.8
|
%
|
||||||||
%
of total segment net revenues
|
13.0
|
%
|
19.4
|
%
|
6.4
|
ppt. |
|
14.3
|
%
|
24.4
|
%
|
10.1
|
ppt. |
—
|
nine
full months of expenses compared to only four and a half months of
expenses for the comparable period one year ago as Altec Lansing
was
acquired in August 2005;
|
—
|
increased
marketing costs associated with trade shows;
and
|
—
|
stock-based
compensation charges.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Consolidated
|
|||||||||||||||||||||||||
Selling,
general and administrative
|
$
|
43,130
|
$
|
46,809
|
$
|
3,679
|
8.5
|
%
|
$
|
110,845
|
$
|
136,256
|
$
|
25,411
|
22.9
|
%
|
|||||||||
%
of total consolidated net revenues
|
19.4
|
%
|
21.7
|
%
|
2.3
|
ppt. |
|
20.4
|
%
|
22.5
|
%
|
2.1
|
ppt. |
|
—
|
stock-based
compensation charges of $2.6
million;
|
—
|
higher
headcount in the marketing function in
ACG;
|
—
|
an
increase in sales expenses attributable to a larger global sales
presence
and an increase in sales-related compensation for ACG;
and
|
—
|
an
increase in general and administrative expenses due to higher headcount,
depreciation, and costs of outside providers for legal, accounting,
and
auditing services.
|
—
|
nine
full months of AEG expenses compared to only four and a half months
of
expenses for the comparable period one year ago as Altec Lansing
was
acquired in August, 2005;
|
—
|
stock-based
compensation charges of $7.6 million,
and
|
—
|
higher
compensation-related charges and costs associated with a larger global
sales presence.
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Communications Group
|
|||||||||||||||||||||||||
Operating
expense
|
$
|
49,129
|
$
|
54,402
|
$
|
5,273
|
10.7
|
%
|
$
|
140,842
|
$
|
154,400
|
$
|
13,558
|
9.6
|
%
|
|||||||||
%
of total segment net revenues
|
30.4
|
%
|
30.8
|
%
|
0.4
|
ppt. |
|
30.6
|
%
|
30.7
|
%
|
0.1
|
ppt. |
|
|||||||||||
Operating
income
|
$
|
25,792
|
$
|
22,855
|
$
|
(2,937
|
)
|
-11.4
|
%
|
$
|
75,669
|
$
|
64,436
|
$
|
(11,233
|
)
|
-14.8
|
%
|
|||||||
%
of total segment net revenues
|
16.0
|
%
|
12.9
|
%
|
(3.0
|
)
ppt.
|
16.4
|
%
|
12.8
|
%
|
(3.7
|
)
ppt.
|
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Audio
Entertainment Group
|
|||||||||||||||||||||||||
Operating
expense
|
$
|
9,981
|
$
|
10,116
|
$
|
135
|
1.4
|
%
|
$
|
15,871
|
$
|
32,332
|
$
|
16,461
|
103.7
|
%
|
|||||||||
%
of total segment net revenues
|
16.4
|
%
|
26.0
|
%
|
9.6
|
ppt. |
|
19.1
|
%
|
31.6
|
%
|
12.5
|
ppt. |
|
|||||||||||
Operating
income (loss)
|
$
|
9,124
|
$
|
(6,037
|
)
|
$
|
(15,161
|
)
|
-166.2
|
%
|
$
|
8,795
|
$
|
(16,471
|
)
|
$
|
(25,266
|
)
|
-287.3
|
%
|
|||||
%
of total segment net revenues
|
15.0
|
%
|
-15.5
|
%
|
(30.5
|
)
ppt.
|
|
10.6
|
%
|
-16.1
|
%
|
(26.7
|
)
ppt.
|
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Consolidated
|
|||||||||||||||||||||||||
Operating
expense
|
$
|
59,110
|
$
|
64,518
|
$
|
5,408
|
9.1
|
%
|
$
|
156,713
|
$
|
186,732
|
$
|
30,019
|
19.2
|
%
|
|||||||||
%
of total consolidated net revenues
|
26.6
|
%
|
29.9
|
%
|
3.4
|
ppt. |
28.8
|
%
|
30.9
|
%
|
2.1
|
ppt. |
|
||||||||||||
Operating
income
|
$
|
34,916
|
$
|
16,818
|
$
|
(18,098
|
)
|
-51.8
|
%
|
$
|
84,464
|
$
|
47,965
|
$
|
(36,499
|
)
|
-43.2
|
%
|
|||||||
%
of total consolidated net revenues
|
15.7
|
%
|
7.8
|
%
|
(7.9
|
)
ppt.
|
|
15.5
|
%
|
7.9
|
%
|
(7.7
|
)
ppt.
|
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005
|
2006
|
(Decrease)
|
2005
|
2006
|
(Decrease)
|
|||||||||||||||||||
Interest
and other income (expense), net
|
$
|
(596
|
)
|
$
|
1,493
|
$
|
2,089
|
-350.5
|
%
|
$
|
667
|
$
|
2,745
|
$
|
2,078
|
311.5
|
%
|
||||||||
%
of total net revenues
|
-0.3
|
%
|
0.7
|
%
|
1.0
|
ppt. |
|
0.1
|
%
|
0.5
|
%
|
0.3
|
ppt. |
|
Three
Months Ended
December
31,
|
Increase
|
Nine
Months Ended
December
31,
|
Increase
|
||||||||||||||||||||||
($
in thousands)
|
2005 | 2006 |
(Decrease)
|
2005 | 2006 |
(Decrease)
|
|||||||||||||||||||
Income
before income taxes
|
$
|
34,320
|
$
|
18,311
|
$
|
(16,009
|
)
|
-46.6
|
%
|
$
|
85,131
|
$
|
50,710
|
$
|
(34,421
|
)
|
-40.4
|
%
|
|||||||
Income
tax expense
|
9,279
|
3,121
|
(6,158
|
)
|
-66.4
|
%
|
24,685
|
10,704
|
(13,981
|
)
|
-56.6
|
%
|
|||||||||||||
Net
income
|
$
|
25,041
|
$
|
15,190
|
$
|
(9,851
|
)
|
-39.3
|
%
|
$
|
60,446
|
$
|
40,006
|
$
|
(20,440
|
)
|
-33.8
|
%
|
|||||||
Effective
tax rate
|
27.0
|
%
|
17.0
|
%
|
(10.0
|
)
ppt.
|
|
29.0
|
%
|
21.1
|
%
|
(7.9
|
)
ppt.
|
|
Nine
Months Ended
December
31,
|
|||||||
($
in thousands)
|
2005
|
2006
|
|||||
Cash
provided by operating activities
|
$
|
46,525
|
$
|
28,164
|
|||
Cash
used for capital expenditures
|
(31,350
|
)
|
(18,739
|
)
|
|||
Cash
used for acquisitions
|
(165,020
|
)
|
-
|
||||
Cash
provided by other investing activities
|
164,416
|
10,696
|
|||||
Cash
used for investing activities
|
(31,954
|
)
|
(8,043
|
)
|
|||
Cash
used for financing activities
|
$
|
(33,748
|
)
|
$
|
(21,157
|
)
|
—
|
increases
in net inventory balances of $28.4 million, primarily related to
finished
goods for our newly-introduced Bluetooth and wireless office products.
Inventory increased due to anticipated future demand and due to a
conscious decision to increase safety stock. Average annual inventory
turns decreased from 4.8 in the third quarter of fiscal 2006 to 4.0
in the
third quarter of fiscal 2007; and
|
—
|
net
income of $40 million for the nine months ended December 31, 2006
compared
to $60.4 million for the same period last year.
|
—
|
a
$12.6 million non-cash stock-based compensation charge was recorded
under
the provisions of SFAS 123(R);
|
—
|
an
increase of $16.1 million in accrued liabilities as a result of an
increase in accruals for employee benefits, increased audit and accounting
fees, and increased accruals related to foreign exchange hedging
activities; and
|
—
|
an
increase in non-cash charges for depreciation and amortization, which
increased to $21.8 million in the nine months ended December 31,
2006
compared to $16.1 million in the same period last year. As a result
of the
acquisition of Altec Lansing in August 2005, we acquired additional
property, plant and equipment resulting in more depreciation, and
we
acquired significant intangible assets resulting in more amortization.
Finally, we placed additional fixed assets into production in our
new
manufacturing plant in Suzhou, China and in our new research and
development center in Tijuana, Mexico, and completed certain building
improvements in our Santa Cruz, California headquarters
facility.
|
Payments
Due by
Period
|
||||||||||||||||||||||
($
in thousands)
|
Total
|
Remainder
of
Fiscal
2007
|
Fiscal
2008
|
Fiscal
2009
|
Fiscal
2010
|
Fiscal
2011
|
Thereafter
|
|||||||||||||||
Operating
leases
|
$
|
12,666
|
$
|
1,062
|
$
|
3,805
|
$
|
3,102
|
$
|
1,780
|
$
|
764
|
$
|
2,153
|
||||||||
Unconditional
purchase obligations
|
85,183
|
56,789
|
28,394
|
|||||||||||||||||||
Total
contractual cash obligations
|
$
|
97,849
|
$
|
57,851
|
$
|
32,199
|
$
|
3,102
|
$
|
1,780
|
$
|
764
|
$
|
2,153
|
December
31, 2006
|
||||||||||
(in
millions)
|
||||||||||
Currency
- forward contracts
|
USD
Value
of
Net FX
Contracts
|
FX
Gain
(Loss)
From
10%
Appreciation
of
USD
|
FX
Gain
(Loss)
Form
10%
Depreciation
of
USD
|
|||||||
Euro
|
$
|
25.7
|
$
|
2.6
|
|
$
|
(2.6
|
) | ||
Great
British Pound
|
6.1
|
0.6
|
|
(0.6
|
) | |||||
Net
position
|
$
|
31.8
|
$
|
3.2
|
|
$
|
(3.2
|
) |
December
31, 2006
|
||||||||||
(in
millions)
|
||||||||||
Currency
- option contracts
|
USD
Value
of
Net FX
Contracts
|
FX
Gain (Loss)
From
10%
Appreciation
of
USD
|
FX
Gain
(Loss)
Form
10%
Depreciation
of
USD
|
|||||||
Call
options
|
$
|
(109.8
|
)
|
$
|
4.1
|
$
|
(9.4
|
)
|
||
Put
options
|
103.6
|
6.1
|
(1.7
|
)
|
||||||
Net
position
|
$
|
(6.2
|
)
|
$
|
10.2
|
$
|
(11.1
|
)
|
(a) |
Evaluation
of disclosure controls and
procedures.
|
(b) |
Changes
in internal control over financial
reporting
|
—
|
Our
operating results are highly dependent on the volume and timing of
orders
received during the quarter, which are difficult to forecast. Customers
generally order on an as-needed basis, and we typically do not obtain
firm, long-term purchase commitments from our customers. As a result,
our
revenues in any quarter depend primarily on orders booked and shipped
in
that quarter;
|
—
|
We
must incur a large portion of our costs in advance of sales orders
because
we must plan research and production, order components and enter
into
development, sales and marketing, and other operating commitments
prior to
obtaining firm commitments from our customers. In the event we acquire
too
much inventory for certain products, the risk of future inventory
write-downs increases. In the event we have inadequate inventory
to meet
the demand for particular products, we may miss significant revenue
opportunities or may incur significant expenses such as air freight,
expediting shipments, and other negative variances in our manufacturing
processes as we attempt to make up for the shortfall. The foregoing
difficulties are exacerbated in periods such as the present when
a
significant portion of our revenue is derived from new products and
the
difficulties of forecasting appropriate volumes of production are
even
more tenuous;
|
—
|
Our
ACG profitability depends, in part, on the mix of our Business-to-Business
(“B2B”) and Business-to-Consumer (“B2C”) as well as our product mix. Our
prices and gross margins are generally lower for sales to B2C customers
compared to sales to our B2B customers. Our prices and gross margins
can
vary significantly by product line as well as within product lines.
The
size and timing of opportunities in this market are difficult to
predict;
|
—
|
A
significant portion of our annual retail sales for AEG generally
occur in
the third fiscal quarter, thereby increasing the difficulty of predicting
revenues and profitability from quarter to quarter and in managing
inventory levels;
|
—
|
Fluctuations
in currency exchange rates impact our revenues and profitability
because
we report our financial statements in U.S. dollars, whereas a significant
portion of our sales to customers are transacted in other currencies,
particularly the Euro. Furthermore, fluctuations in foreign currencies
impact our global pricing strategy resulting in our lowering or raising
selling prices in a currency in order to avoid disparity with U.S.
dollar
prices and to respond to currency-driven competitive pricing actions;
and
|
—
|
Because
we have significant manufacturing operations in Mexico and China,
fluctuations in currency exchange rates in those two countries can
impact
our gross profit and profitability.
|
—
|
If
forecasted demand does not develop, we could have excess inventory
and
excess capacity. Over-forecast of demand could result in higher
inventories of finished products, components and subassemblies. In
addition, because our retail customers have pronounced seasonality,
we
must build inventory well in advance of the December quarter in order
to
stock up for the anticipated future demand. If we were unable to
sell
these inventories, we would have to write off some or all of our
inventories of excess products and unusable components and subassemblies.
Excess manufacturing capacity could lead to higher production costs
and
lower margins.
|
—
|
If
demand increases beyond that forecasted, we would have to rapidly
increase
production. We currently depend on suppliers to provide additional
volumes
of components and sub-assemblies, and we are experiencing greater
dependence on single source suppliers; therefore, we might not be
able to
increase production rapidly enough to meet unexpected demand. This
could
cause us to fail to meet customer expectations. There could be short-term
losses of sales while we are trying to increase production. If customers
turn to our competitors to meet their needs, there could be a long-term
impact on our revenues and profitability.
|
—
|
Rapid
increases in production levels to meet unanticipated demand could
result
in higher costs for components and sub-assemblies, increased expenditures
for freight to expedite delivery of required materials, and higher
overtime costs and other expenses. These higher expenditures could
lower
our profit margins. Further, if production is increased rapidly,
there may
be decreased manufacturing yields, which may also lower our margins.
|
—
|
The
introduction of Bluetooth
and other wireless headsets presents many significant manufacturing,
marketing and other operational risks and uncertainties, including
developing and marketing these wireless headset products; unforeseen
delays or difficulties in introducing and achieving volume production
of
such products, as occurred in our second and third quarter of fiscal
2006;
our dependence on third parties to supply key components, many of
which
have long lead times; and our ability to forecast demand for this
new
product category for which relevant data is incomplete or unavailable.
We
may have longer lead times with certain suppliers than commitments
from
some of our customers. If we are unable to deliver product on time
to meet
the market window of our retail customers, we will lose opportunities
to
increase revenues and profits. We may also be unable to sell these
finished goods, which would result in excess or obsolete
inventory.
|
—
|
Increasing
production beyond planned capacity involves increasing tooling, test
equipment and hiring and training additional staff. Lead times to
increase
tooling and test equipment are typically several months, or more.
Once
such additional capacity is in place, we incur increased depreciation
and
the resulting overhead. Should we fail to ramp production once capacity
is
in place, we would not be able to absorb this incremental overhead,
and
this could lead to lower gross
margins.
|
—
|
We
are in the process of in sourcing some of our production from certain
third party vendors, and shifting some production from our plant
in Mexico
to our plant in Suzhou, China. If we are not able to successfully
transition production we may not be able to meet demand or manufacture
products at a cost which is competitive with historical costs.
|
—
|
Cultural
differences in the conduct of the business;
|
—
|
Difficulties
in integration of the operations, technologies, and products of Altec
Lansing. Our systems integration plan for Altec Lansing includes
the on-going transition of Altec Lansing’s current ERP system to
ours. We anticipate that there will be significant business processes
and
internal controls which will change as a result of the integration.
If we
are unable to complete the systems integration plan successfully
or on a
timely basis this could result either in delays to our internal controls
evaluation for Altec Lansing or in additional costs in the documentation
and testing of these controls;
|
—
|
Diversion
of management's attention from normal daily operations of the core
business;
|
—
|
The
potential loss of key employees of Altec Lansing and
Plantronics;
|
—
|
Competition
may continue to increase in Altec Lansing’s markets more than expected;
and
|
—
|
Altec
Lansing’s product sales and new product development may not evolve as
anticipated.
|
—
|
Anticipate
technology and market trends;
|
—
|
Develop
innovative new products and enhancements on a timely
basis;
|
—
|
Distinguish
our products from those of our
competitors;
|
—
|
Manufacture
and deliver high-quality products in sufficient volumes;
and
|
—
|
Price
our products competitively.
|
—
|
We
obtain certain raw materials, sub-assemblies, components and products
from
single suppliers and alternate sources for these items are not readily
available. To date, we have not experienced any significant interruptions
in the supply of these raw materials, sub-assemblies, components
and
products. Adverse economic conditions could lead to a higher risk
of
failure of our suppliers to remain in business or to be able to purchase
the raw materials, subcomponents and parts required by them to produce
and
provide to us the parts we need. An interruption in supply from any
of our
single source suppliers in the future would materially adversely
affect
our business, financial condition and results of operations.
|
—
|
Prices
of raw materials, components and sub-assemblies may rise. If this
occurs
and we are not able to pass these increases on to our customers or
to
achieve operating efficiencies that would offset the increases, it
would
have a material adverse effect on our business, financial condition
and
results of operations.
|
—
|
Due
to the lead times required to obtain certain raw materials,
sub-assemblies, components and products from certain foreign suppliers,
we
may not be able to react quickly to changes in demand, potentially
resulting in either excess inventories of such goods or shortages
of the
raw materials, sub-assemblies, components and products. Lead times
are
particularly long on silicon-based components incorporating radio
frequency and digital signal processing technologies and such components
are an increasingly important part of our product costs. In particular,
many B2C customer orders have shorter lead times than the component
lead
times, making it increasingly necessary to carry more inventory in
anticipation of those orders, which may not materialize. Failure
in the
future to match the timing of purchases of raw materials, sub-assemblies,
components and products to demand could increase our inventories
and/or
decrease our revenues, consequently materially adversely affecting
our
business, financial condition and results of operations.
|
—
|
Most
of our suppliers are not obligated to continue to provide us with
raw
materials, components and sub-assemblies. Rather, we buy most raw
materials, components and subassemblies on a purchase order basis.
If our
suppliers experience increased demand or shortages, it could affect
deliveries to us. In turn, this would affect our ability to manufacture
and sell products that are dependent on those raw materials, components
and subassemblies. For example, during the first quarter of fiscal
2005,
we had lower shipments to one of our key wireless OEM carrier partners,
which resulted from a constraint in supply of a new part for a custom
product. Such shortages would materially adversely affect our business,
financial condition and results of operations.
|
—
|
Although
we generally use standard raw materials, parts and components for
our
products, the high development costs associated with emerging wireless
technologies permits us to work with only a single source of silicon
chip-sets on any particular new product. We, or our chosen supplier
of
chip-sets, may experience challenges in designing, developing and
manufacturing components in these new technologies which could affect
our
ability to meet market schedules. Due to our dependence on single
suppliers for certain chip sets, we could experience higher prices,
a
delay in development of the chip-set, and/or the inability to meet
our
customer demand for these new products. Our business, operating results
and financial condition could therefore be materially adversely affected
as a result of these factors.
|
—
|
If
supply or demand for iPod products decreases, demand for certain
of our
portable products could be negatively affected, as we experienced
in the
first quarter of fiscal 2007. MP3 integration with cell phones could
take
significant market share from Apple’s iPod
products;
|
—
|
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;
|
—
|
If
Apple changes its iPod product design more frequently than we update
certain of our portable products, certain of our products may not
be
compatible with the changed design. Moreover, if Apple makes style
changes
to its products more frequently than we update certain of our portable
products, consumers may not like the look of our products with the
iPod.
Both of these factors could result in decreased demand for our products
and excess inventories could result which would negatively impact
our
financial results; and
|
—
|
Apple
has recently introduced its own line of iPod speaker products, which
compete with certain of our Altec Lansing-branded speaker products.
As the
manufacturer of the iPod, Apple has unique advantages with regard
to
product changes or introductions that we do not possess, which could
negatively impact our ability to compete effectively against Apple’s
speaker products. Moreover, certain consumers may prefer to buy Apple’s
iPod speakers rather than other vendors’ speakers because Apple is the
manufacturer. As a result, this could lead to decreased demand for
our
products and excess inventories could result which would negatively
impact
our financial results.
|
—
|
New
Product Launch.
With the growth of our product portfolio, we experience increased
complexity in coordinating product development, manufacturing, and
shipping. As this complexity increases, it places a strain on our
ability
to accurately coordinate the commercial launch of our products with
adequate supply to meet anticipated customer demand and effective
marketing to stimulate demand and market acceptance. If we are unable
to
scale and improve our product launch coordination, we could frustrate
our
customers and lose retail shelf space and product
sales.
|
— |
Forecasting,
Planning and Supply Chain Logistics.
With the growth of our product portfolio, we also experience increased
complexity in forecasting customer demand and in planning for production,
and transportation and logistics management. If we are unable to
scale and
improve our forecasting, planning and logistics management, we
could
frustrate our customers, lose product sales or accumulate excess
inventory.
|
—
|
Support
Processes.
To
manage the growth of our operations, we will need to continue to
improve
our transaction processing, operational and financial systems, and
procedures and controls to effectively manage the increased complexity.
If
we are unable to scale and improve these areas, the consequences
could
include: delays in shipment of product, degradation in levels of
customer
support, lost sales, decreased cash flows, and increased inventory.
These
difficulties could harm or limit our ability to
expand.
|
—
|
Uncertain
economic conditions and the decline in investor confidence in the
market
place;
|
—
|
Changes
in our published forecasts of future results of
operations;
|
—
|
Quarterly
variations in our or our competitors' results of operations and changes
in
market share;
|
—
|
The
announcement of new products or product enhancements by us or our
competitors;
|
—
|
The
loss of services of one or more of our executive officers or other
key
employees;
|
—
|
Changes
in earnings estimates or recommendations by securities analysts;
|
—
|
Developments
in our industry;
|
—
|
Sales
of substantial numbers of shares of our common stock in the public
market;
|
—
|
Integration
of the Altec Lansing business or market reaction to future
acquisitions;
|
—
|
General
market conditions; and
|
—
|
Other
factors unrelated to our operating performance or the operating
performance of our competitors.
|
—
|
cultural
differences in the conduct of business;
|
—
|
fluctuations
in foreign exchange rates;
|
—
|
greater
difficulty in accounts receivable collection and longer collection
periods;
|
—
|
impact
of recessions in economies outside of the United States;
|
—
|
reduced
protection for intellectual property rights in some countries;
|
—
|
unexpected
changes in regulatory requirements;
|
—
|
tariffs
and other trade barriers;
|
—
|
political
conditions in each country;
|
—
|
management
and operation of an enterprise spread over various countries; and
|
—
|
the
burden and administrative costs of complying with a wide variety
of
foreign laws.
|
|
PLANTRONICS,
INC.
|
Date:
February 8, 2007
|
By:
/s/ Barbara V. Scherer
|
|
Barbara
V. Scherer
|
|
Senior
Vice President - Finance and Administration and Chief Financial Officer
|
(Principal
Financial Officer and Duly Authorized Officer of the
Registrant)
|
Exhibit
Number
|
Description
of Document
|
2.1
|
Agreement
and Plan of Merger by and among Plantronics, Inc., Sonic Acquisition
Corporation, Altec Lansing Technologies, Inc. and the other parties
named
herein, dated July 11, 2005 (incorporated herein by reference from
Exhibit
2.1 of the Registrant’s Form 8-K (File 001-12696), filed on August 19,
2005).
|
3.1.1
|
Amended
and Restated By-Laws of the Registrant (incorporated herein by reference
from Exhibit (3.1) to the Registrant’s Annual Report on Form 10-K (File
No. 001-12696), filed on June 21, 2002).
|
3.1.2
|
Certificate
of Amendment to Amended and Restated Bylaws of Plantronics, Inc.
(incorporated herein by reference from Exhibit (3.1.2) of the Registrant's
Current Report on Form 10-K (File No. 001-12696), filed on May 31,
2005).
|
3.2.1
|
Restated
Certificate of Incorporation of the Registrant filed with the Secretary
of
State of Delaware on January 19, 1994 (incorporated herein by reference
from Exhibit (3.1) to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-12696), filed on March 4, 1994).
|
3.2.2
|
Certificate
of Retirement and Elimination of Preferred Stock and Common stock
of the
Registrant filed with the Secretary of State of Delaware on January
11,
1996 (incorporated herein by reference from Exhibit (3.3) of the
Registrant’s Annual Report on Form 10-K (File No. 001-12696), filed on
June 27, 1996).
|
3.2.3
|
Certificate
of Amendment of Restated Certificate of Incorporation of the Registrant
filed with the Secretary of State of Delaware on August 5, 1997
(incorporated herein by reference from Exhibit (3.1) to the Registrant’s
Quarterly Report on Form 10-Q (File No. 001-12696), filed on August
12,
1997).
|
3.2.4
|
Certificate
of Amendment of Restated Certificate of Incorporation of the Registrant
filed with the Secretary of State of Delaware on May 23, 2000
(incorporated herein by reference from Exhibit (4.2) to the Registrant’s
Registration Statement on Form S-8 (File No. 333-42664), filed on
July 31,
2000).
|
3.3
|
Registrant’s
Certificate of Designation of Rights, Preferences and Privileges
of Series
A Participating Preferred Stock filed with the Secretary of State
of the
State of Delaware on April 1, 2002 (incorporated herein by reference
from
Exhibit (3.6) to the Registrant’s Form 8-A (File No. 001-12696), filed on
March 29, 2002).
|
4.1
|
Preferred
Stock Rights Agreement, dated as of March 13, 2002 between the Registrant
and Equiserve Trust Company, N.A., including the Certificate of
Designation, the form of Rights Certificate and the Summary of Rights
attached thereto as Exhibits A, B, and C, respectively (incorporated
herein by reference from Exhibit (4.1) to the Registrant’s Form 8-A (File
No. 001-12696), filed on March 29, 2002).
|
10.1*
|
Plantronics,
Inc. Non-EMEA Quarterly Profit Sharing Plan (incorporated herein
by
reference from Exhibit (10.1) to the Registrant’s Report on Form 10-K
(File No. 001-12696), filed on June 1, 2001).
|
10.2*
|
Form
of Indemnification Agreement between the Registrant and certain directors
and executives. (incorporated herein by reference from Exhibit (10.2)
to
the Registrant’s Report on Form 10-K (File No. 001-12696), filed on May
31, 2005).
|
10.3.1*
|
Regular
and Supplemental Bonus Plan (incorporated herein by reference from
Exhibit
(10.4(a)) to the Registrant’s Report on Form 10-K (File No. 001-12696),
filed on June 1, 2001).
|
10.3.2*
|
Overachievement
Bonus Plan (incorporated herein by reference from Exhibit (10.4(b))
to the
Registrant’s Report on Form 10-K (File No. 001-12696), filed on June 1,
2001).
|
10.4.1
|
Lease
Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and
Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises
located
in Tijuana, Mexico (translation from Spanish original) (incorporated
herein by reference from Exhibit (10.5.1) of the Registrant's Quarterly
Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004).
|
10.4.2
|
Lease
Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and
Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises
located
in Tijuana, Mexico (translation from Spanish original) (incorporated
herein by reference from Exhibit (10.5.2) of the Registrant's Quarterly
Report on Form 10-Q (File No. 001-12696), filed on August 6,
2004).
|
10.4.3
|
Lease
Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and
Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises
located
in Tijuana, Mexico (translation from Spanish original) (incorporated
herein by reference from Exhibit (10.5.3) of the Registrant's Quarterly
Report on Form 10-Q (File No. 001-12696), filed on August 6,
2004).
|
10.4.4
|
Lease
Agreement dated October 2004 between Finsa Portafolios, S.A. DE C.V.and
Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises
located
in Tijuana, Mexico (translation from Spanish original) (incorporated
herein by reference from Exhibit (10.5.4) of the Registrant's Quarterly
Report on Form 10-Q (File No. 001-12696), filed on August 6,
2004).
|
10.5
|
Lease
dated December 7, 1990 between Canyge Bicknell Limited and Plantronics
Limited, a subsidiary of the Registrant, for premises located in
Wootton
Bassett, The United Kingdom (incorporated herein by reference from
Exhibit
(10.32) to the Registrant’s Registration Statement on Form S-1 (as
amended) (File No.33-70744), filed on October 20, 1993).
|
10.6*
|
Amended
and Restated 2003 Stock Plan (incorporated herein by reference from
the
Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696),
filed on May 26, 2004).
|
10.7*
|
1993
Stock Option Plan (incorporated herein by reference from Exhibit
(10.8) to
the Registrant's Annual Report on Form 10-K (File No. 001-12696),
filed on
June 21, 2002).
|
10.8
1*
|
1993
Director Stock Option Plan (incorporated herein by reference from
Exhibit
(10.29) to the Registrant's Registration Statement on Form S-1 (as
amended) (File No. 33-70744), filed on October 20, 1993).
|
10.8.2*
|
Amendment
to the 1993 Director Stock Option Plan (incorporated herein by reference
from Exhibit (4.4) to the Registrant's Registration Statement on
Form S-8
(File No. 333-14833), filed on October 25, 1996).
|
10.8.3*
|
Amendment
No. 2 to the 1993 Director Stock Option Plan (incorporated herein
by
reference from Exhibit (10.9(a)) to the Registrant's Report on Form
10-K
(File No. 001-12696), filed on June 1, 2001).
|
10.8.4
*
|
Amendment
No. 3 to the 1993 Director Stock Option Plan (incorporated herein
by
reference from Exhibit (10.9(b)) to the Registrant's Report on Form
10-K
(File No. 001-12696), filed on June 1, 2001).
|
10.8.5*
|
Amendment
No. 4 to the 1993 Director Stock Option Plan (incorporated herein
by
reference from Exhibit (10.9.5) to the Registrant's Annual Report
on Form
10-K (File No. 001-12696), filed on June 21, 2002).
|
10.9.1*
|
2002
Employee Stock Purchase Plan (incorporated herein by reference from
the
Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696),
filed on June 3, 2005).
|
10.9.1
|
Trust
Agreement Establishing the Plantronics, Inc. Annual Profit
Sharing/Individual Savings Plan Trust (incorporated herein by reference
from Exhibit (4.3) to the Registrant's Registration Statement on
Form S-8
(File No. 333-19351), filed on January 7, 1997).
|
10.9.2*
|
Plantronics,
Inc. 401(k) Plan, effective as of April 2, 2000 (incorporated herein
by
reference from Exhibit (10.11) to the Registrant's Report on Form
10-K
(File No. 001-12696), filed on June 1, 2001).
|
10.10*
|
Resolutions
of the Board of Directors of Plantronics, Inc. Concerning Executive
Stock
Purchase Plan (incorporated herein by reference from Exhibit (4.4)
to the
Registrant's Registration Statement on Form S-8 (as amended) (File
No.
333-19351), filed on March 25, 1997).
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10.11.1*
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Plantronics,
Inc. Basic Deferred Compensation Plan, as amended August 8, 1996
(incorporated herein by reference from Exhibit (4.5) to the Registrant's
Registration Statement on Form S-8 (as amended) (File No. 333-19351),
filed on March 25, 1997).
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10.11.2
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Trust
Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation
Plan (incorporated herein by reference from Exhibit (4.6) to the
Registrant's Registration Statement on Form S-8 (as amended) (File
No.
333-19351), filed on March 25, 1997).
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10.11.3
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Plantronics,
Inc. Basic Deferred Compensation Plan Participant Election (incorporated
herein by reference from Exhibit (4.7) to the Registrant's Registration
Statement on Form S-8 (as amended) (File No. 333-19351), filed on
March
25, 1997).
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10.12.1*
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Employment
Agreement dated as of July 4, 1999 between Registrant and Ken Kannappan
(incorporated herein by reference from Exhibit (10.15) to the Registrant's
Annual Report on Form 10-K405 (File No. 001-12696), filed on June
1,
2000).
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10.12.2*
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Employment
Agreement dated as of November 1996 between Registrant and Don Houston
(incorporated herein by reference from Exhibit (10.14.2) to the
Registrant's Annual Report on Form 10-K (File No. 001-12696), filed
on
June 2, 2003).
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10.12.3*
|
Employment
Agreement dated as of April 1997 between Registrant and Barbara Scherer
(incorporated herein by reference from Exhibit (10.14.4) to the
Registrant's Annual Report on Form 10-K (File No. 001-12696), filed
on
June 2, 2003).
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10.12.4*
|
Employment
Agreement dated as of June 2003 between Registrant and Philip Vanhoutte
(incorporated herein by reference from Exhibit (10.12.4) to the
Registrant's Annual Report on Form 10-K (File No. 001-12696), filed
on May
31, 2005).
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10.12.5*
|
Employment
Agreement dated as of May 2001 between Registrant and Joyce Shimizu
(incorporated herein by reference from Exhibit (10.14.5) to the
Registrant's Annual Report on Form 10-K (File No. 001-12696), filed
on
June 2, 2003).
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10.13.1
|
Credit
Agreement dated as of July 31, 2003 between Registrant and Wells
Fargo
Bank N.A. (incorporated herein by reference from Exhibit (10.1) of
the
Registrant's Quarterly Report on Form 10-Q (File No. 001-12696),
filed on
November 7, 2003).
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10.13.2
|
Credit
Agreement Amendment No. 1 dated as of August, 1, 2004, between Registrant
and
Wells
Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.15.2)
to the
Registrant’s
Quarterly Report on Form 10-Q (File No. 001- 12696), filed on November
5,
2004).
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10.13.3
|
Credit
Agreement Amendment No.2 dated as of July 11, 2005, between Registrant
and
Wells Fargo Bank National Association (incorporated herein by reference
from Exhibit (10.15.1) to the Registrants Form 8-K (File No. 001-12696),
filed on July 15, 2005).
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10.13.4
|
Credit
Agreement Amendment No.3 dated as of August 11, 2005, between Registrant
and Wells Fargo Bank National Association (incorporated herein by
reference from Exhibit (10.2) to the Registrants Form 8-K (File No.
001-12696), filed on November 23, 2005).
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10.13.5
|
Credit
Agreement Amendment No.4 dated as of November 17, 2005, between Registrant
and Wells Fargo Bank National Association (incorporated herein by
reference from Exhibit (10.1) to the Registrants Form 8-K (File No.
001-12696), filed on November 23, 2005).
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10.14*
|
Restricted
Stock Award Agreement dated as of October 12, 2004, between Registrant
and
certain of its executive officers (incorporated herein by reference
from
Exhibit (10.1) of the Registrant's Current Report on Form 8-K (File
No.
001-12696), filed on October 14,
2004).
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14
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Worldwide
Code of Business Conduct and Ethics (incorporated herein by reference
from
Exhibit (14) of the Registrant's Current Report on Form 10-K (File
No.
001-12696), filed on May 31, 2005).
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CEO’s
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
|
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CFO’s
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 of the CEO and CFO
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*
|
Indicates
a management contract or compensatory plan, contract or arrangement
in
which any Director or any Executive Officer
participates.
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