Delaware
|
77-0207692
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
Number)
|
Large
accelerated filer T
|
Accelerated
filer £
|
Non-accelerated
filer £
|
Smaller
reporting company £
|
(Do
not check if a smaller reporting company)
|
PART
I. FINANCIAL INFORMATION
|
Page No.
|
Item
1. Financial Statements:
|
|
3
|
|
4
|
|
5
|
|
6
|
|
21
|
|
40
|
|
42
|
|
PART
II. OTHER INFORMATION
|
|
43
|
|
43
|
|
57
|
|
57
|
|
58
|
|
59
|
March 31,
2008
|
September 30,
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 163,091 | $ | 199,983 | ||||
Accounts
receivable, net
|
131,493 | 115,032 | ||||||
Inventory
|
127,088 | 163,433 | ||||||
Deferred
income taxes
|
13,760 | 13,594 | ||||||
Other
current assets
|
14,771 | 20,646 | ||||||
Total
current assets
|
450,203 | 512,688 | ||||||
Long-term
investments
|
25,136 | 24,823 | ||||||
Property,
plant and equipment, net
|
98,530 | 102,543 | ||||||
Intangibles,
net
|
91,511 | 87,498 | ||||||
Goodwill
|
69,171 | 69,171 | ||||||
Other
assets
|
6,842 | 5,947 | ||||||
Total
assets
|
$ | 741,393 | $ | 802,670 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 47,896 | $ | 70,721 | ||||
Accrued
liabilities
|
67,318 | 55,753 | ||||||
Total
current liabilities
|
115,214 | 126,474 | ||||||
Deferred
tax liability
|
32,570 | 30,098 | ||||||
Long-term
income taxes payable
|
14,137 | 13,686 | ||||||
Other
long-term liabilities
|
852 | 964 | ||||||
Total
liabilities
|
162,773 | 171,222 | ||||||
Stockholders'
equity:
|
||||||||
Common
stock
|
673 | 677 | ||||||
Additional
paid-in capital
|
369,655 | 386,717 | ||||||
Accumulated
other comprehensive income (loss)
|
(3,581 | ) | 4,367 | |||||
Retained
earnings
|
608,849 | 642,086 | ||||||
975,596 | 1,033,847 | |||||||
Less:
Treasury stock, at cost
|
(396,976 | ) | (402,399 | ) | ||||
Total
stockholders' equity
|
578,620 | 631,448 | ||||||
Total
liabilities and stockholders' equity
|
$ | 741,393 | $ | 802,670 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
revenues
|
$ | 208,224 | $ | 216,856 | $ | 414,719 | $ | 436,020 | ||||||||
Cost
of revenues
|
123,768 | 123,083 | 246,717 | 251,368 | ||||||||||||
Gross
profit
|
84,456 | 93,773 | 168,002 | 184,652 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research,
development and engineering
|
19,208 | 18,850 | 38,696 | 38,545 | ||||||||||||
Selling,
general and administrative
|
45,941 | 47,745 | 92,052 | 96,143 | ||||||||||||
Restructuring
and other related charges
|
- | (140 | ) | - | 235 | |||||||||||
Total
operating expenses
|
65,149 | 66,455 | 130,748 | 134,923 | ||||||||||||
Operating
income
|
19,307 | 27,318 | 37,254 | 49,729 | ||||||||||||
Interest
and other income (expense), net
|
1,793 | (3,170 | ) | 3,127 | (1,630 | ) | ||||||||||
Income
before income taxes
|
21,100 | 24,148 | 40,381 | 48,099 | ||||||||||||
Income
tax expense
|
4,578 | 6,500 | 8,884 | 9,957 | ||||||||||||
Net
income
|
$ | 16,522 | $ | 17,648 | $ | 31,497 | $ | 38,142 | ||||||||
Net
income per share - basic
|
$ | 0.34 | $ | 0.36 | $ | 0.66 | $ | 0.78 | ||||||||
Shares
used in basic per share calculations
|
48,115 | 48,796 | 47,975 | 48,738 | ||||||||||||
Net
income per share - diluted
|
$ | 0.34 | $ | 0.36 | $ | 0.64 | $ | 0.77 | ||||||||
Shares
used in diluted per share calculations
|
49,310 | 49,489 | 48,963 | 49,362 | ||||||||||||
Cash
dividends declared per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.10 |
Six
Months Ended September 30,
|
||||||||
2007
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 31,497 | $ | 38,142 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
13,974 | 13,973 | ||||||
Stock-based
compensation
|
7,862 | 8,506 | ||||||
Provision
for (benefit from) sales allowances and doubtful accounts
|
370 | (108 | ) | |||||
Provision
for excess and obsolete inventories
|
8,404 | 3,222 | ||||||
Benefit
from deferred income taxes
|
(5,769 | ) | (4,346 | ) | ||||
Income
tax benefit associated with stock option exercises
|
473 | 668 | ||||||
Excess
tax benefit from stock-based compensation
|
(1,291 | ) | (589 | ) | ||||
Loss
on disposal of property, plant, and equipment
|
7 | 91 | ||||||
Impairment
of intangible asset
|
517 | - | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable, net
|
(16,044 | ) | 18,632 | |||||
Inventory
|
(15,316 | ) | (39,566 | ) | ||||
Other
assets
|
211 | (4,886 | ) | |||||
Accounts
payable
|
1,515 | 22,825 | ||||||
Accrued
liabilities
|
7,201 | (5,348 | ) | |||||
Income
taxes payable
|
7,936 | 3,189 | ||||||
Cash
provided by operating activities
|
41,547 | 54,405 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds
from sales of short-term investments
|
168,415 | - | ||||||
Purchase
of short-term investments
|
(212,265 | ) | - | |||||
Capital
expenditures and other assets
|
(11,893 | ) | (14,591 | ) | ||||
Cash
used for investing activities
|
(55,743 | ) | (14,591 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Purchase
of treasury stock
|
- | (6,381 | ) | |||||
Proceeds
from sale of treasury stock
|
2,625 | 2,668 | ||||||
Proceeds
from issuance of common stock
|
5,927 | 6,898 | ||||||
Payment
of cash dividends
|
(4,828 | ) | (4,905 | ) | ||||
Excess
tax benefit from stock-based compensation
|
1,291 | 589 | ||||||
Cash
provided by (used for) financing activities
|
5,015 | (1,131 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
1,429 | (1,791 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
(7,752 | ) | 36,892 | |||||
Cash
and cash equivalents at beginning of period
|
94,131 | 163,091 | ||||||
Cash
and cash equivalents at end of period
|
$ | 86,379 | $ | 199,983 |
(in thousands)
|
March 31,
2008
|
September 30,
2008
|
||||||
Inventory,
net:
|
||||||||
Raw
materials
|
$ | 36,081 | $ | 46,848 | ||||
Work
in process
|
3,611 | 5,003 | ||||||
Finished
goods
|
87,396 | 111,582 | ||||||
$ | 127,088 | $ | 163,433 |
(in thousands)
|
March
31, 2008
|
September 30,
2008
|
||||||
Accrued
liabilities:
|
||||||||
Employee
compensation and benefits
|
$ | 25,089 | $ | 22,638 | ||||
Warranty
accrual
|
10,441 | 11,747 | ||||||
Accrued
advertising and sales and marketing
|
5,762 | 5,487 | ||||||
Accrued
other
|
26,026 | 15,881 | ||||||
$ | 67,318 | $ | 55,753 |
Warranty
obligation at March 31, 2008
|
$ | 10,441 | ||
Warranty
provision relating to products shipped during the period
|
10,232 | |||
Deductions
for warranty claims processed during the period
|
(8,926 | ) | ||
Warranty
obligation at September 30, 2008
|
$ | 11,747 |
Balances at March 31,
2008
|
Balances at September 30,
2008
|
|||||||||||||||||||||||||||||||
Cost
Basis
|
Unrealized Gain(Loss) |
Accrued Interest |
Fair Value |
Cost Basis |
Unrealized Gain(Loss) |
Accrued Interest |
Fair Value |
|||||||||||||||||||||||||
Long-term
investments:
|
||||||||||||||||||||||||||||||||
Auction
rate securities
|
$ | 28,000 | $ | (2,864 | ) | $ | - | $ | 25,136 | $ | 28,000 | $ | (3,177 | ) | $ | - | $ | 24,823 | ||||||||||||||
Total
long-term investments
|
$ | 28,000 | $ | (2,864 | ) | $ | - | $ | 25,136 | $ | 28,000 | $ | (3,177 | ) | $ | - | $ | 24,823 |
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Money
market funds
|
$ | 128,964 | $ | - | $ | - | $ | 128,964 | ||||||||
Derivative
assets
|
- | 3,170 | - | 3,170 | ||||||||||||
Auction
rate securities
|
- | - | 24,823 | 24,823 | ||||||||||||
Reserve
Primary Fund
|
- | - | 1,942 | 1,942 | ||||||||||||
Total
assets measured at fair value
|
$ | 128,964 | $ | 3,170 | $ | 26,765 | $ | 158,899 | ||||||||
Derivative
liabilities
|
$ | 4 | $ | 289 | $ | - | $ | 293 |
Six
Months ended September 30,
2008
|
||||
Balance
as of March 31, 2008
|
$ | 25,136 | ||
Unrealized
loss included in other comprehensive income (loss)
|
(313 | ) | ||
Transfer
of Reserve Primary Fund from Level 1 to Level 3
|
1,942 | |||
Balance
at September 30, 2008
|
$ | 26,765 |
March 31,
2008
|
September
30, 2008
|
||||||||||||||||||||||||
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Useful
Life
|
|||||||||||||||||||
Technology
|
$ | 30,160 | $ | (13,883 | ) | $ | 16,277 | $ | 30,160 | $ | (16,218 | ) | $ | 13,942 |
6-10
years
|
||||||||||
State
contracts
|
1,300 | (1,161 | ) | 139 | 1,300 | (1,254 | ) | 46 |
7
years
|
||||||||||||||||
Patents
|
1,420 | (1,079 | ) | 341 | 1,420 | (1,181 | ) | 239 |
7
years
|
||||||||||||||||
Customer
relationships
|
18,133 | (6,308 | ) | 11,825 | 18,133 | (7,408 | ) | 10,725 |
3-8
years
|
||||||||||||||||
Trademarks
|
300 | (268 | ) | 32 | 300 | (289 | ) | 11 |
7
years
|
||||||||||||||||
Trade
name - inMotion
|
5,000 | (1,641 | ) | 3,359 | 5,000 | (1,953 | ) | 3,047 |
8
years
|
||||||||||||||||
Trade
name - Altec Lansing
|
59,100 | - | 59,100 | 59,100 | - | 59,100 |
Indefinite
|
||||||||||||||||||
OEM
relationships
|
700 | (262 | ) | 438 | 700 | (312 | ) | 388 |
7
years
|
||||||||||||||||
Total
|
$ | 116,113 | $ | (24,602 | ) | $ | 91,511 | $ | 116,113 | $ | (28,615 | ) | $ | 87,498 |
Fiscal Year Ending March
31,
|
||||
Remainder
of 2009
|
$ | 3,859 | ||
2010
|
7,411 | |||
2011
|
7,368 | |||
2012
|
4,788 | |||
2013
|
3,212 | |||
Thereafter
|
1,760 | |||
Total
estimated amortization expense
|
$ | 28,398 |
Severance and Benefits
|
Facilities and Equipment
|
Other
|
Total
|
|||||||||||||
Restructuring
accrual at March 31, 2008
|
$ | 292 | $ | - | $ | 514 | $ | 806 | ||||||||
Restructuring
and other related charges
|
276 | (153 | ) | 112 | 235 | |||||||||||
Cash
payments
|
(301 | ) | 107 | (590 | ) | (784 | ) | |||||||||
Non-cash
|
- | 46 | - | 46 | ||||||||||||
Restructuring
accrual at September 30, 2008
|
$ | 267 | $ | - | $ | 36 | $ | 303 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Cost
of revenues
|
$ | 612 | $ | 626 | $ | 1,253 | $ | 1,280 | ||||||||
Research,
development and engineering
|
855 | 988 | 1,783 | 1,972 | ||||||||||||
Selling,
general and administrative
|
2,282 | 2,624 | 4,826 | 5,254 | ||||||||||||
Stock-based
compensation expense included in operating expenses
|
3,137 | 3,612 | 6,609 | 7,226 | ||||||||||||
Total
stock-based compensation expense
|
3,749 | 4,238 | 7,862 | 8,506 | ||||||||||||
Income
tax benefit
|
(1,313 | ) | (1,433 | ) | (2,622 | ) | (2,734 | ) | ||||||||
Total
stock-based compensation expense, net of tax
|
$ | 2,436 | $ | 2,805 | $ | 5,240 | $ | 5,772 |
Options Outstanding
|
||||||||||||||||
Number
of Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual
Life
|
Aggregate
Intrinsic Value
|
|||||||||||||
(in
thousands)
|
(in
years)
|
(in
thousands)
|
||||||||||||||
Outstanding
at March 31, 2008
|
8,561 | $ | 26.32 | |||||||||||||
Options
granted
|
801 | $ | 24.02 | |||||||||||||
Options
exercised
|
(359 | ) | $ | 19.22 | ||||||||||||
Options
forfeited or expired
|
(283 | ) | $ | 29.07 | ||||||||||||
Outstanding
at September 30, 2008
|
8,720 | $ | 26.31 | 3.93 | $ | 11,287 | ||||||||||
Vested
and expected to vest at September 30, 2008
|
8,540 | $ | 26.36 | 3.88 | $ | 11,157 | ||||||||||
Exercisable
at September 30, 2008
|
6,465 | $ | 26.97 | 3.29 | $ | 9,705 |
Number
of Shares
|
Weighted
Average Grant Date Fair
Value
|
|||||||
(in
thousands)
|
||||||||
Non-vested
at March 31, 2008
|
288 | $ | 26.77 | |||||
Granted
|
30 | $ | 23.76 | |||||
Vested
|
(23 | ) | $ | 28.00 | ||||
Forfeited
|
(14 | ) | $ | 28.46 | ||||
Non-vested
at September 30, 2008
|
281 | $ | 26.26 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
Employee Stock Options
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Expected
volatility
|
38.3 | % | 46.3 | % | 37.1 | % | 47.0 | % | ||||||||
Risk-free
interest rate
|
4.5 | % | 3.1 | % | 4.6 | % | 3.1 | % | ||||||||
Expected
dividends
|
0.7 | % | 0.8 | % | 0.8 | % | 0.8 | % | ||||||||
Expected
life (in years)
|
4.4 | 4.4 | 4.4 | 4.4 | ||||||||||||
Weighted-average
grant date fair value
|
$ | 9.75 | $ | 9.42 | $ | 8.82 | $ | 9.50 | ||||||||
ESPP
|
||||||||||||||||
Expected
volatility
|
32.1 | % | 47.7 | % | 32.1 | % | 47.7 | % | ||||||||
Risk-free
interest rate
|
5.1 | % | 1.9 | % | 5.1 | % | 1.9 | % | ||||||||
Expected
dividends
|
0.7 | % | 0.8 | % | 0.7 | % | 0.8 | % | ||||||||
Expected
life (in years)
|
0.5 | 0.5 | 0.5 | 0.5 | ||||||||||||
Weighted-average
grant date fair value
|
$ | 6.72 | $ | 6.85 | $ | 6.72 | $ | 6.85 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
income
|
$ | 16,522 | $ | 17,648 | $ | 31,497 | $ | 38,142 | ||||||||
Unrealized
gain (loss) on cash flow hedges, net of tax
|
(2,120 | ) | 7,061 | (2,278 | ) | 8,552 | ||||||||||
Foreign
currency translation gain (loss)
|
590 | (541 | ) | 1,006 | (289 | ) | ||||||||||
Unrealized
gain (loss) on long-term investments, net of tax
|
- | 618 | - | (314 | ) | |||||||||||
Comprehensive
income
|
$ | 14,992 | $ | 24,786 | $ | 30,225 | $ | 46,091 |
Local Currency
|
USD Equivalent
|
Position
|
Maturity
|
||||||||
EUR
|
16,000 | $ | 23,404 |
Sell
EUR
|
1
month
|
||||||
GBP
|
6,400 | $ | 11,768 |
Sell
GBP
|
1
month
|
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
income
|
$ | 16,522 | $ | 17,648 | $ | 31,497 | $ | 38,142 | ||||||||
Weighted
average shares-basic
|
48,115 | 48,796 | 47,975 | 48,738 | ||||||||||||
Dilutive
effect of employee equity incentive plans
|
1,195 | 693 | 988 | 624 | ||||||||||||
Weighted
average shares-diluted
|
49,310 | 49,489 | 48,963 | 49,362 | ||||||||||||
Earnings
per share-basic
|
$ | 0.34 | $ | 0.36 | $ | 0.66 | $ | 0.78 | ||||||||
Earnings
per share-diluted
|
$ | 0.34 | $ | 0.36 | $ | 0.64 | $ | 0.77 | ||||||||
Potentially
dilutive securities excluded from earnings per diluted share because their
effect is anti-dilutive
|
3,089 | 5,515 | 4,841 | 6,406 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
revenues
|
||||||||||||||||
Audio
Communications Group
|
$ | 181,047 | $ | 195,349 | $ | 366,619 | $ | 393,876 | ||||||||
Audio
Entertainment Group
|
27,177 | 21,507 | 48,100 | 42,144 | ||||||||||||
Consolidated
net revenues
|
$ | 208,224 | $ | 216,856 | $ | 414,719 | $ | 436,020 | ||||||||
Gross
profit (loss)
|
||||||||||||||||
Audio
Communications Group
|
$ | 84,884 | $ | 92,746 | $ | 170,660 | $ | 181,916 | ||||||||
Audio
Entertainment Group
|
(428 | ) | 1,027 | (2,658 | ) | 2,736 | ||||||||||
Consolidated
gross profit
|
$ | 84,456 | $ | 93,773 | $ | 168,002 | $ | 184,652 | ||||||||
Operating
income (loss)
|
||||||||||||||||
Audio
Communications Group
|
$ | 29,670 | $ | 33,509 | $ | 58,656 | $ | 62,532 | ||||||||
Audio
Entertainment Group
|
(10,363 | ) | (6,191 | ) | (21,402 | ) | (12,803 | ) | ||||||||
Consolidated
operating income
|
$ | 19,307 | $ | 27,318 | $ | 37,254 | $ | 49,729 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||
Office
and Contact Center
|
$ | 131,357 | $ | 119,530 | $ | 263,562 | $ | 242,333 | ||||||||
Mobile
|
35,859 | 60,911 | 77,097 | 120,793 | ||||||||||||
Gaming
and Computer Audio
|
8,277 | 8,977 | 14,762 | 18,598 | ||||||||||||
Other
|
5,554 | 5,931 | 11,198 | 12,152 | ||||||||||||
Total
segment net revenues
|
$ | 181,047 | $ | 195,349 | $ | 366,619 | $ | 393,876 |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||
Docking
Audio
|
$ | 13,615 | $ | 9,198 | $ | 23,906 | $ | 18,970 | ||||||||
PC
Audio
|
12,627 | 10,051 | 21,075 | 19,229 | ||||||||||||
Other
|
935 | 2,258 | 3,119 | 3,945 | ||||||||||||
Total
segment net revenues
|
$ | 27,177 | $ | 21,507 | $ | 48,100 | $ | 42,144 |
|
·
|
Strengthen
brand value of sound, style and simplicity.
We are investing in
a number of initiatives to further improve the sound quality and ease of
use of our products. Our brand promise is sound, style, and
simplicity, and we intend to continue investing resources to ensure we
deliver on this pledge to our
customers.
|
|
·
|
Maintain
revenue growth. We are continuing to invest in research and
development to improve the overall appearance and functionality of our
products. We are seeking to grow the office market through the
introduction of compelling, easy-to-use wireless and corded
products.
|
|
·
|
Improve
profitability. We
are continuing development of our cost effective high-end Bluetooth portfolio,
and, within the AEG business, we are developing new product lines that we
believe will help us to gain share and improve profit
margins.
|
(in thousands except
percentages)
|
Three Months Ended
September 30,
|
Six Months Ended September
30,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 208,224 | 100.0 | % | $ | 216,856 | 100.0 | % | $ | 414,719 | 100.0 | % | $ | 436,020 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
123,768 | 59.4 | % | 123,083 | 56.8 | % | 246,717 | 59.5 | % | 251,368 | 57.7 | % | ||||||||||||||||||||
Gross
profit
|
84,456 | 40.6 | % | 93,773 | 43.2 | % | 168,002 | 40.5 | % | 184,652 | 42.3 | % | ||||||||||||||||||||
Operating
expense:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
19,208 | 9.2 | % | 18,850 | 8.7 | % | 38,696 | 9.3 | % | 38,545 | 8.8 | % | ||||||||||||||||||||
Selling,
general and administrative
|
45,941 | 22.1 | % | 47,745 | 22.0 | % | 92,052 | 22.2 | % | 96,143 | 22.1 | % | ||||||||||||||||||||
Restructuring
and other related charges
|
- | 0.0 | % | (140 | ) | (0.1 | %) | - | 0.0 | % | 235 | 0.1 | % | |||||||||||||||||||
Total
operating expenses
|
65,149 | 31.3 | % | 66,455 | 30.6 | % | 130,748 | 31.5 | % | 134,923 | 31.0 | % | ||||||||||||||||||||
Operating
income
|
19,307 | 9.3 | % | 27,318 | 12.6 | % | 37,254 | 9.0 | % | 49,729 | 11.3 | % | ||||||||||||||||||||
Interest
and other income (expense), net
|
1,793 | 0.8 | % | (3,170 | ) | (1.5 | %) | 3,127 | 0.7 | % | (1,630 | ) | (0.3 | %) | ||||||||||||||||||
Income
before income taxes
|
21,100 | 10.1 | % | 24,148 | 11.1 | % | 40,381 | 9.7 | % | 48,099 | 11.0 | % | ||||||||||||||||||||
Income
tax expense
|
4,578 | 2.2 | % | 6,500 | 3.0 | % | 8,884 | 2.1 | % | 9,957 | 2.3 | % | ||||||||||||||||||||
Net
income
|
$ | 16,522 | 7.9 | % | $ | 17,648 | 8.1 | % | $ | 31,497 | 7.6 | % | $ | 38,142 | 8.7 | % |
(in thousands except
percentages)
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 181,047 | 100.0 | % | $ | 195,349 | 100.0 | % | $ | 366,619 | 100.0 | % | $ | 393,876 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
96,163 | 53.1 | % | 102,603 | 52.5 | % | 195,959 | 53.4 | % | 211,960 | 53.8 | % | ||||||||||||||||||||
Gross
profit
|
84,884 | 46.9 | % | 92,746 | 47.5 | % | 170,660 | 46.6 | % | 181,916 | 46.2 | % | ||||||||||||||||||||
Operating
expense:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
16,194 | 8.9 | % | 16,879 | 8.6 | % | 32,978 | 9.0 | % | 34,076 | 8.7 | % | ||||||||||||||||||||
Selling,
general and administrative
|
39,020 | 21.6 | % | 42,358 | 21.7 | % | 79,026 | 21.6 | % | 85,308 | 21.7 | % | ||||||||||||||||||||
Total
operating expenses
|
55,214 | 30.5 | % | 59,237 | 30.3 | % | 112,004 | 30.6 | % | 119,384 | 30.4 | % | ||||||||||||||||||||
Operating
income
|
$ | 29,670 | 16.4 | % | $ | 33,509 | 17.2 | % | $ | 58,656 | 16.0 | % | $ | 62,532 | 15.8 | % |
(in thousands except
percentages)
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 27,177 | 100.0 | % | $ | 21,507 | 100.0 | % | $ | 48,100 | 100.0 | % | $ | 42,144 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
27,605 | 101.6 | % | 20,480 | 95.2 | % | 50,758 | 105.5 | % | 39,408 | 93.5 | % | ||||||||||||||||||||
Gross
profit (loss)
|
(428 | ) | (1.6 | %) | 1,027 | 4.8 | % | (2,658 | ) | (5.5 | %) | 2,736 | 6.5 | % | ||||||||||||||||||
Operating
expense:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
3,014 | 11.1 | % | 1,971 | 9.2 | % | 5,718 | 11.9 | % | 4,469 | 10.6 | % | ||||||||||||||||||||
Selling,
general and administrative
|
6,921 | 25.4 | % | 5,387 | 25.0 | % | 13,026 | 27.1 | % | 10,835 | 25.7 | % | ||||||||||||||||||||
Restructuring
and other related charges
|
- | 0.0 | % | (140 | ) | (0.7 | %) | - | 0.0 | % | 235 | 0.6 | % | |||||||||||||||||||
Total
operating expenses
|
9,935 | 36.5 | % | 7,218 | 33.5 | % | 18,744 | 39.0 | % | 15,539 | 36.9 | % | ||||||||||||||||||||
Operating
loss
|
$ | (10,363 | ) | (38.1 | %) | $ | (6,191 | ) | (28.7 | %) | $ | (21,402 | ) | (44.5 | %) | $ | (12,803 | ) | (30.4 | %) |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
Office
and Contact Center
|
$ | 131,357 | $ | 119,530 | $ | (11,827 | ) | (9.0 | %) | $ | 263,562 | $ | 242,333 | $ | (21,229 | ) | (8.1 | %) | ||||||||||||||
Mobile
|
35,859 | 60,911 | 25,052 | 69.9 | % | 77,097 | 120,793 | 43,696 | 56.7 | % | ||||||||||||||||||||||
Gaming
and Computer Audio
|
8,277 | 8,977 | 700 | 8.5 | % | 14,762 | 18,598 | 3,836 | 26.0 | % | ||||||||||||||||||||||
Other
|
5,554 | 5,931 | 377 | 6.8 | % | 11,198 | 12,152 | 954 | 8.5 | % | ||||||||||||||||||||||
Total
segment net revenues
|
$ | 181,047 | $ | 195,349 | $ | 14,302 | 7.9 | % | $ | 366,619 | $ | 393,876 | $ | 27,257 | 7.4 | % |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
Docking
Audio
|
$ | 13,615 | $ | 9,198 | $ | (4,417 | ) | (32.4 | %) | $ | 23,906 | $ | 18,970 | $ | (4,936 | ) | (20.6 | %) | ||||||||||||||
PC
Audio
|
12,627 | 10,051 | (2,576 | ) | (20.4 | %) | 21,075 | 19,229 | (1,846 | ) | (8.8 | %) | ||||||||||||||||||||
Other
|
935 | 2,258 | 1,323 | 141.5 | % | 3,119 | 3,945 | 826 | 26.5 | % | ||||||||||||||||||||||
Total
segment net revenues
|
$ | 27,177 | $ | 21,507 | $ | (5,670 | ) | (20.9 | %) | $ | 48,100 | $ | 42,144 | $ | (5,956 | ) | (12.4 | %) |
|
·
|
Mobile
net revenues increased $25.1 million entirely due to increased demand for
Bluetooth
headsets. Most of the revenue growth was in the United States
and was partially offset by weaker results in Europe. The
higher revenues were driven by increased retail placements as a result of
an improved product portfolio along with some continued momentum from the
hands-free driving legislation in the United
States.
|
|
·
|
OCC
net revenues decreased $11.8 million mostly due to weaker global economic
conditions which could continue for the remainder of fiscal
2009. Corded product net revenues decreased $6.9 million while
cordless net revenues decreased $4.9
million.
|
|
·
|
Gaming
and Computer Audio product net revenues increased due to continued
strength of the refreshed product line that was launched in the fall of
fiscal 2008.
|
|
·
|
Mobile
net revenues increased $43.7 million entirely due to increased demand for
Bluetooth
headsets. Most of the revenue growth was in the United States
and was driven by growth from increased retail placements as a result of
an improved product portfolio as well as demand attributable to hands-free
driving legislation in the United
States.
|
|
·
|
OCC
net revenues decreased $21.2 million mostly due to weaker global economic
conditions. Corded product net revenues decreased $15.6 million
while cordless net revenues decreased $5.6
million.
|
|
·
|
Gaming
and Computer Audio product net revenues increased $3.8 million of which
$1.7 million is due to the transfer of responsibility of headset revenues
from AEG to ACG effective July 1, 2007. The remaining increase
is due to continued strength of the refreshed product line that was
launched in the fall of fiscal
2008.
|
|
·
|
Docking
Audio net revenues decreased $4.4 million primarily in the United States
due to a large sale to a warehouse club in the prior year ago
quarter.
|
|
·
|
PC
Audio net revenues decreased by $2.6 million due to an older product
portfolio which is currently being refreshed, weaker economic conditions
in the United States and Europe, and a focus on selective product
placement with higher margin
customers.
|
|
·
|
Other
net revenues increased $1.3 million primarily related to increased
headphone sales in Asia and the United
States.
|
|
·
|
Docking
Audio net revenues decreased $4.9 million primarily due to a large sale to
a warehouse club and sales of surplus products in the prior year ago
period.
|
|
·
|
PC
Audio net revenues decreased by $1.8 million due to an older product
portfolio which is currently being refreshed, weaker economic conditions
in the United States and Europe, and a focus on selective product
placement with higher margin
customers.
|
|
·
|
Other
net revenues increased $0.8 million primarily due to increased headphone
net revenues of $2.1 million related to new product introductions which
was offset in part by a decrease of $1.7 million due to the transfer of
responsibility for headset products to ACG in the second quarter of fiscal
2008.
|
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
United
States
|
$ | 126,399 | $ | 139,856 | $ | 13,457 | 10.6 | % | $ | 257,507 | $ | 274,258 | $ | 16,751 | 6.5 | % | ||||||||||||||||
Europe,
Middle East and Africa
|
49,937 | 46,036 | (3,901 | ) | (7.8 | %) | 99,367 | 97,394 | (1,973 | ) | (2.0 | %) | ||||||||||||||||||||
Asia
Pacific
|
18,316 | 18,088 | (228 | ) | (1.2 | %) | 32,736 | 34,775 | 2,039 | 6.2 | % | |||||||||||||||||||||
Americas,
excluding United States
|
13,572 | 12,876 | (696 | ) | (5.1 | %) | 25,109 | 29,593 | 4,484 | 17.9 | % | |||||||||||||||||||||
Total
International
|
81,825 | 77,000 | (4,825 | ) | (5.9 | %) | 157,212 | 161,762 | 4,550 | 2.9 | % | |||||||||||||||||||||
Total
Consolidated
|
$ | 208,224 | $ | 216,856 | $ | 8,632 | 4.1 | % | $ | 414,719 | $ | 436,020 | $ | 21,301 | 5.1 | % |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 208,224 | $ | 216,856 | $ | 8,632 | 4.1 | % | $ | 414,719 | $ | 436,020 | $ | 21,301 | 5.1 | % | ||||||||||||||||
Cost
of revenues
|
123,768 | 123,083 | (685 | ) | (0.6 | %) | 246,717 | 251,368 | 4,651 | 1.9 | % | |||||||||||||||||||||
Consolidated
gross profit
|
$ | 84,456 | $ | 93,773 | $ | 9,317 | 11.0 | % | $ | 168,002 | $ | 184,652 | $ | 16,650 | 9.9 | % | ||||||||||||||||
Consolidated
gross profit %
|
40.6 | % | 43.2 | % | 2.6 | ppt. | 40.5 | % | 42.3 | % | 1.8 | ppt. | ||||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 181,047 | $ | 195,349 | $ | 14,302 | 7.9 | % | $ | 366,619 | $ | 393,876 | $ | 27,257 | 7.4 | % | ||||||||||||||||
Cost
of revenues
|
96,163 | 102,603 | 6,440 | 6.7 | % | 195,959 | 211,960 | 16,001 | 8.2 | % | ||||||||||||||||||||||
Segment
gross profit
|
$ | 84,884 | $ | 92,746 | $ | 7,862 | 9.3 | % | $ | 170,660 | $ | 181,916 | $ | 11,256 | 6.6 | % | ||||||||||||||||
Segment
gross profit %
|
46.9 | % | 47.5 | % | 0.6 | ppt. | 46.6 | % | 46.2 | % | (0.4 | ) | ppt. | |||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 27,177 | $ | 21,507 | $ | (5,670 | ) | (20.9 | %) | $ | 48,100 | $ | 42,144 | $ | (5,956 | ) | (12.4 | %) | ||||||||||||||
Cost
of revenues
|
27,605 | 20,480 | (7,125 | ) | (25.8 | %) | 50,758 | 39,408 | (11,350 | ) | (22.4 | %) | ||||||||||||||||||||
Segment
gross profit (loss)
|
$ | (428 | ) | $ | 1,027 | $ | 1,455 | (340.0 | %) | $ | (2,658 | ) | $ | 2,736 | $ | 5,394 | (202.9 | %) | ||||||||||||||
Segment
gross profit (loss) %
|
(1.6 | %) | 4.8 | % | 6.4 | ppt. | (5.5 | %) | 6.5 | % | 12.0 | ppt. |
|
·
|
an
improvement in consumer product margins and overall manufacturing
effectiveness offsetting a 5.8 percentage point negative effect resulting
from a higher proportion of consumer products than commercial products in
the overall revenue mix. While consumer products carry lower
margins than commercial products, the level of product margin on our
consumer products has increased
significantly;
|
|
·
|
a
1.7 percentage point benefit from lower requirements for inventory
provisions and warranty costs; and
|
|
·
|
a
1.2 percentage point negative effect from higher freight expenses due to
increased material receipts and fuel
surcharges.
|
|
·
|
an
improvement in consumer product margins and overall manufacturing
effectiveness offsetting a 2.3 percentage point negative effect resulting
from a higher proportion of consumer products than commercial products in
the overall revenue mix. While consumer products carry lower
margins than commercial products, the level of product margin on our
consumer products has increased
significantly;
|
|
·
|
a
1.2 percentage point benefit from lower requirements for warranty costs
and inventory provisions; and
|
|
·
|
a
0.8 percentage point negative effect from higher freight expenses due to
increased material receipts and fuel
surcharges.
|
Three
Months Ended September 30,
|
|
Six
Months Ended September 30,
|
|
|||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 19,208 | $ | 18,850 | $ | (358 | ) | (1.9 | %) | $ | 38,696 | $ | 38,545 | $ | (151 | ) | (0.4 | %) | ||||||||||||||
%
of total consolidated net revenues
|
9.2 | % | 8.7 | % | (0.5 | ) | ppt. | 9.3 | % | 8.8 | % | (0.5 | ) | ppt. | ||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 16,194 | $ | 16,879 | $ | 685 | 4.2 | % | $ | 32,978 | $ | 34,076 | $ | 1,098 | 3.3 | % | ||||||||||||||||
%
of total segment net revenues
|
8.9 | % | 8.6 | % | (0.3 | ) | ppt. | 9.0 | % | 8.7 | % | (0.3 | ) | ppt. | ||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 3,014 | $ | 1,971 | $ | (1,043 | ) |
(34.6
|
%) | $ | 5,718 | $ | 4,469 | $ | (1,249 | ) | (21.8 | %) | ||||||||||||||
%
of total segment net revenues
|
11.1 | % | 9.2 | % | (1.9 | ) | ppt. |
|
11.9 | % | 10.6 | % | (1.3 | ) | ppt. |
|
·
|
the
design and development of wireless office system
products;
|
|
·
|
Bluetooth products and
technology;
|
|
·
|
reusability
of significant components of products;
and
|
|
·
|
the
refresh of AEG product lines.
|
Three
Months Ended September 30,
|
|
Six
Months Ended
September 30,
|
|
|||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 45,941 | $ | 47,745 | $ | 1,804 | 3.9 | % | $ | 92,052 | $ | 96,143 | $ | 4,091 | 4.4 | % | ||||||||||||||||
%
of total consolidated net revenues
|
22.1 | % | 22.0 | % | (0.1 | ) | ppt. | 22.2 | % | 22.1 | % | (0.1 | ) | ppt. | ||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 39,020 | $ | 42,358 | $ | 3,338 | 8.6 | % | $ | 79,026 | $ | 85,308 | $ | 6,282 | 7.9 | % | ||||||||||||||||
%
of total segment net revenues
|
21.6 | % | 21.7 | % | 0.1 | ppt. | 21.6 | % | 21.7 | % | 0.1 | ppt. |
|
|||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 6,921 | $ | 5,387 | $ | (1,534 | ) | (22.2 | %) | $ | 13,026 | $ | 10,835 | $ | (2,191 | ) | (16.8 | %) | ||||||||||||||
%
of total segment net revenues
|
25.4 | % | 25.0 | % | (0.4 | ) | ppt. | 27.1 | % | 25.7 | % | (1.4 | ) | ppt. |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Operating
income
|
$ | 19,307 | $ | 27,318 | $ | 8,011 | 41.5 | % | $ | 37,254 | $ | 49,729 | $ | 12,475 | 33.5 | % | ||||||||||||||||
%
of total consolidated net revenues
|
9.3 | % | 12.6 | % | 3.3 | ppt. | 9.0 | % | 11.3 | % | 2.3 | ppt. | ||||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Operating
income
|
$ | 29,670 | $ | 33,509 | $ | 3,839 | 12.9 | % | $ | 58,656 | $ | 62,532 | $ | 3,876 | 6.6 | % | ||||||||||||||||
%
of total segment net revenues
|
16.4 | % | 17.2 | % | 0.8 | ppt. | 16.0 | % | 15.8 | % | (0.2 | ) | ppt. | |||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Operating
loss
|
$ | (10,363 | ) | $ | (6,191 | ) | $ | (4,172 | ) | (40.3 | %) | $ | (21,402 | ) | $ | (12,803 | ) | $ | (8,599 | ) | (40.2 | %) | ||||||||||
%
of total segment net revenues
|
(38.1 | %) | (28.7 | %) | (9.4 | ) | ppt. | (44.5 | %) | (30.4 | %) | (14.1 | ) | ppt. |
Three
Months Ended September 30,
|
Six
Months Ended September 30,
|
|||||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Interest
and other income (expense), net
|
$ | 1,793 | $ | (3,170 | ) | $ | (4,963 | ) | (276.8 | %) | $ | 3,127 | $ | (1,630 | ) | $ | (4,757 | ) | (152.1 | %) | ||||||||||||
%
of total consolidated net revenues
|
0.8 | % | (1.5 | %) | (2.3 | ) | ppt. | 0.7 | % | (0.3 | %) | (1.0 | ) | ppt. |
Three
Months Ended September 30,
|
|
Six
Months Ended September 30,
|
|
|||||||||||||||||||||||||||||
(in thousands except
percentages)
|
2007
|
2008
|
Increase (Decrease)
|
2007
|
2008
|
Increase (Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Income
before income taxes
|
$ | 21,100 | $ | 24,148 | $ | 3,048 | 14.4 | % | $ | 40,381 | $ | 48,099 | $ | 7,718 | 19.1 | % | ||||||||||||||||
Income
tax expense
|
4,578 | 6,500 | 1,922 | 42.0 | % | 8,884 | 9,957 | 1,073 | 12.1 | % | ||||||||||||||||||||||
Net
income
|
$ | 16,522 | $ | 17,648 | $ | 1,126 | 6.8 | % | $ | 31,497 | $ | 38,142 | $ | 6,645 | 21.1 | % | ||||||||||||||||
Effective
tax rate
|
21.7 | % | 26.9 | % | 5.2 | ppt. | 22.0 | % | 20.7 | % | (1.3 | ) |
ppt.
|
Six
Months Ended September 30,
|
||||||||
|
2007
|
2008
|
||||||
Cash
provided by operating activities
|
$ | 41,547 | $ | 54,405 | ||||
Cash
used for capital expenditures and other assets
|
(11,893 | ) | (14,591 | ) | ||||
Cash
used for other investing activities
|
(43,850 | ) | - | |||||
Cash
used for investing activities
|
(55,743 | ) | (14,591 | ) | ||||
Cash
provided by (used for) financing activities
|
$ | 5,015 | $ | (1,131 | ) |
Currency
- forward contracts
|
Position
|
USD
Value of Net FX Contracts
|
FX
Gain (Loss) From 10% Appreciation
of
USD
|
FX
Gain (Loss) From 10% Depreciation of
USD
|
|||||||||
Euro
|
Sell
EUR
|
$ | 23.4 | $ | 2.3 | $ | (2.3 | ) | |||||
Great
Britain Pound
|
Sell
GBP
|
11.8 | 1.2 | (1.2 | ) | ||||||||
Net
position
|
$ | 35.2 | $ | 3.5 | $ | (3.5 | ) |
Currency
- option contracts
|
USD
Value of Net FX Contracts
|
FX
Gain (Loss) From 10% Appreciation of
USD
|
FX
Gain (Loss) From 10% Depreciation of
USD
|
|||||||||
Call
options
|
$ | (111.5 | ) | $ | 1.3 | $ | (5.4 | ) | ||||
Put
options
|
106.3 | 8.1 | (3.6 | ) | ||||||||
Net
position
|
$ | (5.2 | ) | $ | 9.4 | $ | (9.0 | ) |
(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 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 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. When a significant portion of our revenue is derived
from new products, forecasting the appropriate volumes of production is
even more difficult;
|
|
·
|
in
the ACG segment, our prices and gross margins are generally lower for
sales to Business-to-Consumer (“B2C”) customers compared to sales to our
Business-to-Business (“B2B”) customers. In addition, our prices
and gross margins can vary significantly by product line as well as within
product lines. Therefore, our profitability depends, in part,
on the mix of our B2B to B2C customers as well as our product
mix. In the AEG segment, our prices and gross margins are
generally lower for our PC Audio products than for our Docking Audio
products; therefore, our profitability depends, in part, on our mix of PC
Audio to Docking Audio products. The size and timing
of our product mix and opportunities in these markets are
difficult to predict;
|
|
·
|
we have substantially refreshed
our AEG product line; however, market
adoption of new products is difficult to predict;
and
|
|
·
|
a significant portion of our
annual retail sales for AEG generally occurs in the third
fiscal quarter, thereby increasing the difficulty of predicting revenues
and profitability from quarter to quarter and in managing inventory
levels.
|
|
·
|
we believe that the turnaround
for AEG is largely dependent on the
development of a new product portfolio. We have placed some of
the products within our new portfolio beginning in the Fall of 2008 and
will continue into the next quarter, although ongoing product refreshes on
a routine basis after that will also be required. The
development of these new products may not evolve as
anticipated. There can be no assurance that these new products
will be successful and, during the time we are developing the new
products, our competitors are selling products to our customers and
increasing their market
share;
|
|
·
|
we announced further AEG cost reductions in the first
quarter of fiscal 2009 with a reduction in force at the Milford, Pennsylvania operations. In
addition, we continue to review AEG’s costs structure and may
implement additional cost-cutting initiatives in the
future;
|
|
·
|
competition may continue to
increase in AEG’s markets more than we
expect;
|
|
·
|
meeting the spring and fall market
windows for AEG
products;
|
|
·
|
difficulties retaining or
obtaining shelf space for these products in our sales
channel;
|
|
·
|
difficulties retaining or
improving the brand recognition associated with the Altec Lansing brand during the
turnaround;
|
|
·
|
difficulties in integration of
the operations, technologies, and products of Altec Lansing. We have transitioned
a significant portion of Altec Lansing’s operations onto
our ERP system; however, we have not completed our integration
effort. There has been a significant cost to implement new
systems and business processes. We anticipate that there will
continue to be business processes and internal controls which will change
as a result of the integration;
and
|
|
·
|
the global downturn in the
economy may lessen the amount spent generally by consumers during the
holiday season contained within the third quarter of fiscal 2009
decreasing the demand for our new AEG
products.
|
|
·
|
uncertain economic conditions,
including the possibility of a domestic and global recession, inflationary
pressures, 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;
|
|
·
|
the timing and success of the
integration of the AEG
business;
|
|
·
|
our ability to successfully
complete the product refresh for the Altec Lansing products and turn
around the AEG business in a timeline
consistent with our internal financial
models;
|
|
·
|
general economic, political, and
market conditions, including market volatility;
and
|
|
·
|
other factors unrelated to our
operating performance or the operating performance of our
competitors.
|
|
·
|
rapid
increases in production levels to meet unanticipated demand for our
products 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;
|
|
·
|
we
obtain certain raw materials, sub-assemblies, components and products from
single suppliers and alternate sources for these items are not readily
available. Any 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 could
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 permit us to work with only a single source of silicon
chip-sets on any particular new product. We, or our supplier(s) 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, or the inability to meet our
customer demand for these new products. Additionally, these
suppliers or other suppliers may discontinue production of the parts we
depend on or may not be able to produce due to financial
difficulties. If this occurs, we may have difficulty obtaining
sufficient product to meet our needs. This could cause us to fail to
meet customer expectations. If customers turn to our competitors to
meet their needs, there could be a long-term adverse impact on our
revenues and profitability. Our business, operating results and
financial condition could therefore be materially adversely affected as a
result of these factors;
|
|
·
|
because
of 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 and could materially
adversely affect our business, financial condition and results of
operations; and
|
|
·
|
most
of our suppliers are not obligated to continue to provide us with raw
materials, components and sub-assemblies. Rather, we buy most
of our 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. Any such shortages would
materially adversely affect our business, financial condition and results
of operations.
|
|
·
|
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 sub-assemblies. 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
sub-assemblies. 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. There
could be short-term losses of sales while we are trying to increase
production;
|
|
·
|
the
production and distribution of Bluetooth and other
wireless headsets presents many significant manufacturing, marketing and
other operational risks and
uncertainties:
|
|
·
|
our
dependence on third parties to supply key components, many of which have
long lead times;
|
|
·
|
our
ability to forecast demand for the variety of new products within this
product category for which relevant data is incomplete or unavailable;
and
|
|
·
|
longer
lead times with suppliers than commitments from some of our
customers.
|
|
·
|
if we are unable to deliver
products on time to meet the market window of our retail customers, we
will lose opportunities to increase revenues and profits, or we may incur penalties for
late delivery. We may also be unable to sell
these finished goods, which would result in excess or obsolete
inventory;
|
|
·
|
we
are increasing the use of design and manufacturing of Bluetooth headset
products at our new facilities in China. Development of new
wireless products and ramping of production can be
complex. Unexpected difficulties may arise. Failure
to meet our planned design deadlines or production quantities for new or
existing products can adversely affect our financial
results;
|
|
·
|
increasing
production beyond planned capacity involves increased 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; and
|
|
·
|
we
are working on a new initiative to re-engineer our supply chain by
implementing new product forecasting systems, increasing automation within
supply chain activities, improving the integrity of our supply chain data,
and creating dashboards in order to improve our ability to match
production to demand. If we are not able to successfully implement
this initiative, we may not be able to meet demand or compete effectively
with other companies who have successfully implemented similar
initiatives.
|
|
·
|
anticipate technology and market
trends;
|
|
·
|
develop innovative new products
and enhancements on a timely
basis;
|
|
·
|
distinguish our products from
those of our competitors;
|
|
·
|
create industrial design that
appeals to our customers and
end-users;
|
|
·
|
manufacture and deliver
high-quality products in sufficient volumes;
and
|
|
·
|
price our products
competitively.
|
|
·
|
fluctuations in foreign exchange
rates ;
|
|
·
|
cultural differences in the
conduct of business;
|
|
·
|
greater difficulty in accounts
receivable collection and longer collection
periods;
|
|
·
|
the 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;
|
|
·
|
the management and operation of
an enterprise spread over various
countries;
|
|
·
|
the burden and administrative
costs of complying with a wide variety of foreign laws;
and
|
|
·
|
currency
restrictions.
|
|
·
|
if supply or demand for iPod
products decreases, demand for certain of our Docking Audio products could
be negatively affected;
|
|
·
|
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 Docking Audio
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 Docking Audio 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;
|
|
·
|
Apple has introduced its own line
of iPod speaker products, which competes 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;
and
|
|
·
|
similar risks exist for MP3
players manufactured by companies other than
Apple.
|
|
a.
|
The
2008 Annual Meeting of Stockholders of Plantronics, Inc. was held at
Plantronics Headquarters, 345 Encinal St. Santa Cruz, CA on July 23, 2008
(the "Annual Meeting").
|
|
b.
|
At
the Annual Meeting, the following seven individuals were elected to the
Company's Board of Directors:
|
Nominee
|
Votes Cast For
|
Withheld or Against
|
||
Marvin
Tseu
|
36,163,047
|
7,938,407
|
||
Ken
Kannappan
|
43,748,290
|
353,164
|
||
Brian
Dexheimer
|
43,752,172
|
349,282
|
||
Gregg
Hammann
|
36,165,595
|
7,935,859
|
||
John
Hart
|
36,166,420
|
7,935,034
|
||
Marshall
Mohr
|
43,752,235
|
349,219
|
||
Roger
Wery
|
43,746,406
|
355,048
|
|
c.
|
The
following additional proposals were considered at the Annual Meeting and
were approved by the vote of the stockholders, in accordance with the
tabulation shown below:
|
Votes For
|
Votes Against/Withheld
|
Abstain
|
Broker Non-Vote
|
25,978,583
|
13,689,381
|
15,153
|
4,418,337
|
|
(2)
|
Proposal
to ratify and approve an increase of 500,000 shares of Common Stock of
Plantronics, Inc. issuable under the 2002 Employee Stock Purchase
Plan.
|
Votes For
|
Votes Against/Withheld
|
Abstain
|
Broker Non-Vote
|
38,880,274
|
788,272
|
14,572
|
4,418,336
|
|
(3)
|
Proposal
to ratify the appointment of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of Plantronics, Inc for fiscal year
2009.
|
Votes For
|
Votes Against/Withheld
|
Abstain
|
Broker Non-Vote
|
43,915,109
|
163,298
|
23,045
|
-
|
Certification
of the President and CEO Pursuant to Rule
13a-14(a)/15d-14(a).
|
Certification
of Senior VP, Finance and Administration, and CFO Pursuant to Rule
13a-14(a)/15d-14(a).
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. Section 1350.
|
PLANTRONICS,
INC.
|
|
Date:
November 5, 2008
|
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)
|