UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 OR

(Exact name of registrant as specified in its charter)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

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Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one).

 

The aggregate market value of the common stock held by non-affiliates of the Registrant, based upon the closing price of $51.16$60.30 for shares of the Registrant's common stock on September 25, 2015,28, 2018, the last trading day of the Registrant’s most recently completed second fiscal quarter as reported by the New York Stock Exchange, was approximately $1,704,421,100.$2,383,431,017.  In calculating such aggregate market value, shares of common stock owned of record or beneficially by officers, directors, and persons known to the Registrant to own more than five percent of the Registrant's voting securities as of September 25, 201528, 2018 (other than such persons of whom the Registrant became aware only through the filing of a Schedule 13G filed with the Securities and Exchange Commission) were excluded because such persons may be deemed to be affiliates.  This determination of affiliate status is for purposes of this calculation only and is not conclusive.

As of May 12, 2016, 33,227,11014, 2019, 39,519,584 shares of common stock were outstanding.

Portions of the Registrant's Proxy Statement for its 20162019 Annual Meeting of Stockholders to be held on or about August 4, 2016 are incorporated by reference into Part III of this Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended April 2, 2016.March 30, 2019.

 

This Form 10-K is filed with respect to our fiscal year 2016.Fiscal Year 2019. Each of our fiscal years ends on the Saturday closest to the last day of March.  Fiscal year 2016 had 53 weeksyears 2019, 2018, and ended on April 2, 2016, fiscal years 2015 and 20142017 each had 52 weeks and ended on March 28, 2015,30, 2019, March 31, 2018, and March 29, 2014,April 1, 2017 respectively. For purposes of consistent presentation, we have indicated in this report that each fiscal year ended "March 31" of the given year, even though the actual fiscal year end may have beenwas on a different date.

CERTAIN FORWARD-LOOKING INFORMATION

This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "estimate," "intend," "predict," "project," or "will," or variations of such words and similar expressions are based on current expectations and entail various risks and uncertainties.  Our actual results could differ materially from those anticipatedSpecific forward-looking statements contained within this Form 10-Q include, but are not limited to, statements regarding (i) our expectations for the impact of the Acquisition as it relates to our strategic vision and additional market opportunities for our combined hardware and services offerings, (ii) our beliefs regarding the key factors of our customers' purchasing decisions, drivers for customers' solutions adoption, and the ability of our solutions to provide our users with the versatility and convenience they desire, (iii) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our position in such forward-looking statementsthe market, (iv) our belief that the increased adoption of certain technologies and our open architecture approach has and will continue to increase demand for our solutions, (v) our beliefs regarding the mobile headset category, (vi) our beliefs regarding the service and support offerings and their impact on customer relationships, (vii) our beliefs concerning the factors required to be successful and competitive in the markets we serve and our assessments of our ability to compete, (viii) our beliefs regarding our product development requirements, capabilities and intellectual protection efforts, (ix) our expectations for sales market expansion and sales channel growth, (x) our belief regarding the value of backlog information, (xi) our belief regarding our compliance with manufacturing, operational and materials usage laws and regulations, (xii) regarding future enterprise growth drivers, (xiii) our expectations regarding the impact of UC&C on headset adoption and how it may impact our investment and partnering activities, (xiv) our expectations for new and next generation product and services offerings, (xv) our intentions regarding the focus of our sales, marketing and customer services and support teams, (xvi) our expenses, including research, development and engineering expenses and selling, general and administrative expenses, (xvii) fluctuations in our cash provided by operating activities as a result of a numbervarious factors, including fluctuations in revenues and operating expenses, timing of factors, including,product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of taxes and other payments, (xviii) our future tax rate and payments related to unrecognized tax benefits, (xix) our anticipated range of capital expenditures for the remainder of Fiscal Year 2020 and the sufficiency of our cash, cash equivalents, and cash from operations to sustain future operations and discretionary cash requirements, (xx) our ability to pay future stockholder dividends or repurchase stock, (xxi) our expectations regarding our debt obligations and our ability to draw funds on our credit facility as needed, (xxii) the sufficiency of our capital resources to fund operations, and other statements regarding our future operations, financial condition and prospects, and business strategies.  Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, the factorsthose discussed in the subsection entitled "RiskPart I, "Item 1A. Risk Factors" in Item 1A of this Form 10-K.  ThisAnnual Report on Form 10-K should be read in conjunctionand other documents we have filed with these risk factors.the SEC.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.  Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

ITEM 1.  BUSINESS

COMPANY BACKGROUND

 

Our headsets are communications tools providing a hands-free connection to communication or entertainment devices, while also allowing freedom of movement for our users.  We use a variety of technologies to develop high quality products that meet the needs of our customers, whether for communications or personal entertainment.  Our headsets are widely used for applications such as Unified Communications (“UC”), in contact centers, in the office and in the home, with mobile devices and Internet telephony, for gaming, and for other specialty applications.  Our major product categories includeare Enterprise Headsets, which includes corded and cordless communication headsets, audio processors, and telephone systems; andheadsets; Consumer Headsets, which includes Bluetooth and corded products for mobile device applications, personal computer ("PC") and gaming headsets,gaming; Voice, Video, and specialty products marketed for hearing impaired individuals (throughContent Sharing Solutions, which includes Open SIP desktop phones, conference room phones, and video endpoints, including cameras, speakers, and microphones. Our solutions are designed to work in a wide range of Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), and Video as a Service ("VaaS")

environments. Our RealPresence collaboration solutions range from infrastructure to endpoints and allow people to connect and collaborate globally and naturally. In addition, we have comprehensive Support Services including support on our Clarity brand). solutions and hardware devices, as well as professional, hosted, and managed services.

We shipsell our Enterprise products to approximately 80 countries through a high-touch sales team and a well-developed global network of distributors and channel partners including value-added resellers (VARs), integrators, direct marketing resellers (DMRs), service providers, and resellers. We sell our Consumer products through both traditional and online consumer electronics retailers, consumer product retailers, office supply distributors, wireless carriers, original equipment manufacturers (“OEMs”),catalog and telephonymail order companies, and other service providers.mass merchants.  We have well-developedwell-established distribution channels in North America,the Americas, Europe, Middle East, Africa, and in some parts of the Asia Pacific region where use of our products is widespread. Our distribution channels in other geographic regions are less mature, and while we primarily serve the Enterprise markets in those regions, we continue to expand into mobile, gaming and computer audio, and specialty telephone categories in those regions and other international locations.  While not always the case, revenues from our Consumer category are typically seasonal, with the December quarter (our third fiscal quarter) typically being the strongest.

PlantronicsThe Company was originally founded and incorporated as Plantronics in 1961 and most recently became a public company in 1994. PlantronicsIn March 2019, the Company changed the name under which it markets itself to Poly. Poly is incorporated in the State of Delaware under the name Plantronics, Inc. and is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "PLT". We operate our business as one segment.

In the Investor Relations section of our website, we provide access free of charge, directly or through a link on our website, shortly after they are electronically filed with or furnished to the Securities and Exchange Commission,access to the following filings: our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. This access is provided directly or through a link on our website, shortly after these documents are electronically filed with, or furnished to, the Securities and Exchange Commission. In addition, documents regarding our corporate governance, code of conduct, and the charters of the standing committees of our Board of Directors are also accessible in the Investor Relations section of our website.

MARKET INFORMATION

General Industry Background

TheWe believe the proliferation of voice communications and collaboration applications across much of people's daily lives make communications headsets a key driver ofmakes efficiency, ergonomic comfort, ease of use, interoperability, and safety key factors for our users.customers' purchasing decisions. We believe important drivers for the adoption of our solutions include:

We leverage state-of-the-art technologies in our solutions that can be easily used in conjunction with our strategic partners' tools and common communication platforms in both personal and enterprise settings. The increased adoption of new and existing technologies such as UC&C, Bluetooth, Voice over Internet Protocol ("VoIP"), Digital Signal Processing ("DSP"), and Digital Enhanced Cordless Telecommunications (“DECT™”), and Video-as-a-Service ("VaaS"), each of which is described below, has contributed to increased demand for our headsets and audio solutions:

UC&C audio and video solutions continue to represent our primary focus area. OurWe believe our portfolio of solutions, which combines hardware with highly innovative sensor technology and software functionality, provides the ability to reach people using the mode of communication that is most effective, on the device that is most convenient, and with control over when and how theypeople can be reached. For example,In addition, we recognize the advanced sensor technologyimportance of supporting increasingly popular remote and mobile work styles that are more prevalent in our UC solutions can detect a user's presence, including proximity to&C environments and the user's PC and whether the headset is being worn, and can share this information with others to make them aware of the user's presence and availability. Using this same technology, our solutions can automatically pause audio applications during an incoming call, change the default audio selection to the user's headset, and then answer the call; all of this is achieved without manual intervention. Finally, our solutions allow users to transition calls seamlessly between PCs, smartphones, tablets, and desk phones, without interruption in the conversation or loss in audio quality.trend toward open plan offices which causes unique noise challenges for office-based work styles. We believe we are still early in the UC&C solutions market adoption cycle and that UC&C systems will become more commonly adopted by enterprises to reduce costs and improve collaboration. We believe our solutions will be an important part of the UC&C environment through the offering of contextual intelligence.

Our products enhance communications by providing the following benefits:

Our productsaudio and video solutions are designed to meet the needs of open offices (ranging from enterprise to home offices), contact centers, mobile devices (such as cubicles for knowledge workers and contact centers), meeting rooms (from huddle rooms to boardrooms), mobile workers (using laptops, mobile phones, smartphones, and tablets)tablets in or out of the office), computerback-offices (for management, monitoring and analytics of our systems), PC and gaming, residential, and other specialty applications.  These applications are increasingly overlapping as work styles and lifestyles change, and people use devices for multiple functions such as communication, music, and video entertainment.  We serve these markets through our product categories listed below.

TheWithin our Enterprise market comprises our largest revenue stream andHeadsets product category, we believe it also represents our largest revenue and profit growth opportunity. We offer a broad range of communications headsets,audio solutions, including high-end, ergonomically designed headsets, audio processors, and telephoneother contact center systems.  Our end-users consistare comprised of enterprise employees and small office, home office, contact center, and remote workers. Growth in this categorymarket comes from the following three main factors:

The contact center category is theContact centers are some of our most mature in which we participate,customers and we expect this category to grow slowly over the long-term.  Contact centers have begun to adopt cloud applications and services as an enabler for digital transformation to support an omni-channel model for customer interaction that can also include the deployments of softphones and web-based UC&C capabilities to help improve productivity and reduce costs.  We expect this trend to continue. We develop audio endpoints tailored specifically to UC, and as UC adoption continues to increase, we expect to continue to lead in new product performance by creating solutions that combine hardware and software for an improved customer experience.

We believe the mobile headset category will continue to grow as individuals use the technology for both communications and entertainment. The use of headsets designed for mobile devices represents a high volume opportunity

Revenues from our Consumer Headsets product category are seasonal and istypically strongest in our second largest revenue stream.  The use of mono headsets typically used with mobile devices has experienced a sharp decline overthird fiscal quarter, which includes the past year, while the use of stereo Bluetooth technology has increased as individuals want to remain wireless without compromising on stereo sound quality. Our mono and stereo Bluetooth mobile headsets merge technological innovations with style, because we believeholiday shopping season. Other factors that style has become as important as functionality in shaping consumers' purchasing decisionsdirectly impact performance in the wearable technology space.  While growthproduct category include product life cycles (including the introduction and pace of adoption of new technology), market acceptance of new product introductions, consumer preferences and the competitive retail environment, changes in the mono mobile headset market has slowedconsumer confidence and continues to mature, we believe future growth will be driven primarily by demand for stereo Bluetooth technology.other macroeconomic factors.

Our Voice products include Open SIP Desktop Phones, which aid both traditional and diverse small-to-medium business and enterprise environments in their UC&C transitions, and conference phones, such as the Polycom Trio line of conference phones. Our Desktop Phone devices representextend clear HD voice to desktops, home offices, mobile users, and branch sites. Sales of our Desktop Phones are largely driven from a growing cloud Service Provider channel and strategic partnerships with ecosystem and platform partners seeking to add familiar, but evolved telephony offerings, to meet a wide range of hardware-based voice and video demands. The Polycom Trio line of conference phones is a collaboration hub that has a modular approach to high quality audio, video and content sharing solution for rooms of all sizes. Audio only versions of the Polycom Trio are available in multiple sizes and price points. Trio supports native Microsoft Teams and Skype for Business interfaces as well as connectivity to multiple popular voice and video platforms.

For customers that prefer an emerging opportunity for us. As devices providingon-premises video infrastructure solution, our RealPresence Clariti solution offers a powerful collaboration software platform through which customers can create audio, video, and content collaboration sessions that can connect with any device from anywhere. The platform also provides best in class interoperability that allows any standards-based endpoint to connect into Microsoft Skype or Teams platforms without having to replace their endpoint investments. We also offer a suite of complementary cloud services that aid management of collaboration endpoints and enable third party cloud services on our devices.

We offer a full range of support, professional, managed and cloud services and solutions to customers on a global basis. We provide these users' needs converge,services directly, as well as through our headsets need to be compatible with PCs, mobile phones, tablets, gaming consoles, and various combinationsworldwide ecosystem of these.channel partners. We believe our product development roadmaps address the convergence brought about by these needsservice and wesupport are currently investingcritical components of customer success and create a platform for stronger customer relationships. We offer a full suite of professional services that allow customers to plan, deploy, and optimize solutions in a UC&C environment. By engaging at all points in this areaprocess, we and our partners help customers accelerate deployment, adoption, of UC&C and maximize their Return-On-Investment (ROI). For the ongoing support of end-user customers, we provide maintenance services that include Technical Assistance Center support, software upgrades and updates, parts exchange, on-site assistance, and direct access to enable future growth.engineers for real-time resolution. We also offer an online support portal for customers and a support community where customers can share information and access support 24 hours a day.

 

 

 

The market for our products is very competitive and some of our competitors have greater financial resources than we do, as well as more substantial production, marketing, engineering and other capabilities to develop, manufacture, market, and sell their products.

 

One of our primary competitors in the Enterprise Headsets and Consumer Headsets areas and, to a lesser extent, in the gaming and PC audio areas is GN Netcom, a subsidiary of GN Store Nord A/S., a Danish telecommunications conglomerate that competes with us in the office, contact center, and mobile categories and, on a limited scale, in the gaming and computer audio categories.conglomerate.  In addition, Motorola, Samsung, and LG are significant competitors in the consumer mono Bluetooth headset category. Sennheiser Communications VXI, and regional companies are competitors in the computer, office, and contact center categories, while Beats,Apple, Skullcandy, Logitech, Bose, and LG are competitors in the stereo Bluetooth headset category.  In addition, Turtle Beach, Skullcandy, Logitech, and Razer are competitors in the gaming category.

We believe the principal factors to be successful and competitive in each of the markets we serve are as follows:

We believe that our products and strategy enable us to compete effectively based on these factors.

 

During fiscal years 2016, 2015, and 2014, we incurred approximately $90.4 million, $91.6 million, and $84.8 million, respectively, in research, development, and engineering expenses.  Historically, we have conducted most of our research, development, and engineering with an in-house staff and thea limited use of contractors.  Key locations for our research, development, and engineering staff are in the U.S., Mexico, China, the Netherlands, and the United Kingdom. India.

During fiscal year 2016,Fiscal Year 2019, we developed and introduced innovative products that enabled us to better address changing customer demands and emerging trends.  Our goal is to bring the right products to customers at the right time and haveutilizing best-in-class development processes.

 

 

We maintain a worldwide sales force to provide ongoing global customer support and service globally.service.  To support our partners in the Enterprise market and their customers' needs, we have a well-established, multi-leveltwo-tiered distribution network in North America,the Americas, Europe, Middle East and Africa, and Asia Pacific regions and, in some parts of the Asia Pacific region where use of our products is widespread. Our distribution channels in other regions are less mature, and while we primarily serve the Enterprise market in those regions, we are expanding into the Consumer market in those locations.select markets, direct resellers.

Our global commercial sales channel network includes technologyenterprise distributors, direct and electronics distributors,indirect resellers, retailers, network and national and regional resellers.  The resellers typically offer a wide variety of products from multiple vendors to both other resellers and end users.  Our commercial distribution channel generally maintains an inventory of our products.  Our distribution of specialty products includes distributors, retail, government programs, and health care professionals.

Our distributors, direct and indirect resellers, system integrators, managed service providers, e-commerce partners, telephony and computer equipment providers resell our commercial headsets and endpoint products. Wireless carriers, retailers, and e-commerce partners also sell our consumer headsets as Plantronics branded products. As we expand into new markets and product categories, we expect to build relationships in new distribution and marketing models.

In addition, we have built a strong foundation of alliance partners, which allow existing and future distribution and reseller partners to sell into Microsoft, Zoom, Google and other service provider environments. Our commercial distribution channel maintains an inventory of our products.  Our distribution of specialty products includes retail, government programs, customer service, hospitality and healthcare professionals. Plantronics branded consumer headsets are sold through retailers to corporate customers, small businesses, and to individuals who use them for a variety of personal and professional purposes.  Revenues from this channel are seasonal, with our third fiscal quarter typically being the strongest quarter due to holiday seasonality.

We have a diverse group of customers located throughout the world.  Our principal channel partners are distributors, retailers, and carriers.  Our commercial distributors and retailers represent our first and second largest sales channels in terms of net revenues, respectively. No customerTwo customers, ScanSource and Ingram Micro Group, accounted for more than 10%16.0% and 11.4%, respectively, of our consolidated net revenues in fiscal years 2016, 2015, or 2014.

from 2010 to 2013. Ms. Huser also served as Vice President, Deputy General Counsel of eBay, Inc., an online global commerce leader, from 2008 to 2010. Ms. Huser graduated from the University of Arizona.Wisconsin - Madison, with a Bachelor of Business Administration, Accounting and Marketing and holds a Juris Doctorate from Stanford Law School.

Ms. MersereauMr. Loebbaka joined Plantronics in 2012October 2017 as Senior Vice President, MarketingGlobal Sales and Chief Marketing Officer.was promoted to Executive Vice President Global Sales in July 2018. Prior to joining Plantronics, Ms. Mersereaufrom March 2016 to June 2017, Mr. Loebbaka served as Chief Commercial Officer at Spruce Finance, Inc., a consumer finance company. Before Spruce Finance, he served as Senior Vice President, Global Sales, Marketing Officer and Service, at Enphase Energy, an energy management and solutions technology company, from 2010 to 2015. Previously, he held roles of ever increasing responsibility in sales and marketing at Seagate Technology, PLC, an industry leading company focused on core elements of data storage in the enterprise and consumer markets, including Senior Vice President of C3 Energy LLC,Europe, Middle East and Africa and earlier as a providerSenior Vice President of smart grid analytics SaaS solutions,Global Channel Sales and Corporate Marketing. Mr. Loebbaka has also held General Manager and other senior sales and marketing management roles at Adaptec, a computer storage products company, Brunswick Corporation, a leading global designer, manufacturer and marketer of recreation products company, and Apple, Inc., a multinational technology company. Mr. Loebbaka holds an MBA from 2011The Kellogg School of Management at Northwestern University and a Bachelor of Science degree in Mechanical Engineering from the University of Illinois at Urbana-Champaign.

Mr. Puorro joined the Company as Executive Vice President, General Manager Group Systems in December 2018 and in May 2019 was promoted to 2012.  From 2002his current position. Prior to 2011, Ms. Mersereaujoining the Company, Mr. Puorro served in variousa variety of ever increasing roles of increasing responsibility at Cisco Systems, Inc., a global provider of networking equipment, including Senior Vice President of Corporate Marketing. Previously, Ms. Mersereau servedduring two separate periods from 2000 to 2007 and thereafter from September 2009 to December 2018.  During his most recent employment ending in various senior marketing roles at IBM Corporation, Coca-Cola Corporation, The Wendy's Company, and Burger King International. Ms. Mersereau holds a Bachelor of Arts degree from the University of Western Ontario. 

Executive officers serve at the discretion of the Board of Directors.  There are no family relationships between any of the directors and executive officers of Plantronics.the Company.

 

Our stock price will reflectcompetitive landscape continues to rapidly evolve as the industry moves into new markets for collaboration such as mobile, browser-based, and cloud-delivered collaboration offerings. Competitors in these markets also continue to develop and introduce new technologies, sometimes proprietary or closed architectures, that may block or limit our ability to compete in certain markets. Many of our competitors are larger, offer broader product lines, may integrate their products and solutions with communications solutions, devices, and adapters manufactured or provided by them or others, offer products or solutions incompatible with our products, have established market positions, and have substantially greater financial, marketing, and other resources; all of which may increase pressure to reduce our pricing, increase our spending on sales and marketing, or both, which would correspondingly have a negative impact on our revenues and operating margins.

We may not be able to compete successfully against our current or future competitors. We expect our competitors to continue to improve the performance of their current products and to introduce new products or new technologies that provide improved performance. New product introductions by our business relativecurrent or future competitors, or our delay in bringing new products to among other things,market, could cause a significant decline in sales or loss of market acceptance of our products. We believe that ongoing competitive pressure may result in a reduction in the prices of our products and our competitors’ products. In addition, the introduction of additional lower priced competitive products or of new products or product platforms could render our existing products or technologies obsolete. We also believe we will face increasing competition expectationsfrom alternative UC&C endpoint solutions that employ new technologies or new combinations of securities analysts or investors,technologies.

Further, the commoditization of certain headset and general economicvideoconferencing products is leading to the availability of alternative, lower cost competitive products targeted to enterprises, consumers and small businesses, which could harm sales.  If we do not distinguish our products, through distinctive, technologically advanced features and designs, as well as continue to build and strengthen our brand recognition, our products may become commoditized.  In addition, failure to effectively market our products could lead to lower and industry conditions.  Ourmore volatile revenue and earnings, excess inventory, and the inability to recover associated development costs, any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We also face competition from companies, principally located in or originating from the Asia Pacific region, offering low cost products, including products modeled on, direct copies of, or counterfeits of our products. Online marketplaces make it easier for disreputable and fraudulent sellers to introduce their copies or counterfeit products into the stream of commerce by commingling legitimate products with copies and counterfeits; thereby making it extremely difficult to track and remove copies and counterfeits. The introduction of low-cost alternatives, copies and counterfeits has resulted in and will continue to cause market pricing pressure, customer dissatisfaction and harm to our reputation and brand name. If product prices are substantially reduced by new or existing market participants, our business, financial condition, or results of operations could be materially and adversely affected if anyaffected.

Increased consolidation and the formation of strategic partnerships in our industry may lead to increased competition, which could adversely affect our business and future results of operations.

Strategic partnerships and acquisitions are being formed and announced by our competitors on a regular basis, which increases competition and can result in increased downward pressure on our product prices. As a result, competition with larger combined companies with significantly greater financial, sales and marketing resources, a larger channel network and expanded product lines is a constant threat to our market share and revenues. Competitors can sell their communications solutions product lines in conjunction with proprietary network equipment or platform technology as a complete solution, making it more difficult to compete against them or to ascertain pricing on competitive products. In addition, some competitors may use their strengths in adjacent markets to foreclose competition in the following risks occur.  Accordingly, the trading priceUC&C solutions market. In some cases, proprietary solutions may also preclude our competitive products from being fully interoperable with our competitors' endpoints, infrastructure and/or network products.

Acquisitions or partnerships made by one of our strategic partners could also limit the potential contribution of our strategic relationships to our business and restrict our ability to form strategic relationships with these companies in the future and, as a result, harm our business. Rumored or actual consolidation of our partners and competitors may cause uncertainty and disruption to our business and can cause our stock could decline, and investors could lose all or part of their investment.price to fluctuate.

Our operations and financial performance are dependent on the global economy.and regional economies as well as industry specific trends and events. Uncertainty regarding future economic conditions makesand the markets into which we sell make it challenging both in the near and long-term to forecast operating results, make business decisions, and identify risks that may affect our business, sources and uses of cash, financial condition, and results of operations. Economic concerns, such as uncertain or inconsistent global or regional economic growth, stagnation or contraction, including the pace of economic growth in the United States in comparison to other geographic and economic regions, pressure on economic growth in Europe, uncertain growth prospects in the Asia Pacific region,and Latin America regions, as well as anxiety regardingactual or potential geopolitical conflicts and their short and long-term economic impact, increase the uncertainty and unpredictability for our business as consumers, businesses and governmentgovernmental agencies periodically and often unpredictably postpone or forego spending. A global economic downturn, changes in the industries in which we sell our products, or continued erratic or declining business or governmental spending or hiring have in the past and may again in the future reduce sales of our products, increase sales cycles, slow adoption of new technologies, increase price competition, and cause customers and suppliers to default on their financial obligations.

Additionally, althoughto the nature and extent of austerity measures previously implemented by governments implement general or specific reductions in various countries, including the U.S. and Europe, are less severe in recent fiscal periods, those that remain reduce,spending, demand for our products by affected governmentthose governmental agencies subject to the measures and by customers who derive all or a portion of their revenues from these agencies.agencies, may decline. Similarly, to the extent uncertainty regarding public debt limits or governmentgovernmental budgets particularly in the U.S and Europe, hinder spending by retail consumers, businesses or governmentgovernmental agencies, sales of our products may not grow as much as expectedbe materially harmed or may decrease or be delayed. We cannot predict the impact that governmental spending reductions will have on us or our customers or whether and to what extent our business and results of operations may be adversely harmed.

Additionally, our customers and suppliers suffer from their own financial and economic challenges. If global or regional economic conditions deteriorate, whether in general or particular market segments, one or morein specific markets, customers or suppliers may demand pricing accommodations, delay payments, delays or shipmentscurtail prior deployment plans, or become insolvent. It is impossible to reliably determine if and to what extent customers and suppliers may suffer, whether we will be required to adjust our prices or the amount we pay for materials and components or face collection issues with customers or if customer or supplier bankruptcies will occur.

Fluctuations in foreign currency exchange rates impact our revenues and profitability because we report our financial statements in U.S. dollars and purchase a majority of our component parts from our supply chain in USD, whereas a significant portion of our sales are transacted in other currencies, particularly the Euro and the British Pound Sterling ("GBP"). If the USD strengthens further, it could further harm our financial condition and operating results in the future. Furthermore, fluctuations in foreign currency rates impact our global pricing strategy, which may result in our lowering or raising selling prices in one or more currencies in order to avoid disparityminimize disparities with USD prices and to respond to currency-driven competitive pricing actions. For example, the strengthening of the USD against numerous worldwide currencies that accelerated during fiscal year 2015 and the continued strength of the USD throughout fiscal year 2016 negatively impacted our sales, pricing, margins, market share and operations overall. Should the dollar remain strong or strengthen further against foreign currencies, principally the Euro and the GBP, we may be compelled to raise prices for customers in the affected regions. Price increases may be unacceptable to our customers who could seekchoose to replace our products with lower pricedless costly alternatives in which case our sales and market share maywill be adversely impacted. Otherwise, ifIf we reduce prices to stay competitive in the affected regions, our profitability may be harmed. In fiscal year 2016, international revenues were reduced by approximately $27 million, net of the effects of hedging, due to unfavorable foreign exchange fluctuations in the other foreign currencies in which we sell.

Large or frequent fluctuations in foreign currency rates, coupled with the ease of identifying global price differences for our products via the Internet, increases pricing pressure as well as the likelihood of additionaland allows unauthorized third party “grey market” resellers in varying countries whoto take advantage of price disparities, thereby undermining our premium brand image, established sales channels, and support and operations infrastructure. We also have significant manufacturing operations in Mexico and fluctuations in the Mexican Peso exchange rate can impact our gross profit and profitability. Additionally, the majority of our suppliers are located internationally, principally in Asia. VolatileAsia, and volatile or sustained increases or decreases in exchange rates ofbetween the U.S. Dollar and Asian currencies may result in increased costs or reductions in the number of suppliers qualified to meet our standards.

Although we hedge currency exchange rates exposures we deem material, changes in exchange rates may nonetheless still have a negative impact on our financial results. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, decisions and actions of central banks and political developments.

We hedge a portion of our Euro and GBP forecasted revenue exposures for the future, typically over 12-month periods. In addition, we hedge a portion of our Mexican Peso forecasted cost of revenues and maintain foreign currency forward contracts denominated in Euros, GBP, Australian and AustralianCanadian Dollars that hedge against a portion of our foreign-currency denominated assets and liabilities. Our foreign currency hedging contracts reduce, but do not eliminate, the impact of currency exchange rate movements, particularly if the fluctuations are significant or sustained, and we do not execute hedging contracts in all currencies in which we conduct business. There is no assurance that our hedging strategies will be effective. Additionally, even if our hedging techniques are successful in the periods during which the rates are hedged, our future revenues, gross profit, and profitability may be negatively affected both at current rates and by adverse fluctuations in currencies against the USD. For instance, because our hedging instruments cover a period of up to 24 months, we anticipate that the hedging conducted in fiscal year 2016 will deliver little benefit to offset the stronger U.S. Dollar against major currencies in fiscal year 2017. See Item 7A for further quantitative information regarding potential foreign currency fluctuations.

Our industry is characterized by rapid technological changes, evolving industry standards, frequent new product introductions, short-term customer commitments, decreasing product life cycles, and changes in demand. Production levels are generally forecasted based on anticipatednon-binding customer forecasts and historic product demand and we often place orders with suppliers for materials, components and componentssub-assemblies (“materials and components”) as well as finished products 13many weeks or more in advance of projected customer orders. Actual customer demand depends on many factors and may vary significantly from forecasts. We will lose opportunities to increase revenues and profits and may incur increased costs and penalties including expedited shipping fees and late delivery penalties if we underestimate customer demand.

Conversely, overestimating demand couldmay result in higher inventories of raw materials, components, and sub-assemblies ("materials and components")components and finished products, which may later require us to write off all or a material portion of our inventories. We routinely review inventory for usage potential, including fulfillment of customer warranty obligations and spare part requirements, and we write down to the lower of cost or market value the excess and obsolete inventory, which may materially adversely affect our results of operations.

For instance, periodically, we or our competitors announce new products, capabilities, or technologies that replace or shorten the life cycles of legacy products or cause customers to defer or stop purchasing legacy products until new products become available. Additionally, new product announcements may incite customers to increase purchases of successful legacy products as part of a last-time buy strategy, thereby increasing sales in the short-term while decreasing future sales and delaying new product adoption. These risks increase the difficulty of accurately forecasting demand for discontinued and new products. Accordingly, during any transition to new products we may experienceas well as the likelihood of inventory obsolescence, and loss of revenue and associated gross profit.

If any of the above occur, our business, financial condition and results of operations could be materially harmed.

We have significant operations in various tax jurisdictions throughout the world, and a substantial portion of our taxable income has historically been generated in jurisdictions outside of the U.S. Currently, someShould there be changes in foreign tax laws that seek to impose withholding taxes on the repatriation of our operations are taxed at rates substantially lower than U.S. tax rates. If our income in these lower tax jurisdictions were no longer to qualify for these lowercash or increase foreign tax rates the applicable tax laws were rescinded or changed, or the mix of ouron overseas earnings shifts from lower rate jurisdictions to higher rate jurisdictions, our operating results could be materially adversely affected. Furthermore, the repatriation of non-U.S. earnings for which we have not previously provided U.S. taxes could result in higher effective tax rates for us and subject us to significant additional U.S. income tax liabilities.

Various governmental tax authorities have recently increased their scrutiny of tax strategies employed by corporations and individuals. In addition, the Organization for Economic Cooperation and Development issued guidelines and proposals during fiscal year 2016 that may change how our tax obligations are determined in many of the countries in which we do business. If U.S. or other foreign tax authorities change applicable tax laws or successfully challenge the manner in which our profits are currently recognized, our overall taxes could increase, and our business, cash flow, financial condition, and results of operations could be materially adversely affected.

We are also subject to examination by the Internal Revenue Service ("IRS") and other tax authorities, including state revenue agencies and foreign governments. While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and results of operations.

We are subject to taxation in the U.S. and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The changes included in the Tax Act are broad and complex. As rule making bodies and new legislation is enacted to interpret the Tax Act, these changes may adjust the estimates provided in this report. The changes may possibly be materially adversely affected if we are unablematerial, due to, develop, manufacture,among other things, the Treasury Department’s promulgation of regulations and market new productsguidance that interpret the Tax Act, corrective technical legislative amendments that may change the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to changing customer requirementsthe Tax Act, or any updates or changes to estimates the company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and new technologies.foreign exchange rates of foreign subsidiaries.

In addition, it is evolving more rapidly now than inuncertain how each country where we do business may react to the past and we anticipate this trend will continue. Historically, new products primarily offered stylistic changes and quality improvements rather than significant new technologies. Our increasing reliance and focus on the UC market has resulted in a growing number of our products that integrate complex, state-of-the-art technology, increasing the risks associated with new product ramp-up, including product performance and defects in the early stages of production.

Our future growth and profitability are tied to our ability to successfully bring to market new and innovative services offerings like Habitat Soundscaping which we offer as a subscription service. We are investing significant time, resources and money into our services offerings with no expectation that they will provide material revenue in those standardsthe near term and capabilitieswithout any assurance they will succeed. Moreover, we expect that as comparedwe continue to wired technologies. If salesexplore, develop and margins onrefine new offerings they will continue to evolve, may not generate sufficient interest by end customers, may create channel conflicts with our traditional corded products declineexisting hardware distribution partners, and we aremay be unable to successfully design, develop, and market alternatives at historically comparable margins,compete effectively, generate significant revenues or achieve or maintain acceptable levels of profitability.

Additionally, our revenue and profits may decrease.

service levels and compliance. If we do not successfully execute our customers' closed proprietary systems to open platforms such ascloud strategy or anticipate the PC, smartphones and tablets. In turn, these devices have become more openneeds of our customers, our credibility as a result of technologies such as cloud computingservices provider could be questioned and trends toward more open source software code development. As a result, the risk that currentour prospects for future revenue growth and potential competitors could enter our markets and commoditize our products by offering similar products has increased.

IfAccordingly, if we are unablefail to develop, manufacture, market,successfully launch, manage and introduce enhanced ormaintain our new products in a timely manner in response to changing market conditions or customer requirements, including changing fashion trends and styles,evolving services offerings future revenue growth and profitability may be limited and our business financial condition, and results of operations will be materially adversely affected.significantly harmed.

Our customer mix is changing, and certain retailers, OEMs, and wireless carriers are more significant.significant than other customers.  In particular, we have several large customers whose order patterns are difficult to predict. Offers and promotions by these customers may result in significant fluctuations in their purchasing activities over time, which may increase the volatility of our revenues.  If we are unable to correctly anticipate the quantities and timing of their purchase requirements, our revenues may be adversely affected, or we may be left holding large volumes of inventory that cannot be sold to other customers.

Furthermore, many customers with whom we conduct business haveare quite large with substantial buying power or who have strategic importance to our product marketing objectives. Many use their buying power or strategic importance to mandate onerous terms and conditions in ourto conduct business arrangements with them including unfavorable payment terms, fees and penalties for early, late and inaccurate shipments,shipping fees and penalties, generous return rights, most favored pricing, and mandatory marketing and promotional fees. These terms are often non-negotiable and are frequently broad, ambiguous and inconsistent across customers making compliance complex and subject to interpretation. If our compliance with these or similar future provisions are incorrect or inadequate, we could be liable for breach of contract damages or our reputation with one or more key customers could be materially adversely harmed, either of which could have an adverse effect on our financial condition or results of operations.

Although we take physical and cybersecurity seriously and devote significant resources and deploy protective network security tools and devices, data encryption and other security measures to prevent unwanted intrusions and to protect our systems, products and data, we have and will continue to experience attacks of varying degrees in the conduct of our business. Cyber attackers tend to target the most popular products, services and technology companies, which can include our products, services or networks. As a result, our network is subject to unauthorized access, viruses, embedded malware and other malicious software programs.  In addition, outside parties may attempt to fraudulently induce employees or customers to disclose information in order to providegain access to our employee, vendor or customer data. Unauthorized access our network, data or systems could result in disclosure, modification, misuse, loss, or destruction of company, employee, customer, or other third party data or systems, the theft of sensitive or confidential data including intellectual property and business and personal information, system disruptions, access to our financial reporting systems, operational interruptions, product or shipment disruptions or delays, and delays in or cessation of the services we offer.

Any breaches or unauthorized access could ultimately result in significant legal and financial exposure, litigation, regulatory and enforcement action, and loss of valuable company intellectual property.  Affected parties or government authorities could initiate legal or regulatory actions against us in connection with greater insight intoany security breaches or improper disclosure of data, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.  Such breaches could also cause damage to our reputation, impact the characteristicsmarket’s perception of us and motivationsof the products and services that we offer, and cause an overall loss of confidence in the security of our distribution channelsproducts and services, resulting in a potentially material adverse effect on our business, revenues and results of operations, as well as customer attrition.

In addition, the cost and operational consequences of investigating, remediating, eliminating and putting in place additional information technology tools and devices designed to prevent actual or perceived security breaches, as well as the needscosts to comply with any notification obligations resulting from such a breach, could be significant and impact margins. Further, due to the growing sophistication of our end customers,the techniques used to better incentivize our sales partners and promoteobtain unauthorized access to or to sabotage networks, systems, or our products, which change frequently and often are not detected immediately by existing antivirus and other detection tools, we may be unable to end customers,anticipate these techniques or to implement adequate preventative measures. We can make no assurance that we have begun regional implementation of an authorization program as well as a back end rebate program. Under the authorization program, distributorswill be able to detect, prevent, timely and resellers are asked to enter into agreementsadequately address or supplement existing agreements in connection with the sale of allmitigate such cyber attacks or a portion of our products. The back end rebate program ties payment of post-sale discounts to distributor program compliance obligations. These programs are new and our partners may deem them difficult, time-consuming or disruptive, or the terms of the programs or our agreements unacceptable.security breaches.

We are subject to an innumerable and ever-increasing number of global laws relating to the collection, use, retention, security, and transfer of personally information about our customers, end-users of our products, business partners and employees globally. Data protection laws may be interpreted and applied inconsistently from country to country and often impose requirements that are inconsistent with one another. In many cases, these laws apply not only to third-party transactions, but also to transfers of information internally and by and between us and other parties with whom we have commercial relations. These laws continue to develop in ways we cannot predict and may materially increase our cost of doing business, particularly as we expand the nature and types of products and services we offer including, without limitation, our software-as-a-service and Soundscaping subscription services.

Regulatory scrutiny of privacy, data protection, use of data and data collection is increasing on a global basis. Complying with these varying requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business and violations of privacy-related laws can result in significant damages, fines and penalties.  For instance, in Europe, the General Data Protection Regulation (“GDPR”) was adopted in 2016 and became fully effective on May 25, 2018 and the California Consumer Privacy Act was enacted on June 28, 2018.

Complying with privacy laws, regulations, or other obligations relating to privacy, data protection, or information security have caused and will continue to cause us to incur substantial operational costs and may require us to periodically modify our data handling practices. Moreover, compliance may impact demand for our offerings and force us to bear the burden of more customersonerous obligations in our contracts. Non-compliance could result in proceedings against us by governmental entities or resellers.

embedded in such products and applications. If we are unable to meet or maintain applicable certification or other requirements specified by the United States Federal government or to do so within the timeframes required, or if our competitors have certifications for competitive products for which we are not yet certified, our revenues and results of operations couldwould be materially, adversely affected.impacted.

We are increasingly incorporating advanced software features and functionalities into our products, offering firmware and software fixes, updates, and upgrades and developing Internet based software-as-a-service offerings that provide additional value that complements our headsets.products. As the nature and extent of software integration in our products increases or if sales of standalone software applications or services become material, the way we report revenue related to our products and services could be significantly affected. For example, we are increasingly required to evaluate whether our revenue transactions include multiple deliverables and, as such, whether the revenue generated by each transaction should be recognized upon delivery, over a period of time or apportioned and recognized based on a combination of the two in light of all the facts and circumstances related to each transaction.two. Moreover, the software and services revenue recognition rules are complex and dynamic.

Our success depends in part on our ability to protect our copyrights, patents, trademarks, trade dress, trade secrets, and other intellectual property, including our rights to certain domain names. We rely primarily on a combination of nondisclosure agreements and other contractual provisions as well as patent, trademark, trade secret, and copyright laws to protect our proprietary rights. Effective protection and enforcement of our intellectual property rights may not be available in every country in which our products and media properties are distributed to customers. The process of seeking intellectual property protection can be lengthy, expensive, and uncertain. Patents may not be issued in response to our applications, and any that may be issued may be invalidated, circumvented, or challenged by others. If we are required to enforce our intellectual property rights through litigation, the costs and diversion of management's attention could be substantial. Furthermore, we may be countersued by an actual or alleged infringer if we attempt to enforce our intellectual property rights, which may materially increase our costs, divert management attention, and result in injunctive or financial damages being awarded against us. In addition, existing patents, copyright registrations, trademarks, trade secrets and domain names may not provide competitive advantages or be adequate to safeguard and maintain our rights. If it is not feasible or possible to obtain, enforce, or protect our intellectual property rights, our business, financial condition, and results of operations could be materially, adversely affected.

Patents, copyrights, trademarks, and trade secrets are owned by individuals or entitiesthird parties that may make claims or commence litigation based on allegations of infringement or other violations of intellectual property rights. These claims or allegations may relate to intellectual property that we develop or that is incorporated in the materials or components provided by one or more suppliers. As we have grown, intellectual property rights claims against us and our suppliers have increased along withincreased. There has also been a general trend of increasing intellectual property infringement claims against all corporations.corporations that make and sell products. Our products, technologies and the components and materials contained in our products may be subject to certain third-party claims and, regardless of the merits of the claim, intellectual property claims are often time-consuming and expensive to litigate, settle, or otherwise resolve. In addition,Many of our agreements with our distributors and resellers require us to indemnify them for certain third-party intellectual property infringement claims. To the extent claims against us or our suppliers are successful, we may have to pay substantial monetary damages or discontinue the manufacture and distribution of products that are found to be in violation of another party's rights. We also may have to obtain, or renew on less favorable terms, licenses to manufacture and distribute our products or materials or components included in those products, which may significantly increase our operating expenses. Moreover, many of our agreements with our distributors and resellers require us to indemnify them for certain third-party intellectual property infringement claims. Discharging our indemnity obligations may involve time-consuming and expensive litigation and result in substantial settlements or damages awards, our products being enjoined, and the loss of a distribution channel or retail partner, any of which may have a material adverse impact on our operating results.

Our products must meet existing and new requirements set by regulatory authorities in each jurisdiction in which we sell them. For example, certain of our Enterprise products must meet local phone system standards. Certainstandards and certain of our wireless products must work within existing permitted radio frequency ranges. Moreover, competition for limited radio frequency bandwidth as a result of an increasing use of wireless products increases the risk of interference or diminished product performance. For instance, in the U.S. the increase in the number of products operating in the unlicensed 903-928 megahertz radio frequency range using significantly higher power than our wireless products and those of many other users of the unlicensed frequency range may cause our wireless products to experience interference which, if material, may harm our reputation and adversely affect our sales.

As regulations and local laws change, new regulations are enacted, and competition increases, we may need to modify our products to address those changes. Regulatory restrictions and competition may increasechanges, increasing the costs to design, manufacture, and sell our products, resulting in a decrease inand thereby decreasing our margins or a decrease in demand for our products if we attempt to pass along the costs. Regulations may also negatively adversely affect our ability to procure or manufacture raw materials and components necessary for our products. Compliance with regulatory restrictions and bandwidth limitations may impact the actual or perceived technical quality and capabilities of our products, reducing their marketability. In addition, if the products we supply to various jurisdictions fail to comply with the applicable local or regional regulations, if our customers or merchants transfer products into unauthorized jurisdictions or our products interfere with the proper operation of other devices, we or consumersend users purchasing our products may be responsible for the damages that our products cause; thereby causing us to alter the performance of our products, pay substantial monetary damages or penalties, cause harm to our reputation, or cause us to suffer other adverse consequences.

We are regularly subject to a wide variety of litigation including claims, lawsuits, and other similar proceedings involving our business practices and products including claims and disputes regarding product liability claims, labor and employment claims, and commercial matters.disputes. The number and significance of these claimsdisputes and disputesinquiries have increased as our company haswe have grown larger, our business has expanded in scope and geographic reach, and our products and services have increased in complexity.

Frequently, the outcome and impact of any claims, lawsuits, and other similar proceedings cannot be predicted with certainty. Moreover, regardless of the outcome such proceedings can have an adverse impact on us because of significant legal costs, diversion of management resources, and other factors. Determining reserves for our pending litigation is a complex, fact-intensive process that is subject to judgment calls.judgment. It is possible that a resolution of one or more such proceedings could require us to make substantial payments to satisfy judgments, penalties or to settle claims or proceedings, any of which could harm our business. These proceedings could also result in reputational harm, sanctions, consent decrees, or orders preventing us from offering certain products, or services, or requiring a change in our business practices in costly ways. Any of these consequences could materially harm our business.

We maintain product liability insurance, and general liability and other forms of insurance in amounts we believe sufficient to cover reasonably anticipated claims, including some of those described above; however, the coverage provided under the policies could be inapplicable or insufficient to cover the full amount of any one or more claims. Consequently, claims brought against us, whether or not successful, could have a material adverse effect upon our business, financial condition, and results of operations.

Our success depends to a large extent upon the services of a limited number of executive officers and other key employees. The unanticipated loss of the services of one or more of our executive officers or key employees, whether or not anticipated, could have a material adverse effect upon our business, financial condition, and results of operations. We also believe that our future success will depend in large part upon our ability to attract, motivate and retain highly skilled technical, management, sales, and marketing personnel. Competition for such personnel is intense. Weintense and the salary, benefits and other costs to employ the right personnel may make it difficult to achieve our financial goals. Consequently, we may not be successful in attracting, motivating and retaining such personnel, and our failure to do so could have a material adverse effect on our business, operating results, or financial condition.

We are subject to various federal, state, local, and foreign environmental laws and regulations, including those governing the use, discharge, and disposal of hazardous substances in the ordinary course of our manufacturing process.processes or the recycling of all or a portion of the components of our products. It is possible that future environmental legislation may be enacted or current environmental legislation may be interpreted in any given country in a manner that creates environmental liability with respect to our facilities, operations, or products.  We may also be required to implement new or modify existing policies, processes and procedures as they relate to the usemeet such environmental laws. Although our management systems are designed to maintain compliance, we cannot

assure you that we have been or will be at all times in complete compliance with such laws and disposalregulations. If we violate or fail to comply with any of our products.them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions. To the extent any new or modified policies, processes or procedures are difficult, time-consuming or costly to implement orimplement. we may incur claims for environmental matters exceeding reserves or insurance for environmental liability, our operating results could be negatively impacted.impacted

War, terrorism, public health issues, natural disasters, or other business interruptions, whether in the U.S. or abroad, have caused or could cause damage or disruption to international commerce by creating economic and political uncertainties that may have a strong negative impact on the global economy, us, and our suppliers or customers.  Our major business operations and those of many of our vendors and their sub-suppliers (collectively, "Suppliers") are subject to interruption by disasters, including, without limitation, earthquakes, floods, and volcanic eruptions or other natural or manmade disasters, fire, power shortages, terrorist attacks and other hostile acts, public health issues, flu or similar epidemics or pandemics, and other events beyond our control and the control of our Suppliers.  

Should any of the events above arise we could be negatively impacted by the need for more stringent employee travel restrictions, limitations in the availability of freight services, governmental actions limiting the movement of products between various regions, delays in production, and disruptions in the operations of our Suppliers.suppliers.  Our operating results and financial condition could be adversely affected by these events.

Our Boardboard of Directorsdirectors has the authority to issue preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of those shares without any further vote or action by the stockholders. The issuance of our preferred stock could have the effect of making it more difficult for a third party to acquire us. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which could also have the effect of delaying or preventing our acquisition by a third party. Further, certain provisions of our Certificate of Incorporation and bylaws could delay or make more difficult a merger, tender offer or proxy contest, which could adversely affect the market price of our common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

ITEM 2.  PROPERTIES

ITEM 3.  LEGAL PROCEEDINGS

ITEM 4.  MINE SAFETY DISCLOSURES

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

As of May 12, 2016,14, 2019, there were approximately 4839 holders of record of our common stock.  Because many of our shares of common stock are held by brokers and other institutions on behalf of beneficial owners, we are unable to estimate the total number of beneficial owners, but we believe it is significantly higher than the number of record holders.  On April 1, 2016,

The graph below compares the last trading dayannual percentage change in the cumulative return to the stockholders of fiscal year 2016,our common stock with the last sale reportedcumulative return of the NYSE Stock Market Index and a peer group index for the period commencing on the NYSEmorning of March 29, 2014 and ending on March 30, 2019. The information contained in the performance graph shall not be deemed to be "soliciting material" or be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

The graph assumes that $100 was invested on the morning of March 29, 2014 in our common stock (based on price at the close of trading on March 29, 2014) and in each index (based on prices at the close of trading on March 28, 2014), and that dividends, if any, were reinvested. The measurement date used for our common stock was $39.36 per share.is the last day of our fiscal year for each period shown.

 

ITEM 6.  SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and notes thereto included in Item 8 of this Form 10-K in order to fully understand factors that may affect the comparability of the information presented below. Fiscal yearYear 2016 consisted of 53 weeks. All other fiscal years presented consisted of 52 weeks.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis is intended to help you understand our results of operations and financial condition. It is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and related notes thereto included elsewhere in this report.  This discussion contains forward-looking statements.  Please see the sections entitled "Certain Forward Looking Information" and "Risk Factors" above for discussions of the uncertainties, risks, and assumptions associated with these statements.  Our fiscal year-end financial reporting periods end on the Saturday closest to March 31^st.  Fiscal year 2016 had 53 weeksYears 2019, 2018, and ended on April 2, 2016, fiscal years 2015 and 20142017 each had 52 weeks and ended on March 28, 2015,30, 2019, March 31, 2018, and March 29, 2014,April 1, 2017 respectively. For purposes of presentation, we have indicated our accounting fiscal year as ending on March 31.

We are a leading global designer, manufacturer, and marketer of lightweightintegrated communications and collaboration solutions that span headsets, telephone headset systems, other communication endpoints,Open SIP desktop phones, audio and accessories for the worldwide businessvideo conferencing, cloud management and consumer markets under the Plantronics brand.  In addition, we manufactureanalytics software solutions, and market specialty telephone products under our Clarity brand, such as telephones for the hearing impaired, and other related products for people with special communication needs.services. Our major product categories are Enterprise Headsets, which includes headsets optimized for Unified Communications (“UC”), other corded and cordless communication headsets, audio processors, and telephone systems; andheadsets; Consumer Headsets, which includes Bluetooth and corded products for mobile device applications, personal computer ("PC") and gaming headsets,gaming; Voice, Video, and specialty products marketedContent Sharing Solutions, which includes Open SIP desktop phones, conference room phones, and video endpoints, including cameras, speakers and microphones. All of our solutions are designed to work in a wide range of Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), and Video as a Service ("VaaS") environments. Our RealPresence collaboration solutions range from infrastructure to endpoints and allow people to connect and collaborate globally and naturally. In addition, we have comprehensive Support Services including support on our solutions and hardware devices, as well as professional, hosted, and managed services.

On July 2, 2018, we completed our acquisition (the “Acquisition”) of all of the issued and outstanding shares of capital stock of Polycom, Inc. (“Polycom”) for hearing impaired individuals.approximately $2.2 billion in stock and cash. As a result, on that date we also became a leading global provider of open, standards-based Unified Communications & Collaboration ("UC&C") endpoints for voice, video, and content sharing, and a comprehensive line of support and services for the workplace under the Polycom brand.

Compared to the prior year, net revenues decreased 0.9%increased 95.4% to $856.9 million.$1.7 billion. The decreaseincrease in net revenues was driven by lower revenues within our Consumer product category, which declined 6.3% fromprimarily related to the prior year. This decline was partially offset by slight growthAcquisition. As a result of purchase accounting, a total of $84.8 million of deferred revenue that otherwise would have been recognized in our Enterprise product category, which increased 1.2% from the prior year. While our primary driver of revenue growth continues to be revenues from the sale of our UC products, our fiscal year 2016 Consumer revenues were negatively impacted by $22 million due to the rapid decline of the U.S. market for mono Bluetooth headsets. However, we believe we grew our market share in this category, which helped to partially offset the decline. Our fiscal year 2016 revenues were also negatively impacted by fluctuations in foreign currency exchange rates. Compared to the other foreign currencies in which we sell, a stronger U.S. Dollar ("USD") decreased2019 was excluded from annual net revenues of approximately $1.7 billion.

The table below summarizes net revenues for the Fiscal Years ended March 31, 2018, and 2019 by approximately $27 million,product categories:

Operating profit decreased 27.5%(188.5)% from the prior year to $108.0$(109.3) million due primarily to restructuring charges taken during fiscal year 2016, the fluctuations in foreign currency exchange rates, and the impactor (6.5)% of a non-recurring, favorable litigation settlement in fiscal year 2015. The adverse fluctuations in foreign currency exchange rates negatively impacted our net revenues, but favorably impacted our operatingdriven primarily by $160.2 million of amortization of purchased intangibles, $68.7 million of acquisition and integration expenses, although to a lesser degree, for a net unfavorable impact of $11and $30.4 million to our operating profit. These items were partially offset by a reduction in variable compensation expense due to lower profitability. We delivered $68.4 million in net income, representing approximately 8.0% of our net revenues.inventory fair value adjustment.

We generate approximately 40% to 45%Our strategic initiatives are primarily focused on driving long-term growth through our end-to-end portfolio of our revenues from international sales; therefore,audio and video endpoints, including headsets, desktop phones, conference room phones, and video collaboration solutions. The acquisition positions us well as a global leader in communications and collaboration endpoints and by targeting the impact of currency movements on our net revenues can be significant. In addition, in some international locations where we sell in USD, we also face additional pricing pressure, discounting, and lost businessfaster-growing market segments, such as the stronger dollar negatively impacts buying decisions. Unfavorable impacts fromHuddle Room segment for video collaboration, we believe will drive long-term revenue growth.

Within the global economymarket for our Enterprise Headsets, we anticipate the key driver of growth over the next few years will be the continued adoption of UC&C solutions. We believe enterprises are increasing their adoption of UC&C systems to reduce costs, improve collaboration, and consumer spending together with exchange rate fluctuations could continuemigrate to negatively impact our net revenuesmore capable and flexible technology. We expect the growth of UC&C solutions will increase overall headset adoption in enterprise environments, and we believe most of the growth in our fiscal year 2017. We continually work to offset currency movements through hedging strategiesEnterprise Headsets product category over the next three years will come from headsets designed to minimize the volatility of results and dampen large fluctuations. However, as our revenue hedging instruments cover a period of up to 12 months, the hedging conducted a year ago is expected to deliver little benefit to offset the stronger dollar against other major currencies in fiscal year 2017.for UC&C.

Revenues from our Consumer products channelHeadsets are seasonal and typically strongest in our third fiscal quarter, which includes the majority of the holiday shopping season. Additionally, otherOther factors that directly impact our Consumerperformance in the product category performance, such as consumer preferences, changes in consumer confidence and other macroeconomic factors,include product life-cycleslife cycles (including the introduction and pace of adoption of new technology), market acceptance of new product introductions, consumer preferences and the competitive retail environment. Our Consumer business continues to be impacted by a declineenvironment, changes in sales volumes in our mono Bluetooth products as the market for these products contracts. The unit volumes in our stereo Bluetooth category increased slightly when compared to the prior fiscal year, driven primarily by our newer generation of products. We anticipate that these newer productsconsumer confidence and other planned investments in the Consumer category will allow us to better compete in these consumer product categories as they continue to expand. While we have been building our stereo portfolio over the last several years, it is not yet as robust as our mono Bluetooth portfolio of products. As a result of these market changes, we have reduced the amount we expect to invest in non-premium mono Bluetooth portfolio while shifting that investment toward additional stereo Bluetooth products. This shift toward entertainment solutions is important to our long-term brand position.

We remain cautious about the macroeconomic environment, based on uncertainty around trade and fiscal policy in the U.S., as well as and broader economic uncertainty in many parts of Europe and Asia Pacific, which makes it difficult for us to gauge what impact the economy may haveeconomic impacts on our future business, and the fact that the UC opportunity has not matured as quickly as we initially anticipated.business. We will continue to monitor our expenditures and prioritize expenditures that further our strategic long-term growth opportunities such as innovative product development in our core research and development efforts, including the use of software and services as part of our portfolio. UC will also remain the central focus of our sales force, marketing group, and other customer service and support teams as we continue investing in key strategic alliances and integrations with major UC vendors.opportunities.

The following tables set forth,graphs display net revenues by product category for Fiscal Years 2017, 2018, and 2019:

Net Revenues

Enterprise products represent our largest source of revenues, while Consumer products represent our largest unit volumes.  Net revenues may vary due to seasonality, the timing of new product introductions and discontinuation of existing products, discounts and other incentives, and channel mix. Net revenues derived from sales of Consumer products into the retail channel typically account for a seasonal increase in net revenues in the third quarter of our fiscal year.

The following graphs display net revenues by a slight decline in Core Enterprise (non-UC products).domestic and international split, as well as by percentage of total net revenue by major geographic region:

As a percentage of total net revenues, U.S. net revenues decreased slightly compared with internationalin Fiscal Year 2019 from Fiscal Year 2018 due primarily to the Acquisition, which increased our presence in the Asia Pacific region. International net revenues infor Fiscal Year 2019 increased from the prior fiscal year 2016 compareddue to fiscal year 2015. The decrease in absolute dollars in U.S. net revenues was driven primarily by weakerthe Acquisition and increased sales of our UC&C products and Consumer revenues primarily as a result of the declining mono Bluetooth market,products, which waswere partially offset by increased Enterprise net revenues due to continued growththe unfavorable impact of fluctuations in demand for UC. The decrease in absolute dollars in international revenues was due primarily to decreased Core Enterprise net revenues, partially offset by higher UC and Consumer revenues. International revenues were reduced by approximately $27 million, net of the effects of hedging, in fiscal year 2016 compared to fiscal year 2015, due to unfavorable foreign exchange fluctuations in the other foreign currencies in which we sell.rates.

As a percentage of total net revenues, U.S. net revenues decreased slightly compared with internationalin Fiscal Year 2018 from Fiscal Year 2017 due to a decline in sales of our Consumer Headset and Core Enterprise Headset products which were partially offset by increased sales of our UC&C products. International net revenues infor Fiscal Year 2018 increased from the prior fiscal year 2015 compared to fiscal year 2014. The increase in absolute dollars in U.S. net revenues was driven primarily by increased Enterprise net revenues due to continued growth in demand forincreased sales of our UC and stronger Consumer revenues as a result of a refreshed and enhanced next generation product portfolio. The increase in absolute dollars in international revenues was due primarily to increased Enterprise net revenues reflecting continued growth in demand for UC&C products and to a lesser extent, higher Consumer revenues. International revenues were reduced by approximately $5 million, netthe favorable impact of the effects of hedging,fluctuations in fiscal year 2015 compared to fiscal year 2014, due to unfavorable foreign exchange fluctuations in the other foreign currencies inrates which we sell.were partially offset by lower sales of our Consumer products.

Cost of revenues consists primarily of direct manufacturing and contract manufacturer costs, warranty expense,costs, freight expense, depreciation, duty expense, reserves forduties, excess and obsolete inventory costs, royalties, and an allocation of overhead expenses, including facilities, IT, and human resources costs.expenses.

Compared to Fiscal Year 2017, gross profit as a percentage of net revenues increased in Fiscal Year 2018 primarily due to product cost reductions, the strengthening of foreign currencies relative to the USD,US Dollar which negativelyfavorably impacted margins on our international product sales. Gross profit was further negatively impacted bysales, and a lower mix of Core Enterprise sales, which carry higher margins than our UC and Consumer categories.

There are significant variances in gross profit percentages between our higher and lower margin products;products including Polycom products resulting from the Acquisition; therefore, small variations in product mix, which can be difficult to predict, can have a significant impact on gross profit.profit as a percentage of net revenues.  Gross profit percentages may also vary based on distribution channel, return rates, and other factors.

 

Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside services, including legal fees associated with protecting our intellectual property, expensed materials, depreciation, and an allocation of overhead expenses, including facilities, IT, and human resources costs.expenses.

The increase in research, development, and engineering expenses in fiscal year 2015Fiscal Year 2019 compared to fiscal year 2014Fiscal Year 2018 was primarily due primarily to $4.7 millionthe inclusion of Polycom operating expenses.

The decrease in headcount-related costs, including increased salary expense,research, development, and performance-based compensation, and an increase to equity-based compensation resulting from the shorter vesting schedule of restricted stock grants made after May 2013engineering expenses in Fiscal Year 2018 compared to restricted stock grants madeFiscal Year 2017 was primarily due to lower compensation expenses, driven by reduced funding of our variable compensation plans and cost reductions from our restructuring actions initiated in current and prior to May 2013.fiscal periods.

 

Selling, general, and administrative expense consists primarily of compensation costs, marketing costs, travel expenses, professional service fees, and allocations of overhead expenses, including IT, facilities, and human resources costs.expenses.