Gross profit may vary depending on the product mix, channel mix, amount of excess and obsolete inventory charges, changes in the warranty repair costs or return rates, and other factors. The shift from higher margin corded products to lower margin wireless products, particularly the Bluetooth products, and the ramp up of costs associated with our plant in China have decreased and could continue to decrease our gross profit.* We expect gross profit pressures to remain for the foreseeable future.* In the near term, actions designed to improve our gross margins through supply management and improvements in the product launch cycle will be a principal focus for us.*
-25-
For the nine month period ended December 31, 2004, compared to the same period in the prior year, the increase in interest and other income was driven primarily by higher interest income, including approximately $0.3 million in interest received from a one-time litigation settlement.
We expect interest and other income, net to be approximately flat in the fourth quarter.*
INCOME TAX EXPENSE
| | | | | | | | | | | | | | |
| | | Three Months | | | | | | Nine Months | | | | | | | | Three Months Ended | | | | | | |
| | | Ended | | | | | | Ended | | | | | | | | June 30, | | | | | | |
| | | December 31, | | December 31, | | | | December 31, | | December 31, | | | | | | | | | | | | Increase | | | |
$ in thousands | | 2003 | | 2004 | | | | 2003 | | 2004 | | Increase | | | | 2004 | | | 2005 | | | (Decrease) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | $ | 25,170 | | $ | 33,947 | | $ | 8,777 | | 35 | % | $ | 59,047 | | $ | 99,256 | | $ | 40,209 | | 68 | % | | $ | 31,038 | | $ | 29,723 | | $ | (1,315 | ) | | -4 | % |
| Income tax expense | | | 7,551 | | | 9,505 | | | 1,954 | | | 26 | % | | 17,714 | | | 27,792 | | | 10,078 | | | 57 | % | | | 8,691 | | | 8,025 | | | (666 | ) | | -8 | % |
| Net income | | | 17,619 | | | 24,442 | | | 6,823 | | | 39 | % | | 41,333 | | | 71,464 | | | 30,131 | | | 73 | % | | | 22,347 | | | 21,698 | | | (649 | ) | | -3 | % |
| | | | | | | | | | | | | | |
| Effective tax rate | | | | 28.0 | % | | 27.0 | % | | 1.0 | | ppt. | | |
For the three and nine month periods ended December 31, 2004,first quarter of fiscal 2006, compared to the same periods in the priorquarter a year ago, income tax expense increaseddecreased as a result of higher income.our overall tax rate decreasing from 28% to 27% and a decrease in profit before tax. The reduction in the effective tax ratesrate is due to the finalization of our international tax restructuring at the end of fiscal 2005. There were 28.0%no significant events in the first quarter of fiscal 2006 which impacted the expected tax rate of 27%.
On October 22, 2004, the President of the United States of America signed the American Jobs Creation Act of 2004 (the "AJCA"). The AJCA creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. As of June 30, 2005, our management had not decided whether to, or to what extent, we might repatriate foreign earnings under the AJCA, and, 30.0%, respectivelyaccordingly, the financial statements do not reflect any provision for taxes on unremitted foreign earnings.
While it is difficult to predict the 2005tax rate for fiscal 2006, we still expect it to be approximately 27%; however, the tax rate may be affected by the closing of acquisitions, the repatriation of any foreign earnings, the mix of tax jurisdictions in which profits are determined to be earned and 2004 periods.taxed, changes in estimates and credits, benefits and deductions.*
LIQUIDITY AND CAPITAL RESOURCES.
Our aggregate cash, cash equivalents and marketable securities at December 31, 2004June 30, 2005 were $229.8$212.2 million compared with $180.6$242.8 million at March 31, 2004.2005, a decrease of $30.6 million. Cash equivalents are comprised of highly liquid investmentshave a maturity when purchased with an original or remaining maturity of 90 days or less.less; marketable securities have a maturity of greater than 90 days, and are classified as available-for-sale.
The decrease in cash, cash equivalents, and marketable securities is primarily the result of our repurchase of 1,372,500 shares of our common stock for an aggregate of $47.3 million at an average price of $34.44 per share, the $7.4 million cash payment for the acquisition of Octiv, and capital expenditures of $10.4 million, of which $3.7 million were related to the construction of our manufacturing plant and facility in Suzhou, China. We generated $35.9 million from operations, which partially offset the uses of cash, discussed above.
In July 2005, we announced that we had entered into a Definitive Agreement and Plan of Merger for the acquisition of Altec Lansing, Inc. If this transaction closes, we will pay approximately $166-$168 million in cash including direct acquisition costs.* We have had a revolving credit facility with a major bank, including a letter of credit subfacility. Subsequent to quarter end, we entered into a second amendment to our Credit Agreement which permits the acquisition of Altec Lansing. The amendment extends the revolving termination date from August 1, 2006 to August 1, 2010, and increases the revolving credit from $75 million to $100 million, and reduces the interest rate spread over LIBOR from 0.875% to 0.750%. As of December 31, 2004,July 29, 2005, we had no cash borrowings under the revolving credit facility and $1.7 million outstanding under the letter of credit subfacility. The amounts outstanding under the letter-of-credit subfacility were principally associated with purchases of inventory. The terms of the credit facility contain covenants that materially limit our ability to incur debt and pay dividends, among other matters. It also requires us to maintain, in addition to a minimum annual net income, a maximum leverage ratio and a minimum quick ratio. These covenants may adversely affect us to the extent we cannot comply with them.* We are currently in compliance with the covenants under this agreement. If the acquisition of Altec Lansing is consummated, we may draw upon this line of credit to fund our purchase obligation, which could decrease our liquidity.* While Plantronics and Altec Lansing have executed a definitive agreement, there is no assurance they will complete the transaction, for example, the companies may fail to satisfy conditions for closing.*
Our primary non recurring cash requirements have historically been, and are expected to continue to be, for capital expenditures, including investment in our under construction manufacturing operations in China, tooling for new products, and leasehold improvements for facilities expansion.* We estimate that remaining fiscal 2006 capital expenditures will be approximately $44.6 million.* At June 30, 2005, we had working capital of $340.3$302.0 million, including $212.2 million of cash, cash equivalents and marketable securities, compared towith working capital of $249.4$335.5 million, including $242.8 million of cash, cash equivalents and marketable securities, at March 31, 2004.2005.
Our liquidity, capital resources, and results of operations in any period could be affected by the exercise of outstanding stock options and issuance of common stock under our employee stock purchase plan. The resulting increase in the number of outstanding shares could affect our per share results of operations. However, we cannot predict the timing or amount of proceeds from the exercise of these securities, or whether they will be exercised at all.*
We believe that our current cash, cash equivalents, and marketable securities and cash provided by operations, and our line of credit will be sufficient to fund operations for at least the next twelve months.* However, any projections of future financial needs and sources of working capital are subject to uncertainty. See "Certain Forward-Looking Information" and "Risk Factors Affecting Future Operating Results" in this Quarterly Report for factors that could affect our estimates for future financial needs and sources of working capital.
Throughout the first quarter of fiscal 2005 and 2006, we entered into foreign currency forward-exchange contracts, which typically mature in one month, to hedge the exposure to foreign currency fluctuations of expected foreign currency-denominated receivables, payables, and cash balances. We record on the balance sheet at each reporting period the fair value of our forward-exchange contracts and record any fair value adjustments in results of operations. Gains and losses associated with currency rate changes on contracts are recorded as other income (expense), offsetting transaction gains and losses on the related assets and liabilities.
Additionally, throughout the first quarter of 2005 and 2006, we entered into a hedging program to hedge a portion of forecasted revenues denominated in the Euro and Great British Pound with put and call option contracts used as collars. At each reporting period, we record the net fair value of our unrealized option contracts on the balance sheet with related unrealized gains and losses as Accumulated other comprehensive income (loss), a separate component of stockholders' equity. Gains and losses associated with realized option contracts are recorded against revenue.
We have an additional hedging program to hedge a portion of the China Yuan payments related to the forecasted construction costs for our facility in China. We are hedging the currency exposure with forward-exchange contracts. At each reporting period, we record the net fair value of our unrealized forward-exchange contracts on the balance sheet with related unrealized gains and losses as Accumulated other comprehensive income, a separate component of stockholders' equity. Gains and losses associated with realized option contracts are recorded in Other Income and Expenses.
In July 2005, the People's Bank of China announced that the China Yuan will be de-pegged from the dollar in favor of a managed float against a basket of currencies. Previously, the China Yuan had been pegged to the US dollar. We anticipate that this revaluation may increase the cost of the production of our China facility; however, additional revaluations or changes may be made by the People's Bank of China in the future.* The impact of any future revaluations would be determined by the amount of the change in the currency rate.*
The table below for the periods indicated, provides selected condensed consolidated cash flow information:information for the periods presented:
| | | | Three Months Ended | |
| | | June 30, | |
$ in thousands | | | 2004 | | | 2005 | |
| | | | | | | | |
| Cash provided by operating activities | | $ | 33,334 | | $ | 35,875 | |
| | | | | | | | |
| Cash used for capital expenditures and other assets | | | (9,285 | ) | | (10,826 | ) |
| Cash provided by (used for) all other investing activities | | | (13,650 | ) | | 32,306 | |
| Cash provided by (used for) investing activities | | | (22,935 | ) | | 21,480 | |
| | | | | | | | |
| Cash provided by (used for) financing activities | | $ | 5,952 | | $ | (47,822 | ) |
| | | Nine Months Ended | | | |
| | | December 31, | | Provided | |
$ in thousands | | 2003 | | 2004 | | (Used) | |
| | | | | | | | | | |
| Cash provided by operating activities | | | 47,994 | | | 47,732 | | | (262 | ) | | (0.5 | )% |
| | | | | | | | | | | | | | |
| Cash used for capital expenditures | | | (13,217 | ) | | (18,783 | ) | | (5,566 | ) | | 42.1 | % |
| Cash provided by (used for) all other investing activities | | | 4,570 | | | (10,500 | ) | | (15,070 | ) | | (329.8 | )% |
| Cash used for investing activities | | | (8,647 | ) | | (29,283 | ) | | (20,636 | ) | | 238.6 | % |
| | | | | | | | | | | | | | |
| Cash provided by financing activities | | | 14,920 | | | 22,678 | | | 7,758 | | | 52.0 | % |
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities represent the most significant source of funding for us. For the nine month period ended December 31, 2004,first quarter of fiscal 2006, compared to the same nine month period in the priorquarter a year ago, operating cash flows provided by operating activities were relatively flat. Cash flows provided by operating activities for the nine month period ended December 31, 2004 wereincreased primarily driven by net income earned on higher sales volume and offset in part by higher inventory and accounts receivable balances. Our inventory balances increased as a result of the higher level of business, decisionsdue to increaseour continued efforts to reduce our inventory safety stocklevels and other factors. We have a goal of improvingto improve our inventory turns to 5turns. Our gross inventory balance decreased by $4.2 million during the December 2005 quarter.* The accounts receivable increase was primarily driven by the strong growthquarter with key reductions in the third quarter’s sales coupled with the impact of the strengthening of the Great British Poundour Bluetooth related inventories and the Euro againstintroduction of new shipping terms for some of our Far East vendors from freight-on-board shipping point ("FOB") to delivered ex ship ("DES"), which shifts the U.S. dollar.risk of loss to the vendor until the goods reach their destination. Our days sales outstanding ("DSO") increased to 54 days in the thirdfirst quarter of fiscal 2006 from 53 days in the fourth quarter of fiscal 2005 and up 7 days from 51 daysthe year ago quarter. Our quarter over quarter increase in DSO is primarily attributable to a change in the second quarter of fiscal 2005. DSO was flat in comparisonU.S. customer mix but also due to 54 daysthe increase in the third quarteramount and proportion of fiscal 2004.international sales as compared to our domestic sales. In international locations, trade terms that are standard in a particular locale may extend longer than is standard in the U.S. This may increase our working capital requirements and may have a negative impact on our cash flow provided by operating activities.* We believe the net receivable balance is collectible and that we have sufficient reserves to cover our anticipated exposure to bad debt.*
Additionally asNew accounting rules effective for us in the first quarter of fiscal 2007 require that a resultportion of the risecash benefits resulting from the tax deductibility of increases in our stock price, our income tax benefit associated with stock option exercises increasedthe value of equity instruments issued under share-based arrangements be included as part of cash flows from financing activities rather than from operating activities.* This change in classification will likely have a result of increased stock option exercises by employees during the nine month period ended December 31, 2004. The increase in accrued liabilities was primarily the result of an increase in exchange rates and itssignificant negative effect on the fair market valueour cash provided by operating activities in periods after adoption of our economic hedges. Comparatively, the nine months ended December 31, 2003 had less net income; however, increasesthese new rules.* See "Recent Accounting Pronouncements" included in accounts receivable and inventories were more modest.Footnote 2 of this Form 10-Q.
We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues and operating results, collection of accounts receivable, changes to inventory levels, and timing of payments.*
CASH FLOWS FROM INVESTING ACTIVITIES
During the nine months ended December 31, 2004,first quarter of fiscal 2006, cash flows used forfrom investing activities increased $20.6provided $21.5 million. The cash provided in the first quarter of fiscal 2006 is attributable to net proceeds of $39.7 million as compared to(total purchases of $56.3 million and proceeds of $96.0 million) from the same period last year. This was due tosale of marketable securities, comprised of auction rate securities and bonds. The proceeds from the sale of marketable securities were offset in part by total capital expenditures of $18.8$10.4 million, inincluding $3.7 million for our China manufacturing facility, which is still under construction and which we will not begin depreciating until it has been placed into service. The remainder of the nine month period ended December 31, 2004 compared to expenditures of $13.2 million in the same period in the prior year. These capital expenditures werepurchases was incurred principally for leasehold improvements at our corporate headquarters and international design centers, machinery and equipment, tooling, construction of our China manufacturing facility, computers and software. We also purchased short-term marketable securities primarily comprised of an AAA fixed rate Federal Home Loan Banks bond and other municipal bonds for $10.5 million in the current period, which represents a shift in our investment strategy to take advantage of better rates i n short-term marketable securities. We anticipate making further investments in marketable securities as interest rates continue to rise in order to obtain more favorable yields. In* As our business grows, we may need additional facilities and capital expenditures to support this growth.* We will continue to evaluate new business opportunities and new markets. If we pursue new opportunities or markets in areas in which we do not have existing facilities, we may need additional expenditures to support future expansion.* We also purchased Octiv, Inc. during the same periodquarter for $7.4 million, net of cash received.
During the first quarter of fiscal 2005, we used $22.9 million of cash for investing activities. The cash flows used in the prior year, we received $5.0 million from maturitiesfirst quarter of short-term marketable securities.
We have a revolving credit facility with a major bank for $75 million, including a letter of credit subfacility. The facility and subfacility both expire on July 31, 2005. As of January 28,fiscal 2005 we had no cash borrowings under the revolving credit facility and $2.0 million outstanding under the letter of credit subfacility. The amounts outstanding under the letter-of-credit subfacility were principally associated withare attributable to net purchases of inventory. The terms$13.7 million in marketable securities, comprised of the credit facility contain covenants that materially limitauction rate securities and bonds, and capital expenditures of $9.3 million principally for leasehold improvements at our ability to incur debtcorporate headquarters, machinery and pay dividends, among other matters. Under our current credit facility agreement, we have the ability to declare dividends so long as the aggregate amount of all such dividends declared or paidequipment, tooling, computers and common stock repurchased or redeemed in any four consecutive fiscal quarter periods shall not exceed 50% of the amount of cumulative consolidated net income in the eight consecutive fiscal quarter period ending with the fiscal quarter immediately preceding the date as of which the applicable distributions occurred. We are currently in compliance with the covenants and the dividend provision under this agreement.software.
As compared to the nine month period ended December 31, 2004, weWe anticipate thatour capital expenditures will increase slightly overin order to complete the next nine months excludingplant and design center in China, where we anticipate spendingplan to spend approximately $15-20 million.an additional $11 million this fiscal year.*
CASH FLOWS FROM FINANCING ACTIVITIES
During the nine months ended December 31, 2004,first quarter of fiscal 2006, cash flows fromused for financing activities increased bywere approximately $7.8M. The increase is$47.8 million. This was primarily due to the repurchase of 1,372,500 shares of our common stock, which completed the 15th and 16th stock repurchase programs, for an aggregate of $47.3 million with an average price of $34.44 per share. We also paid a cash dividend totaling $2.4 million. During the first quarter of fiscal 2006, the Board of Directors authorized us to repurchase an additional 1,000,000 shares of Common Stock under our 16th program. As of June 30, 2005, there were no remaining shares authorized for repurchase compared to the 372,500 shares authorized for repurchase as of the end of the fourth quarter in fiscal 2005. These cash out flows were offset in part by proceeds from the exercise of stock options. We did not repurchase any sharesoptions totaling $1.4 million and the reissuance of our common stock under our stock repurchase plan during the nine month period ended December 31, 2004. We reissued through employee benefit plans 66,00713,984 shares of our treasury stock for $2.2 million. During the nine months ended December 31, 2003, we repurchased 122,800 shares of our common stock under our stock repurchase plan for $1.8 million and reissued through employee benefit plans 121,729totaling $0.5 million.
During the first quarter of fiscal 2005, cash flows provided by financing activities were approximately $6.0 million. This was primarily due to proceeds from exercises of stock options of approximately $5.5 million and proceeds from the reissuance of 12,542 shares of our treasury stock through employee benefit plans for $1.9proceeds of $0.4 million. As of December 31, 2004, 142,600 shares remained available for repurchase under our stock repurchase plan. During the nine month period ended December 31, 2004, we made dividend payments under the dividends policy adopted by our Board of Directors in July 2004 totaling $4.8 million.
On January 18,July 19, 2005, we announced that our Board of Directors had declared a cash dividend of $0.05 per share of our common stock, payable on March 10,September 9, 2005 toshareholders of record on February 11,August 12, 2005.The plan approved by the Board anticipates a total annualized dividend of $0.20 per common share.* The actual declaration of future dividends, and the establishment of record and payment dates, is subject to final determination by the Audit Committee of the Board of Directors of Plantronics each quarter after its review of our financial performance.
Our liquidity, capital resources, and results of operations in any period could be affected by the exercise of outstanding stock options and issuance of common stock under our employee stock purchase plan. The resulting increase in the number of outstanding shares could also affect our per share results of operations. However, we cannot predict the timing or amount of proceeds from the exercise of these securities, or whether they will be exercised at all.OFF BALANCE SHEET ARRANGEMENTS
We believehave not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that our current cash and cash equivalents balance and cash provided by operations will be sufficientexpose us to fund operations for at leastmaterial continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the next twelve months.* However, any projections of future financial needs and sources of working capital are subject to uncertainty. See "Certain Forward-Looking Information" and "Risk Factors Affecting Future Operating Results" in this Quarterly Report for factors that could affect our estimates for future financial needs and sources of working capital.Company.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:ESTIMATES
Management’sManagement's discussion and analysis of financial condition and results of operations are based upon Plantronics’Plantronics' consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we base estimates and judgments on historical experience and on various other factors that Plantronics’Plantronics' management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.
We believe our most critical accounting policies and estimates include the following:
| · | Allowance for Doubtful Accounts |
| · | Excess and Obsolete Inventory |
| · | Goodwill and Intangibles |
Revenue Recognition
Revenue from sales of products to customers is recognized: when title and risk of ownership are transferred to customers when persuasive evidence of an arrangement exists;recognized when the price to the buyer is fixed or determinable; and when following criteria have been met:
| · | title and risk of ownership are transferred to customers; |
| · | persuasive evidence of an arrangement exists; |
| · | the price to the buyer is fixed or determinable; and |
| · | collection is reasonably assured. |
We recognize revenue net of estimated product returns and expected payments to resellers for customer programs including cooperative advertising, marketing development funds, volume rebates, and special pricing programs.
Estimated product returns are deducted from revenues upon shipment, based on historical return rates, the product stage relative to its expected life cycle, and assumptions regarding the rate of sell-through to end users from our various channels based on historical sell-through rates.
Should product lives vary significantly from our estimates, or should a particular selling channel experience a higher than estimated return rate, or a slower sell-through rate causing inventory build-up, then our estimated returns, which net againstare recorded as a reduction to revenue, may need to be revised and could have an adverse impact on revenues.
Reductions to revenue for expected and actual payments to resellers for volume rebates and pricing protection are based on actual expenses incurred during the period, on estimates for what is due to resellers for estimated credits earned during the period and any adjustments for credits based on actual activity. If the actual payments exceed our estimates, this could result in an adverse impact on our revenues. Since we have historically been able to reliably estimate the amount of allowances required for future price adjustments and product returns, we recognize revenue, net of projected allowances, upon shipment to our customers. In situations where we are unable to reliably estimate the amount of future price adjustments and product returns, we defer recognition of the revenue until the right to future price adjustments and product returns lapses, and we are no longer under any obligation to reduce the price or accept the return of the product.
If market conditions warrant, Plantronics may take action to stimulate demand, which could include increasing promotional programs, decreasing prices, or increasing discounts. Such actions could result in incremental reductions to revenue and margins at the time such incentives are offered. To the extent that we reduce pricing, we may incur reductions to revenue for price protection based on our estimate of inventory in the channel that is subject to such pricing actions.
ALLOWANCE FOR DOUBTFUL ACCOUNTSAllowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We regularly perform credit evaluations of our customers’customers' financial condition and consider factors such as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks and economic conditions that may affect a customers' ability to pay. The allowance for doubtful accounts is reviewed monthly and adjusted if necessary based on our assessments of our customerscustomers' ability to pay. If the financial condition of our customers should deteriorate or if actual defaults are higher than our historical experience, additional allowances may be required, which could have an adverse impact on operating expense.
EXCESS AND OBSOLETE INVENTORY-30-
Excess and Obsolete Inventory
We write-down our inventory for excess and obsolete inventories. Write-downs are determined by reviewing our demand forecast and by determining what inventory, if any, isare not saleable. Our demand forecast projects future shipments using historical rates and takes into account market conditions, inventory on hand, purchase commitments, product development plans and product life expectancy, inventory on consignment, and other competitive factors. If our demand forecast is greater than actual demand, and we fail to reduce our manufacturing accordingly, we could be required to write down additional inventory, which would have a negative impact on our gross margin.
At the point of loss recognition, a new, lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
WARRANTYWarranty
We provide for the estimated cost of warranties as part of our cost of sales at the time revenue is recognized. Our warranty obligation is affected by product failure rates and our costs to repair or replace the products, as well as the number of shipments in thea quarter. Should actual failure rates, actual returns and costs differ from our estimates, revisions to our warranty obligation may be required,, which may affect our cost of sales.revenues.*
GOODWILL AND INTANGIBLESGoodwill and Intangibles
As a result of past acquisitions, we have made, we have recorded goodwill and intangible assets on our balance sheet. Goodwill has been measured as the excess of the cost of acquisition over the amount assigned to tangible and identifiable intangible assets acquired less liabilities assumed. We perform at least annually, or more frequently if indicators of impairment exist, a review to determine if the carrying value of the goodwill and intangibles is impaired. Our review process for determining the carrying value is complex and utilizes estimates for future cash flow, discount rates, growth rates, estimated costs, and other factors, which utilize both historical data, internal estimates, and, in some cases, external consultants and outside data. If our estimates are inaccurate or if the underlying business requirements change, our goodwill and intangibles may become impaired, and we may be required to take an impairment charge.*
INCOME TAXESIncome Taxes
We are subjectOur effective tax rate differs from the statutory rate due to incomethe impact of foreign operations, tax credits, state taxes, bothand other factors. Our future effective tax rates could be impacted by a shift in the mix of domestic and foreign income; tax treaties with foreign jurisdictions; changes in tax laws in the United States as well asor internationally; a change which would result in severala valuation allowance being required to be taken; or a federal, state or foreign jurisdictions. We must make certain estimates and judgments in determining income tax expense for our financial statements. These estimates occur in the calculationjurisdiction's view of tax benefits and deductions,returns which differs materially from what we originally provided. We assess the probability of adverse outcomes from tax credits, and tax assets and liabilities which are generated from differences inexaminations regularly to determine the timingadequacy of when items are recognizedour reserve for book purposes and when they are recognized for tax purposes.income taxes.
We account for income taxes under an asset and liability approach that requires the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities to be recognized as deferred tax assets and liabilities. We are required to evaluate on an ongoing basis whether or not we will realize a benefit from net deferred tax assets. If recovery iswere not likely, we would be required to establish a valuation allowance. As of the end of the third quarterJune 30, 2005, we believe that all of our deferred tax assets are recoverable; however, if there were a change in our ability to recover our deferred tax assets, we would be required to take a charge in the period in which we determined that recovery was not probable.
Our effective tax rate differs from the statutory rate due to the impact of foreign operations, tax credits, state taxes, and other factors. Our future effective tax rates could be impacted by a shift of the mix of domestic and foreign income; tax treaties with foreign jurisdictions; changes in tax laws in the United States or internationally; a change which would result in a valuation allowance being required to be taken; or an IRS, state or foreign jurisdiction’s view of tax returns which differs materially from what we originally provided. We assess the probability of adverse outcomes from tax examinations regularly to determine the adequacy of our provision for income taxes.
RISK FACTORS AFFECTING FUTURE OPERATING RESULTS:
Investors or potential investors in our stock should carefully consider the risks described below. Our stock price will reflect the performance of our business relative to, among other things, our competition, expectations of securities analysts or investors, general economic and market conditions and industry conditions. You should carefully consider the following factors in connection with any investment in our stock. Our business, financial condition and results of operations could be materially adversely affected if any of the risks occur. Should any or all of the following risks materialize, the trading price of our stock could decline and investors could lose all or part of their investment.
If we do not match production to demand, we will be at risk of losing business or our margins could be materially adversely affected.
Historically, we have generally been able to increase production to meet increasing demand. However, the demand for our products depends on many factors and is inherently difficult to forecast. We have experienced sharp fluctuations in demand, especially for headsets for wireless and cellular phones. Significant unanticipated fluctuations in demand could cause the following operating problems, among others:
If forecasted demand does not develop, we would have excess inventories of finished products, components and subassemblies and excess manufacturing capacity. In particular, given the trend of shorter cycles to product obsolescence it is likely we would be unable to sell these inventories and would have to write off some or all of our inventories of excess products and unusable components and subassemblies. In addition, excess manufacturing capacity could lead to higher production costs and lower margins.
Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and subassemblies, 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. Therefore, we might not be able to increase production rapidly enough to meet unexpected demand. This could cause us to fail to meet customer expectations. There could be short-term losses of sales while we are trying to increase production. If customers turn to competitive sources of supply to meet their needs, there could be a long-term negative effect on our revenues.
Due to the lead times required to obtain certain raw materials, subassemblies, 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, subassemblies, 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. Failure in the future to match the timing of purchases of raw materials, subassemblies, components and products to demand could increase our inventories and/or decrease our revenues, consequently materially adversely affecting our business, financial condition and results of operations.
Product obsolescence, excess inventory and other asset impairment can negatively affect our results of operations.
We operate in a high technology industry which is subject to rapid and frequent technology and market demand changes. These changes can often render existing or developing technologies obsolete. In addition, the introduction of new products and any related actions to discontinue existing products can cause existing inventory to become obsolete. These obsolescence issues can require write-downs in inventory value when it is determined that the recorded value of existing inventory is greater than its fair market value. Also, the pace of change in technology development and in the release of new products has increased and is expected to continue to increase, which means that the cycles to product obsolescence are becoming shorter. If sales of one of these products have a negative effect on sales of another of our p roducts, it could significantly increase the inventory levels of the negatively impacted product. For each of our products, the potential exists for new products to render existing products obsolete, cause inventories of existing products to increase, cause us to discontinue a product or reduce the demand for existing products.
We have strong competitors and expect to face additional competition in the future.
The markets for our products are highly competitive. We compete with a variety of companies in the various markets for communications headsets. Currently, our single largest competitor is GN Netcom, a subsidiary of GN Great Nordic Ltd., a Danish telecommunications conglomerate. Internationally, Sennheiser Communications is a significant competitor in the computer, office and contact center market.
We currently operate principally in a multilevel distribution model, selling most of our products to distributors who, in turn, resell to dealers or end-customers. GN Netcom’s acquisitions indicate it may be moving towards a direct sales model, since recent acquisitions were of companies employing direct sales and marketing models. While we believe that our business and our customers benefit from our current distribution structure, if GN Netcom or other competitors sell directly, they may offer lower prices, placing pricing pressure on our products, which could materially adversely affect our business and results of operations.
We also expect to face additional competition from companies that traditionally did not offer communications headsets. We expect to face new competition in the office, mobile, computer and residential markets. For example, the Sony-Ericsson joint venture competes formidably with several Bluetooth hands-free solutions. In addition, we manufacture branded products for a number of large household-name retailers. These retailers directly compete with Plantronics brand products, frequently within the same store. The effect of our retail customers competing directly with our own products has placed pressure on our margins and the negative impact this has on our business could increase in the future.
We anticipate other competition from consumer electronics companies that currently manufacture and sell mobile phones or computer peripheral equipment. These new competitors are likely to be larger, offer broader product lines, bundle or integrate with other products communications headset tops and bases manufactured by them or others, offer products containing bases that are incompatible with our headset tops and have substantially greater financial, marketing and other resources than we do. These companies have such scale, market share and direct consumer interface as the base equipment providers that we accessorize, that they have a great amount of influence over defining the categories in mobile phone, computer and office headsets in terms of price points and marketing. This affects our business by making our marketing efforts less effective than desired, dictates pricing of our products by influencing the broader market’s expectations thereby placing adverse pressure on our sales and margins.
We also expect to face additional competition from companies, principally located in the Far East, which offer very low cost headset products, including products which are modeled on, or are direct copies of our products. These new competitors are likely to offer very low cost products which may result in price pressure in the market. If market prices are substantially reduced by such new entrants into the headset market, our business, financial condition and results of operations could be materially adversely affected.
A significant portion of our sales come from the contact center market and a decline in demand in that market could materially adversely affect our results.
We have historically derived a material amount of our net sales from the contact center market, and we expect that this market will continue to account for a significant portion of our net sales. Because of our reliance on the contact center market, we will be affected more by changes in the rate of contact center establishment and expansion and the communications products that contact center agents use than would a company serving a broader market. While we believe that this market may grow in future periods, this growth could be slow or revenues from this market could be flat or decline in response to various factors. Any decrease in the demand for contact centers and related headset products could cause a decrease in the demand for our products, which would materially adversely affect our business, financial condition and results of operations.
In addition, we are seeing a proliferation of speech-activated and voice interactive software in the market place. We have been re-assessing long-term growth prospects for the contact center market given the growth rate and the advancement of these new voice recognition-based technologies. Businesses that first embraced these new technologies to resolve labor shortages at the peak of the last economic up cycle are now increasing spending on these technologies in hopes of reducing total costs. We may experience a decline in our sales to the contact center market if businesses increase their adoption of speech-activated and voice interactive software as an alternative to customer service agents. Should this trend continue, it could cause a net reduction in contact center agents and our revenues to this market segm ent could decline rather than grow in future years.
We depend on the development of the office, mobile, computer and residential markets,our ability to effectively market our products, and we could be materially adversely affected if they do not develop as we expect.*
WhileWe compete in the Business-to-Business ("B2B") market for the sale of our office and contact center market is still a substantial portion of our business, weproducts. We believe that our future prospects will dependgreatest long term opportunity for profit growth is in large part on the growthoffice market and our foremost strategic objective is to increase headset adoption in demand forthis market. To increase adoption of headsets in the office, we are investing in creating new products that are more appealing in functionality and design as well as investing in our first national advertising campaign to increase awareness and interest. If these investments do not generate incremental revenue, our business could be materially affected. We are also experiencing a more price aggressive and competitive environment in our B2B markets which puts pressure on profitability and could result in a loss of market share if we do not respond effectively.
We also compete in the Business-to-Consumer (B2C) market for the sale of our mobile, computer audio, gaming, and residential markets. These communicationsClarity products. We believe that consumer marketing is highly relevant in the B2C market, which is dominated by large brands that have significant consumer mindshare. We are investing in marketing initiatives to increase our brand in the consumer space. We believe this will help in increasing our market share and promote headset marketsadoption in the office market as well. The B2C market is characterized by relatively rapid product obsolescence so we are relatively new and continue to be developed. Moreover,at risk if we do not have extensive experiencethe right products at the right time to meet consumer needs. In addition, product differentiation is not as significant as in selling headset productsthe B2B market; therefore, we are experiencing even more significant price competition in this market and pricing actions by our competitors can result in us experiencing significant losses and can result in excess inventory.
If we are unable to customersstimulate growth in these markets. If theour B2B and B2C markets, if our costs to stimulate demand for headsets in these markets fails to develop, or develops more slowly than we currently anticipate,do not generate incremental profit, or if we are unableexperience significant price competition, these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, failure to effectively market our products to customers in these markets it wouldcould lead to lower and more volatile revenue and earnings, excess inventory and the inability to recover the associated development costs any of which could also have a material adverse effect on the potential demand for our products and on our business, financial condition, and results of operations.operations and cash flows.
These headset markets are also subject to general economic conditions and if there is a slowing of national or international economic growth, these markets may not materialize to the levels we require to achieve our anticipated financial results, which could in turn materially adversely affect the market price of our stock. In particular, we may accept returns from our retailers of products which have failed to sell as expected, and in some instances, such products may be returned to our inventory. Should product returns vary significantly from our estimate, then our estimated returns, which net against revenue, may need to be revised.
New product development is risky, and our business will be materially adversely affected if we doare not respondable to develop, manufacture and market new products in response to changing customer requirements and new technologies.
Our success depends upon our ability to enhance existing products, to respond to changing market requirements, and to develop, manufacture, market and introduce in a timely manner new products that keep pace with technological developments and end-user requirements. We anticipate introducing an unusually high number of important new products in volume in August and September 2005. The technologies, products and solutions that we choose to pursue may not become as commercially successful as we planned. We may experience difficulties in realizing the expected benefits from our investments in new technologies. Conversely, we may not be able to ramp production quickly enough to satisfy the demand that our new products generate. If we are unable to develop, manufacture, market and introduce enhanced or new products in a timely manner in response to changing market conditions or customer requirements, including changing fashion trends and styles, it will materially adversely affect our business, financial condition and results of operations.
Historically, the technology used in lightweight communications headsets has evolved slowly. New products have primarily offered stylistic changes and quality improvements, rather than significant new technologies. The technology used in hands-free communications devices, including our products, is evolving more rapidly now than it has historically, and we anticipate that this trend may accelerate. We believe this is particularly true for our newer emerging technology products especially in the mobile, computer, residential and certain parts of the office markets. We believe products designed to serve these markets generally exhibit shorter lifecycles and are increasingly based on open standards and protocols. WeAs we develop new generations of products more quickly, we expect that the cyclepace of product obsolescence due to continual development in technology will continue to become sho rter.increase concurrently. The disposition of inventories of obsolete products may result in reductions to our operating margins and materially adversely affect our earnings and results of operations.
If we do not match production to demand, we will be at risk of losing business or our gross margins could be materially adversely affected.
Our success depends uponHistorically, we have generally been able to increase production to meet increasing demand. However, the demand for our abilityproducts is dependent on many factors and such demand is inherently difficult to enhance existingforecast. We have experienced sharp fluctuations in demand, especially for headsets for wireless and cellular phones. Significant unanticipated fluctuations in demand and the global trend towards consignment of products to respond to changing market requirements, and to develop and introduce in a timely manner new products that keep pace with technological developments and end-user requirements. The technologies, products and solutions that we choose to pursue may not become as commercially successful as we planned. We may experience difficulties in realizingcould cause the expected benefits from our investments in new technologies. following operating problems, among others:
| · | If forecasted demand does not develop, we could have excess inventory and excess capacity. Over forecast of demand could result in higher inventories of finished products, components and subassemblies. If we were unable to sell these inventories, we would have to write off some or all of our inventories of excess products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins. Factory absorption could decrease if forecasted demand causes us to hire more personnel who are unable to produce sufficient product to meet forecasts. |
| · | If demand increases beyond that forecasted, we would have to rapidly increase production. We depend on suppliers to provide additional volumes of components and subassemblies, and are experiencing greater dependencies on single source suppliers. Therefore, we might not be able to increase production rapidly enough to meet unexpected demand. This could cause us to fail to meet customer expectations. There could be short-term losses of sales while we are trying to increase production. If customers turn to competitive sources of supply to meet their needs, there could be a long-term impact on our revenues. |
| · | Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and subassemblies, increased expenditures for freight to expedite delivery of required materials, and higher overtime costs and other expenses. These higher expenditures could lower our profit margins. Further, if production is increased rapidly, there may be decreased manufacturing yields, which may also lower our margins. |
| · | The introduction of Bluetooth and other wireless headsets presents many significant manufacturing, marketing and other operational risks and uncertainties, including: developing and marketing these wireless headset products; unforeseen delays or difficulties in introducing and achieving volume production of such products; our dependence on third parties to supply key components, many of which have long lead times; and our ability to forecast demand and customer return rates accurately for this new product category for which relevant data is incomplete or unavailable. We may have longer lead times with certain suppliers than commitments from some of our customers. |
| Increasing production beyond planned capacity involves increasing tooling, test equipment and hiring and training additional staff. Lead times to increase tooling and test equipment are typically several months, or more. Once such additional capacity is in place, we incur increased depreciation and the resulting overhead. Should we fail to ramp production once capacity is in place, we are unable to develop, manufacture and market enhanced or new products in a timely manner in response to changing market conditions or customer requirements, including changing fashion trends and styles, it will not be able to absorb this incremental overhead and this can lead to lower gross margins. |
Any of the foregoing problems could materially adversely affect our business, financial condition and results of operations.
ChangesThe acquisition of Altec Lansing Technologies, Inc. involves material risks.
There are inherent risks in regulatory requirementsacquiring Altec Lansing that could materially adversely affect our business, financial condition and results of operations. The risks faced in connection with acquisition includes among others:
· cultural differences in the conduct of the business;
· difficulties in integration of the operations, technologies, and products of Altec Lansing;
· the risk that the consolidation of Altec Lansing may adversely impact our marginsnot be as successful as we comply with such changes or reduce our ability to generate revenues if we are unable to comply.may have anticipated;
Our products must meet· the requirements set by regulatory authoritiesrisk of diverting management's attention from normal daily operations of the business;
· difficulties in integrating the numerous jurisdictions in which we sell them. As regulationstransactions and local laws change, we must modify, if possible, our products to address those changes. Regulatory restrictionsbusiness information systems of Altec Lansing;
· the potential loss of key employees of Altec Lansing and Plantronics;
· competition may increase the costs to designin Altec Lansing's markets more than expected; and manufacture our products, resulting in a decrease in our margins or a decrease in demand for our products if the costs are passed along. Compliance with regulatory restrictions may affect the technical quality and capabilities of our products, reducing their marketability. New legislation prohibiting the use of phones while operating a motor vehicle may reduce demand for our products.
· Altec Lansing's product sales may not evolve as anticipated.
Mergers and acquisitions, particularly those of high-technology companies, are inherently risky, and no assurance can be given that future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must also manage any acquisition related growth effectively. Failure to manage growth effectively and successfully integrate acquisitions made by us could materially harm our business and operating results.
The failure of our suppliers to provide quality components or services in a timely manner could adversely affect our results.
Our growth and ability to meet customer demanddemands depend in part on our capability to obtain timely deliveries of raw materials, components, subassemblies and products from our suppliers. We buy raw materials, components and subassemblies from a variety of suppliers and assemble them into finished products. We also have certain of our products manufactured for us by third party suppliers. The cost, quality, and availability of such goods are essential to the successful production and sale of our products. Obtaining raw materials, components, subassemblies and finished products entails various risks, including the following:
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We obtain certain raw materials, subassemblies, components and products from single suppliers and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these raw materials, subassemblies, components and products. Adverse economic conditions could lead to a higher risk of failure of our suppliers to remain in business or to be able to purchase the raw materials, subcomponents and parts required by them to produce and provide to us the parts we need. An interruption in supply from any of our single source suppliers in the future would materially adversely affect our business, financial condition and results of operations. |
| | · | Prices of raw materials, components and subassemblies may rise. If this occurs and we are not able to pass these increases on to our customers or to achieve operating efficiencies that would offset the increases, it would have a material adverse effect on our business, financial condition and results of operations. |
We obtain certain raw materials, subassemblies, components and products from single suppliers and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these raw materials, subassemblies, components and products, none of which has significantly affected our results of operations. An interruption in supply from any of our single source suppliers in the future would materially adversely affect our business, financial condition and results of operations.Most of our suppliers are not obligated to continue to provide us with raw materials, components and subassemblies. Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience increased demand or shortages, it could affect the availability or cost of needed inventories. In turn, this would affect our ability to manufacture and sell products that are dependent on those raw materials, components and subassemblies. If this occurs and we are not able to pass these increases on to our customers or to achieve operating efficiencies that would offset the increases, it would have a material adverse effect on our business, financial condition and results of operations. | · | Due to the lead times required to obtain certain raw materials, subassemblies, 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, subassemblies, 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. Failure in the future to match the timing of purchases of raw materials, subassemblies, components and products to demand could increase our inventories and/or decrease our revenues, consequently materially adversely affecting our business, financial condition and results of operations. |
| · | Most of our suppliers are not obligated to continue to provide us with raw materials, components and subassemblies. Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience increased demand or shortages, it could affect deliveries to us. In turn, this would affect our ability to manufacture and sell products that are dependent on those raw materials, components and subassemblies. This would materially adversely affect our business, financial condition and results of operations. |
| · | Although we generally use standard raw materials, parts and components for our products, the high development costs associated with emerging wireless technologies permits us to work with only a single source of silicon chip-sets on any particular new product. We, or our chosen supplier of chip-sets, may experience challenges in designing, developing and manufacturing components in these new technologies which could affect our ability to meet time to market schedules. Due to our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in development of the chip-set, and/or the inability to meet our customer demand for these new products. Our business, operating results and financial condition could therefore be materially adversely affected as a result of these factors. |
The results of the marketing campaign that we are commencing will be uncertain.
On July 20, 2005, we launched a major marketing campaign for wireless office and new Bluetooth devices. Advertisements will commence in a broad array of media during late August 2005. The effect that this advertising will have is uncertain. If the advertising does not generate sufficient incremental demand for our products,
costs will increase and earnings will be reduced. Conversely, the
high development costs associated with emerging wireless technologies permits usadvertising may generate more demand than we can fill and we may not be able to
work with only a single sourcesell sufficient quantities of
silicon chip-sets on any particular new
product. We, or
our chosen supplier of chip-sets, may experience challenges in designing, developing and manufacturing components in these new technologies which could affect our abilityexisting products to meet
time to market schedules. Due to our dependence on single suppliers for certain chip sets, we could experience higher prices, a delay in developmentthe demand created by the marketing campaign. This may be particularly true at the end of the
chip-set, and/orsecond quarter of fiscal 2006 since advertising will not commence until late August 2005 and the
inabilitySeptember quarter is traditionally back end loaded due to
meet our customer demand forseasonality. There is also a danger that these
new products. Our business, operating results, financial condition or cash flowsconditions could
therefore be materially adversely affected as a resultcarry over to the third quarter of
these factors.The introduction of new Bluetooth products and other wireless headsets presents many significant manufacturing, marketing and other operational risks and uncertainties, including: developing and marketing these wireless headset products; unforeseen delays or difficulties in introducing and achieving volume production of such products; our dependence on third parties to supply key components, many of which have long lead times; and our ability to forecast demand and customer return rates accurately for this new product category for which relevant data is incomplete or not available. We have longer lead times with certain suppliers than commitments from some of our customers.fiscal 2006.
We sell our products through various channels of distribution that can be volatile.
We sell substantially all of our products through distributors, retailers, OEM’sOEM's and telephony service providers. Our existing relationships with these parties are not exclusive and can be terminated by either party without cause. Our channel partners also sell or can potentially sell products offered by our competitors. To the extent that our competitors offer our channel partners more favorable terms, such partners may decline to carry, de-emphasize or discontinue carrying our products. In the future, we may not be able to retain or attract a sufficient number of qualified channel partners. Further, such partners may not recommend, or continue to recommend, our products. In the future, our OEM customers or potential OEM customers may elect to manufacture their own products, similar to those we currently s ellsell to them. The inability to establish or maintain successful relationships with distributors, OEM’s,OEM's, retailers and telephony service providers or to expand our distribution channels could materially adversely affect our business, financial condition andor results of operations.
As a result of the growth of our mobile headset business, our customer mix is changing and certain OEM’s, retailersOEM's and wireless carriers are becoming significant. This greater reliance on certain large customers could increase the volatility of our revenues and earnings. 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 of their purchasing activities over time. If we are unable to anticipate the purchase requirements of these customers, our quarterly revenues may be adversely affected and/or we may be exposed to large volumes of inventory that cannot be immediately resold to other customers.
In particular,We have strong competitors and expect to face additional competition in the future.
The markets for our products are highly competitive. We compete with a variety of companies in the various markets for communications headsets. The actions of our competitors, particularly with regard to pricing and promotional programs, could have a negative impact on our prices and profitability. Currently, our single largest competitor is GN Netcom, a subsidiary of GN Great Nordic Ltd., a Danish telecommunications conglomerate. We are currently experiencing more price competition from GN Netcom in the B2B markets than in the past. Internationally, Sennheiser Communications is a significant competitor in the computer, office and contact center market.
We currently operate principally in a multilevel distribution model - we sell most of our products to distributors who, in turn, resell to dealers or end-customers. GN Netcom's acquisitions indicate it may be moving towards a direct sales model, since six of their nine acquisitions were of companies employing direct sales and marketing models. While we believe that our business and our customers benefit from our current distribution structure, if GN Netcom or other competitors sell directly, they may offer lower prices, which could materially adversely affect our business and results of operations.
We also expect to face additional competition from companies that currently do not offer communications headsets. We believe that this is particularly true in the office, mobile, computer and residential markets. For example, the Sony-Ericsson joint venture has also announced the launch of several Bluetooth hands-free solutions.
Motorola is a significant competitor in the consumer headset market, primarily in the mobile Bluetooth market, and has a brand name that is very well known and supported with significant marketing investments. Motorola also benefits from the ability to bundle other offerings with their headsets. We are also experiencing additional competition from other consumer electronics companies that currently manufacture and sell mobile phones or computer peripheral equipment. These competitors generally are larger, offer broader product lines, bundle or integrate with other products communications headset tops and bases manufactured by them or others, offer products containing bases that are incompatible with our headset tops and have substantially greater financial, marketing and other resources than we do.
We also expect to face additional competition from companies, principally located in the Far East, which offer very low cost headset products, including products which are modeled on, or are direct copies of our products. These new competitors are likely to offer very low cost products which may result in price pressure in the market. If market prices are substantially reduced by such new entrants into the headset market, our business, financial condition or results of operations could be materially adversely affected.
While we believe we comply with environmental laws and regulations, we are obligatedstill exposed to absorbpotential risks from environmental matters.
We are actively working to gain an understanding of the complete requirements concerning the removal of certain potentially environmentally sensitive materials from our retailersproducts to comply with the European Union Directives on Restrictions on certain Hazardous Substances on electrical and electronic equipment ("ROHS") and on Waste Electrical and Electronic Equipment ("WEEE"). Some of our customers are requesting that we implement these new compliance standards sooner than the legislation would require. While we believe that we will have the resources and ability to fully meet our customers' requests, and spirit of the ROHS and WEEE directives, if unusual occurrences arise or if we are wrong in our assessment of what it will take to fully comply, there is a risk that we will not be able to meet the aggressive schedule set by our customers or comply with the legislation as passed by the EU member states. If that were to happen, a material negative effect on our financial results may occur.
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. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, environmental legislation has been enacted and may in the future be enacted or interpreted to create environmental liability with respect to our facilities or operations. We have included in our financial statements a reserve of $1.5 million for possible environmental remediation of the site of one of our previous businesses. While no claims have been asserted against us in connection with this matter, such claims could be asserted in the future and any liability that might result could exceed the amount of the reserve.
Changes in regulatory requirements may adversely impact our gross margins as we comply with such changes or reduce our ability to generate revenues if we are unable to comply.
Our products must meet the requirements set by regulatory authorities in the numerous jurisdictions in which we sell them. As regulations and local laws change, we must modify our products to address those changes. Regulatory restrictions may increase the costs to design and manufacture our products, resulting in a decrease in our margins or a decrease in demand for our products if the costs are passed along. Compliance with regulatory restrictions may impact the technical quality and capabilities of our products reducing their marketability.
A significant portion of our sales come from the contact center market and a decline in demand in that market could materially adversely affect our results.
A large portion of our net sales is derived from the contact center market, and we expect that this market size will continue. While we believe that this market may grow in future periods, this growth could be slow or revenues from this market could be flat or decline. A deterioration in general economic conditions could result in a reduction in the establishment of new contact centers and in capital investments to expand or upgrade existing centers, which could negatively affect our business. Because of our reliance on the contact center market, we will be affected more by changes in the rate of contact center establishment and expansion and the communications products that contact center agents use than would a company serving a broader market. Any decrease in the demand for contact centers and related headset products could cause a decrease in the demand for our products, which would materially adversely affect our business, financial condition and results of operations.
The adoption of voice-activated software may cause revenue declines.
In addition,we are seeing a proliferation of speech-activated and voice interactive software in the market place. We have failedbeen re-assessing long-term growth prospects for the contact center market given the growth rate and the advancement of these new voice recognition-based technologies. Businesses that first embraced them to sellresolve labor shortages at the peak of the last economic up cycle are now increasing spending on these technologies in hopes of reducing total costs. We may experience a decline in our sales to the contact center market if businesses increase their adoption of speech-activated and voice interactive software as expected,an alternative to customer service agents. Should this trend continue, it could cause a net reduction in contact center agents and our revenues to this market segment could decline rather than grow in some instances, such products may be returned to our inventory. Should product returns vary significantly from our estimate, then our allowance for estimated returns, which we record as a reduction of revenue, may need to be revised.future years.
Our stock price may be volatile and the value of your investment in Plantronics stock could be diminished.
The market price for our common stock may continue to be affected by a number of factors, including:
the announcement of new products or product enhancements by us or our competitors;
| · | uncertain economic conditions and the decline in investor confidence in the market place; |
| · | 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; |
| · | quarterly variations in our or our competitors' results of operations; |
| · | changes in our published forecasts of future results of operations; |
| · | 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; |
| · | general market conditions; and |
| · | other factors unrelated to our operating performance or the operating performance of our competitors. |
In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in particular, and that have often been unrelated to the operating performance of these companies. Such factors and fluctuations, as well as general economic, political and market conditions, such as recessions, could materially adversely affect the market price of our executive officerscommon stock.
Our corporate tax rate may increase, which could adversely impact our cash flow, financial condition and results of operations.
We have significant operations in various tax jurisdictions throughout the world and a substantial portion of our taxable income historically has been generated in these jurisdictions. Currently, some 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 lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected. Moreover, if U.S. or other key employees;
quarterly variationsforeign tax authorities were to change applicable foreign tax laws or successfully challenge the manner in which our orprofits are currently recognized, our competitors’ results of operations;
changes in our published forecasts of future results of operations;
changes in earnings estimates or recommendations by securities analysts;
developments in our industry; and
general market conditions.
Our quarterly operating results may fluctuate significantly and are not a good indicator of future performance.
Our quarterly operating results have fluctuated significantly in the past and may vary significantly in the future as a result of a number of factors, many of which are out of our control. These factors include:
market acceptance and transition of new product introductions, other new products launched in 2005, new products launched in the future, and product enhancements by us or our existing or potential new competitors;
difficult general economic conditions, as has been the case with the recent global economic uncertainty and downturn in technology spending, and specific economic conditions prevailing in the communications industry and other technology industries;
variations in sales and profits in higher tax, as compared to lower tax, jurisdictions; and/or the results of tax planning strategies, tax audits, reassessment of tax reserves, and tax refunds on our effective tax rate;
the prices and performance of our products and those of our existing or potential new competitors;
changes in our sales management and sales organization whichoverall taxes could result in disruptions among our channel partners;
the timing and size of the orders for our products, in particular OEM demand is very volatile and difficult to forecast;
our distribution channels reducing their inventory levels;
the level and mix of inventory that we hold to meet future demand;
slowing sales by our channel partners to their customers which places further pressure on our channel partners to minimize inventory levels and reduce purchases of our products;
the near and long-term impact of terrorist attacks and incidents and any military response or uncertainty regarding any military response to those attacks;
the shift in sales mix of products we sell to lower margin products;
fluctuations in the level of international salesincrease, and our exposure to international currency fluctuations in both revenuesbusiness, cash flow, financial condition and expenses;
the cost and availability of components used in many of our products;
manufacturing costs;
the level and cost of warranty claims;
future changes in existing financial accounting standards or practices or taxation rules or practices;
the impact of disruptions in our operations, for any reason, including the recurrence of SARS or other similar event;
the impact of seasonality on our various product lines and geographic regions; and
adverse outcomes to litigation.
As a result of these and other factors, we believe that period-to-period comparisons of our historical results of operations are not a good predictorcould be materially adversely affected.
Changes in stock option accounting rules will adversely impact our operating results prepared in accordance with generally accepted accounting principles, and may adversely impact our stock price and our competitiveness in the employee marketplace.
Technology companies like ours have a history of using broad basedWe measure compensation expense for our employee stock option programs to hire, incent and retain our workforce in a competitive marketplace. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), allows companiescompensation plans under the choice of either using a fairintrinsic value method of accounting for options, which would result in expense recognition for all options granted, or using an intrinsic value method, as prescribed by Accounting Principles BoardAPB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), with pro forma disclosure of the impact on net income (loss) of using the fair value option expense recognition method. We have elected to apply APB 25 and accordingly we generally do not recognize any expense with respe ct to employee stock options as long as such options are granted at exercise prices equal to the fair value of our common stock on the date of grant.
. In December 2004, the FASBFinancial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which replaces SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") and supercedessupersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first interim or annual period after June 15, 2005, with early adoption encouraged. On March 29, 2005, the SEC issued SAB 107, which provides the SEC Staff's views regarding interactions between FAS 123R and certain SEC rules and regulations, and provides interpretations of the valuation of share-based payments for public companies.
The pro forma disclosures previously permitted under SFAS 123, no longer will be an alternativeCompany is currently evaluating FAS 123R and SAB 107 to financial statement recognition. We are requireddetermine the fair value method to adopt SFAS 123R in our second quarter of fiscal 2006. Under SFAS 123R, we must determin emeasure compensation expense, the appropriate assumptions to include in the fair value model, to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at dateuse upon adoption, and the period in which to adopt the provisions of adoption.FAS 123R. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either asimpact of the beginningadoption of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning ofFAS 123R in the first quarter of adoptionfiscal 2007 cannot be reasonably estimated at this time due to the factors discussed above as well as the unknown level of SFAS 123R, while the retroactive method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We are evaluating the requirements of SFAS 123R and we expect that the adoption of SFAS 123R willshare-based payments granted in future years, but is expected to have a material adverse impact on our consolidated results of operations and earnings per share. We have not yet determined the method of adoption or the effect of adopting SFAS 123R, and we have not determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.upon adoption.
This statement will have a significant impact on our consolidated statement of operations as we will be required to expense the fair value of our stock options rather than disclosing the impact on our consolidated results of operations within our footnotes in accordance with the disclosure provisions of SFAS 123 (see Notes 2 and 8 of the notes to the unaudited consolidated financial statements). This will result in lower reported earnings per share which could negatively impact our future stock price. In addition, this statement could impact our ability to utilize broad based employee stock plans to reward employees and could result in a competitive disadvantage to us in the employee marketplace.
In addition, it is our expectation that our use of restricted stock, restricted stock units and capped stock appreciation rights for employee awards will increase and our use of stock options will decrease.* Although it is anticipated that such a change in the types of employee awards that are issued will create less dilution due to fewer aggregate shares issued, it is also expected that the amount of cash received by us from the exercise of stock options will decline and our financial condition and liquidity could be adversely affected as a result.
We have significant foreign operations and there are inherent risks in operating abroad.
During the thirdour first quarter of fiscal year 2005,2006, approximately 33.2%35% of our net sales were derived from customers outside the United States. In addition, we conduct the majority of our headset assembly operations in our manufacturing facility located in Mexico, and we obtain most of the components and subassemblies used in our products from various foreign suppliers. A fire, flood or earthquake, political unrest or other disaster or condition affecting our facilities could haveWe are building a material adverse effect on our business, financial conditionfactory in the Peoples Republic of China and results of operations. Weare also purchasepurchasing a growing number of turn-key products directly from Asia. The inherent risks of international operations, either in Mexico or in Asia, could materially adversely affect our business, financial condition and results of operations. The ty pestypes of risks faced in connection with international operations and sales include, among others:
fluctuations in foreign exchange rates, in particular, if RMB becomes a floating currency our investment in the new manufacturing facility under construction in Suzhou, China may require more U.S. dollars; | · | cultural differences in the conduct of business; |
| · | fluctuations in foreign exchange rates, particularly with the re-evaluation of the Chinese Yuan; |
| · | greater difficulty in accounts receivable collection and longer collection periods; |
| · | impact of recessions in economies outside of the United States; |
| · | reduced protection for intellectual property rights in some countries; |
| · | unexpected changes in regulatory requirements; |
| · | tariffs and other trade barriers; |
| · | political conditions in each country; |
| · | management and operation of an enterprise spread over various countries; and |
| · | the burden of complying with a wide variety of foreign laws. |
Table of business;Contentsgreater difficulty in accounts receivable collection;unexpected changes in regulatory requirements;tariffs and other trade barriers;economic and political conditions in each country;management and operation of an enterprise spread over various countries; andthe burden of complying with a wide variety of foreign laws.
Our success depends on our ability to assimilate new technologies in our products and to properly train our channel partners in the use of those products.
The markets for voice communications and network systems products are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. The success of our new products depends on several factors, including proper new product definition, product cost, timely completion and introduction of new products, proper positioning of new products in relation to our total product portfolio and their relative pricing, differentiation of new products from those of our competitors and market acceptance of these products. Additionally, properly addressing the complexities associated with compatibility issues, channel partner training, technical and sales support as well as field support are also factors that may affect our success in this market. When we take any significant actio ns regarding our product offerings, or acquire new product offerings, it is important to educate and train our channel partners to avoid any confusion as to the desirability of the new product offering compared to our existing product offerings. We may not identify successful new product opportunities and develop and bring products to market in a timely manner or be successful in developing a service provider strategy. Additionally, we cannot assure you that competing technologies developed by others will not render our products or technologies obsolete or noncompetitive. Further, as we introduce new products that can or will render existing products obsolete, these product transition cycles may not go smoothly, causing an increased risk of inventory obsolescence and relationship issues with our channel partners. The failure of our new product development efforts, any inability to service or maintain the necessary third-party interoperability licenses, our inability to properly manage product transition and our inability to enter new markets, such as the service provider market, would harm our business and results of operations.
We face and might in the future face intellectual property infringement claims that might be costly to resolve.
We have from time to time received, and may in the future receive, communications from third parties asserting patent or other intellectual property rights covering our products. In addition, our industry is characterized by uncertain and conflicting intellectual property claims and vigorous protection and pursuit of intellectual property rights or positions which could result in significant and protracted and expensive litigation. We cannot assure you that we will prevail in any such litigation, that intellectual property claims will not be made against us in the future or that we will not be prohibited from using the technologies subject to any such claims or be required to obtain licenses and make corresponding royalty payments. In addition, the necessary management attention to, and legal costs associated wi th, litigation can have a significant adverse effect on our operating results and financial condition.
We have intellectual property rights that could be infringed by others and we are potentially at risk of infringement of the intellectual property rights of others.
Our success will depend 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 trademark, patent, copyright, and trade secret protection may not be available in every country in which our products and media properties are distributed to customers. We currently hold 94106 United States patents and additional foreign patents and will continue to seek patents on our inventions when we believe it to be appropriate. The process of seeking patent protection can be lengthy and expensive. Patents may n otnot be issued in response to our applications, and patents that are issued may be invalidated, circumvented or challenged by others. If we are required to enforce our patents or other proprietary rights through litigation, the costs and diversion of management’smanagement's attention could be substantial. In addition, the rights granted under any patents may not provide us competitive advantages or be adequate to safeguard and maintain our proprietary rights. Moreover, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. If we do not enforce and protect our intellectual property rights, it could materially adversely affect our business, financial condition and results of operations.
We are exposed to potential lawsuits alleging defects in our products and/or hearing loss caused by our products.
The use of our products exposes us to the risk of product liability and hearing loss claims. These claims have in the past been, and are currently being, asserted against us. None of the previously resolved claims have materially affected our business, financial condition andor results of operations, nor do we believe that any of the pending claims will have such an effect. Although we maintain product liability insurance, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability or hearing loss claims brought against us could have a material adverse effect upon our business, financial condition and results of operations.
Our mobile headsets are used with mobile telephones. There has been continuing public controversy over whether the radio frequency emissions from mobile telephones are harmful to users of mobile phones. We believe that there is no conclusive proof of any health hazard from the use of mobile telephones but that research in this area is incomplete. We have tested our headsets through independent laboratories and have found that use of our corded headsets reduces radio frequency emissions at the user’suser's head to virtually zero. Our Bluetooth and other wireless headsets emit significantly less powerful radio frequency emissions than mobile phones. However, if research was to establish a health hazard from the use of mobile telephones or public controversy grows even in the absence of conclusive research findings, there could be an adverse impact on the demand for mobile phones, which reduces demands for headset products. Likewise, should research establish a link between radio frequency emissions and wireless headsets and public concern in this area grow, demand for our wireless headsets could be reduced creating a material adverse effect on our financial results.
There is also continuing and increasing public controversy over the use of mobile telephones by operators of motor vehiclesvehicles. While we believe that our products enhance driver safety by permitting a motor vehicle operator to generally be able to keep both hands free to operate the vehicle, there is no certainty that this is the case and we may be subject to claims arising from allegations that use of a mobile telephone and headset contributed to a motor vehicle accident. TheWe maintain product liability insurance and general liability insurance that we believe would cover any such claims. However, the coverage provided under our product liabilitypolicies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability claims brought against us could have a material adverse effect upon our business, financial condition and results of operations.
WhileOur business could be materially adversely affected if we believe we comply with environmental laws and regulations, we are still exposed to potential risks from environmental matters.lose the benefit of the services of key personnel.
We are subjectOur success depends to various federal, state, locala significant extent upon the services of a limited number of executive officers and foreign environmental laws and regulations, including those governingother key employees. The unanticipated loss of the use, discharge and disposalservices of hazardous substances in the ordinary courseone or more of our manufacturing process. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, environmental legislation has been enacted and may in the future be enactedexecutive officers or interpreted to create environmental liability with respect to our facilities or operations. Wekey employees could have included in our financial statements a reserve of $1.5 million for possible environmental remediation of the site of one of our previous businesses. While no claims have been asserted against us in connection with this matter, such claims could be asserted in th e future and any liability that might result could exceed the amount of the reserve.
We are actively working to gain an understanding of the complete requirements concerning the removal of certain potentially environmentally sensitive materials from our products to comply with the European Union Directives on Restrictions on certain Hazardous Substances on electrical and electronic equipment ("ROHS") and on Waste Electrical and Electronic Equipment ("WEEE"). Some of our customers are requesting that we implement these new compliance standards sooner than the legislation would require. While we believe that we will have the resources and ability to fully meet our customers’ requests and the spirit of the ROHS and WEEE directives, if unusual occurrences arise or if we are wrong in our assessment of what it will take to fully comply, there is a risk that we will not be able to meet the aggress ive schedule set by our customers or comply with the legislation as passed by the EU member states. If that were to happen, a material negativeadverse effect on our financial results may occur.
While we believe that we currently have adequate control structures in place, we are still exposed to potential risks from recent legislation requiring companies to evaluate controls under Section 404 of the Sarbanes Oxley Act of 2002.
We are working diligently toward evaluating our internal controls systems in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls, as required by this legislation. We are performing the system and process evaluation and testing (and any necessary remediation) required in an effort to comply with the management certification and independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes Oxley Act. As a result, we have incurred and expect to incur additional expenses and consumption of management’s time. While we anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 in a timely fashion, we cannot be certain as t o the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the Securities Exchange Commission or the New York Stock Exchange. Any such action could adversely effect our financial results.
Future acquisitions may involve material risks.
We may in the future acquire other companies. There are inherent risks in acquiring other companies or businesses that could materially adversely affectupon our business, financial condition and results of operations. The types of risks faced in connection with acquisitions include, among others:
cultural differencesWe also believe that our future success will depend in
the conduct of business;difficulties in integration of the operations, technologies,large part upon our ability to attract and products of the acquired company;the risk that the consolidation of the acquired companyretain additional highly skilled technical, management, sales and marketing personnel. Competition for such personnel is intense. We may not produce the enhanced efficiencies or be as successful as we may have anticipated;the risk of diverting management’s attention from normal daily operations of the business;difficulties in integrating the transactions and business information systems of the acquired company; andthe potential loss of key employees of the acquired company.Mergers and acquisitions, particularly those of high-technology companies, are inherently risky, and no assurance can be given that future acquisitions will be successful in attracting and will not materially adversely affectretaining such personnel, and our failure to do so could have a material adverse effect on our business, operating results or financial condition. We
While we believe we currently have adequate internal control over financial reporting, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), beginning with our Annual Report on Form 10-K for the fiscal year ended March 31, 2005, we are required to furnish a report by our management on our internal control over financial reporting. Such report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Such report must also manage any acquisition related growth effectively. Failure to manage growth effectively and successfully integrate acquisitions made by us could materially harmcontain a statement that our business and operating results.independent registered public accounting firm has issued an attestation report on management's assessment of such internal control.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. Auditing Standard No. 2 provides the professional standards and related performance guidance for auditors to attest to, and report on, management's assessment of the effectiveness of internal control over financial reporting under Section 404. Management's assessment of internal control over financial reporting requires management to make subjective judgments and, particularly because Section 404 and Auditing Standard No. 2 are newly effective, some of the judgments will be in areas that may be open to interpretation and therefore the report is uniquely difficult to prepare.
Provisions in our charter documents and Delaware law and our adoption of a stockholder rights plan may delay or prevent a third party from acquiring us, which could affectdecrease the price at which you can sell yourvalue of our stock.
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.
In 2002, our Boardboard of Directorsdirectors adopted a stockholder rights plan, pursuant to which we distributed one right for each outstanding share of common stock held by stockholders of record as of April 12, 2002. Because the rights may substantially dilute the stock ownership of a person or group attempting to take us over without the approval of our board of directors, the plan could make it more difficult for a third party to acquire us, or a significant percentage of our outstanding capital stock, without first negotiating with our board of directors regarding such acquisition.
The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors including those set forth in "Risk Factors Affecting Future Operating Results."
INTEREST RATE RISK
At December 31, 2004,June 30, 2005, we had cash and cash equivalents totaling $219.3$87.5 million, compared to $180.6$78.4 million at March 31, 2004.2005. At December 31, 2004,June 30, 2005, we had $10.5$124.7 million in marketable securities and none$164.4 million at March 31, 2004.2005. Cash equivalents have an original or remaining maturity when purchased of ninety days or less; marketable securities generally have an original or remaining maturity when purchased of greater than ninety days, but less than one year. We believe we are not currently exposed to significant interest rate risk as our cash was investedIncluded in securities or interest bearing accounts with maturities of less than ninety days. The average maturity period for our marketable securities at December 31, 2004, wasare auction rate securities whose reset dates may be less than three months.months, however, the underlying security's maturity are greater than one year. The taxable equivalent interest rates locked in on those marketable securities averag esaverages approximately 2.60%2.895%. Our investment policy requires that we only invest in deposit accounts, certificates of deposit or commercial paper with minimum ratings of A1/P1, money market mutual funds with minimum ratings of AAA, U.S. treasury bills, notes or bonds, federal agency bonds or notes, corporate bonds with minimum ratings of A/A, municipal bonds or notes with minimum ratings of A1/VMIG1, and auction rate preferred stock with a minimum rating of A/A.
The following table presents the hypothetical changes in fair value in the securities, excluding cash and cash equivalents, held at June 30, 2005 that are sensitive to changes in interest rates. The modeling technique used measures the change in fair values.
| | | | | Current Fair Market Value | | | | |
| | | Valuation of Securities Given an Interest Rate | | (excluding accrued | | | Valuation of Securities Given an Interest Rate | |
(in thousands) | | | Decrease of X basis points | | interest) | | | Increase of X basis points | |
| | | | 100 BPS | | | | | | 50 BPS | | | | | | 100 BPS | | | | | | 50 BPS | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Marketable Securities | | $ | 124,157 | | | | | $ | 124,108 | | $ | 124,046 | | $ | 123,960 | | | | | $ | 124,010 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Our $75 million revolving credit facility and letter of credit subfacility
bothwere to expire on July 31, 2005.
On July 11, 2005, we entered into a Second Amendment to the credit facility and credit subfacility, which extends the revolving termination date to August 1, 2010, increases the revolving credit to $100 million, and reduces the interest rate spread over on LIBOR loans from 0.875% to 0.750%. Additionally, the financial covenant requiring us to maintain a minimum interest coverage ratio is replaced by a requirement that we maintain a minimum annual net income As of
January 28,July 29, 2005, we had no cash borrowings under the revolving credit facility and
$2.0$1.7 million outstanding under the letter of credit subfacility. If we choose to borrow under this facility in the future and market interest rates rise, then our interest payments would increase accordingly.
FOREIGN CURRENCY EXCHANGE RATE RISK
In the thirdfirst quarter of fiscal 2005,2006, approximately 33%35% of our net sales wererevenue was derived from customerssales outside of the United States, with 22% of total revenuesapproximately 24% denominated in foreign currencies, predominately the EuroGreat British Pound and the Great British Pound. In fiscal year 2002, we implementedEuro. We are engaged in a hedging strategy to minimizediminish, and make more predictable, the effect of these currency fluctuations. Specifically, we began to hedgehedged our European transaction exposure, hedging both our Great British Pound and Euro positions. We have expanded our hedging activities to include a hedging program to hedge our economic exposure by hedging a portion of Euro and Great British Pound positions.denominated sales. However, we can providehave no assurance that exchange rate fluctuations will not materially adversely affect our business in the future.
The following table below provides information about our financial instruments and underlying transactions that are sensitive to foreign currency exchange rates, including foreign currency forward-exchange contracts and nonfunctional currency-denominated receivables and payables. If theseThe net amount that is exposed to changes in foreign currency positions arerates is then subjected to either a 10% appreciation or 10% depr eciationchange in the value of the foreign currency versus the U.S. dollar we could incur a loss of $1.8 million or a gain of $1.5 million.dollar.
The table below presents the effect on our foreign currency transaction exposure of a hypothetical 10% appreciation and a 10% depreciation of the U.S. dollar against the indicated currencies.
| | | | | | | | | | | | | | | | | | |
| | December 31, 2004 | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | Net | | | | | | | | | | |
| | | | | | | | Underlying | | | Net | | | FX | | | FX | |
| | | | | | | | Foreign | | | Exposed | | | Gain (Loss) | | | Gain (Loss) | |
| | | | | USD Value | | | Currency | | | Long (Short) | | | From 10% | | | From 10% | |
| | | | | of Net FX | | | Transaction | | | Currency | | | Appreciation | | | Depreciation | |
| | Currency - forward contracts | | | Contracts | | | Exposures | | | Position | | | of USD | | | of USD | |
| | Euro | | $ | 7.2 | | | 17.5 | | | 10.3 | | $ | (1.1 | ) | $ | 0.9 | |
| | Great British Pound | | | - | | | 6.1 | | | 6.1 | | | (0.7 | ) | | 0.6 | |
| | | | | | | | | | | | | | | | | | |
| | Net position | | $ | 7.2 | | $ | 23.6 | | $ | 16.4 | | $ | (1.8 | ) | $ | 1.5 | |
| | | | | | | | | | | | | | | | | | |
June 30, 2005 | | | | | | | | | | | | | | | | |
(in millions) | | | | | | Net | | | | | | | | | | |
| | | | | | | Underlying | | | Net | | | FX | | | FX | |
| | | | | | | Foreign | | | Exposed | | | Gain (Loss) | | | Gain (Loss) | |
| | | | USD Value | | | Currency | | | Long (Short) | | | From 10 | | | From 10% | |
| | | | If Net FX | | | Transaction | | | Currency | | | Appreciation | | | Depreciation | |
Currency - forward contracts | | | Contracts | | | Exposures | | | Position | | | of USD | | | of USD | |
| Euro | | $ | 9.6 | | $ | 19.6 | | $ | (10.0 | ) | $ | (1.1 | ) | $ | 0.9 | |
| Great British Pound | | | 3.3 | | | 9.7 | | | (6.4 | ) | | (0.7 | ) | | 0.6 | |
| Net position | | $ | 12.9 | | $ | 29.3 | | $ | (16.4 | ) | $ | (1.8 | ) | $ | 1.5 | |
| | | | | | | | | | | | | | | | | |
Beginning fiscal 2004, we expanded our hedging activities to include a hedging program to hedge our economic exposure by hedging a portion of forecasted Euro and Great British Pound denominated sales. As of December 31, 2004,June 30, 2005, we had foreign currency put and call option contracts of approximately€40.243.7 million and£13.3 £16.7 million denominated in Euros and Great British Pounds, respectively. OurAs of June 30, 2005, we also had foreign currency put option contracts of approximately €43.7 million and £16.7 million denominated in Euros and Great British Pounds, respectively. Collectively, our option contracts hedge against a portion of our forecasted foreign denominated sales. The table below provides information about our foreign currency option contracts that are sensitive to foreign currency exchange rates. If these net exposed currency positions are subjected to either a 10% appreciation or 10% depreciation versus the U.S. dollar, we could incur a gain of $7.3million$8.0 million or a loss of $8.0$7.8 million.
The table below presents the impact on our currency option contracts of a hypothetical 10% appreciation and a 10% depreciation of the U.S. dollar against the indicated option contract type for cash flow hedges:
June 30, 2005 | | | | | | | | | | |
(in millions) | | | | | | | | | | |
| | | | | | FX | | | FX | |
| | | | | | | Gain (Loss) | | | Gain (Loss) | |
| | | | USD Value | | | From 10% | | | From 10% | |
| | | | of Net FX | | | Appreciation | | | Depreciation | |
Currency - option contracts | | | Contracts | | | of USD | | | of USD | |
| Call options | | $ | (88.5 | ) | $ | 0.8 | | $ | (3.9 | ) |
| Put options | | | 84.8 | | | 7.2 | | | (3.9 | ) |
| Net position | | $ | (3.7 | ) | $ | 8.0 | | $ | (7.8 | ) |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| | December 31, 2004 | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | |
| | | | | | | | FX | | | FX | | |
| | | | | | | | Gain (Loss) | | | Gain (Loss) | | |
| | | | | USD Value | | | From 10% | | | From 10% | | |
| | | | | of Net FX | | | Appreciation | | | Depreciation | | |
| | Currency - option contracts | | | Contracts | | | of USD | | | of USD | | |
| | Call options | | $ | (75.9 | ) | $ | 5.0 | | $ | (7.4 | ) | |
| | Put options | | | 72.4 | | | 2.3 | | | (0.6 | ) | |
| | | | | | | | | | | | | |
| | Net position | | $ | (3.5 | ) | $ | 7.3 | | $ | (8.0 | ) | |
The table below presents the impact on our currency option contracts of a hypothetical 10% appreciation and a 10% depreciation of the U.S. dollar against the indicated option contract type for cash flow hedges.
June 30, 2005 | | | | | | | | | | |
(in millions) | | | | | | FX | | | FX | |
| | | | | | Gain (Loss) | | | Gain (Loss) | |
| | | USD Value | | | From 10% | | | From 10% | |
| | | of Net FX | | | Appreciation | | | Depreciation | |
Currency - forward contracts | | | Contracts | | | of USD | | | of USD | |
| China Yuan | | $ | 9.9 | | $ | (0.9 | ) | $ | 1.1 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| |
(a) | 38 | |
Evaluation of disclosure controls and procedures. |
Item 4. Controls And Procedures
(a) Evaluation of disclosure controls and procedures.Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) ofand 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q.10-Q (the "Evaluation Date"). Our disclosure controls and procedures include components of our internal control over financial reporting. Based on thatthis evaluation, our Chief Executive OfficerCEO and our Chief Financial OfficerCFO concluded as of the Evaluation Date that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in ensuringsuch that the material information required to be disclosedincluded in our reports that we file or submit under the Securities Excha ngeExchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified inby the Securities and Exchange Commission’s rules and forms.Commission.
(b) Changes in internal control over financial reporting. | (b) | Changes in internal control over financial reporting. |
There waswere no changechanges in our internal control over financial reporting (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) that occurred during the period covered by this Quarterly Report on Form 10-Q that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
PART II. -- OTHER INFORMATION
We are presently engaged in various legal actions arising in the normal course of our business. We believe that it is unlikely that any of these actions will have a material adverse impact on our operating results.* However, because of the inherent uncertainties of litigation, the outcome of any of these actions could be unfavorable and could have a material adverse effect on our financial condition, results of operations or cash flows.
Share Repurchase Programs
The appealfollowing presents the shares repurchased during the three months ended June 30, 2005.
| | | | | | | | | Total Number of | | | Maximum Number | |
| | | | | | | | | | Shares Purchased | | | of Shares that May | |
| | | | | | | | | | as Part of Publicity | | | Yet Be Purchased | |
| | | | Total Number of | | | Average Price | | | Announced Plans | | | Under the | |
| | | | Shares Purchased | | | Paid per Share | | | or Programs | | | Plans or Programs | |
| | | | | | | | | | | | | | |
| April 3, 2005 to April 30, 2005 | | | 552,500 | | $ | 37.10 | | | 552,500 | | | 820,000 | |
| | | | | | | | | | | | | | |
| May 1, 2005 June 4, 2005 | | | 820,000 | | $ | 32.65 | | | 820,000 | | | - | |
| | | | | | | | | | | | | | |
| June 5, 2005 to July 2, 2005 | | | | | | | | | - | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total | | | 1,372,500 | | $ | 34.44 | | | 1,372,500 | | | | |
| | | | | | | | | | | | | | |
As of July 29, 2005, there were approximately 95 holders of record of our Common Stock.
| a. | The 2005 Annual Meeting of Stockholders of Plantronics, Inc. (the "Company") was held at 160 Central Park South, New York, NY on July 21, 2005 (the "Annual Meeting"). |
| b. | At the Annual Meeting, the following six individuals were elected to the Company's Board of Directors. |
| Nominee | Votes Cast For | Withheld or Against |
| Marvin Tseu | 32,535,750 | 11,810,002 |
| Ken Kannappan | 41,274,283 | 3,071,469 |
| Gregg Hammann | 41,738,105 | 2,607,647 |
| Marshall Mohr | 41,732,254 | 2,613,498 |
| Trude Taylor | 40,127,544 | 4,218,208 |
| Roger Wery | 39,927,033 | 4,418,719 |
| 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. |
(1) Proposal to approve an increase of 1,300,000 shares of Common Stock of Plantronics, Inc. issuable under the 2003 Stock Plan.
| Votes For | Votes Against/Withheld | Abstain | Broker Non-Vote |
| 32,157,221 | 8,129,427 | 73,053 | 3,986,051 |
(2) Proposal to approve an increase of 200,000 shares in the lawsuit filed on February 8, 2001 inCommon Stock issuable under the Superior Court in Santa Clara County, California by GN Hello Direct, Inc. was concluded in our favor. We were awarded and received from GN Hello Direct, Inc. a payment of $3.1 million. Plantronics may be entitled to additional attorneys fees and costs.2002 Employee Stock Purchase Plan.
| Votes For | Votes Against/Withheld | Abstain | Broker Non-Vote |
| 36,966,919 | 3,373,948 | 18,834 | 3,986,051 |
(3) Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Plantronics for fiscal 2006.
| Votes For | Votes Against/Withheld | Abstain | Broker Non-Vote |
| 43,496,989 | 832,355 | 16,408 | 0 |
(a) | Exhibits. The following exhibits are filed as part of this Quarterly Report on Form 10-Q. |
| | | |
Exhibit Number | | | Description of Document | |
| 3.1.1 | | | Amended and Restated By-Laws of the Registrant (incorporated herein by reference from Exhibit (3.1) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). | |
| 3.1.2 | | | Certificate of Amendment to Amended and Restated Bylaws of Plantronics, Inc. | |
| 3.2.1 | | | Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference from Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on March 4, 1994). | |
| 3.2.2 | | | Certificate of Retirement and Elimination of Preferred Stock and Common Stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference from Exhibit (3.3) of the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 27, 1996). | |
| 3.2.3 | | | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on August 7, 1997 (incorporated herein by reference from Exhibit (3.1) to the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 8, 1997). | |
| 3.2.4 | | | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on May 23, 2000 (incorporated herein by reference from Exhibit (4.2) to the Registrant's Registration Statement on Form S-8 (File No. 001-12696), filed on October 31, 2000). | |
| 3.3 | | | Registrant's Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 1, 2002 (incorporated herein by reference from Exhibit (3.6) to the Registrant's Form 8-A (File No. 001-12696), filed on March 29, 2002). | |
| 4.1 | | | Preferred Stock Rights Agreement, dated as of March 13, 2002 between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively (incorporated herein by reference from Exhibit (4.1) to the Registrant's Form 8-A (File No. 001-12696), filed on March 29, 2002). | |
| 10.1* | | | Plantronics, Inc. Non-EMEA Quarterly Profit Sharing Plan (incorporated herein by reference from Exhibit (10.1) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.2* | | | Form of Indemnification Agreement between the Registrant and certain directors and executives. | |
| 10.3.1* | | | Regular and Supplemental Bonus Plan (incorporated herein by reference from Exhibit (10.4(a)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.3.2* | | | Overachievement Bonus Plan (incorporated herein by reference from Exhibit (10.4(b)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.4.1 | | | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). | |
| 10.4.2 | | | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.2) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). | |
| 10.4.3 | | | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.3) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). | |
| 10.4.4 | | | Lease Agreement dated October 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.4) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). | |
| 10.5 | | | Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, The United Kingdom (incorporated herein by reference from Exhibit (10.32) to the Registrant's Registration Statement on Form S-1 (as amended) (File No.33-70744), filed on October 20, 1993). | |
| 10.6* | | | Amended and Restated 2003 Stock Plan (incorporated herein by reference from the Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696), filed on June 3, 2005). | |
| 10.7* | | | 1993 Stock Option Plan (incorporated herein by reference from Exhibit (10.8) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). | |
| 10.8 1* | | | 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended) (File No. 33-70744), filed on October 20, 1993). | |
| 10.8.2* | | | Amendment to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (File No. 333-14833), filed on October 25, 1996). | |
| 10.8.3* | | | Amendment No. 2 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(a)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.8.4 * | | | Amendment No. 3 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(b)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.8.5* | | | Amendment No. 4 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). | |
| 10.9.1* | | | 2002 Employee Stock Purchase Plan (incorporated herein by reference from Exhibit (10.10.2) to the Registrant's Annual Report on Form 10-K (File Number 001-12696), filed on September 21, 2002). | |
| 10.9.1 | | | Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference from Exhibit (4.3) to the Registrant's Registration Statement on Form S-8 (File No. 333-19351), filed on January 7, 1997). | |
| 10.9.2* | | | Plantronics, Inc. 401(k) Plan, effective as of April 2, 2000 (incorporated herein by reference from Exhibit (10.11) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). | |
| 10.10* | | | Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). | |
| 10.11.1* | | | Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference from Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). | |
| 10.11.2 | | | Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference from Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). | |
| 10.11.3 | | | Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference from Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). | |
| 10.12.1* | | | Employment Agreement dated as of October 4, 1999 between Registrant and Ken Kannappan (incorporated herein by reference from Exhibit (10.15) to the Registrant's Annual Report on Form 10-K405 (File No. 001-12696), filed on September 1, 2000). | |
| 10.12.2* | | | Employment Agreement dated as of November 1996 between Registrant and Don Houston (incorporated herein by reference from Exhibit (10.14.2) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). | |
| 10.12.3* | | | Employment Agreement dated as of March 1997 between Registrant and Barbara Scherer (incorporated herein by reference from Exhibit (10.14.4) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). | |
| 10.12.4* | | | Employment Agreement dated as of June 2003 between Registrant and Philip Vanhoutte. | |
| 10.12.5* | | | Employment Agreement dated as of May 2001 between Registrant and Joyce Shimizu (incorporated herein by reference from Exhibit (10.14.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). | |
| 10.13.1 | | | Credit Agreement dated as of October 31, 2003 between Registrant and Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on November 7, 2003). | |
| 10.13.2 | | | Credit Agreement Amendment No. 1 dated as of August, 1, 2004, between Registrant and Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.15.2) to the Registrant's Quarterly Report on Form 10-Q (File No. 001- 12696), filed on November 5, 2004). | |
| 10.13.3 | | | Credit Agreement Amendment No.2 dated as of July 11, 2005, between Registrant and Wells Fargo Bank National Association (incorporated herein by reference from Exhibit (10.15.1) to the Registrants Form 8-K (File No. 001-12696), filed on July 15, 2005). | |
| 10.14* | | | Restricted Stock Award Agreement dated as of October 12, 2004, between Registrant and certain of its executive officers (incorporated herein by reference from Exhibit (10.1) of the Registrant's Current Report on Form 8-K (File No. 001-12696), filed on October 14, 2004). | |
| 31.1 | | | CEO's Certification Pursuant to Rule 13a-14(a)/15d-14(a) | |
| 31.2 | | | CFO's Certification Pursuant to Rule 13a-14(a)/15d-14(a) | |
| 32.1 | | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the CEO and CFO | |
| * | | | Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates. | |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PLANTRONICS, INC. |
| |
| | |
| Date: August 10, 2005 | 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) |
Exhibits
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
EXHIBITS INDEX |
Exhibit Number | Description of Document |
| 3.1 | Amended and Restated By-Laws of the Registrant (incorporated herein by reference from Exhibit (3.1) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
| 3.1.1 | Amended and Restated By-Laws of the Registrant (incorporated herein by reference from Exhibit (3.1) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
| 3.1.2 | Certificate of Amendment to Amended and Restated Bylaws of Plantronics, Inc. |
| 3.2.1 | Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference from Exhibit (3.1) to the Registrant’sRegistrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on March 4, 1994). |
| 3.2.2 | Certificate of Retirement and Elimination of Preferred Stock and Common Stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference from Exhibit (3.3) of the Registrant’sRegistrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 27, 1996). |
| 3.2.3 | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on August 7, 1997 (incorporated herein by reference from Exhibit (3.1) to the Registrant’sRegistrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 8, 1997). |
| 3.2.4 | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on May 23, 2000 (incorporated herein by reference from Exhibit (4.2) to the Registrant’sRegistrant's Registration Statement on Form S-8 (File No. 001-12696), filed on October 31, 2000). |
| 3.3 | Registrant’sRegistrant's Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 1, 2002 (incorporated herein by reference from Exhibit (3.6) to the Registrant’sRegistrant's Form 8-A (File No. 001-12696), filed on March 29, 2002). |
| 4.1 | Preferred Stock Rights Agreement, dated as of March 13, 2002 between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively (incorporated herein by reference from Exhibit (4.1) to the Registrant’sRegistrant's Form 8-A (File No. 001-12696), filed on March 29, 2002). |
| 10.1* | Plantronics, Inc. Non-EMEA Quarterly Profit Sharing Plan (incorporated herein by reference from Exhibit (10.1) to the Registrant’sRegistrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
| 10.2* | Form of Indemnification Agreement between the Registrant and certain directors and executives and Schedule of Other Documents Omitted (incorporated herein by reference from Exhibit (10.1) to PI Holdings Inc.’s Quarterly Report on Form 10-Q (File No. 33-26770), filed February 9, 1993).executives. |
10.3* | Form of Employment Agreement, Addendum to Employment Agreement and Second Addendum to Employment Agreement between the Registrant and certain executives; and Schedule of Other Documents Omitted (incorporated herein by reference from Exhibit (10.2) to PI Holdings Inc.’s Quarterly Report on Form 10-Q (File No. 33-26770), filed February 9, 1993). |
10.4.1*10.3.1* | Regular and Supplemental Bonus Plan (incorporated herein by reference from Exhibit (10.4(a)) to the Registrant’sRegistrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.4.2*10.3.2* | Overachievement Bonus Plan (incorporated herein by reference from Exhibit (10.4(b)) to the Registrant’sRegistrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.5.110.4.1 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.210.4.2 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.2) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.310.4.3 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.3) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.410.4.4 | Lease Agreement dated October 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.4) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.610.5 | Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, The United Kingdom (incorporated herein by reference from Exhibit (10.32) to the Registrant’sRegistrant's Registration Statement on Form S-1 (as amended) (File No.33-70744), filed on October 20, 1993). |
10.7*10.6* | Amended and Restated 2003 Stock Plan (incorporated herein by reference from the Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696), filed on May 26, 2004). |
10.8*10.7* | 1993 Stock Option Plan (incorporated herein by reference from Exhibit (10.8) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
10.910.8 1* | 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended) (File No. 33-70744), filed on October 20, 1993). |
10.9.2*10.8.2* | Amendment to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (File No. 333-14833), filed on October 25, 1996). |
10.9.3*10.8.3* | Amendment No. 2 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(a)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.9.410.8.4 * | Amendment No. 3 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(b)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.9.5*10.8.5* | Amendment No. 4 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
10.10.1*10.9.1* | 2002 Employee Stock Purchase Plan (incorporated herein by reference from Exhibit (10.10.2) to the Registrant's Annual Report on Form 10-K (File Number 001-12696), filed on September 21, 2002). |
10.11.110.9.1 | Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference from Exhibit (4.3) to the Registrant's Registration Statement on Form S-8 (File No. 333-19351), filed on January 7, 1997). |
10.11.2*10.9.2* | Plantronics, Inc. 401(k) Plan, effective as of April 2, 2000 (incorporated herein by reference from Exhibit (10.11) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.12*10.10* | Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.1*10.11.1* | Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference from Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.210.11.2 | Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference from Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.310.11.3 | Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference from Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.14.1*10.12.1* | Employment Agreement dated as of October 4, 1999 between Registrant and Ken Kannappan (incorporated herein by reference from Exhibit (10.15) to the Registrant's Annual Report on Form 10-K405 (File No. 001-12696), filed on September 1, 2000). |
10.14.2*10.12.2* | Employment Agreement dated as of November 1996 between Registrant and Don Houston (incorporated herein by reference from Exhibit (10.14.2) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.14.3*10.12.3* | Employment Agreement dated as of March 1997 between Registrant and Barbara Scherer (incorporated herein by reference from Exhibit (10.14.4) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.14.4*10.12.4* | Employment Agreement dated as of May 1998June 2003 between Registrant and Craig May (incorporated herein by reference from Exhibit (10.14.3) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003).Philip Vanhoutte. |
10.14.5*10.12.5* | Employment Agreement dated as of May 2001 between Registrant and Joyce Shimizu (incorporated herein by reference from Exhibit (10.14.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.15.110.13.1 | Credit Agreement dated as of October 31, 2003 between Registrant and Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on November 7, 2003). |
10.15.210.13.2 | Credit Agreement Amendment No. 1 dated as of August, 1, 2004, between Registrant and Wells Fargo Bank N.A. (incorporated herein by reference from Exhibit (10.15.2) to the Registrant's Quarterly Report on Form 10-Q (File No. 001- 12696), filed on November 5, 2004). |
10.16*10.13.3 | Credit Agreement Amendment No.2 dated as of July 11, 2005, between Registrant and Wells Fargo Bank National Association (incorporated herein by reference from Exhibit (10.15.1) to the Registrants Form 8-K (File No. 001-12696), filed on July 15, 2005). |
| 10.14* | Restricted Stock Award Agreement dated as of October 12, 2004, between Registrant and certain of its executive officers (incorporated herein by reference from Exhibit (10.1) of the Registrant's Current Report on Form 8-K (File No. 001-12696), filed on October 14, 2004). |
| 31.1 | CEO’sCEO's Certification Pursuant to Rule 13a-14(a)/15d-14(a) |
| 31.2 | CFO’sCFO's Certification Pursuant to Rule 13a-14(a)/15d-14(a) |
| 32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the CEO and CFO |
| * | Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | |
| PLANTRONICS, INC. |
|
|
|
Date: February 4, 2005 | By: | /s/ Barbara V. Scherer |
|
|
| Senior Vice President - Finance and Administration and Chief Financial Officer(Principal Financial Officer and Duly Authorized Officer of the Registrant) |
EXHIBITS
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
EXHIBITS INDEX
|
Exhibit Number
| Description of Document
|
3.1 | Amended and Restated By-Laws of the Registrant (incorporated herein by reference from Exhibit (3.1) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
3.2.1 | Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on January 19, 1994 (incorporated herein by reference from Exhibit (3.1) to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-12696), filed on March 4, 1994). |
3.2.2 | Certificate of Retirement and Elimination of Preferred Stock and Common Stock of the Registrant filed with the Secretary of State of Delaware on January 11, 1996 (incorporated herein by reference from Exhibit (3.3) of the Registrant’s Annual Report on Form 10-K (File No. 001-12696), filed on September 27, 1996). |
3.2.3 | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on August 7, 1997 (incorporated herein by reference from Exhibit (3.1) to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 8, 1997). |
3.2.4 | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on May 23, 2000 (incorporated herein by reference from Exhibit (4.2) to the Registrant’s Registration Statement on Form S-8 (File No. 001-12696), filed on October 31, 2000). |
3.3 | Registrant’s Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 1, 2002 (incorporated herein by reference from Exhibit (3.6) to the Registrant’s Form 8-A (File No. 001-12696), filed on March 29, 2002). |
4.1 | Preferred Stock Rights Agreement, dated as of March 13, 2002 between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively (incorporated herein by reference from Exhibit (4.1) to the Registrant’s Form 8-A (File No. 001-12696), filed on March 29, 2002). |
10.1* | Plantronics, Inc. Non-EMEA Quarterly Profit Sharing Plan (incorporated herein by reference from Exhibit (10.1) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.2* | Form of Indemnification Agreement between the Registrant and certain directors and executives and Schedule of Other Documents Omitted (incorporated herein by reference from Exhibit (10.1) to PI Holdings Inc.’s Quarterly Report on Form 10-Q (File No. 33-26770), filed February 9, 1993). |
10.3* | Form of Employment Agreement, Addendum to Employment Agreement and Second Addendum to Employment Agreement between the Registrant and certain executives; and Schedule of Other Documents Omitted (incorporated herein by reference from Exhibit (10.2) to PI Holdings Inc.’s Quarterly Report on Form 10-Q (File No. 33-26770), filed February 9, 1993). |
10.4.1* | Regular and Supplemental Bonus Plan (incorporated herein by reference from Exhibit (10.4(a)) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.4.2* | Overachievement Bonus Plan (incorporated herein by reference from Exhibit (10.4(b)) to the Registrant’s Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.5.1 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.1) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.2 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.2) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.3 | Lease Agreement dated May 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.3) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.5.4 | Lease Agreement dated October 2004 between Finsa Portafolios, S.A. DE C.V.and Plamex, S.A. de C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from Spanish original) (incorporated herein by reference from Exhibit (10.5.4) of the Registrant's Quarterly Report on Form 10-Q (File No. 001-12696), filed on August 6, 2004). |
10.6 | Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a subsidiary of the Registrant, for premises located in Wootton Bassett, The United Kingdom (incorporated herein by reference from Exhibit (10.32) to the Registrant’s Registration Statement on Form S-1 (as amended) (File No.33-70744), filed on October 20, 1993). |
10.7* | Amended and Restated 2003 Stock Plan (incorporated herein by reference from the Registrant's Definitive Proxy Statement on Form 14-A (File No. 001-12696), filed on May 26, 2004). |
10.8* | 1993 Stock Option Plan (incorporated herein by reference from Exhibit (10.8) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
10.9 1* | 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.29) to the Registrant's Registration Statement on Form S-1 (as amended) (File No. 33-70744), filed on October 20, 1993). |
10.9.2* | Amendment to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (File No. 333-14833), filed on October 25, 1996). |
10.9.3* | Amendment No. 2 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(a)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.9.4 * | Amendment No. 3 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9(b)) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.9.5* | Amendment No. 4 to the 1993 Director Stock Option Plan (incorporated herein by reference from Exhibit (10.9.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 21, 2002). |
10.10.1* | 2002 Employee Stock Purchase Plan (incorporated herein by reference from Exhibit (10.10.2) to the Registrant's Annual Report on Form 10-K (File Number 001-12696), filed on September 21, 2002). |
10.11.1 | Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan Trust (incorporated herein by reference from Exhibit (4.3) to the Registrant's Registration Statement on Form S-8 (File No. 333-19351), filed on January 7, 1997). |
10.11.2* | Plantronics, Inc. 401(k) Plan, effective as of April 2, 2000 (incorporated herein by reference from Exhibit (10.11) to the Registrant's Report on Form 10-K (File No. 001-12696), filed on September 1, 2001). |
10.12* | Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase Plan (incorporated herein by reference from Exhibit (4.4) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.1* | Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated herein by reference from Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.2 | Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated herein by reference from Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.13.3 | Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by reference from Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended) (File No. 333-19351), filed on March 25, 1997). |
10.14.1* | Employment Agreement dated as of October 4, 1999 between Registrant and Ken Kannappan (incorporated herein by reference from Exhibit (10.15) to the Registrant's Annual Report on Form 10-K405 (File No. 001-12696), filed on September 1, 2000). |
10.14.2* | Employment Agreement dated as of November 1996 between Registrant and Don Houston (incorporated herein by reference from Exhibit (10.14.2) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.14.3* | Employment Agreement dated as of March 1997 between Registrant and Barbara Scherer (incorporated herein by reference from Exhibit (10.14.4) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.14.4* | Employment Agreement dated as of May 1998 between Registrant and Craig May (incorporated herein by reference from Exhibit (10.14.3) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.14.5* | Employment Agreement dated as of May 2001 between Registrant and Joyce Shimizu (incorporated herein by reference from Exhibit (10.14.5) to the Registrant's Annual Report on Form 10-K (File No. 001-12696), filed on September 2, 2003). |
10.15.1 | Credit Agreement dated as of October 31, 2003 between Registrant and Wells Fargo Bank N.A (incorporated herein by reference from Exhibit (10.1) of the Registrant's Annual Report on Form 10-Q (File No. 001-12696), filed on November 7, 2003). |
10.15.2 | Credit Agreement Amendment No. 1 dated as of August, 1, 2004, between Registrant and Wells Fargo Bank N.A. |
10.16* | Restricted Stock Award Agreement dated as of October 12, 2004, between Registrant and certain of its executive officers (incorporated herein by reference from Exhibit (10.1) of the Registrant's Current Report on Form 8-K (File No. 001-12696), filed on October 14, 2004). |
31.1 | CEO’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) |
31.2 | CFO’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the CEO and CFO |
* | Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates. |
