UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~January 1,~~July 2, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission File Number: 001-12696

Plantronics, Inc.

(Exact name of registrant as specified in its charter)


Delaware			77-0207692
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

345 Encinal Street

Santa Cruz, California 95060

(Address of principal executive offices)

(Zip Code)

(831) 420-3002

(Registrant's telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	POLY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~February 3,~~August 8, 2022, ~~42,778,870~~ 43,993,852 shares of the registrant's common stock were outstanding.

PLANTRONICS, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~January 1,~~July 2, 2022 and April ~~3, 20~~212, 2022	3
	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	4
	Condensed Consolidated Statements of Comprehensive (Loss)Income for the Three ~~and Nine~~ Months Ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	6
	Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three ~~and Nine~~ Months Ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021	87
	Notes to the Condensed Consolidated Financial Statements	108
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3027
	Overview	3128
	Results of Operations	3330
	Financial Condition	3835
	Off Balance Sheet Arrangements and Contractual Obligations	4037
	Critical Accounting Estimates	4138
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4239
Item 4.	Controls and Procedures	4441

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	4441
Item 1A.	Risk Factors	4441
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542
Item 6.	Exhibits	4643

Signatures		4744

Plantronics, Poly, the Propeller design, the Poly logo, and Polycom are trademarks of Plantronics, Inc.

All other trademarks are the property of their respective owners.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLANTRONICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)


		January 1, 2022		April 3, 2021			July 2, 2022		April 2, 2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	182,700	$	202,560	Cash and cash equivalents	$	142,362	$	170,000
Restricted cash		—		493,908

Short-term investments	Short-term investments	17,017		14,559		Short-term investments	11,908		13,703
Accounts receivable, net	Accounts receivable, net	275,913		267,464		Accounts receivable, net	274,939		277,924
Inventory, net	Inventory, net	216,750		194,405		Inventory, net	245,189		234,102
Other current assets	Other current assets	61,484		65,214		Other current assets	90,918		83,410
Total current assets	Total current assets	753,864		1,238,110		Total current assets	765,316		779,139
Non-current assets	Non-current assets					Non-current assets

Property, plant, and equipment, net	Property, plant, and equipment, net	126,973		140,875		Property, plant, and equipment, net	124,052		127,021
Purchased intangibles, net	Purchased intangibles, net	255,564		341,614		Purchased intangibles, net	202,437		230,478
Goodwill	Goodwill	796,216		796,216		Goodwill	796,216		796,216
Deferred tax assets	Deferred tax assets	211,543		95,800		Deferred tax assets	214,229		215,861
Other non-current assets	Other non-current assets	70,332		51,654		Other non-current assets	68,449		76,639
Total assets	Total assets	$	2,214,492	$	2,664,269	Total assets	$	2,170,699	$	2,225,354

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY						LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	160,529	$	151,244	Accounts payable	$	173,252	$	168,610
Accrued liabilities	Accrued liabilities	328,551		394,084		Accrued liabilities	317,219		338,836
Current portion of long-term debt		—		478,807

Total current liabilities	Total current liabilities	489,080		1,024,135		Total current liabilities	490,471		507,446
Non-current liabilities	Non-current liabilities					Non-current liabilities
Long-term debt, net	Long-term debt, net	1,499,228		1,496,064		Long-term debt, net	1,501,337		1,500,283

Long-term income taxes payable	Long-term income taxes payable	76,095		86,227		Long-term income taxes payable	66,770		68,082

Other non-current liabilities	Other non-current liabilities	139,469		138,609		Other non-current liabilities	118,515		129,381
Total liabilities	Total liabilities	2,203,872		2,745,035		Total liabilities	2,177,093		2,205,192
Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)	0		0		Commitments and contingencies (Note 6)	0		0
Stockholders' equity (deficit)
Stockholders' (deficit) equity						Stockholders' (deficit) equity
Common stock	Common stock	926		912		Common stock	940		930
Additional paid-in capital	Additional paid-in capital	1,596,313		1,556,272		Additional paid-in capital	1,630,792		1,616,198
Accumulated other comprehensive income (loss)		11,454		(3,221)
Accumulated other comprehensive income						Accumulated other comprehensive income	39,081		32,911
Accumulated deficit	Accumulated deficit	(716,423)		(765,233)		Accumulated deficit	(780,403)		(747,316)
Total stockholders' equity before treasury stock	Total stockholders' equity before treasury stock	892,270		788,730		Total stockholders' equity before treasury stock	890,410		902,723
Less: Treasury stock, at cost	Less: Treasury stock, at cost	(881,650)		(869,496)		Less: Treasury stock, at cost	(896,804)		(882,561)
Total stockholders' equity (deficit)		10,620		(80,766)
Total liabilities and stockholders' equity (deficit)		$	2,214,492	$	2,664,269
Total stockholders' (deficit) equity						Total stockholders' (deficit) equity	(6,394)		20,162
Total liabilities and stockholders' (deficit) equity						Total liabilities and stockholders' (deficit) equity	$	2,170,699	$	2,225,354

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020			July 2, 2022		July 3, 2021
Net revenues	Net revenues									Net revenues
Net product revenues	Net product revenues	$	354,022	$	420,711	$	1,086,607	$	1,059,846	Net product revenues	$	364,208	$	371,203
Net service revenues	Net service revenues	55,544		63,974		173,155		191,529		Net service revenues	51,351		59,969
Total net revenues	Total net revenues	409,566		484,685		1,259,762		1,251,375		Total net revenues	415,559		431,172
Cost of revenues	Cost of revenues									Cost of revenues
Cost of product revenues	Cost of product revenues	226,994		236,842		682,360		622,718		Cost of product revenues	231,677		235,196
Cost of service revenues	Cost of service revenues	18,386		21,186		58,334		64,921		Cost of service revenues	15,841		20,787
Total cost of revenues	Total cost of revenues	245,380		258,028		740,694		687,639		Total cost of revenues	247,518		255,983

Gross profit	Gross profit	164,186		226,657		519,068		563,736		Gross profit	168,041		175,189

Operating expenses	Operating expenses									Operating expenses
Research, development, and engineering	Research, development, and engineering	46,216		54,150		136,090		156,327		Research, development, and engineering	51,269		45,466
Selling, general, and administrative	Selling, general, and administrative	121,387		129,641		364,417		361,892		Selling, general, and administrative	131,903		120,734
Loss, net from litigation settlements		—		—		—		17,561

Restructuring and other related charges	Restructuring and other related charges	2,398		13,977		33,977		49,477		Restructuring and other related charges	(49)		28,972
Total operating expenses	Total operating expenses	170,001		197,768		534,484		585,257		Total operating expenses	183,123		195,172

Operating (loss) income		(5,815)		28,889		(15,416)		(21,521)
Operating loss										Operating loss	(15,082)		(19,983)

Interest expense	Interest expense	15,948		18,417		53,871		58,182		Interest expense	16,121		21,782
Other non-operating income, net		(995)		(2,596)		(1,664)		(4,188)
(Loss) income before income taxes		(20,768)		13,068		(67,623)		(75,515)
Other non-operating expense (income), net										Other non-operating expense (income), net	2,922		(692)
Loss before income taxes										Loss before income taxes	(34,125)		(41,073)

Income tax benefit	Income tax benefit	(9,604)		(7,045)		(116,433)		(7,208)		Income tax benefit	(1,038)		(4,262)
Net (loss) income		$	(11,164)	$	20,113	$	48,810	$	(68,307)
Net loss										Net loss	$	(33,087)	$	(36,811)

Per share data	Per share data									Per share data
Basic (loss) earnings per common share		$	(0.26)	$	0.49	$	1.15	$	(1.67)
Diluted (loss) earnings per common share		$	(0.26)	$	0.48	$	1.11	$	(1.67)
Basic shares used in computing (loss) earnings per common share		42,745		41,252		42,450		40,894
Diluted shares used in computing (loss) earnings per common share		42,745		42,184		43,811		40,894
Basic and diluted loss per common share										Basic and diluted loss per common share	$	(0.76)	$	(0.88)

Basic and diluted shares used in computing loss per common share										Basic and diluted shares used in computing loss per common share	43,428		42,061

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(in thousands)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020			July 2, 2022		July 3, 2021
Net (loss) income		$	(11,164)	$	20,113	$	48,810	$	(68,307)
Net loss										Net loss	$	(33,087)	$	(36,811)

Other comprehensive income, before tax	Other comprehensive income, before tax									Other comprehensive income, before tax
Unrealized gains on cash flow hedges
Unrealized cash flow hedge gains (losses)		7,846		(3,754)		8,520		(8,339)
Unrealized gains (losses) on cash flow hedges										Unrealized gains (losses) on cash flow hedges
Unrealized cash flow hedge gains										Unrealized cash flow hedge gains	10,094		440
Net (gains) losses reclassified into net revenues	Net (gains) losses reclassified into net revenues	(1,804)		1,054		(671)		1,797		Net (gains) losses reclassified into net revenues	(3,365)		1,772
Net gains reclassified into cost of revenues	Net gains reclassified into cost of revenues	(10)		—		(489)		—		Net gains reclassified into cost of revenues	(446)		(236)
Net losses reclassified into interest expense	Net losses reclassified into interest expense	2,100		3,039		7,582		10,290		Net losses reclassified into interest expense	622		3,089
Net unrealized gains on cash flow hedges	Net unrealized gains on cash flow hedges	8,132		339		14,942		3,748		Net unrealized gains on cash flow hedges	6,905		5,065

Income tax benefit (expense) in other comprehensive income		38		599		(267)		1,122
Income tax expense in other comprehensive income										Income tax expense in other comprehensive income	(735)		(243)
Other comprehensive income	Other comprehensive income	8,170		938		14,675		4,870		Other comprehensive income	6,170		4,822

Comprehensive (loss) income		$	(2,994)	$	21,051	$	63,485	$	(63,437)
Comprehensive loss										Comprehensive loss	$	(26,917)	$	(31,989)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		Nine Months Ended					Three Months Ended
		January 1, 2022		December 26, 2020			July 2, 2022		July 3, 2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income (loss)		$	48,810	$	(68,307)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Net loss						Net loss	$	(33,087)	$	(36,811)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities						Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization	Depreciation and amortization	112,796		124,881		Depreciation and amortization	36,577		39,833
Amortization of debt issuance costs	Amortization of debt issuance costs	5,046		3,962		Amortization of debt issuance costs	1,054		2,937
Stock-based compensation	Stock-based compensation	34,214		31,104		Stock-based compensation	14,594		10,416
Deferred income taxes	Deferred income taxes	(115,660)		(15,373)		Deferred income taxes	1,243		(5,943)
Provision for excess and obsolete inventories	Provision for excess and obsolete inventories	8,160		12,767		Provision for excess and obsolete inventories	1,027		5,310
Restructuring and other related charges	Restructuring and other related charges	33,977		49,477		Restructuring and other related charges	(49)		28,972
Cash payments for restructuring charges	Cash payments for restructuring charges	(27,515)		(28,794)		Cash payments for restructuring charges	(2,859)		(12,230)
Other operating activities	Other operating activities	(1,526)		(6,000)		Other operating activities	1,323		920
Changes in assets and liabilities	Changes in assets and liabilities					Changes in assets and liabilities
Accounts receivable, net	Accounts receivable, net	(8,569)		(71,439)		Accounts receivable, net	2,763		(3,758)
Inventory, net	Inventory, net	(24,699)		(39,941)		Inventory, net	(11,913)		6,326
Current and other assets	Current and other assets	(9,129)		(15,246)		Current and other assets	9,961		(3,919)
Accounts payable	Accounts payable	9,170		62,454		Accounts payable	6,158		12,515
Accrued liabilities	Accrued liabilities	(45,502)		47,529		Accrued liabilities	(22,962)		(40,265)
Income taxes	Income taxes	(19,625)		(15,925)		Income taxes	(6,811)		(3,454)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	(52)		71,149		Net cash (used in) provided by operating activities	(2,981)		849

Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Proceeds from sales of short-term investments		264		667

Purchases of short-term investments	Purchases of short-term investments	(760)		(394)		Purchases of short-term investments	(65)		(404)

Capital expenditures	Capital expenditures	(20,682)		(16,753)		Capital expenditures	(7,132)		(6,052)
Proceeds from sale of property, plant, and equipment		—		1,900

Other investing activities	Other investing activities	(4,000)		—		Other investing activities	—		(4,000)
Net cash used in investing activities	Net cash used in investing activities	(25,178)		(14,580)		Net cash used in investing activities	(7,197)		(10,456)

Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities

Employees' tax withheld and paid for restricted stock and restricted stock units	Employees' tax withheld and paid for restricted stock and restricted stock units	(12,154)		(3,193)		Employees' tax withheld and paid for restricted stock and restricted stock units	(14,243)		(10,225)
Proceeds from issuances under stock-based compensation plans	Proceeds from issuances under stock-based compensation plans	5,841		5,731		Proceeds from issuances under stock-based compensation plans	10		9
Proceeds from revolving line of credit		—		50,000
Repayments of revolving line of credit		—		(50,000)

Repayments of long-term debt	Repayments of long-term debt	(480,689)		(46,980)		Repayments of long-term debt	—		(480,689)

Net cash used in financing activities	Net cash used in financing activities	(487,002)		(44,442)		Net cash used in financing activities	(14,233)		(490,905)

Effect of exchange rate changes on cash and cash equivalents and restricted cash	Effect of exchange rate changes on cash and cash equivalents and restricted cash	(1,536)		4,059		Effect of exchange rate changes on cash and cash equivalents and restricted cash	(3,227)		805
Net (decrease) increase in cash and cash equivalents and restricted cash		(513,768)		16,186
Net decrease in cash and cash equivalents and restricted cash						Net decrease in cash and cash equivalents and restricted cash	(27,638)		(499,707)

Cash and cash equivalents and restricted cash at beginning of period	Cash and cash equivalents and restricted cash at beginning of period	696,468		213,879		Cash and cash equivalents and restricted cash at beginning of period	170,000		696,468
Cash and cash equivalents and restricted cash at end of period	Cash and cash equivalents and restricted cash at end of period	$	182,700	$	230,065	Cash and cash equivalents and restricted cash at end of period	$	142,362	$	196,761

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

~~The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown~~ PLANTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(in ~~the condensed consolidated statements of cash flows:~~thousands)

(Unaudited)

(in thousands) January 1, 2022 April 3, 2021
Cash and cash equivalents $ 182,700 $ 202,560
Restricted cash — 493,908
Total cash and cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 182,700 $ 696,468


	Three Months Ended July 2, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Treasury Stock		Total Stockholders' (Deficit) Equity
	Shares	Amount
Balances at April 2, 2022	43,073	$	930	$	1,616,198	$	32,911	$	(747,316)	$	(882,561)	$	20,162
Net loss	—	—		—		—		(33,087)		—		(33,087)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		6,170		—		—		6,170

Proceeds from issuances under stock-based compensation plans	651	10		—		—		—		—		10



Stock-based compensation	—	—		14,594		—		—		—		14,594


Employees' tax withheld and paid for restricted stock units	—	—		—		—		—		(14,243)		(14,243)




Balances at July 2, 2022	43,724	$	940	$	1,630,792	$	39,081	$	(780,403)	$	(896,804)	$	(6,394)


	Three Months Ended July 3, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Stockholders' Deficit
	Shares	Amount
Balances at April 3, 2021	41,751	$	912	$	1,556,272	$	(3,221)	$	(765,233)	$	(869,496)	$	(80,766)
Net loss	—	—		—		—		(36,811)		—		(36,811)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		4,823		—		—		4,823

Proceeds from issuances under stock-based compensation plans	569	9		—		—		—		—		9


Stock-based compensation	—	—		10,416		—		—		—		10,416


Employees' tax withheld and paid for restricted stock and restricted stock units	—	—		—		—		—		(10,225)		(10,225)




Balances at July 3, 2021	42,320	$	921	$	1,566,688	$	1,602	$	(802,044)	$	(879,721)	$	(112,554)

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

~~PLANTRONICS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)~~

~~(in thousands)~~

~~(Unaudited)~~

Three Months Ended January 1, 2022
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Accumulated Deficit Treasury Stock Total Stockholders' (Deficit) Equity
Shares Amount
Balances at October 2, 2021 42,721 $ 926 $ 1,584,088 $ 3,284 $ (705,259) $ (880,806) $ 2,233
Net loss — — — — (11,164) — (11,164)
Net unrealized gains on cash flow hedges, net of tax — — — 8,170 — — 8,170
Proceeds from issuances under stock-based compensation plans 43 — — — — — —
Stock-based compensation — — 12,225 — — — 12,225
Employees' tax withheld and paid for restricted stock and restricted stock units — — — — — (844) (844)
Balances at January 1, 2022 42,764 $ 926 $ 1,596,313 $ 11,454 $ (716,423) $ (881,650) $ 10,620

Three Months Ended December 26, 2020
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders' Deficit
Shares Amount
Balances at September 26, 2020 41,246 $ 907 $ 1,526,677 $ (9,650) $ (796,324) $ (866,615) $ (145,005)
Net income — — — — 20,113 — 20,113
Net unrealized gains on cash flow hedges, net of tax — — — 938 — — 938
Proceeds from issuances under stock-based compensation plans 19 — — — — — —
Stock-based compensation — — 11,486 — — — 11,486
Employees' tax withheld and paid for restricted stock and restricted stock units (6) — — — — (144) (144)
Other equity changes — — (3) (409) 3 — (409)
Balances at December 26, 2020 41,259 $ 907 $ 1,538,160 $ (9,121) $ (776,208) $ (866,759) $ (113,021)

Nine Months Ended January 1, 2022
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Treasury Stock Total Stockholders' (Deficit) Equity
Shares Amount
Balances at April 3, 2021 41,751 $ 912 $ 1,556,272 $ (3,221) $ (765,233) $ (869,496) $ (80,766)
Net income — — — — 48,810 — 48,810
Net unrealized gains on cash flow hedges, net of tax — — — 14,675 — — 14,675
Proceeds from issuances under stock-based compensation plans 785 11 — — — — 11
Stock-based compensation — — 34,214 — — — 34,214
Employees' tax withheld and paid for restricted stock and restricted stock units — — — — — (12,154) (12,154)
Proceeds from Employee Stock Purchase Program 228 3 5,827 — — — 5,830
Balances at January 1, 2022 42,764 $ 926 $ 1,596,313 $ 11,454 $ (716,423) $ (881,650) $ 10,620

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Nine Months Ended December 26, 2020
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders' Deficit
Shares Amount
Balances at March 28, 2020 40,406 $ 896 $ 1,501,340 $ (13,582) $ (707,904) $ (863,566) $ (82,816)
Net loss — — — — (68,307) — (68,307)
Net unrealized gains on cash flow hedges, net of tax — — — 4,870 — — 4,870
Proceeds from issuances under stock-based compensation plans 667 6 — — — — 6
Repurchase of restricted common stock (10) — — — — — —
Stock-based compensation — — 31,104 — — — 31,104
Employees' tax withheld and paid for restricted stock and restricted stock units (261) — — — — (3,193) (3,193)
Proceeds from Employee Stock Purchase Program 457 5 5,719 — — — 5,724
Other equity changes — — (3) (409) 3 — (409)
Balances at December 26, 2020 41,259 $ 907 $ 1,538,160 $ (9,121) $ (776,208) $ (866,759) $ (113,021)

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

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PLANTRONICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION

Plantronics, Inc. (“Poly,” the “Company”) is a leading global communications company that designs, manufactures, and markets integrated communications and collaboration solutions that span headsets, open Session Initiation Protocol ("SIP") and native ecosystem desktop phones, conference room phones, video conferencing solutions and peripherals, including cameras, speakers, and microphones, cloud management and analytics software solutions, and services.for professionals. The Company has two operating and reportable segments, Products and Services, and offers its products under the

, Plantronics and Polycom brands.

~~Founded~~Acquisition by HP Inc.

On March 25, 2022, Poly entered into an Agreement and Plan of Merger (the “Merger Agreement”) with HP Inc. (“HP”) and Prism Subsidiary Corp. (“Merger Sub”), a wholly owned subsidiary of HP, providing for Poly’s acquisition in ~~1961,~~an all-cash transaction for $40.00 per share of Poly's common stock by way of a merger of Merger Sub with and into Poly (the “Merger”), with Poly continuing as a wholly owned subsidiary of HP. The Merger Agreement and transactions contemplated by the ~~Company~~Merger Agreement were approved by Poly's Board of Directors (the “Board”). On June 23, 2022, Poly stockholders voted to adopt the Merger Agreement. The Merger is ~~incorporated~~expected to close, subject to receipt of required regulatory clearances and the satisfaction of other customary closing conditions, in calendar year 2022.

Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of Poly’s common stock (except as otherwise set forth in the ~~state~~Merger Agreement) will be canceled and automatically converted into the right to receive $40.00 in cash, without interest and less any applicable withholding taxes. Upon consummation of ~~Delaware under~~ the ~~name Plantronics, Inc. and in March 2019, the Company changed the name under which it markets itself to Poly. The Company is~~Merger, Poly’s common stock will no longer be listed on ~~the New York Stock Exchange ("NYSE") under the ticker symbol "POLY."~~any public market.

The ~~accompanying~~descriptions of the Merger Agreement and the transactions contemplated thereby contained in this Quarterly Report are summaries only and are qualified in their entirety by reference to the full text of the Merger Agreement, which is attached as Annex A to the definitive proxy statement on Schedule 14A filed by Poly with the SEC on May 17, 2022, as amended.

Basis of Presentation

The Company's unaudited condensed consolidated financial statements ~~of the Company have been~~and accompanying notes are prepared ~~on a basis materially consistent~~in conformity with and should be reviewed in conjunction with, the Company's audited consolidated financial statements as of and for the year ended April 3, 2021 and notes thereto included in the Company's Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission ("SEC"United States (“U.S.”) on May 18, 2021 and include all adjustments necessary to fairly state the information set forth herein. Certain information and footnote disclosures normally included in financial statements prepared pursuant to the rules and regulations of the SEC applicable to interim financial information and in accordance withgenerally accepted accounting principles ~~generally accepted in the United States of America ("GAAP"~~(“GAAP”) ~~have been condensed or omitted pursuant to such rules~~ and ~~regulations. These condensed consolidated financial statements~~ contain all necessary adjustments, ~~necessary for a fair presentation of the Company’s consolidated financial position and the consolidated results of operations and cash flows as of the dates and for the periods presented and~~which are normal and recurring in ~~nature. The Company's reporting currency is United States Dollars ("USD.") The interim period results are subject~~nature, necessary to ~~variation and are not necessarily indicative of the results of operations to be expected~~provide a fair financial statement presentation for the ~~full fiscal year.~~periods presented. The condensed consolidated balance sheet for April 2, 2022 was derived from audited financial statements. The financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated. The unaudited condensed consolidated financial statements and accompanying notes should be reviewed in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2022, filed with the Securities and Exchange Commission (“SEC”) on May 27, 2022.

The Company’s fiscal year ends on the Saturday closest to the last day of March. The Company’s current and prior fiscal ~~year ends~~years end on April 1, 2023 and April 2, 2022, respectively, and ~~consists~~both consist of 52 weeks. The ~~Company's prior fiscal year~~three months ended ~~on April~~July 2, 2022 and July 3, 2021 ~~and consisted~~both consist of 5313 weeks. ~~The three and nine months ended January 1, 2022 and December 26, 2020 each contain 13 and 39 weeks, respectively.~~

~~Risks and uncertainties~~

The Company is subject to a greater degree of uncertainty than normal in making the judgments and estimates needed to apply its significant accounting policies due to the ongoing COVID-19 pandemic and supply chain disruptions. The Company has assessed accounting estimates and other matters, including those using prospective financial information, using information that is reasonably available as of the issuance date of the condensed consolidated financial statements. The accounting estimates and other matters the Company has assessed included, but were not limited to, impairment of goodwill and other long-lived assets, provisions for doubtful accounts, valuation allowances for deferred tax assets, inventory and related reserves, and revenue recognition and related reserves. The Company may make changes to these estimates and judgments, which could result in material impacts to the condensed consolidated financial statements in future periods. The extent and duration of the impact of the COVID-19 pandemic and the shortage of adequate component supply on the Company's business is highly uncertain and difficult to predict. The Company relies on contract manufacturers and sourcing of materials from the Asia Pacific region, as well as its owned manufacturing facility in Mexico. The Company has experienced disruptions in both its own supply chain as well as those of its contract manufacturers and suppliers both as a result of COVID-19 as well as the global shortage of key components. Such disruptions have had, and may continue to have, a material impact on the Company's ability to source critical component parts, complete production of its products, fulfill customer orders, and adversely affect the ability to meet customer demands as companies utilize work-from-home and hybrid work models. Additionally, if a significant number of the Company's workforce employed in any of these manufacturing facilities or in the Company's offices were to contract the virus, the Company may experience delays or the inability to develop, produce, and deliver the Company's products on a timely basis. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic and the supply chain disruptions, and it is possible that it could cause a local and/or global economic recession.

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The severity of the impact of the COVID-19 pandemic and supply chain disruptions on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of these factors and the extent and severity of the impact on its customers and suppliers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, including potential write-offs due to financial weakness and/or bankruptcy of its customers, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers and suppliers.

As of the issuance date of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic and supply chain disruptions may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

~~Reclassifications~~0Reclassifications

Certain prior year amounts have been reclassified for consistency with current year presentation. Each of the reclassifications was immaterial and had no effect on the Company's results of operations or cash flows.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) did not and are not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

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3. DEFERRED COMPENSATION

~~As of January 1, 2022, the~~The Company ~~held~~holds investments in mutual funds ~~with a fair value totaling $17.0 million, whose holdings are~~comprised of publicly traded debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability was $17.0 million as of January 1, 2022. As of April 3, 2021, the Company held investments in mutual funds with a fair value totaling $14.6 million, all of which related to debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. The total related deferred compensation liability as of April 3, 2021 was $14.6 million. TheThese investments are recorded at fair value inand classified as short-term investments in ~~the~~its condensed consolidated balance sheets. The corresponding deferred compensation plan liability is recorded in accrued liabilities and other non-current liabilities in ~~the~~its condensed consolidated balance sheets. As of July 2, 2022 and April 2, 2022, the fair value of these investments were $11.9 million and $13.7 million, respectively. As of July 2, 2022 and April 2, 2022, the related deferred compensation plan liability was $11.9 million and $13.7 million, respectively.

4. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS

Accounts receivable, net

(in thousands) January 1, 2022 April 3, 2021
Accounts receivable $ 358,877 $ 352,108
Provisions for promotions, rebates, and other (82,155) (82,315)
Provisions for doubtful accounts and sales allowances (809) (2,329)
Accounts receivable, net $ 275,913 $ 267,464

The Company maintains a provision for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company regularly performs credit evaluations of its customers’ financial conditions and considers factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks, and economic conditions that may affect a customer's ability to pay.


(in thousands)	July 2, 2022		April 2, 2022
Accounts receivable	$	359,643	$	381,744

Provisions for promotions and rebates	(84,190)		(102,499)
Provisions for doubtful accounts and sales allowances	(514)		(1,321)
Accounts receivable, net	$	274,939	$	277,924

Inventory, net


(in thousands)	(in thousands)	January 1, 2022		April 3, 2021		(in thousands)	July 2, 2022		April 2, 2022
Raw materials	Raw materials	$	85,820	$	87,050	Raw materials	$	94,943	$	90,192
Work in process	Work in process	3,277		9,511		Work in process	1,164		1,656
Finished goods	Finished goods	127,653		97,844		Finished goods	149,082		142,254
Inventory, net	Inventory, net	$	216,750	$	194,405	Inventory, net	$	245,189	$	234,102

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Accrued Liabilities


(in thousands)	(in thousands)	January 1, 2022		April 3, 2021		(in thousands)	July 2, 2022		April 2, 2022
Short-term deferred revenue	Short-term deferred revenue	$	132,498	$	141,375	Short-term deferred revenue	$	122,412	$	128,339
Employee compensation and benefits	Employee compensation and benefits	65,757		84,318		Employee compensation and benefits	67,804		69,011
Operating lease liabilities, current		16,504		21,701
Warranty obligation		16,044		14,774

Provision for returns	Provision for returns	14,133		25,133		Provision for returns	17,520		17,672

Accrued other	Accrued other	83,615		106,783		Accrued other	109,483		123,814
Accrued liabilities	Accrued liabilities	$	328,551	$	394,084	Accrued liabilities	$	317,219	$	338,836

The Company's warranty obligation is recorded in accrued liabilities and other non-current liabilities in the condensed consolidated balance sheets. Changes in the warranty obligation during the ~~nine~~three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021 were as follows:


		Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Warranty obligation at beginning of period	Warranty obligation at beginning of period	$	17,384	$	15,261	Warranty obligation at beginning of period	$	18,711	$	17,384

Warranty provision related to products shipped	Warranty provision related to products shipped	13,179		17,092		Warranty provision related to products shipped	4,733		4,157
Deductions for warranty claims processed	Deductions for warranty claims processed	(19,424)		(12,736)		Deductions for warranty claims processed	(6,494)		(6,800)
Adjustments related to preexisting warranties	Adjustments related to preexisting warranties	8,307		(4,097)		Adjustments related to preexisting warranties	1,848		3,603
Warranty obligation at end of period	Warranty obligation at end of period	$	19,446	$	15,520	Warranty obligation at end of period	$	18,798	$	18,344

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5. PURCHASED INTANGIBLE ASSETS

As of ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, the carrying value of purchased intangible assets ~~excluding fully amortized assets and goodwill,~~ is as follows:


		January 1, 2022							April 3, 2021							July 2, 2022							April 2, 2022
(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing Assets	Amortizing Assets														Amortizing Assets
Existing technology	Existing technology	$	427,123	$	(325,787)	$	101,336	1.6 years	$	427,123	$	(277,071)	$	150,052	Existing technology	$	429,923	$	(358,575)	$	71,348	1.1 years	$	429,923	$	(342,103)	$	87,820
Customer relationships	Customer relationships	240,024		(156,441)		83,583		2.5 years	240,024		(128,740)		111,284		Customer relationships	240,024		(173,157)		66,867		2.0 years	240,024		(164,799)		75,225
Trade name/Trademarks	Trade name/Trademarks	115,600		(44,955)		70,645		5.5 years	115,600		(35,322)		80,278		Trade name/Trademarks	115,600		(51,378)		64,222		5.0 years	115,600		(48,167)		67,433
Total intangible assets	Total intangible assets	$	782,747	$	(527,183)	$	255,564	3.0 years	$	782,747	$	(441,133)	$	341,614	Total intangible assets	$	785,547	$	(583,110)	$	202,437	2.6 years	$	785,547	$	(555,069)	$	230,478

During the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and July 3, 2021, the Company recognized amortization expense of $~~27.8~~28.0 million and ~~$86.0~~$30.4 million, respectively. ~~During the three and nine months ended December 26, 2020, the Company recognized~~

Future amortization expense attributable to purchased intangible assets as of ~~$30.7 million and $94.5 million, respectively.~~July 2, 2022 was as follows:


(in thousands)	Amount
2023 (remaining nine months)	84,124
2024	66,869
2025	22,544
2026	12,844
2027	12,844
Thereafter	3,212
Total	$	202,437

1210

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~~Expected amortization expense attributable to purchased intangible assets for each of the next five years and thereafter as of January 1, 2022 is as follows:~~

(in thousands) Amount
2022 (remaining three months) 27,808
2023 111,232
2024 65,936
2025 21,688
2026 12,844
Thereafter 16,056
Total $ 255,564

6. COMMITMENTS AND CONTINGENCIES

Future Minimum Lease Payments

Future minimum lease payments under non-cancelable operating leases as of ~~January 1,~~July 2, 2022 were as follows:


(in thousands)	(in thousands)	Operating Leases(1)		(in thousands)	Operating Leases(1)
2022 (remaining three months)		$	6,443
2023		14,875
2023 (remaining nine months)				2023 (remaining nine months)	$	9,983
2024	2024	13,419		2024	12,485
2025	2025	9,669		2025	9,166
2026	2026	8,100		2026	7,956
2027				2027	6,344
Thereafter	Thereafter	17,244		Thereafter	10,802
Total lease payments	Total lease payments	69,750		Total lease payments	56,736
Less: Imputed interest(2)	Less: Imputed interest(2)	(7,958)		Less: Imputed interest(2)	(6,167)
Present value of lease liabilities	Present value of lease liabilities	$	61,792	Present value of lease liabilities	$	50,569

(1) The weighted average remaining lease term was ~~4.8~~4.9 years as of ~~January 1,~~July 2, 2022.

(2) The weighted average discount rate was ~~4.6%~~4.5% as of ~~January 1,~~July 2, 2022.

Unconditional Purchase Obligations

The Company's off-balance sheet unconditional purchase obligations are comprised of third-party manufacturing, component purchases, and other general and administrative commitments.

We use several contract manufacturers to manufacture raw materials, components, and subassemblies for our products through our supply and demand information that can cover periods up to 78 weeks. The contract manufacturers use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers using a combination of purchase orders, supplier contracts, including annual minimum purchase obligations, and open orders based on projected demand information. ~~As of January 1, 2022, we had outstanding off-balance sheet third-party manufacturing, component purchase, and other general and administrative commitments of~~

~~$615.5 million, including off-balance sheet consigned inventories of~~ ~~$65.3 million~~.

A substantial portion of the raw materials, components, and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our ~~condensed~~ consolidated balance sheets until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the risk of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results.

As of July 2, 2022, the Company had outstanding off-balance sheet unconditional purchase obligations of $687.6 million, including third-party manufacturing and component purchases of $557.0 million net of consigned inventories of $77.4 million. We expect to consume unconditional purchase obligations in the normal course of business, net of an immaterial purchase commitments reserve. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs in partnering with our suppliers given the current environment.

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Other Guarantees and Obligations

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets of a subsidiary, matters related to the Company's conduct of business and tax matters prior to the sale. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various triggering events relating to the sale and use of its products and services.

In addition, the Company also provides indemnification to customers against claims related to undiscovered liabilities, additional product liability, or environmental obligations. The Company has also entered into indemnification agreements with

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its directors, officers, and certain other personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers of the Company or certain of its affiliated entities. The Company maintains director and officer liability insurance, which may cover certain liabilities arising from its obligation to indemnify its directors, officers, and certain other personnel in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these agreements due to the limited history of prior claims and the unique facts and circumstances involved in each particular claim. Such indemnification obligations might not be subject to maximum loss clauses. Historically, the Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in the condensed consolidated financial statements.

As of July 2, 2022, the Company had $28.7 million in off balance-sheet contractual obligations related to advisory services performed in connection with the Merger Agreement which are contingent upon the close of the Merger.

Claims and Litigation

On January 23, 2018, FullView, Inc. filed a complaint in the United States District Court of the Northern District of California against Polycom, Inc. (“Polycom”) alleging infringement of two patents and thereafter filed a similar complaint in connection with the ~~same~~counterpart patents in Canada. Polycom thereafter filed anpetitions for inter ~~partes reexamination ("IPR"~~parties review (“IPR”) of ~~one~~both patents U.S. Patent Trial and Appeal Board (“PTAB”), the results of ~~the patents,~~ which ~~was then~~were appealed to the Court of Appeals for the Federal ~~Circuit Court.~~Circuit. Litigation in both matters in the United States and Canada, respectively, were stayed pending the results of that appeal. ~~Polycom also filed an IPR of~~Subsequent to the ~~second patent and the U.S. Patent Trial and Appeal Board (“PTAB”) denied institution of the IPR petition.~~appeal, FullView ~~also~~ initiated arbitration proceedings under a terminated license agreement with Polycom alleging that Polycom had failed to pay certain royalties due under that agreement. The arbitration panel awarded an immaterial amount to FullView. FullView filed a First and Second Amended Complaint and Polycom filed a motion to dismiss. The Court granted Polycom's partial motion to dismiss without prejudice and invalidated one of the patents in ~~suit. Litigation~~suit and granted FullView's motion of validity on the ~~remaining~~second patent. On June 30, 2022, FullView filed a motion for summary judgment on infringement of the ‘143 patent ~~is ongoing.~~and the Company filed its opposition in July. These motions currently are tentatively scheduled to be heard by the Court on September 29, 2022. Discovery continues in this matter.

On June 21, 2018, directPacket Research Inc. (“directPacket”) filed a complaint alleging patent infringement by Polycom ~~Inc.~~ in the United States District Court for the Eastern District of Virginia, Norfolk Division. The Court granted Polycom’s Motion to Transfer Venue to the Northern District of California. Polycom filed petitions for IPR of the asserted patents which were granted by the PTAB. The District Court matter was stayed pending resolution of the IPRs. After oral argument, ~~held in October 2020, on January 11, 2021,~~ the PTAB issued final written decisions invalidating two of the asserted patents. The remaining claims of the third patent were unasserted against the Company. ~~On February 12, 2021,~~ directPacket ~~filed a notice of appeal~~appealed the PTAB decision regarding the '588 patent and Polycom appealed the PTAB's decision on the '978 patent to the United States Court of Appeals for the Federal Circuit with respect to the PTAB’s final written decision regarding the ’588 patent. On March 15, 2021, Polycom filed a notice of appeal to the United States Court of Appeals for the Federal Circuit with respect to the PTAB’s final written decision regarding the ’978 patent.Circuit. On December 13, 2021, the Court issued an affirmance of the decision regarding the invalidity of all asserted claims of the ‘978 patent. On January 27, 2022, the Court vacated the PTAB’s finding that certain claims of the '588 patent were invalid as obvious and remanded the case for further proceedings at the PTAB. ~~Litigation is ongoing.~~The PTAB agreed with Polycom that additional briefing was needed to decide the issue of invalidity in light of the Federal Circuit’s revised claim construction. The district court case remains stayed pending the PTAB decision.

On November 15, 2019, Felice Bassuk, individually and on behalf of others similarly situated, filed a complaint against the Company, its former CEO, Joseph Burton, its CFO, Charles Boynton, and its former CFO, Pamela Strayer, alleging various securities law violations. The Company disputes the allegations. The Court appointed lead plaintiff and lead counsel and renamed the action “In re Plantronics, Inc. Securities Litigation” on February 13, 2020. Plaintiffs filed the amended complaint on June 5, 2020 and the Company filed a Motion to Dismiss the Amended Complaint on August 7, 2020. ~~Plaintiffs filed their opposition on October 2, 2020 and the Company replied on November 16, 2020.~~ The hearing scheduled for January 13, 2021 was vacated and on March 29, 2021, the Court issued its order granting the Company’s motion to dismiss, but allowing the Plaintiffs leave to amend their complaint. On April 13, 2021, pursuant to the parties’ mutual agreement, the Court issued its order granting a stipulation and scheduling order which provides the plaintiffs until June 15, 2021 (subsequently extended to June 22, 2021) to consider whether or not to file a second amended complaint, and if filed, allowing defendants until August 16, 2021 to file a motion to dismiss, with plaintiffs’ opposition to such motion due on or before September 30, 2021, and with

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~~defendants’ reply to be filed on or before November 1, 2021.~~ The Plaintiff filed its second amended complaint on June 22, 2021 and the Company filed its Motion to Dismiss on September 7, 2021. The court is expected to rule based on the briefs without a hearing and the parties are awaiting the court's ruling.

On December 17, 2019, Cisco Systems, Inc. (“Cisco”) filed a First Amended Complaint for Trade Secret Misappropriation against Plantronics, Inc. and certain individuals which amends a previously filed complaint against certain other individuals. The Company disputes the allegations. The Company filed a Motion to Dismiss and the Court granted the Motion with leave to amend as to defendants He, Chung and Williams, granted the Motion to Compel Arbitration for defendant Williams and granted in part and denied in part the Motion to Dismiss by defendants Puorro and the Company. Cisco filed an Amended Complaint and the defendants moved to dismiss or strike portions of the Amended Complaint. The Court granted in part and denied in part the Motion to Dismiss. On September 10, 2020, the Company filed a Motion for Protective Order and a Motion to Strike and Challenge the Sufficiency of Cisco’s Trade Secret Disclosure. On December 21, 2020, the Court granted in part and denied in part such Motions. On December 30, 2020, Cisco filed a motion for leave to file a Motion for Reconsideration. On January 11,

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2021 the Company filed its opposition. The Court issued its Case Management and Pretrial order setting a settlement conference which occurred on April 1, 2021. During such mediation conference, the parties were unable to reach settlement. The Texas arbitration proceeding between Mr. Williams and Cisco was settled pursuant to an agreement by the parties, and Mr. Williams was dismissed with prejudice from both that proceeding and from the district court action. On August 13, 2021, Mr. He settled with Cisco pursuant to which he will be permanently enjoined and forever prohibited from receiving, using, and/or distributing Cisco Confidential Business Information except in limited circumstances. Discovery is ongoing.

On July 22, 2020, Koss Corporation filed a complaint alleging patent infringement by the Company and Polycom ~~Inc.~~ in the United States District Court for the Western District of Texas, Waco Division. The Company answered the Complaint on October 1, 2020 disputing the claims. On December 18, 2020, the Company filed a Motion to Transfer Venue to the Northern District of ~~California. On January 29, 2021, the plaintiff amended its infringement contentions to add new accused products. On February 12, 2021, the plaintiff filed its opposition to the Motion to Transfer. On~~California which was granted on May 20, ~~2021, the judge granted the Company’s Motion to Transfer Venue to the Northern District of California.~~2021. On November 1, 2021, the Company filed a Motion to Dismiss the suit with the District Court on the grounds of non-patentable subject matter. The Court will rule based on the briefs without a hearing and the parties are awaiting the Court's ruling.

During the months of May through June 2022, seven purported stockholders commenced separate actions against the Company and its directors related to the Merger. Those cases were: Stein v. Plantronics, Inc., et al., Civil Action No. 22-cv-03574, filed in the United States District Court for the Southern District of New York on May 3, 2022; Whitfield v. Plantronics, Inc., et al., Civil Action No. 22-cv-02583, filed in the United States District Court for the Eastern District of New York on May 5, 2022; Vicknair v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-02753, filed in the United States District Court for the Eastern District of New York on May 11, 2022; Justice, II v. Plantronics, Inc., et al., No. 2:22-cv-01861, filed in United States District Court for the Eastern District of Pennsylvania on May 12, 2022; Hansen v. Plantronics, Inc., et al., Civil Action No. 5:22-cv-02989-VKD, filed in the United States District Court for the Northern District of California on May 20, 2022; Nathan v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-04461, filed in the United States District Court for the Southern District of New York on May 31, 2022; and Finger v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-03288, filed in the United States District Court for the Eastern District of New York on June 3, 2022. We refer to the complaints referenced in this paragraph collectively as the “Complaints.” The Complaints asserted claims against all defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and against the individual defendants under Section 20(a) of the Exchange Act for alleged “control person” liability, with respect to allegedly false or misleading statements in the Company’s preliminary proxy statement filed on May 2, 2022 and/or the Company’s definitive proxy statement filed on May 17, 2022. The Complaints sought, among other relief (1) to enjoin defendants from consummating the Merger; (2) to rescind the Merger or recover damages, if the Merger is completed; (3) to require the individual defendants to issue a revised proxy statement; (4) declaratory relief; and (5) attorneys’ fees and costs. All of the Complaints were voluntarily dismissed with prejudice in June and July 2022 prior to the consummation of the Merger.

In addition to the specific matters discussed above, the Company is involved in various legal proceedings and investigations arising in the normal course of conducting business. Where applicable, in relation to the matters described above, the Company has accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to the Company's financial condition, results of operations, or cash flows. The Company is not able to estimate an amount or range of any reasonably possible loss, including in excess of any amount accrued, because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings.

However, based upon the Company's historical experience, the resolution of these proceedings is not expected to have a material effect on the Company's financial condition, results of operations or cash flows. The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.

7. DEBT

The carrying value of the Company's outstanding debt as of ~~January 1,~~July 2, 2022 and April ~~3, 2021~~2, 2022 was as follows:


(in thousands)	(in thousands)	January 1, 2022		April 3, 2021		(in thousands)	July 2, 2022		April 2, 2022
4.75% Senior Notes	4.75% Senior Notes	$	494,549	$	493,985	4.75% Senior Notes	$	494,925	$	494,737
5.50% Senior Notes		—		478,807

Term loan facility	Term loan facility	1,004,679		1,002,079		Term loan facility	1,006,412		1,005,546

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As of ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, the net unamortized discount, premium, and debt issuance costs on the Company's outstanding debt were ~~$17.6~~$15.5 million and ~~$22.6~~$16.5 million, respectively.

4.75% Senior Notes

On March 4, 2021, the Company issued $500.0 million aggregate principal amount of 4.75% Senior Notes. The 4.75% Senior Notes mature on March 1, 2029 and bear interest at a rate of 4.75% per annum, payable semi-annually on March 1 and

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September 1 of each year, commencing on September 1, 2021. The Company received proceeds of $493.9 million from issuance of the 4.75% Senior Notes, net of issuance costs of $6.1 million, which are presented in the condensed consolidated balance sheets as a reduction to the outstanding amount payable and are being amortized to interest expense using the straight-line method, which approximates the effective interest method for this debt, over the term of the 4.75% Senior Notes. A portion of the proceeds was used to repay the outstanding principal of the 5.50% Senior Notes on May 17, 2021.

The Company may redeem all or part of the 4.75% Senior Notes, upon not less than a 15-day or more than a 60-day notice, however, the applicable redemption price will be determined as follows:

Redemption Period Requiring Payment of:

Redemption Up To 40% Using Cash Proceeds From An Equity Offering (3)

Make-Whole (1)

Premium (2)

Date

Specific Price

4.75% Senior Notes

Prior to March 1, 2024

On or after March 1, 2024

Prior to March 1, 2024

104.75%

(1) If the Company redeems the notes prior to the applicable date, the price is principal plus a make-whole premium, which means, the greater of (i) 1.0% of the principal or (ii) the excess of the present value of the redemption price at March 1, 2024 plus interest through March 1, 2024 over the principal amount.

(2) If the Company redeems the notes on or after the applicable date, the price is principal plus a premium which declines over time, as specified in the applicable indenture, together with accrued and unpaid interest.

(3) If the Company redeems the notes prior to the applicable date with net cash proceeds of one or more equity offerings, the price is equal to the amount specified above, together with accrued and unpaid interest, subject to a maximum redemption of 40% of the aggregate principal amount of the respective note being redeemed and at least 50% of the aggregate principal amount remains outstanding immediately after any such redemption (unless the notes are redeemed or repurchased substantially concurrently).

In addition, upon the occurrence of certain change of control triggering events, the Company may be required to repurchase the 4.75% Senior Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The 4.75% Senior Notes contain restrictive covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments and other restricted payments, transfer and sell assets, create liens, enter into transactions with affiliates, and engage in mergers, consolidations, or sales of assets.

On June 27, 2022, in connection with the Merger, HP announced that it commenced (i) an offer to exchange (the “Exchange Offer”) any and all outstanding 4.75% Senior Notes issued by Poly for up to $500,000,000 aggregate principal amount of new notes to be issued by HP and cash and (ii) the related solicitation of consents (the “Consent Solicitation” and, together with the Exchange Offer, the “Exchange Offer and Consent Solicitation”) to adopt the Amendments (as defined below) to the indenture (the “Indenture”) governing the 4.75% Senior Notes. On July 19, 2022, HP announced that the requisite number of consents have been received to adopt the Amendments with respect to all outstanding 4.75% Senior Notes. On July 25, 2022, Poly entered into a supplemental indenture (the “Supplemental Indenture”) to the Indenture implementing the Amendments.

The proposed amendments (the “Amendments”) contained in the Supplemental Indenture will amend the Indenture to, among other things, eliminate from the Indenture (i) substantially all of the restrictive covenants, (ii) certain of the events which may lead to an “Event of Default”, (iii) the restrictions on Poly consolidating with or merging into another person or conveying, transferring or leasing all or any of its properties and assets to any person, (iv) the reporting covenant and (v) the obligation to offer to purchase the 4.75% Senior Notes upon certain change of control transactions (including the Merger). The Amendments will only become operative upon the settlement of the Exchange Offer, which is expected to occur promptly after the Expiration Date (as defined in the exchange offer memorandum and consent solicitation statement, dated June 27, 2022 and as amended from time to time) and no earlier than the closing date of the Merger.

The foregoing description of the Supplemental Indenture does not purport to be complete and is qualified in its entirety by reference to the Supplemental Indenture, a copy of which is attached as Exhibit 4.1 to the Current Report on Form 8-K filed by Poly with the SEC on July 27, 2022.

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5.50% Senior Notes

In May 2015, the Company issued $500.0 million aggregate principal amount of 5.50% Senior Notes. The 5.50% Senior Notes mature on May 31, 2023, and bear interest at a rate of 5.50% per annum, payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 2015. The Company received net proceeds of $488.4 million from issuance of the 5.50% Senior Notes, net of issuance costs of $11.6 million, which are being amortized to interest expense over the term of the 5.50% Senior Notes using the straight-line method, which approximates the effective interest method for this debt. A portion of the proceeds was used to repay all then-outstanding amounts under the Company's revolving line of credit agreement with Wells Fargo Bank and the remaining proceeds were used primarily for share repurchases.

On May 17, 2021, the Company used a portion of the proceeds from the 4.75% Senior Notes to redeem the outstanding principal and accrued interest of the 5.50% Senior Notes of $493.9 million.

Term Loan Facility

In connection with the acquisition of Polycom completed on July 2, 2018, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (the “Credit Agreement.”) The Credit Agreement replaced the Company’s prior revolving credit facility in its entirety. The Credit Agreement provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100 million that matures in July 2023 and (ii) a $1.275 billion term loan facility priced at LIBOR plus 2.50% due in quarterly principal installments commencing on the last business day of March, June, September and December beginning with the first full fiscal quarter ending after the closing date under the Credit Agreement for the aggregate principal amount funded on the closing date under the Credit Agreement multiplied by 0.25% (subject to prepayments outlined in the Credit Agreement) and all remaining outstanding principal due at maturity in July 2025. The Company has paid the full amount of term debt principal due prior to maturity. The Company borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs which are being amortized to interest expense over the term of the Credit Agreement using the straight-line method, which approximates the effective interest method for this debt. The proceeds from the initial borrowing under the Credit Agreement were used to finance the acquisition of Polycom, to refinance certain debt of Polycom, and to pay related

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fees, commissions and transaction costs. The Company has additional borrowing capacity under the Credit Agreement through the revolving credit facility, which could be used to provide ongoing working capital and capital for other general corporate purposes of the Company and its subsidiaries. The Company’s obligations under the Credit Agreement are currently guaranteed by Polycom and will from time to time be guaranteed by, subject to certain exceptions, any domestic subsidiaries that may become material in the future. Subject to certain exceptions, the Credit Agreement is secured by first-priority perfected lien on, and security interests in, substantially all of the personal property of the Company and each subsidiary guarantor and will from time to time also be secured by certain material real property that the Company or any subsidiary guarantor may acquire. Borrowings under the Credit Agreement bear interest due on a quarterly basis at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) the prime rate publicly announced from time to time by Wells Fargo Bank, National Association, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin. The Company must also pay (i) an unused commitment fee ranging from 0.200% to 0.300% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement, and (ii) a per annum fee equal to (a) for each performance standby letter of credit outstanding under the Credit Agreement with respect to non-financial contractual obligations, 50% of the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit, and (b) for each other letter of credit outstanding under the Credit Agreement, the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit.

On December 29, 2021, the Company entered into Amendment No. 3 to Credit Agreement (“Amendment No. 3”) by and among the Company, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent. Amendment No. 3 amended the Credit Agreement, as previously amended, to (i) increase the maximum Secured Net Leverage Ratio (as defined in the Credit Agreement) permitted to 3.75 to 1.00 as of the end of any fiscal quarter ending during the period beginning on January 2, 2022 through December 31, 2022 and to 3.00 to 1.00 as of the end of any fiscal quarter ending thereafter, except that the maximum Secured Net Leverage Ratio shall be deemed to be 3.00 to 1.00 at all times for purposes of determining pro forma compliance with each Specified Pro Forma Financial Covenant Test (as defined in the Credit Agreement).

Additionally, Amendment No. 3 modified the calculation of the Secured Net Leverage Ratio solely for purposes of determining compliance with Section 7.11(a) of the Credit Agreement for any fiscal quarter ending between January 2, 2022 through December 31, 2022 by amending the definition of Consolidated EBITDA to (a) limit the aggregate amount added back pursuant

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to clause (vii) thereof (relating to certain acquisition expenses) to the greater of $30,000,000 and 10% of Consolidated EBITDA for such Measurement Period (as defined in the Credit Agreement) (calculated before giving effect to any such expenses to be added back pursuant to such clause (vii) for such Measurement Period), (b) limit the aggregate amount added back pursuant to clause (vii) thereof in respect of integration expenses related to the Polycom Acquisition (as defined in the Credit Agreement) to $30,000,000, and (c) limit the aggregate amount added back pursuant to clause (viii) thereof (relating to certain non-recurring or unusual items reducing consolidated net income) to the greater of $30,000,000 and 10% of Consolidated EBITDA for such Measurement Period (calculated before giving effect to any such items to be added back pursuant to such clause (viii) for such Measurement Period).

The financial covenants under the Credit Agreement, as amended, are for the benefit of the revolving credit lenders only and do not apply to any other debt of the Company. The Credit Agreement also contains various other restrictions and covenants, some of which have become more stringent over time, including restrictions on our, and certain of our subsidiaries, ability to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, consummate acquisitions, make investments, and pay dividends and other distributions. The Company has the unilateral ability to terminate the revolving line of credit such that the financial covenants described above are no longer applicable. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if the Company, any subsidiary guarantor or, with certain exceptions, any other subsidiary becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) while a payment or bankruptcy event of default exists or (ii) upon the lenders’ request, during the continuance of any other event of default. As of ~~January 1,~~July 2, 2022, the Company was in compliance ~~with~~with all financial covenants.

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The Company may prepay the loans and terminate the commitments under the Credit Agreement at any time without penalty. Additionally, the Company is subject to mandatory debt repayments five business days after the filing of its consolidated financial statements for any annual period in which the Company generates Excess Cash (as defined in the Credit Agreement). In accordance with the terms of the Credit Agreement, the Company did not generate Excess Cash during the fiscal year ended April ~~3, 2021~~2, 2022 and therefore is not required to make any debt repayments in the fiscal year ended April ~~2, 2022.~~1, 2023. During the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022, the ~~Compa~~Comp~~ny d~~idany did not prepay any aggregate principal amount of the term loan facility. As of ~~January 1,~~July 2, 2022, the Company had 53 letters of credit outstanding under the revolving credit facility for a total of ~~$2.9 million.~~$2.4 million.

8. RESTRUCTURING AND OTHER RELATED CHARGES

~~Summary of Restructuring Plans~~

~~Fiscal Year 2022 Restructuring Plan~~

~~During the nine months ended January 1, 2022, the~~The Company has committed to actions to reduce expenses to enable strategic investments in revenue growth. ~~The costs incurred to date under this plan~~These actions include severance benefits related to headcount reductions in the Company's global workforce, ~~and~~ facility related charges due to the closure or consolidation of ~~offices.~~

~~Fiscal Year 2021 Restructuring Plan~~

During Fiscal Year 2021, the Company committed to additional actions to reduce expenses and align its overall cost structure better with projected revenue levels, as well as reorganize its executive management to align to its new Chief Executive Officer's management structure. The costs incurred to date under this plan include severance benefits related to headcount reductions in the Company's global workforce and facility related charges due to the closure or consolidation of leased offices.

~~Legacy Restructuring Plans~~

In connection with the Polycom acquisition, in Fiscal Years 2019 and 2020 the Company initiated actions to rationalize post-acquisition operations and realign its cost structure. These actions included streamlining the global workforce, closure or consolidation of leased offices, ~~and distribution centers, consumer product portfolio optimization efforts,~~ and legal entity rationalization.

~~The following table summarizes the restructuring~~Restructuring and other related charges recognized in the Company's condensed consolidated statements of ~~operations:~~operations is as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Severance	Severance	$	191	$	3,969	$	19,592	$	27,161	Severance	$	(422)	$	19,301
Facility	Facility	—		1,658		(503)		3,300		Facility	151		(472)
Other (1)	Other (1)	374		1,107		5,285		3,416		Other (1)	132		4,103
Total cash charges	Total cash charges	565		6,734		24,374		33,877		Total cash charges	(139)		22,932
Non-cash charges (2)	Non-cash charges (2)	1,833		7,243		9,603		15,600		Non-cash charges (2)	90		6,040
Total restructuring and other related charges	Total restructuring and other related charges	$	2,398	$	13,977	$	33,977	$	49,477	Total restructuring and other related charges	$	(49)	$	28,972

(1) Other costs primarily represent associated legal and advisory services.

(2) Non-cash charges primarily represent accelerated depreciation due to the closure or consolidation of facilities.

1816

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~~The~~Changes in the Company's restructuring liabilities ~~as of January 1,~~during the three months ended July 2, 2022 are as follows:


(in thousands)	(in thousands)	As of April 3, 2021		Accruals (1)		Cash Payments		As of January 1, 2022		(in thousands)	As of April 2, 2022		Accruals (1)		Cash Payments		As of July 2, 2022
Fiscal Year 2022 Plan

Severance	Severance	$	—	$	20,281	$	(15,577)	$	4,704	Severance	$	4,502	$	(422)	$	(2,244)	$	1,836
Facility	Facility	—		—		—		—		Facility	642		151		(490)		303
Other	Other	—		5,313		(5,228)		85		Other	85		132		(125)		92
Total Fiscal Year 2022 Plan		$	—	$	25,594	$	(20,805)	$	4,789

Fiscal Year 2021 Plans
Severance		$	6,039	$	(720)	$	(3,475)	$	1,844
Facility		913		83		(465)		531
Other		186		(28)		(158)		—
Total Fiscal Year 2021 Plans		$	7,138	$	(665)	$	(4,098)	$	2,375

Legacy Plans
Severance		$	1,222	$	31	$	(813)	$	440
Facility		3,281		(586)		(1,799)		896
Other		—		—		—		—
Total Legacy Plans		$	4,503	$	(555)	$	(2,612)	$	1,336

Total	Total									Total	$	5,229	$	(139)	$	(2,859)	$	2,231
Severance		$	7,261	$	19,592	$	(19,865)	$	6,988
Facility		4,194		(503)		(2,264)		1,427
Other		186		5,285		(5,386)		85
Grand Total		$	11,641	$	24,374	$	(27,515)	$	8,500

(1) Excludes non-cash charges ~~of $9.6 million~~ recorded in restructuring and other related charges in the condensed consolidated statements of operations for the ~~nine~~three months ended ~~January 1,~~July 2, 2022.

9. ACCUMULATED OTHER COMPREHENSIVE INCOME ~~(LOSS)~~

The components of accumulated other comprehensive income, ~~(loss),~~ net of tax, are as follows:


(in thousands)	(in thousands)	January 1, 2022		April 3, 2021		(in thousands)	July 2, 2022		April 2, 2022
Accumulated unrealized gain (loss) on cash flow hedges		$	6,839	$	(7,836)
Accumulated unrealized gain on cash flow hedges						Accumulated unrealized gain on cash flow hedges	$	34,466	$	28,296
Accumulated foreign currency translation adjustments	Accumulated foreign currency translation adjustments	4,615		4,615		Accumulated foreign currency translation adjustments	4,615		4,615

Accumulated other comprehensive income (loss)		$	11,454	$	(3,221)
Accumulated other comprehensive income						Accumulated other comprehensive income	$	39,081	$	32,911

10. DERIVATIVES

Foreign Currency Derivatives

The Company's foreign currency derivatives consist primarily of foreign currency forward and option contracts. The Company does not purchase derivative financial instruments for speculative trading purposes. The derivatives expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the derivative instrument. The Company's maximum exposure to loss as a result of credit risk was equal to the carrying value of the Company's derivative assets as of ~~January 1,~~July 2, 2022 and April ~~3, 2021.~~2, 2022. The Company seeks to mitigate such risk by limiting its counterparties to large financial institutions. In addition, the Company monitors the potential risk of loss with any one counterparty resulting from this type of credit risk on an ongoing basis.

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The Company enters into master netting arrangements with counterparties to mitigate credit risk in derivative transactions, when possible. A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. As of ~~January 1,~~July 2, 2022, the Company had International Swaps and Derivatives Association ~~("ISDA")~~ agreements with 5 applicable banks and financial institutions which contained netting provisions. The Company has elected to present the fair value of derivative assets and liabilities within the Company's condensed consolidated balance sheets on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. Derivatives not subject to master netting agreements are not eligible for net presentation. As of ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, no cash collateral had been received or pledged related to these derivative instruments.

Offsetting of Financial Assets/Liabilities under Master Netting Agreements with Derivative Counterparties

As of ~~January 1,~~July 2, 2022

Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands) Gross Amount of Eligible Offsetting Recognized Derivative Liabilities Cash Collateral Received Net Amount of Derivative Assets
Derivatives subject to master netting agreements $ 10,572 $ (4,915) $ — $ 5,657
Derivatives not subject to master netting agreements — —
Total $ 10,572 $ 5,657

Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands) Gross Amount of Eligible Offsetting Recognized Derivative Assets Cash Collateral Received Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements $ (4,915) $ 4,915 $ — $ —
Derivatives not subject to master netting agreements — —
Total $ (4,915) $ —

~~As of April 3, 2021~~


		Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements							Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)	(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities		Cash Collateral Received		Net Amount of Derivative Assets		(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities		Cash Collateral Received		Net Amount of Derivative Assets
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	5,106	$	(5,106)	$	—	$	—	Derivatives subject to master netting agreements	$	40,032	$	(778)	$	—	$	39,254
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	—						—		Derivatives not subject to master netting agreements	—						—
Total	Total	$	5,106					$	—	Total	$	40,032					$	39,254

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		Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements							Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)	(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Assets		Cash Collateral Received		Net Amount of Derivative Liabilities		(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Assets		Cash Collateral Received		Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	(11,700)	$	5,106	$	—	$	(6,594)	Derivatives subject to master netting agreements	$	(778)	$	778	$	—	$	—
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	—						—		Derivatives not subject to master netting agreements	—						—
Total	Total	$	(11,700)					$	(6,594)	Total	$	(778)					$	—

As of April 2, 2022


	Gross Amount of Derivative Assets Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities		Cash Collateral Received		Net Amount of Derivative Assets
Derivatives subject to master netting agreements	$	31,891	$	(1,800)	$	—	$	30,091
Derivatives not subject to master netting agreements	—						—
Total	$	31,891					$	30,091


	Gross Amount of Derivative Liabilities Presented in the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet that are Subject to Master Netting Agreements
(in thousands)			Gross Amount of Eligible Offsetting Recognized Derivative Assets		Cash Collateral Received		Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements	$	(1,800)	$	1,800	$	—	$	—
Derivatives not subject to master netting agreements	—						—
Total	$	(1,800)					$	—

The gross fair value of the Company's outstanding derivative contracts at ~~January 1,~~July 2, 2022 and April ~~3, 2021~~2, 2022 was as follows:


(in thousands)	(in thousands)	January 1, 2022		April 3, 2021		(in thousands)	July 2, 2022		April 2, 2022
Derivative assets(1)	Derivative assets(1)					Derivative assets(1)
Non-designated hedges	Non-designated hedges	$	317	$	2,864	Non-designated hedges	$	2,314	$	1,590
Cash flow hedges	Cash flow hedges	2,803		2,242		Cash flow hedges	9,194		4,688
Interest rate swaps	Interest rate swaps	7,452		—		Interest rate swaps	28,524		25,613
Total derivative assets	Total derivative assets	$	10,572	$	5,106	Total derivative assets	$	40,032	$	31,891

Derivative liabilities(2)	Derivative liabilities(2)					Derivative liabilities(2)
Non-designated hedges	Non-designated hedges	$	1,134	$	18	Non-designated hedges	$	89	$	39
Cash flow hedges	Cash flow hedges	477		1,819		Cash flow hedges	496		384
Interest rate swaps	Interest rate swaps	3,304		9,863		Interest rate swaps	193		1,377
Accrued interest	Accrued interest	22		102		Accrued interest	(24)		28
Total derivative liabilities	Total derivative liabilities	$	4,937	$	11,802	Total derivative liabilities	$	754	$	1,828

(1) Short-term derivative assets are recorded in other current assets and long-term derivative assets are recorded in other non-current assets on the condensed consolidated balance sheets. As of ~~January 1,~~July 2, 2022, the portion of derivative assets classified as long-term was ~~$6.9~~$11.6 million. As of April ~~3, 2021~~2, 2022, the portion of derivative assets classified as long-term was ~~$0.1~~$16.1 million.

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(2) Short-term derivative liabilities are recorded in accrued liabilities and long-term derivative liabilities are recorded in other non-current liabilities on the condensed consolidated balance sheets. As of ~~January 1,~~July 2, 2022, the portion of derivative liabilities classified as long-term was $0.1 million. As of April ~~3, 2021,~~2,2022, the portion of derivative liabilities classified as long-term was ~~$2.0~~$0.1 million.

Non-Designated Hedges

As of ~~January 1,~~July 2, 2022, the Company had foreign currency forward contracts denominated in Euro ("EUR") and Great Britain Pound Sterling ("GBP.") The Company does not elect to obtain hedge accounting for these forward contracts. These forward contracts hedge against a portion of the Company’s foreign currency-denominated cash balances, accounts receivables, and accounts payables. The following table summarizes the notional value of the Company’s outstanding foreign exchange currency contracts and approximate USD equivalent at ~~January 1,~~July 2, 2022:

(in thousands)

Local Currency

USD Equivalent

Position

Maturity

(in thousands)

Local Currency

USD Equivalent

Position

Maturity

EUR

€

25,000

28,335

Sell EUR

1 month

EUR

€

51,900

54,070

Sell EUR

1 month

GBP

10,400

14,040

Sell GBP

1 month

GBP

7,200

8,664

Sell GBP

1 month

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations

The effect of non-designated derivative contracts on results of operations recognized in other non-operating income, net in the condensed consolidated statements of operations was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Gain (loss) on foreign exchange contracts	Gain (loss) on foreign exchange contracts	$	651	$	(4,440)	$	1,841	$	(7,173)	Gain (loss) on foreign exchange contracts	$	6,713	$	(486)

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Cash Flow Hedges

Costless Collars

The Company hedges a portion of the forecasted EUR and GBP denominated revenues with costless collars. On a monthly basis, the Company enters into option contracts with a six to twelve-month term. Collar contracts are scheduled to mature at the beginning of each fiscal quarter, at which time the instruments convert to forward contracts. The Company also enters into cash flow forwards with a three-month term. Once the hedged revenues are recognized, the forward contracts become non-designated hedges to protect the resulting foreign monetary asset position for the Company.

The notional value of the Company's outstanding EUR and GBP option and forward contracts at the end of each period was as follows:

~~January 1,~~July 2, 2022

April ~~3, 2021~~2, 2022

(in millions)

EUR

GBP

EUR

GBP

Option contracts

€~~77.4~~84.4

£~~15.7~~17.3

€~~91.4~~72.8

£~~18.1~~14.2

Forward contracts

€~~75.0~~69.4

£~~14.0~~13.8

€~~76.0~~68.1

£~~15.6~~14.1

The Company will reclassify all related amounts in accumulated other comprehensive income into earnings within the next twelve months.

Cross-currency Swaps

The Company hedges a portion of the forecasted Mexican Peso (“MXN”) denominated expenditures with a cross-currency swap. As of ~~January 1,~~July 2, 2022, and April ~~3, 2021,~~2, 2022, the Company had foreign currency swap contracts of approximately MXN ~~415.9~~363.0 million and MXN ~~564.3~~572.4 million, respectively.

The following table summarizes the notional value of the Company's outstanding MXN currency swaps and approximate USD Equivalent at ~~January 1,~~July 2, 2022:

(in thousands) Local Currency USD Equivalent Position Maturity
MXN 415,938 $ 19,860 Buy MXN Monthly over a nine month period

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(in thousands)

Local Currency

USD Equivalent

Position

Maturity

MXN

362,970

17,293

Buy MXN

Monthly over a nine month period

The Company will reclassify all related amounts in accumulated other comprehensive income into earnings within the next twelve months.

Interest Rate Swaps

On June 15, 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. The swap involves the receipt of floating-rate interest payments for fixed interest rate payments at a rate of 0.39% over the life of the agreement. Additionally, on July 30, 2018, the Company entered into a four-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022. The swap involves the receipt of floating-rate interest payments for fixed interest rate payments at a rate of 2.78% over the life of the agreement.

The Company has designated the interest rate swaps as cash flow hedges. The purpose of the interest rate swaps is to hedge against changes in cash flows (interest payments) attributable to fluctuations in the Company's variable rate debt. The swaps are valued based on prevailing LIBOR rate curves on the date of measurement. The Company also evaluates counterparty credit risk when it calculates the fair value of the interest rate swaps. Changes in the fair value of the interest rate swaps are recorded to other comprehensive income and are reclassified to interest expense over the life of the underlying debt as interest is accrued. During the ~~nine~~three months ended ~~January 1,~~July 2, 2022, the Company reclassified into interest expense $~~7.6~~0.6 million and had a $~~4.1~~28.3 million unrealized gain on its interest rate swaps derivatives designated as cash flow hedges.

The Company will reclassify approximately ~~$2.7~~$16.9 million in accumulated other comprehensive income into earnings within the next twelve months.

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Effect of Designated Derivative Contracts on Accumulated Other Comprehensive Income (Loss) and Condensed Consolidated Statements of Operations

The following table presents the pre-tax effects of derivative instruments designated as cash flow hedges on accumulated other comprehensive income (loss) and the condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Loss included in accumulated other comprehensive income (loss), as of beginning of period	Loss included in accumulated other comprehensive income (loss), as of beginning of period	$	(3,252)	$	(16,747)	$	(10,062)	$	(20,156)	Loss included in accumulated other comprehensive income (loss), as of beginning of period	$	26,805	$	(10,062)

Gain (loss) recognized in other comprehensive income (loss)	Gain (loss) recognized in other comprehensive income (loss)	7,846		(3,754)		8,520		(8,339)		Gain (loss) recognized in other comprehensive income (loss)	10,094		440

Amount of (gain) loss reclassified from accumulated other comprehensive income (loss) into net revenues	Amount of (gain) loss reclassified from accumulated other comprehensive income (loss) into net revenues	(1,804)		1,054		(671)		1,797		Amount of (gain) loss reclassified from accumulated other comprehensive income (loss) into net revenues	(3,365)		1,772
Amount of gain reclassified from accumulated other comprehensive income (loss) into cost of revenues	Amount of gain reclassified from accumulated other comprehensive income (loss) into cost of revenues	(10)		—		(489)		—		Amount of gain reclassified from accumulated other comprehensive income (loss) into cost of revenues	(446)		(236)
Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense	Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense	2,100		3,039		7,582		10,290		Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense	622		3,089
Total amount of loss reclassified from accumulated other comprehensive income to the condensed consolidated statements of operations		286		4,093		6,422		12,087
Total amount of (gain) loss reclassified from accumulated other comprehensive income to the condensed consolidated statements of operations										Total amount of (gain) loss reclassified from accumulated other comprehensive income to the condensed consolidated statements of operations	(3,189)		4,625

Gain (loss) included in accumulated other comprehensive income (loss), as of end of period	Gain (loss) included in accumulated other comprehensive income (loss), as of end of period	$	4,880	$	(16,408)	$	4,880	$	(16,408)	Gain (loss) included in accumulated other comprehensive income (loss), as of end of period	$	33,710	$	(4,997)

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11. FAIR VALUE MEASUREMENTS

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. In determining fair value, we use various valuation approaches. The hierarchy of those valuation approaches is in three levels based on the reliability of inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following is a summary of the hierarchy levels:

•Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

•Level 3: Inputs are unobservable for the asset or liability.


		Carrying Value at January 1, 2022		Fair Value at January 1, 2022 Using Inputs Considered as:							Carrying Value at July 2, 2022		Fair Value at July 2, 2022 Using Inputs Considered as:
(in thousands)	(in thousands)			Level 1		Level 2		Level 3		(in thousands)			Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	182,700	$	182,700	$	—	$	—	Cash and cash equivalents	$	142,362	$	142,362	$	—	$	—
Short-term investments	Short-term investments	17,017		17,017		—		—		Short-term investments	11,908		11,908		—		—
Derivative instruments	Derivative instruments	10,572		—		10,572		—		Derivative instruments	40,032		—		40,032		—

Liabilities:	Liabilities:									Liabilities:
Derivative instruments	Derivative instruments	$	4,937	$	—	$	4,937	$	—	Derivative instruments	$	754	$	—	$	754	$	—
Long-term debt	Long-term debt	1,499,228		—		1,474,436		—		Long-term debt	1,501,337		—		1,507,708		—


		Carrying Value at April 3, 2021		Fair Value at April 3, 2021 Using Inputs Considered as:							Carrying Value at April 2, 2022		Fair Value at April 2, 2022 Using Inputs Considered as:
(in thousands)	(in thousands)			Level 1		Level 2		Level 3		(in thousands)			Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	202,560	$	202,560	$	—	$	—	Cash and cash equivalents	$	170,000	$	170,000	$	—	$	—
Restricted cash		493,908		493,908		—		—

Short-term investments	Short-term investments	14,559		14,559		—		—		Short-term investments	13,703		13,703		—		—
Derivative instruments	Derivative instruments	5,106		—		5,106		—		Derivative instruments	31,891		—		31,891		—

Liabilities:	Liabilities:									Liabilities:
Derivative instruments	Derivative instruments	$	11,802	$	—	$	11,802	$	—	Derivative instruments	$	1,828	$	—	$	1,828	$	—
Current portion of long-term debt		478,807		—		482,669		—

Long-term debt	Long-term debt	1,496,064		—		1,497,323		—		Long-term debt	1,500,283		—		1,521,562		—

Valuation Techniques

•Cash and cash equivalents, short-term investments, and restricted cash are classified within Level 1 of the fair value hierarchy. Financial instruments classified as Level 1 are based on quoted market prices in active markets. The types of financial instruments the Company classifies within Level 1 include bank deposits, money market securities, and publicly traded mutual funds. ~~Restricted cash represents the cash held in trust and restricted for use to redeem the 5.50% Senior Notes. Refer to Note 7,~~ ~~Debt~~.

•The Company estimates the fair value of derivatives using pricing models that use observable market inputs. The significant Level 2 inputs used in the valuation of derivatives include spot rates and forward rates. These inputs were obtained from pricing services, broker quotes, and other sources.

•The fair value of long-term debt was determined based on inputs that were observable in the market, including the trading price, when available.

There were no transfers between fair value hierarchy levels during the three months ended July 2, 2022 or July 3, 2021.

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~~The Company did not incur any material realized or unrealized gains or losses in the three and nine months ended January 1, 2022 or December 26, 2020.~~

~~There were no transfers between fair value hierarchy levels during the three and nine months ended January 1, 2022 or December 26, 2020.~~

12. INCOME TAXES

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions. The Company's income tax benefit is determined using an estimated annual effective tax rate, adjusted for discrete items arising during the period. The effective tax rates for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and July 3, 2021 were ~~46.2%~~3.0% and ~~172.2%~~10.4%, respectively. ~~The effective tax rates for the three and nine months ended December 26, 2020 were (53.9)% and 9.6%, respectively.~~

Income tax benefit for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and July 3, 2021 was ~~$(9.6)~~$1.0 million and ~~$(116.4)~~$4.3 million, respectively. Income tax benefit for the three and nine months ended December 26, 2020 was $(7.0) million and $(7.2) million, respectively. During the three months ended October 2, 2021, the Company transferred certain non-Americas intellectual property (“IP”) rights between our wholly-owned subsidiaries ("IP transfer") to align with our evolving business operations, resulting in the derecognition of a deferred tax asset of $91.1 million and the recognition of a new deferred tax asset of $204.3 million, which represents the book and tax basis difference in the IP and was based on the fair value of the IP, in the respective subsidiaries. This results in a net discrete deferred tax benefit of $113.2 million. The impact of the IP transfer to net cash flows on the condensed consolidated statements of cash flows during the nine months ended January 1, 2022 was not material.respectively.

The difference between the effective tax rate and the U.S. federal statutory rate primarily relates to the ~~changes in uncertain~~excess stock tax ~~positions,~~benefit, U.S. and foreign income mix, and the valuation allowance on the U.S. federal and state deferred tax assets ~~(DTAs)~~(“DTAs”) that continues to be maintained as of ~~January 1,~~July 2, 2022.

A significant portion of the Company's DTAs relate to the IP transfer between wholly-owned subsidiaries. At this time, based on evidence currently available, the Company considers it more likely than not that it will have sufficient taxable income in the future that will allow the Company to realize the DTAs; however, failure to generate sufficient future taxable income could result in some or all DTAs not being utilized in the future. If the Company is unable to generate sufficient future taxable income, a substantial valuation allowance to reduce the Company's DTAs may be required.

The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. Significant judgment is required in evaluating our uncertain tax positions and determining the Company's provision for income taxes. During the three months ended ~~January 1,~~July 2, 2022, the amount of gross unrecognized tax benefits decreased by ~~$3.6~~$1.1 million. As of ~~January 1,~~July 2, 2022, the Company has ~~$17.9~~$14.3 million of unrecognized tax benefits, all of which could result in a reduction of the Company’s effective tax rate if recognized. The reduction in gross unrecognized tax benefits is primarily attributable to the lapse of applicable statute of limitations.

In September 2021, we transferred certain non-Americas intellectual property (“IP”) rights between our wholly-owned subsidiaries (“IP transfer”) to align with our evolving business operations, resulting in the derecognition of a deferred tax asset (“DTA”) of $91.1 million and the recognition of a new DTA of $204.5 million, which represents the book and tax basis difference in the IP and was based on the fair value of the IP, in the respective subsidiaries. This results in a net discrete deferred tax benefit of $113.4 million.

Management has concluded that an impairment for local statutory and tax reporting to the aforementioned IP exists and the impairment loss is deductible for local tax purposes. As such, a DTA related to net operating loss carryforward of $48.0 million was recognized, offset by a corresponding decrease in the DTA related to the intangible asset by the same amount as of April 2, 2022. Because the IP intangible asset is the result of an intercompany transfer, there is no intangible asset recognized in the consolidated balance sheets. Accordingly, there is no net impact to the Company’s consolidated statements of operations, balance sheet, or cash flows.

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13. COMPUTATION OF ~~(LOSS) EARNINGS~~LOSS PER COMMON SHARE

Basic (loss) earnings per share is calculated by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and vesting of restricted stock, if the effect is dilutive, in accordance with the treasury stock method. The potentially dilutive effect of outstanding stock options and restricted stock has been excluded from the computation of diluted loss per share in periods where the Company had a net loss, as their effect is anti-dilutive.

The following table sets forth the computation of basic and diluted (loss) earnings per common share for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands, except per share data)	July 2, 2022		July 3, 2021
Numerator:	Numerator:									Numerator:
Net (loss) income		$	(11,164)	$	20,113	$	48,810	$	(68,307)
Net loss										Net loss	$	(33,087)	$	(36,811)

Denominator:	Denominator:									Denominator:
Weighted-average basic shares outstanding	Weighted-average basic shares outstanding	42,745		41,252		42,450		40,894		Weighted-average basic shares outstanding	43,428		42,061
Weighted-average diluted shares outstanding	Weighted-average diluted shares outstanding	42,745		42,184		43,811		40,894		Weighted-average diluted shares outstanding	43,428		42,061

Basic (loss) earnings per common share		$	(0.26)	$	0.49	$	1.15	$	(1.67)
Diluted (loss) earnings per common share		$	(0.26)	$	0.48	$	1.11	$	(1.67)
Basic and diluted loss per common share										Basic and diluted loss per common share	$	(0.76)	$	(0.88)
Diluted loss per common share										Diluted loss per common share	$	(0.76)	$	(0.88)

Potentially dilutive securities excluded from diluted (loss) earnings per common share because their effect is anti-dilutive		383		988		210		1,248
Potentially dilutive securities excluded from diluted loss per common share because their effect is anti-dilutive										Potentially dilutive securities excluded from diluted loss per common share because their effect is anti-dilutive	175		405

14. REVENUE AND ~~MAJOR CUSTOMERS~~

The Company designs, builds, and markets collaboration solutions which combine legendary audio expertise and powerful video and conferencing capabilities to create endpoints that power meaningful human connections and provide solutions that make life easier when they work together and with our partners' services.GEOGRAPHIC INFORMATION

The Company’s major product categories are Headsets, Voice, Video, ~~Voice,~~ and Services. Headsets include wired and wireless communication headsets; Voice includes open SIP and native ecosystem desktop phones as well as conference room phones; Video includes video conferencing solutions and peripherals, such as cameras, speakers, and microphones. The broad portfolio of Services include video interoperability, hardware and support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping customers achieve their goals for collaboration. The Company's cloud management and analytics software enables IT administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior. All of the Company's solutions are designed to integrate seamlessly with the platform and services of our customers choice in a wide range of Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), and Video as a Service ("VaaS") environments. The Company's RealPresence collaboration solutions range from infrastructure to endpoints and allow people to connect and collaborate globally, naturally, and seamlessly.

Product revenue is largely comprised of sales of hardware devices, peripherals, and platform software licenses used in communication and collaboration in offices and contact centers, with mobile devices, cordless phones, and computers. Services revenue primarily includes support on hardware devices, professional, hosted and managed services, and solutions to the Company's customers.

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The following table disaggregates revenues by major product category for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Net revenues	Net revenues									Net revenues
Headsets	Headsets	$	195,479	$	240,908	$	553,452	$	618,498	Headsets	$	175,811	$	172,194
Voice	Voice	53,156		67,076		174,159		156,682		Voice	65,284		61,298
Video	Video	105,387		112,727		358,996		284,666		Video	123,113		137,711
Services	Services	55,544		63,974		173,155		191,529		Services	51,351		59,969
Total net revenues	Total net revenues	$	409,566	$	484,685	$	1,259,762	$	1,251,375	Total net revenues	$	415,559	$	431,172

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For reporting purposes, revenue is attributed to each geographic region based on the location of the customer. ~~Other than the U.S., no country accounted for 10% or more of the Company's total net revenues for the three and nine months ended January 1, 2022 and December 26, 2020.~~ The following table presents total net revenues by geography:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Net product revenues	Net product revenues									Net product revenues
U.S.	U.S.	$	160,731	$	169,812	$	522,770	$	473,633	U.S.	$	171,408	$	175,970

Europe, Middle East, and Africa	Europe, Middle East, and Africa	119,067		164,896		327,868		357,389		Europe, Middle East, and Africa	107,683		111,460
Asia Pacific	Asia Pacific	46,273		57,481		161,836		155,460		Asia Pacific	55,729		58,270
Americas, excluding U.S.	Americas, excluding U.S.	27,951		28,522		74,133		73,364		Americas, excluding U.S.	29,388		25,503
Total international net product revenues	Total international net product revenues	193,291		250,899		563,837		586,213		Total international net product revenues	192,800		195,233

Total net product revenues	Total net product revenues	$	354,022	$	420,711	$	1,086,607	$	1,059,846	Total net product revenues	$	364,208	$	371,203

Net service revenues	Net service revenues									Net service revenues
U.S.	U.S.	$	21,498	$	23,601	$	66,347	$	71,839	U.S.	$	21,040	$	22,758

Europe, Middle East, and Africa	Europe, Middle East, and Africa	14,117		16,533		43,199		48,545		Europe, Middle East, and Africa	12,307		14,661
Asia Pacific	Asia Pacific	16,140		19,342		51,643		57,196		Asia Pacific	14,701		18,488
Americas, excluding U.S.	Americas, excluding U.S.	3,789		4,498		11,966		13,949		Americas, excluding U.S.	3,303		4,062
Total international net service revenues	Total international net service revenues	34,046		40,373		106,808		119,690		Total international net service revenues	30,311		37,211

Total net service revenues	Total net service revenues	$	55,544	$	63,974	$	173,155	$	191,529	Total net service revenues	$	51,351	$	59,969

Total net revenues	Total net revenues	$	409,566	$	484,685	$	1,259,762	$	1,251,375	Total net revenues	$	415,559	$	431,172

~~Deferred~~The Company's deferred revenue represents the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of period end and is ~~primarily~~ comprised of non-cancelable maintenance support performance obligations on hardware devices which are typically billed in advance and recognized ratably over the contract term as the services are delivered. As of ~~January 1,~~July 2, 2022 and April ~~3, 2021,~~2, 2022, the Company's deferred revenue balance was ~~$199.2~~$183.6 million and ~~$213.8~~$193.1 million, ~~respectively.~~respectively, of which $122.4 million and $64.7 million, respectively, was classified as current. During the three months ended ~~January 1,~~July 2, 2022, the Company recognized ~~$46.2~~$42.9 million in total net revenues that were recorded in deferred revenue at the beginning of the period.

~~Table~~Upon establishment of ~~Contents~~

creditworthiness, the Company may extend credit terms to its customers which typically ranges between 30 and 90 days from the date of invoice depending on geographic region and type of customer. The ~~table below represents aggregate amount~~Company typically bills upon product hardware shipment, at time of software activation, upon the start of service entitlement, or upon completion of services. The balance of contract assets was $3.5 million and $4.3 million as of July 2, 2022 and April 2, 2022, respectively. None of the ~~transaction price allocated~~Company's contracts are deemed to ~~the performance obligations that are unsatisfied (or partially unsatisfied) as of January 1, 2022:~~

(in thousands) Current Non-Current Total
Unsatisfied (or partially unsatisfied) performance obligations $ 132,498 $ 66,695 $ 199,193

~~Sales, value add, and other taxes collected concurrently with revenue producing activities are excluded from revenue.~~

The Company's indirect channel model includes both a two-tiered distribution structure, where the Company sells to distributors that subsequently sell to resellers, and a one-tiered structure where the Company sells directly to resellers. For these arrangements, transfer of control begins at the time access to the Company's services is made available to the end customer and entitlements have ~~been contractually established, provided all other criteria for revenue recognition are met.~~significant financing components.

Commercial distributors and retailers represent the Company's largest sources of net revenues. Sales through its distribution and retail channels are made primarily under agreements allowing for rights of return and include various sales incentive programs, such as back end rebates, discounts, marketing development funds, price protection, and other sales incentives. The Company has an established sales history for these arrangements and the Company records the estimated reserves at the inception of the contract as a reflection of the reduced transaction price. Customer sales returns are estimated based on historical data, relevant current data, and the monitoring of inventory build-up in the distribution channel. Revenue reserves represent a reasonable estimation made by management and are subject to significant judgment. Estimated reserves may differ from actual returns or incentives provided due to unforeseen customer return or claim patterns or changes in circumstances. For certain customer contracts which have historically demonstrated variability, the Company has considered the likelihood of being under-reserved and has considered a constraint accordingly. Provisions for sales returns are presented within accrued liabilities in the condensed consolidated balance sheets. Provisions for promotions, rebates, and other sales incentives are presented as a reduction of accounts receivable unless there is no identifiable right to offset, in which case they are presented within accrued liabilities on the condensed consolidated balance sheets. See Note 4, ~~Details of Certain Balance Sheet Accounts~~.

For certain arrangements, the Company pays commissions, bonuses and taxes associated with obtaining the contracts. The Company capitalizes such costs if they are deemed to be incremental and recoverable. The Company has elected to use the practical expedient to record the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Determining the amortization period of costs related to obtaining a contract involves judgment. Capitalized commissions and related expenses on hardware sales and services recognized at a point in time generally have an amortization period of less than one year. Maintenance-related performance obligations generally have an amortization period greater than one year when considering renewals. Capitalized commissions are amortized to selling, general, and administrative expense on a straight-line basis. The capitalized amount of incremental and recoverable costs of obtaining contracts and related amortization was not material as of and for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022.

15. SEGMENT REPORTING ~~AND GEOGRAPHIC INFORMATION~~

The Company's Chief Executive Officer is identified as its Chief Operating Decision Maker ("(“CODM."”) The CODM has organized the Company, manages resource allocations, and measures performance among its 2 operating segments: Products and Services.

The Products reportable segment includes the Headsets, Voice and Video product lines. The Services reportable segment includes maintenance support on hardware devices as well as professional, managed and cloud services and solutions.

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In managing the 2 operating segments the CODM uses information about their revenue and gross margin after adjustments to exclude certain non-cash transactions and activities that are not reflective of the Company's ongoing or core operations as further described below. The CODM does not review asset information by segment.

Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom.

Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the ~~Acquisition~~acquisition of Polycom. The Company's deferred revenue primarily relates to service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents

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the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines.

~~Stock compensation expense:~~Acquisition costs: Represents charges incurred in connection with the pending Merger with HP.

Stock-based compensation: Represents the non-cash expense associated with the Company's grant of stock-based awards to employees and non-employee directors.

The following table presents segment results for revenue and gross margin, as reviewed by the CODM, and the related reconciliation to the Company's condensed consolidated GAAP results:


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Segment revenues, as reviewed by CODM	Segment revenues, as reviewed by CODM									Segment revenues, as reviewed by CODM
Products	Products	$	354,149	$	420,976	$	1,087,058	$	1,060,733	Products	$	364,299	$	371,379
Services	Services	56,324		66,998		175,925		203,250		Services	51,588		61,053
Total segment revenues, as reviewed by CODM	Total segment revenues, as reviewed by CODM	$	410,473	$	487,974	$	1,262,983	$	1,263,983	Total segment revenues, as reviewed by CODM	$	415,887	$	432,432

Segment gross profit, as reviewed by CODM	Segment gross profit, as reviewed by CODM									Segment gross profit, as reviewed by CODM
Products	Products	$	144,630	$	201,392	$	456,937	$	492,262	Products	$	151,095	$	153,548
Services	Services	37,939		45,812		117,591		138,329		Services	35,756		40,266
Total segment gross profit, as reviewed by CODM	Total segment gross profit, as reviewed by CODM	$	182,569	$	247,204	$	574,528	$	630,591	Total segment gross profit, as reviewed by CODM	$	186,851	$	193,814


		Three Months Ended				Nine Months Ended					Three Months Ended
(in thousands)	(in thousands)	January 1, 2022		December 26, 2020		January 1, 2022		December 26, 2020		(in thousands)	July 2, 2022		July 3, 2021
Total segment revenues, as reviewed by CODM	Total segment revenues, as reviewed by CODM	$	410,473	$	487,974	$	1,262,983	$	1,263,983	Total segment revenues, as reviewed by CODM	$	415,887	$	432,432
Deferred revenue purchase accounting	Deferred revenue purchase accounting	(907)		(3,289)		(3,221)		(12,608)		Deferred revenue purchase accounting	(328)		(1,260)
GAAP net revenues	GAAP net revenues	$	409,566	$	484,685	$	1,259,762	$	1,251,375	GAAP net revenues	$	415,559	$	431,172

Total segment gross profit, as reviewed by CODM (1)	Total segment gross profit, as reviewed by CODM (1)	$	182,569	$	247,204	$	574,528	$	630,591	Total segment gross profit, as reviewed by CODM (1)	$	186,851	$	193,814
Purchase accounting amortization	Purchase accounting amortization	(16,238)		(16,459)		(48,714)		(51,873)		Purchase accounting amortization	(16,472)		(16,238)
Deferred revenue purchase accounting	Deferred revenue purchase accounting	(907)		(3,289)		(3,221)		(12,608)		Deferred revenue purchase accounting	(328)		(1,260)
Acquisition costs										Acquisition costs	(507)		—
Stock-based compensation	Stock-based compensation	(1,238)		(799)		(3,525)		(2,374)		Stock-based compensation	(1,503)		(1,127)
GAAP gross profit	GAAP gross profit	$	164,186	$	226,657	$	519,068	$	563,736	GAAP gross profit	$	168,041	$	175,189

(1) Includes depreciation expense of ~~$3.4~~$3.2 million and ~~$3.7~~$3.6 million for the three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020,~~July 3, 2021, respectively. ~~Includes depreciation expense of $11 million and $10.7 million for the nine months ended January 1, 2022 and December 26, 2020, respectively.~~

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTAIN FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our intentions, beliefs, projections, outlook, analyses or current expectations that are subject to many risks and uncertainties. ~~Such~~All of our forward-looking statements are subject to risks and uncertainties relating to our pending merger (the “Merger”) with HP Inc. (“HP”) and Prism Subsidiary Corp. pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated March 25, 2022, and corresponding impacts on our business, including (i) that the consummation of the Merger with HP is contingent upon the satisfaction of a number of conditions, including regulatory approvals, that may be outside of our or HP’s control and that we and HP may be unable to satisfy or obtain or that may delay the consummation of the Merger or cause the parties to abandon the Merger; (ii) while the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our financial condition, operating results, and business; (iii) uncertainty about the Merger may adversely affect relationships with our customers, suppliers and employees, whether or not the Merger is completed; (iv) as a result of the Merger, our current and prospective employees could experience uncertainty about their future with us, which may result in key employees departing because of issues relating to such uncertainty or a desire not to remain with HP following the completion of the Merger; and (v) the ability to complete the Merger is subject to the receipt of consents and approvals from government entities, which may impose conditions that could have an adverse effect on us or could cause us and/or HP to abandon the Merger. Additionally, such forward-looking statements and the associated risks and uncertainties include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 ~~(coronavirus) outbreak,~~pandemic, and its impact across our businesses, our operations and global supply chain, including, our expectations that the virus has caused, and will continue to cause, a shift to a hybrid work environment and that the elevated demand we have experienced in certain product lines, including our Video and Voice devices, will continue over the long term; (ii) risks related to global supply chain disruptions, including continued uncertainty and potential impact on future quarters relating to a shortage of adequate component supply, including integrated circuits and manufacturing capacity, long lead times for raw materials and components, increased costs to us and increased pass-through costs to our customers, increased purchase commitments and a delay in our ability to fulfill orders, including as a result of Russia's conflict with Ukraine, all of which has had, and may continue to have, an adverse impact on our business and operating results and which could continue to negatively affect our profitability and/or market share; (iii) expectations related to our ability to manage profitability and ~~maintain~~improve margins in light of supply chain challenges, including our efforts to implement productivity improvements in our Tijuana manufacturing facility, while making investments for long-term growth, including investments in strategic alliances and/or acquisitions, in light of the supply chain challenges; (iv) our expectations regarding growth objectives related to our strategic initiatives designed to expand our product and service offerings, including our expectations related to increased demand for our solutions to facilitate hybrid working in and out of offices for our enterprise customers, as well as our expectations related to building strategic alliances and key partnerships with providers of collaboration tools and platforms to drive revenue growth and market share, including expectations related to our expansion of our presence in China; (v) our belief that we will continue to experience increased customer and partner demand in collaboration endpoints, and that we will be able to design new product offerings to meet changes in demand due to a global hybrid work environment; (vi) expectations related to our ability to fulfill the backlog generated by supply constraints and to timely supply the number of products to fulfill current and future customer demand in a timely manner to satisfy perishable demand; (vii) risks associated with our dependence on manufacturing operations conducted in our own facility in Tijuana, Mexico and through contract manufacturers, original design manufacturers, and suppliers to manufacture our products, to timely obtain sufficient quantities of materials and/or finished products of acceptable quality, at acceptable prices, and in the quantities necessary for us to meet critical schedules for the delivery of our own products and services and fulfill our anticipated customer demand; (viii) risks associated with our ability to secure critical components from sole source suppliers or identify alternative suppliers and/or buy component parts on the open market or completed goods in quantities sufficient to meet our requirements on a timely basis, affecting our ability to deliver products and services to our customers; (ix) risks related to increased cost of goods sold, including increased freight and other costs associated with expediting shipment and delivery of high-demand products to key markets in order to meet customer demand; (x) risks associated with passing on increased costs through price increases to customers; (xi) the impact if global or regional economic conditions deteriorate further, on our customers and/or partners, including increased demand for pricing accommodations, delayed payments, delayed deployment plans, insolvency or other issues which may increase credit losses; (xii) risks associated with significant and/or abrupt changes in product demand which increases the complexity of management’s evaluation of potential excess or obsolete inventory; (xiii) expectations related to our Services reportable segment revenues, particularly as we introduce next-generation, less complex, product solutions, or as companies shift from on premises to work from home options for their workforce, which have resulted and may continue to result in decreased demand for our professional, installation and/or managed service offerings; (xiv) expectations related to our efforts to drive sales and sustainable profitable revenue growth, to improve our profitability and cash

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flow, and accelerate debt reduction and de-levering; (xv) risks associated with forecasting sales and procurement demands, which are inherently difficult, particularly with continuing uncertainty in regional and global economic conditions; (xvi) our expectations regarding our ability to control costs, streamline operations and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; (xvii) expectations relating to our ~~earnings guidance,~~financial projections, particularly as economic uncertainty, including, without limitation, uncertainty related to the continued impact of COVID-19, the current constraints in our ability to source key components for our products, continued uncertainty in the macro-economic climate and other external factors, puts further pressure on management judgments used to develop ~~forward-looking financial guidance and other~~ prospective financial information; (xviii) expectations related to U.S. GAAP and non-GAAP financial results for the full Fiscal Year 2022, including total net revenues, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA), tax rates, intangibles amortization, diluted weighted average shares outstanding, and diluted earnings per share (EPS); (xix) our forecast and estimates with respect to tax matters, including expectations with respect to the valuation of our intellectual property or expectations regarding utilization of our deferred tax assets; and (xx) our expectations regarding pending and potential future litigation, in addition to other matters discussed in this Quarterly Report on Form 10-Q that are not purely historical data. Such forward-looking

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statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, those discussed in this Quarterly Report on Form 10-Q; in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021,~~2, 2022, filed with the ~~Securities and Exchange Commission ("SEC")~~SEC on May ~~18, 2021;~~27, 2022; and other documents we have filed with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

OVERVIEW

~~Plantronics, Inc. (“~~Poly~~” “Company,” “we,” “our,” or “us”)~~ is a leading global communications technology company that designs, manufactures, and markets integrated communications and collaboration solutions for professionals. We offer a comprehensive selection of premium audio and video products designed to work in an era where work is no longer a place and enterprise work forces are increasingly distributed. Our products and services are designed and engineered to connect people with high fidelity and incredible clarity. They are professional-grade, easy to use, and work seamlessly with major video and audio-conferencing platforms.

Our major product categories are Headsets, Voice, Video, ~~Voice,~~ and Services. Headsets include wired and wireless communication headsets; Voice includes open Session Initiation Protocol ~~("SIP"~~(“SIP”) and native ecosystem desktop phones, as well as conference room ~~phones;~~phones and speakerphones; Video includes conferencing solutions and peripherals, such as cameras, speakers, and ~~microphones.~~microphones; Services includes a broad portfolio of offerings including video interoperability, maintenance and troubleshooting support for our solutions, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping our customers achieve their collaboration goals. Additionally, our cloud management and analytics software enable Information Technology (“IT”) administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior.

All of our solutions are designed to integrate seamlessly with ~~the platform and services of our customers’ choice in~~ a wide range of Unified Communications & Collaboration (“UC&C”), Unified Communication as a Service (“UCaaS”), and Video as a Service (“VaaS”) ~~environments.~~

Additionally, our cloud management and analytics software enables Information Technology administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior. We offer a broad portfolio of services including video interoperability, support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helpingplatforms, allowing our customers ~~achieve~~the flexibility to use the communications platform of their ~~goals for collaboration.~~choice.

We sell our products through a well-developed global network of distributors and channel partners, including value-added resellers, integrators, direct marketing resellers, and service providers, as well as through both traditional and online retailers, office supply distributors, and e-commerce channels. We have well-established distribution channels in the Americas, Europe, Middle East, Africa, and Asia Pacific, where use of our products is widespread.

Our fiscal year ends on the Saturday closest to the last day of March. The ~~year~~years ended April 1, 2023 (“Fiscal Year 2023”) and April 2, 2022 ("(“Fiscal Year ~~2022"~~2022”) ~~has~~have 52 ~~weeks, while the year ended April 3, 2021 ("Fiscal Year 2021") had 53~~ weeks. The three months ended ~~January 1,~~July 2, 2022 ~~("third~~(“first quarter Fiscal Year ~~2022"~~2023”) and ~~December 26, 2020 ("third~~July 3, 2021 (“first quarter Fiscal Year ~~2021"~~2022”) each ~~had~~have 13 weeks.

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Acquisition by HP Inc.

On March 25, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with HP Inc. (“HP”) and Prism Subsidiary Corp. (“Merger Sub”), a wholly owned subsidiary of HP, providing for Poly's acquisition by HP in an all-cash transaction for $40.00 per share by way of a merger of Merger Sub with and into Poly (the “Merger”), with Poly continuing as a wholly owned subsidiary of HP. On June 23, 2022, Poly stockholders voted to adopt the Merger Agreement. The ~~nine months ended January 1, 2022~~Merger is expected to close, subject to receipt of required regulatory clearances and ~~December 26, 2020 each had 39 weeks.~~the satisfaction of other customary closing conditions, in calendar year 2022.

Impact of the Current Environment, Supply Chain Disruptions, and COVID-19 on Our Business

We have experienced and continue to monitor limited supply and longer lead times for certain key components, such as semiconductor chips, necessary to complete production and meet customer demand, including fulfillment of our backlog. We do not manufacture these component parts and currently purchase certain parts, including semiconductor chips and sub-assemblies that require semiconductor chips, from single or limited sources. Additionally, constrained supply has resulted in price inflation for certain components, including semiconductor chips, ~~on the~~increased spot market prices and purchases, increased transportation costs, inefficiencies at our owned manufacturing facility in Tijuana, Mexico, entry into multi-year commitments at increased cost to secure supply, and inability to fulfill backlog for certain products timely. ~~We continue~~For certain of our products, our additional supply increases our exposure to monitor our supply chain and are taking action against limited supply and increasing lead times, including increased spot market purchases, outreach to critical suppliers, and entering into contractual obligations that provide for increased costs, and multi-year commitments, to secure supply.risks associated with significant and/or abrupt changes in product demand, which could result in potential excess of obsolete inventory. Additionally, to the extent we pass through increased costs to our customers, this may result in reduced demand. These factors, among others, are affecting and are expected to continue to affect total net revenue and gross margin rates. We continue to monitor our supply chain and are taking action to mitigate future disruption including outreach to critical suppliers, migration of multiple product lines to newer technologies, and incorporating supply chain design concepts into the earliest phases of product development.

In addition, COVID-19 has continued to spread globally and continues to add uncertainty and influence global economic activity, the global supply chain, and financial markets. The impact of the pandemic on our operations has varied by local conditions, government mandates, and business limitations, including travel bans, remote work, and other restrictions.

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The COVID-19 pandemic led to a massive increase in remote ~~work. As a result, during Fiscal Year 2021 we experienced~~and hybrid work driving elevated demand for certain ~~enterprise Headsets and Video devices and a decline in demand for~~of our ~~Voice~~ products and associated Services, as companies shifted from in-office to work-from-home arrangements for many of their office workers. Beginning in the fourth quarter of Fiscal Year 2021 and continuing through the third quarter of Fiscal Year 2022, we experienced elevated demand for certain Video and Voice devices as companies began to shift from work-from-home arrangements to hybrid work models.

solutions. However, the impact of COVID-19 is fluid and uncertain, and it has caused, and may continue to cause, various negative effects as we continue to experience constraints in our supply chain, specifically the sourcing of certain components and raw materials, and increased logistics costs to meet customer demand, which, in turn, adversely impacts our gross margins. As a result, the impact of COVID-19 to date has had mixed effects on our results of operations.

The full extent and duration of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict and will depend on many factors outside of our control, including the extent and duration of the pandemic, mutations, and variants of the virus, the development and availability of effective treatments, including the availability of vaccines for our global workforce, mandates of protective public safety measures, and the impact of the pandemic on the global economy, global supply chains, and demand for our products. It is not possible at this time to foresee whether or when the outbreak of COVID-19 or other events beyond our control will be effectively contained, nor can we estimate the entirety of the impact that COVID-19 or such other pandemics or natural or man-made disaster will have on the global economy, our business, customers, suppliers, or other business partners. As such, impacts from such events on Poly are highly uncertain and we will continue to assess the impact from such events on our condensed consolidated financial statements.

In responding to this pandemic, employee safety continues to be a critical concern for Poly and we have taken measures to protect our employees globally by adherence to public safety and shelter in place directives, physical distancing protocols within offices and manufacturing facilities, providing personal protective equipment, including face masks and hand sanitizers, conducting routine sanitation of facilities, requiring health monitoring before entry into Poly facilities and restricting the number of visitors to our sites. The safety protocols implemented globally meet or exceed current regulations; however, we continue to monitor employees’ safety and evolving regulatory requirements. Although our manufacturing facility remains open and certain office employees may utilize our offices when necessary, the majority of all non-factory employees continue to work from home, using headsets and other Poly-issued equipment. We provided COVID-19 vaccines to our employees and their immediate families, as well as other workers, at our manufacturing facility on a voluntary basis free of charge.

~~Third~~First Quarter Fiscal Year ~~2022~~2023 Highlights

Total net revenues for the ~~third~~first quarter of Fiscal Year 2023 were $415.6 million, a decrease of $15.6 million or 3.6%, compared to the first quarter of Fiscal Year 2022, ~~were $409.6 million, a decrease of $75.1 million or (15.5)%, compared to the third quarter of Fiscal Year 2021,~~ primarily driven by ~~decreased sales~~declines in our ~~Headset, Voice,~~Video and Services ~~and Video~~ product categories.

Products gross margin rate for the ~~third~~first quarter of Fiscal Year 2023 decreased from 36.6% in the first quarter of Fiscal Year 2022 ~~decreased from 43.7% in the third quarter of Fiscal Year 2021~~ to ~~35.9%~~36.4%, primarily driven by increased component costs ~~unfavorable product mix,~~as well as transportation costs. We continued to experience the effects of the current supply environment including constrained supply and ~~increased transportation costs.~~longer lead times for certain components, such as semiconductor chips.

During the ~~third~~first quarter of Fiscal Year ~~2022, we announced~~2023, Poly continues to expand its portfolio of smart devices with the ~~partnership with Appspace, a leading provider~~introduction of ~~workspace experience software, to deliver dynamic digital signage on Poly video OS devices to enhance~~ the ~~Return to Office experience for employees and visitors. The digital signage was available on~~ Poly Studio ~~X Series (including~~R30 video bar, the Poly ~~Studio X30, X50, X70)~~Sync 10 speakerphone, and ~~G7500 video conference devices~~enhancements to the Poly Lens platform. These pro-grade solutions, combined with ~~an Appspace subscription. We also announced the updated~~developments to Poly ~~Room Solutions~~DirectorAI smart camera technology help deliver meeting equity for ~~Microsoft Teams Rooms on Windows. The new lineup of Poly Studio Kits offers premium audio~~hybrid and ~~video for focus, small, medium, and large rooms, and feature Poly's Director AI technology.~~office workers alike. These products were available during the ~~third~~first quarter of Fiscal Year ~~2022~~2023 and did not have a material impact on total net revenues.

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RESULTS OF OPERATIONS

The Company’s reportable segments are Products and Services. Our Products reportable segment includes the Headsets, Voice, and Video product lines. Our Services reportable segment includes maintenance support on hardware devices, as well as professional, managed, and cloud services and solutions.

Total Net Revenues

The following table sets forth total net revenues by reportable segment for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


		Three Months Ended								Nine Months Ended									Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	January 1, 2022		December 26, 2020		Change				January 1, 2022		December 26, 2020		Change				(in thousands, except percentages)	July 2, 2022		July 3, 2021		Change
Products	Products	$	354,022	$	420,711	$	(66,689)	(15.9)	%	$	1,086,607	$	1,059,846	$	26,761	2.5	%	Products	$	364,208	$	371,203	(1.9)	%
Services	Services	55,544		63,974		(8,430)		(13.2)	%	173,155		191,529		(18,374)		(9.6)	%	Services	51,351		59,969		(14.4)	%
Total net revenues	Total net revenues	$	409,566	$	484,685	$	(75,119)	(15.5)	%	$	1,259,762	$	1,251,375	$	8,387	0.7	%	Total net revenues	$	415,559	$	431,172	(3.6)	%

Products

Total product net revenues decreased in the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, ~~compared to the third quarter of Fiscal Year 2021, primarily~~ due to ~~the followin~~g:

•~~Headset, Voice, and Video product categories net revenues decreased primarily due to constrained supply of certain components, such as semiconductor chips.~~

~~Total product net revenues increased~~a decline in ~~the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, primarily due to the following:~~

•our Video product category ~~net revenues increased, driven by the shift to hybrid work arrangements and the need for office workers to be able to effectively communicate and collaborate regardless of location.~~

•~~Voice product category net revenues also increased as companies returned or made plans to return to the office.~~

•~~Headsets product category net revenues decreased~~ primarily due to constrained supply of certain components, such as semiconductor chips.

Services

Total services net revenues decreased in the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, ~~compared to the third quarter of Fiscal Year 2021 and in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020,~~ primarily due to ~~the~~a mix shift within our Video product ~~mix shift~~category away from legacy ~~Platform and Telepresence~~platforms to our recently launched ~~Studio~~ video bars, which are less complex, less expensive, and easier to install and ~~operate, and carry optional service contracts. The decrease was partially offset by the impact of the deferred revenue fair value adjustment resulting from the Polycom acquisition.~~operate.

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Geographic Region

The following table sets forth total net revenues by geographic region for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020:~~July 3, 2021:


		Three Months Ended								Nine Months Ended									Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	January 1, 2022		December 26, 2020		Change				January 1, 2022		December 26, 2020		Change				(in thousands, except percentages)	July 2, 2022		July 3, 2021		Change
United States	United States	$	182,229	$	193,413	$	(11,184)	(5.8)	%	$	589,117	$	545,472	$	43,645	8.0	%	United States	$	192,448	$	198,728	(3.2)	%

International net revenues:	International net revenues:																	International net revenues:
Europe, Middle East, and Africa	Europe, Middle East, and Africa	133,184		181,429		(48,245)		(26.6)	%	371,067		405,933		(34,866)		(8.6)	%	Europe, Middle East, and Africa	119,990		126,121		(4.9)	%
Asia Pacific	Asia Pacific	62,413		76,823		(14,410)		(18.8)	%	213,479		212,657		822		0.4	%	Asia Pacific	70,430		76,758		(8.2)	%
Americas, excluding United States	Americas, excluding United States	31,740		33,020		(1,280)		(3.9)	%	86,099		87,313		(1,214)		(1.4)	%	Americas, excluding United States	32,691		29,565		10.6	%
Total international net revenues	Total international net revenues	227,337		291,272		(63,935)		(22.0)	%	670,645		705,903		(35,258)		(5.0)	%	Total international net revenues	223,111		232,444		(4.0)	%

Total net revenues	Total net revenues	$	409,566	$	484,685	$	(75,119)	(15.5)	%	$	1,259,762	$	1,251,375	$	8,387	0.7	%	Total net revenues	$	415,559	$	431,172	(3.6)	%

United States ~~(U.S.)~~

U.S. total net revenues decreased in the ~~third~~first quarter of Fiscal Year ~~2022~~2023 compared to the ~~third~~first quarter of Fiscal Year ~~2021,~~2022, primarily due to decreased net sales in the ~~Voice product category. U.S.~~ Video ~~Headsets~~ and Services ~~total net revenues were materially unchanged in the~~ ~~third quarter of Fiscal Year 2022 compared to the third quarter of Fiscal Year 2021.~~

~~U.S. total net revenues increased in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, primarily due to increased net sales in the Video and Voice~~ product ~~categories,~~category, partially offset by ~~decreased net sales~~increases in ~~the Services category. U.S. Headsets total net revenues were materially unchanged during the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020.~~Voice and Headsets.

International

International total net revenues decreased in the ~~third~~first quarter of Fiscal Year ~~2022~~2023 compared to the ~~third~~first quarter of Fiscal Year ~~2021,~~2022, primarily due to decreased net sales in ~~the Headsets,~~ Video ~~Services, and Voice product categories.~~

~~International total net revenues decreased in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, primarily due to decreased net sales in the Headsets~~ and Services product categories, partially offset ~~increased net sales~~by increases in ~~the Video product category. International~~ Voice ~~total net revenues were materially unchanged during the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020.~~and Headsets.

During the ~~third~~first quarter of Fiscal Year ~~2022,~~2023, changes in foreign exchange rates ~~favorably~~unfavorably impacted total net revenues by ~~$1.6~~$6.3 million, net of the effects of hedging, compared to a ~~$8.4~~$9.6 million favorable impact on revenue in the ~~third~~first quarter of fiscal year 2021. During the nine months ended January 1, 2022, changes in foreign exchange rates favorably impacted total net revenues by $16.6 million, net of the effects of hedging, compared to a $5.8 million favorable impact on revenue in the prior year period.Fiscal Year 2022.

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Cost of Revenues and Gross Profit

Cost of revenues consists primarily of direct and contract manufacturing costs, amortization of acquired technology, freight, warranty, charges for excess and obsolete inventory, depreciation, duties, royalties, and overhead expenses.


(in thousands, except percentages)	(in thousands, except percentages)	Three Months Ended										Nine Months Ended										(in thousands, except percentages)	Three Months Ended
		January 1, 2022			December 26, 2020			Change				January 1, 2022			December 26, 2020			Change					July 2, 2022			July 3, 2021			Change
Products:	Products:																					Products:
Net revenues	Net revenues	$	354,022		$	420,711		$	(66,689)	(15.9)	%	$	1,086,607		$	1,059,846		$	26,761	2.5	%	Net revenues	$	364,208		$	371,203		(1.9)	%
Cost of revenues	Cost of revenues	226,994			236,842			(9,848)		(4.2)	%	682,360			622,718			59,642		9.6	%	Cost of revenues	231,677			235,196			(1.5)	%
Gross profit	Gross profit	$	127,028		$	183,869		$	(56,841)	(30.9)	%	$	404,247		$	437,128		$	(32,881)	(7.5)	%	Gross profit	$	132,531		$	136,007		(2.6)	%
Gross profit %	Gross profit %	35.9		%	43.7		%					37.2		%	41.2		%					Gross profit %	36.4		%	36.6		%
Services:	Services:																					Services:
Net revenues	Net revenues	$	55,544		$	63,974		$	(8,430)	(13.2)	%	$	173,155		$	191,529		$	(18,374)	(9.6)	%	Net revenues	$	51,351		$	59,969		(14.4)	%
Cost of revenues	Cost of revenues	18,386			21,186			(2,800)		(13.2)	%	58,334			64,921			(6,587)		(10.1)	%	Cost of revenues	15,841			20,787			(23.8)	%
Gross profit	Gross profit	$	37,158		$	42,788		$	(5,630)	(13.2)	%	$	114,821		$	126,608		$	(11,787)	(9.3)	%	Gross profit	$	35,510		$	39,182		(9.4)	%
Gross profit %	Gross profit %	66.9		%	66.9		%					66.3		%	66.1		%					Gross profit %	69.2		%	65.3		%
Total:	Total:																					Total:
Net revenues	Net revenues	$	409,566		$	484,685		$	(75,119)	(15.5)	%	$	1,259,762		$	1,251,375		$	8,387	0.7	%	Net revenues	$	415,559		$	431,172		(3.6)	%
Cost of revenues	Cost of revenues	245,380			258,028			(12,648)		(4.9)	%	740,694			687,639			53,055		7.7	%	Cost of revenues	247,518			255,983			(3.3)	%
Gross profit	Gross profit	$	164,186		$	226,657		$	(62,471)	(27.6)	%	$	519,068		$	563,736		$	(44,668)	(7.9)	%	Gross profit	$	168,041		$	175,189		(4.1)	%
Gross profit %	Gross profit %	40.1		%	46.8		%					41.2		%	45.0		%					Gross profit %	40.4		%	40.6		%

Products

Gross profit as a percentage of total product net revenues decreased in the ~~third~~first quarter of Fiscal Year ~~2022~~2023 compared to the ~~third~~first quarter of Fiscal Year ~~2021 and in the nine months ended January 1,~~ 2022, ~~compared to the nine months ended December 26, 2020,~~ primarily due to increased component costs, unfavorable product mix, and increased transportation ~~costs.~~costs, partially offset by higher average selling price. The increase in component costs was primarily driven by increased spot market purchases of certain key components, such as semiconductor chips, due to global supply shortages. Transportation costs increased as a result of high global demand and limited capacity of air freight carriers and increased air freight usage to mitigate longer component lead times to meet our commitments to customers.

Services

Gross profit as a percentage of total services net revenues ~~was materially unchanged during~~increased in the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022 ~~compared~~due to ~~the third quarter of Fiscal Year 2021~~lower support costs including compensation and ~~in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020.~~other headcount related expenses.

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Operating Expenses

Operating expenses for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021 were as follows:


		Three Months Ended										Nine Months Ended											Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	January 1, 2022			December 26, 2020			Change				January 1, 2022			December 26, 2020			Change				(in thousands, except percentages)	July 2, 2022			July 3, 2021			Change
Research, development, and engineering	Research, development, and engineering	$	46,216		$	54,150		$	(7,934)	(14.7)	%	$	136,090		$	156,327		$	(20,237)	(12.9)	%	Research, development, and engineering	$	51,269		$	45,466		12.8	%
% of total net revenues	% of total net revenues	11.3		%	11.2		%					10.8		%	12.5		%					% of total net revenues	12.3		%	10.5		%
Selling, general and administrative		121,387			129,641			(8,254)		(6.4)	%	364,417			361,892			2,525		0.7	%
Selling, general, and administrative																						Selling, general, and administrative	131,903			120,734			9.3	%
% of total net revenues	% of total net revenues	29.6		%	26.7		%					28.9		%	28.9		%					% of total net revenues	31.7		%	28.0		%
Loss, net from litigation settlements		—			—			—		—	%	—			17,561			(17,561)		100.0	%
% of total net revenues		—		%	—		%					—		%	1.4		%

Restructuring and other related charges	Restructuring and other related charges	2,398			13,977			(11,579)		(82.8)	%	33,977			49,477			(15,500)		(31.3)	%	Restructuring and other related charges	(49)			28,972			(100.2)	%
% of total net revenues	% of total net revenues	0.6		%	2.9		%					2.7		%	4.0		%					% of total net revenues	—		%	6.7		%
Total operating expenses	Total operating expenses	$	170,001		$	197,768		$	(27,767)	(14.0)	%	$	534,484		$	585,257		$	(50,773)	(8.7)	%	Total operating expenses	$	183,123		$	195,172		(6.2)	%
% of total net revenues	% of total net revenues	41.5		%	40.8		%					42.4		%	46.8		%					% of total net revenues	44.1		%	45.3		%

Research, Development, and Engineering

Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside services, expensed materials, and overhead expenses. Research, development, and engineering expenses ~~decreased~~increased during the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, ~~compared to the third quarter of Fiscal Year 2021 and in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020,~~ primarily due to ~~lower compensation expense due to reduction in headcount, cost control efforts, and lower~~higher incentive compensation.

Selling, General, and Administrative

Selling, general, and administrative costs are expensed as incurred and consist primarily of compensation costs, marketing costs, travel expenses, professional service fees, and overhead expenses. Selling, general and administrative expenses ~~decreased~~increased during the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, compared to the third quarter of Fiscal Year 2021, primarily due to lower incentive compensation, partially offset by increased marketing and travel expense. Selling, general and administrative expenses increased during the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, primarily due to higher ~~sales commissions, marketing,~~incentive compensation, travel expenses and ~~travel expense,~~charges incurred in connection with the pending Merger with HP partially offset by lower ~~facilities expenses.~~

~~Loss, net from Litigation Settlements~~

Loss, net from litigation settlements decreased during the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, due to the recording of one-time litigation charges for settlements during the prior period.advertising expense.

Restructuring and Other Related Charges

Restructuring and other related charges decreased during the ~~third~~first quarter of Fiscal Year ~~2022~~2023 compared to the ~~third~~first quarter of Fiscal Year ~~2021 and in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020.~~2022. During the three ~~and nine~~ months ended ~~January 1, 2022 and December 26, 2020~~July 3, 2021 we recorded restructuring and other related charges to reduce expenses and optimize our cost structure. These actions consisted of headcount reductions and office closures.

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Interest Expense

Interest expense for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021 was as follows:


		Three Months Ended										Nine Months Ended											Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	January 1, 2022			December 26, 2020			Change				January 1, 2022			December 26, 2020			Change				(in thousands, except percentages)	July 2, 2022			July 3, 2021			Change
Interest expense	Interest expense	$	15,948		$	18,417		$	(2,469)	13.4	%	$	53,871		$	58,182		$	(4,311)	7.4	%	Interest expense	$	16,121		$	21,782		26.0	%
% of total net revenues	% of total net revenues	3.9		%	3.8		%					4.3		%	4.6		%					% of total net revenues	3.9		%	5.1		%

Interest expense decreased during the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, ~~compared~~primarily due to lower outstanding balance of Senior Notes. During the ~~third~~first quarter of Fiscal Year ~~2021 and in the nine months ended January 1,~~ 2022 ~~compared to the nine months ended December 26, 2020, primarily due to lower~~we incurred interest expense related to the ~~2023~~2025 Senior Notes ~~and lower outstanding principal balance on the term loan facility, partially offset by~~as well as the amortization of the remaining debt issuance costs ~~related to the 2023 Senior Notes, which were redeemed during the first quarter of Fiscal Year 2022, and interest expense related to the 2029 Senior Notes, which were issued~~upon their redemption in ~~the fourth quarter of Fiscal Year~~May 2021.

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Other Non-Operating ~~Income,~~Expense (Income), Net

Other non-operating income, net for the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021 was as follows:


		Three Months Ended										Nine Months Ended											Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	January 1, 2022			December 26, 2020			Change				January 1, 2022			December 26, 2020			Change				(in thousands, except percentages)	July 2, 2022			July 3, 2021			Change
Other non-operating income, net		$	(995)		$	(2,596)		$	1,601	(61.7)	%	$	(1,664)		$	(4,188)		$	2,524	(60.3)	%
Other non-operating expense (income), net																						Other non-operating expense (income), net	$	2,922		$	(692)		(522.3)	%
% of total net revenues	% of total net revenues	(0.2)		%	(0.5)		%					(0.1)		%	(0.3)		%					% of total net revenues	0.7		%	(0.2)		%

Other non-operating ~~income,~~expense, net ~~decreased~~increased during the ~~third~~first quarter of Fiscal Year 2023 compared to the first quarter of Fiscal Year 2022, ~~compared to the third quarter of Fiscal Year 2021,~~ primarily due to ~~immaterial net foreign currency~~unrealized losses compared to immaterial net foreign currency gains in the prior period. Other non-operating income, net decreased in the nine months ended January 1, 2022 compared to the nine months ended December 26, 2020, primarily due to lower immaterial unrealized gains on the deferred compensation ~~plan investments~~asset portfolio and higher immaterial ~~net~~ foreign ~~currency losses during the current period compared to immaterial net foreign currency gains in the prior period.~~exchange losses.

Income Tax Benefit


		Three Months Ended										Nine Months Ended											Three Months Ended
(in thousands except percentages)	(in thousands except percentages)	January 1, 2022			December 26, 2020			Change				January 1, 2022			December 26, 2020			Change				(in thousands except percentages)	July 2, 2022			July 3, 2021			Change
(Loss) income before income taxes		$	(20,768)		$	13,068		$	(33,836)	258.9	%	$	(67,623)		$	(75,515)		$	7,892	10.5	%
Loss before income taxes																						Loss before income taxes	$	(34,125)		$	(41,073)		16.9	%
Income tax benefit	Income tax benefit	(9,604)			(7,045)			(2,559)		(36.3)	%	(116,433)			(7,208)			(109,225)		(1,515.3)	%	Income tax benefit	(1,038)			(4,262)			75.6	%
Net (loss) income		$	(11,164)		$	20,113		$	(31,277)	155.5	%	$	48,810		$	(68,307)		$	117,117	171.5	%
Net loss																						Net loss	$	(33,087)		$	(36,811)		10.1	%
Effective tax rate	Effective tax rate	46.2		%	(53.9)		%					172.2		%	9.6		%					Effective tax rate	3.0		%	10.4		%

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions. The Company's income tax benefit is determined using an estimated annual effective tax rate, adjusted for discrete items arising during the period. The effective tax rates for the three and nine months ended January 1, 2022 were 46.2% and 172.2%, respectively. The effective tax rates for the three and nine months ended December 26, 2020 were (53.9)% and 9.6%, respectively.

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~~Income~~The difference between the effective tax rate and the U.S. federal statutory rate primarily relates to the excess stock tax benefit, ~~for~~U.S. and foreign income mix, and the ~~three~~valuation allowance on the U.S. federal and nine months ended January 1, 2022 was $(9.6) million and $(116.4) million, respectively. Income tax benefit for the three and nine months ended December 26, 2020 was $(7.0) million and $(7.2) million, respectively. state DTAs that continues to be maintained as of July 2, 2022.

In September 2021, we~~During the three months ended October 2, 2021, the Company~~ transferred certain non-Americas intellectual property (“IP”) rights between our wholly-owned subsidiaries ("(“IP ~~transfer"~~transfer”) to align with our evolving business operations, resulting in the derecognition of a deferred tax asset (“DTA”) of $91.1 million and the recognition of a new ~~deferred tax asset~~DTA of ~~$204.3~~$204.5 million, which represents the book and tax basis difference in the IP and was based on the fair value of the IP, in the respective subsidiaries. This results in a net discrete deferred tax benefit of ~~$113.2~~$113.4 million. ~~The impact of the IP transfer to net cash flows on the condensed consolidated statements of cash flows during the nine months ended January 1, 2022 was not material.~~

~~The difference between~~Management has concluded that an impairment for local statutory and tax reporting to the ~~effective tax rate~~aforementioned IP exists and the ~~U.S. federal statutory rate primarily relates~~impairment loss is deductible for local tax purposes. As such, a DTA related to net operating loss carryforward of $48.0 million was recognized, offset by a corresponding decrease in the DTA related to the ~~changes~~intangible asset by the same amount as of April 2, 2022. Because the IP intangible asset is the result of an intercompany transfer, there is no intangible asset recognized in ~~uncertain tax positions, U.S.~~the consolidated balance sheets. Accordingly, there is no net impact to the Company’s consolidated statements of operations, balance sheet, or cash flows.

Valuation allowances are established when necessary to reduce DTA's to the amounts that are more-likely-than-not expected to be realized. Management assesses the available positive and ~~foreign~~negative evidence to estimate whether sufficient future taxable income ~~mix, and~~will be generated to permit use of the existing DTA's. Valuation allowances are established when necessary to reduce DTA's to the amounts that are more-likely-than-not to be realized. On the basis of this evaluation, as of July 2, 2022, a valuation allowance ~~on the~~against our U.S. federal and state ~~deferred tax assets (DTAs) that~~DTA's continues to be ~~maintained as of January 1, 2022.~~maintained.

A significant portion of the Company's DTAs relate to ~~the IP transfer~~internal intellectual property restructuring between ~~wholly-owned subsidiaries completed during the three months ended October 2, 2021.~~wholly owned subsidiaries. At this time, based on evidence currently available, the Company considers it more likely than not that it will have sufficient taxable income in the future that will allow the Company to realize the ~~DTAs;~~DTAs. The amount of the DTA's considered realizable, however, ~~failure to generate sufficient~~could be adjusted if estimates of future taxable income ~~could result in some~~increase or ~~all DTAs not being utilized~~decrease, or if objective negative evidence in the ~~future. If the Company~~form of cumulative losses is ~~unable~~no longer present and additional weight is given to ~~generate sufficient~~subjective evidence, such as our future ~~taxable income, a substantial valuation allowance to reduce the Company's DTAs may be required.~~projections.

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FINANCIAL CONDITION

Liquidity and Capital Resources

The following tables present selected financial information and statistics as of ~~January 1,~~July 2, 2022 and April ~~3, 2021~~2, 2022 and for the ~~nine~~three months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020~~July 3, 2021 (in thousands):


		January 1, 2022		April 3, 2021			July 2, 2022		April 3, 2021
Cash and cash equivalents and short-term investments	Cash and cash equivalents and short-term investments	$	199,717	$	217,119	Cash and cash equivalents and short-term investments	$	154,270	$	183,703
Property, plant, and equipment, net	Property, plant, and equipment, net	126,973		140,875		Property, plant, and equipment, net	124,052		127,021
Current portion of long-term debt		—		478,807

Long-term debt, net	Long-term debt, net	1,499,228		1,496,064		Long-term debt, net	1,501,337		1,500,283
Working capital	Working capital	264,784		213,975		Working capital	274,845		271,691


		Nine Months Ended					Three Months Ended
		January 1, 2022		December 26, 2020			July 2, 2022		July 3, 2021
Cash (used in) provided by operating activities	Cash (used in) provided by operating activities	$	(52)	$	71,149	Cash (used in) provided by operating activities	$	(2,981)	$	849
Cash used in investing activities	Cash used in investing activities	(25,178)		(14,580)		Cash used in investing activities	(7,197)		(10,456)
Cash used in financing activities	Cash used in financing activities	(487,002)		(44,442)		Cash used in financing activities	(14,233)		(490,905)

Our cash and cash equivalents as of ~~January 1,~~July 2, 2022 consisted of bank deposits ~~and money market funds~~ with third-party financial institutions. As of ~~January 1,~~July 2, 2022, of our ~~$199.7~~$154.3 million of cash and cash equivalents and short-term investments, ~~$104.7~~$59.6 million was held domestically while ~~$95.0~~$94.7 million was held by foreign subsidiaries, and approximately ~~71%~~64% was based in USD-denominated instruments. As of ~~January 1,~~July 2, 2022, our short-term investments were composed of mutual funds. An additional source of liquidity is ~~$97.1~~$97.6 million of availability from our revolving credit facility, net of outstanding letters of credit.

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Historically, we use cash provided by operating activities as our primary source of liquidity. We expect that cash provided by operating activities will fluctuate in future periods, including the current quarter as a result of a number of factors, including fluctuations in our revenues, the timing of compensation-related payments, such as our annual bonus/variable compensation plan, interest payments on our long-term debt, product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of tax and other payments.

During the ~~nine months ended January 1, 2022,~~first quarter of Fiscal Year 2023, cash used in operating activities of ~~$(52) thousand~~$(3.0) million was a result of ~~$(98.4)~~a $(33.1) million net loss, $(22.8) million of cash used in net working capital and $(2.9) million of cash payments for restructuring charges, partially offset by ~~$48.8 million of net income and $49.5~~$55.8 million in net favorable non-cash ~~charges.~~adjustments. Cash used in investing activities of ~~$(25.2)~~$(7.2) million consisted primarily of capital expenditures. Cash used in financing activities of $(14.2) million consisted of employees' tax withheld and paid for restricted stock units.

During the first quarter of Fiscal Year 2022, cash provided by operating activities of $0.8 million was a result of non-cash adjustments to net loss of $66.3 million, partially offset by $(36.8) million of net loss and a decrease in the net change in operating assets and liabilities of $(28.7) million. Cash used in investing activities of ($10.4) million consisted primarily of capital expenditures of ~~$(20.7)~~($6.1) million and other investing activities of ~~$(4.0)~~($4.0) million. Cash used in financing activities ~~of $(487.0) million~~ consisted primarily of ~~$(480.7)~~($480.7) million of repayments of long-term debt and ~~$(12.2)~~$($10.2) million of employees' tax withheld and paid for restricted stock and restricted stock ~~units, partially offset by $5.8 million of proceeds from stock compensation plans.~~units.

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Capital Expenditures

We anticipate our current cash and cash flows from operating activities will be sufficient to fund our capital expenditures in Fiscal Year ~~2022 will be approximately $25 million to $35 million,~~2023, relating primarily to investments in our manufacturing capabilities, including tooling for new products, new ~~information technology~~IT investments, and facilities upgrades. We will continue to evaluate new business opportunities and new markets. As a result, our future growth within the existing business or new opportunities and markets may dictate the need for additional facilities and capital expenditures to support that growth.

Debt

In July 2018, in connection with the acquisition of Polycom, ~~acquisition,~~ the Company entered into a Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto and borrowed the full amount available under the term loan facility of $1.245 billion, net of approximately $30 million of discounts and issuance costs. During the first ~~nine~~three months of Fiscal Year ~~2022,~~2023, we did not ~~repurchase~~repay any of our outstanding principal. As of ~~January 1,~~July 2, 2022, we had $1.0 billion of principal outstanding.

OnIn December ~~29,~~ 2021, the Company entered into an Amendment to the Credit Agreement in order to relax certain financial covenants on the revolving line of credit. The financial covenants under the Credit Agreement are for the benefit of the revolving credit lenders only and do not apply to any other debt of the Company. As of ~~January 1,~~July 2, 2022, the Company has ~~five~~three outstanding letters of credit on the revolving credit facility for a total of ~~$2.9~~$2.4 million and had ~~$97.1~~$97.6 million available under the revolving credit facility. As of ~~January 1,~~July 2, 2022, the Company was in compliance with the financial covenants.

OnIn July ~~30,~~ 2018, the Company entered into a 4-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $831 million and matures on July 31, 2022. OnIn June ~~15,~~ 2021, the Company entered into a three-year amortizing interest rate swap agreement with Bank of America, N.A. The swap has an initial notional amount of $680 million and matures on July 31, 2024. During the ~~nine~~three months ended ~~January 1,~~July 2, 2022, the Company reclassified into interest expense $~~7.6~~0.6 million and recorded a $~~4.1~~28.3 million unrealized gain on its interest rate swaps derivatives designated as a cash flow hedge.

OnIn March 4, 2021, the Company issued $500.0 million aggregate principal amount of 4.75% Senior Notes. The 4.75% Senior Notes mature onin March 1, 2029 and bear interest at a rate of 4.75% per annum, payable semi-annually on March 1 and September 1 of each ~~year, commencing on September 1, 2021.~~year. A portion of the proceeds from the 4.75% Senior Notes was used to redeem the outstanding principal and accrued interest on the 5.50% Senior Notes of $493.9 ~~million.~~million in May 2021. As of ~~January 1,~~July 2, 2022, $500 million of principal was outstanding. On July 25, 2022, the Company entered into a supplemental indenture to, among other changes, eliminate substantially all of the restrictive covenants with respect to certain change of control triggering events, effective no earlier than the closing date of the Merger with HP. See Note 7, Debt, of the accompanying notes to the condensed consolidated financial statements included within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

~~During~~Our ability to make scheduled payments or to refinance our obligations with respect to the ~~first quarter of Fiscal Year 2022, we redeemed the outstanding principal and accrued interest on the 5.50%~~ Senior Notes and our other indebtedness under our Credit Agreement will depend on our financial and operating performance, which, in turn, is subject to prevailing economic and industry conditions and other factors, including the availability of ~~$493.9 million.~~financing in the banking and capital markets, beyond our control. In addition, any refinancing of our indebtedness may be at higher interest rates, particularly in the current environment of rising interest rates, and may require us to comply with more onerous covenants, which could further restrict our operations.

We may at any time and from time to time, depending on market conditions and prices, continue to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Under the terms of the Merger Agreement, from the date of the Merger Agreement to the termination or consummation of the Merger, we are restricted in our ability to drawdown or incur additional indebtedness, under certain conditions, without the prior written consent of HP.

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In addition, our liquidity, capital resources, and results of operations in any period could be affected by repurchases of our common stock, the payment in the future of cash dividends if the Board determines to reinstate the dividend program, the exercise of outstanding stock options, restricted stock grants under stock plans, and the issuance of common stock under the ~~ESPP. The acquisition of Polycom affected our liquidity and leverage ratios and we are working to reduce our debt leverage~~

~~Table of Contents~~

~~ratios by prioritizing the repayment of the debt obtained to finance such acquisition.~~Employee Stock Purchase Program (“ESPP”). We receive cash from the exercise of outstanding stock options under our stock plan and the issuance of shares under our ~~Employee Stock Purchase Plan.~~ESPP. However, the resulting increase in the number of outstanding shares from these equity grants and issuances could affect our earnings per share. We cannot predict the timing or amount of proceeds from the sale or exercise of these securities or whether they will be exercised, forfeited, canceled, or will expire.

~~Further~~For further information regarding ~~the Company’s~~our debt issuances and related hedging activity ~~can be found in~~refer to Note 7, Debt, and Note 10, Derivatives, of the accompanying notes to the condensed consolidated financial statements included within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

~~Common Stock Repurchases~~

From time to time, our Board authorizes programs under which we may repurchase shares of our common stock in the open market or through privately negotiated transactions, including accelerated stock repurchase agreements. On November 28, 2018, the Board approved a 1.0 million share repurchase program expanding our capacity to repurchase shares to approximately 1.7 million shares. During the nine months ended January 1, 2022, we did not repurchase any shares of our common stock. As of January 1, 2022, there remained 1,369,014 shares authorized for repurchase under the existing stock repurchase program.

We believe that our current cash and cash equivalents, short-term investments, cash ~~flow from~~provided by operations, and availability of additional funds under the Credit Agreement, as amended from time to time, will be sufficient to fund our operations for one year from the date of issuance of these financial ~~statements. However,~~statements; however, any projections of future financial needs and sources of working capital are subject to uncertainty, particularly in light of the uncertainty resulting from the impact of COVID-19 on our financial results. Readers are cautioned to review the risks, uncertainties, and assumptions set forth in this Quarterly Report on Form 10-Q, including the section entitled "“Certain Forward-Looking Information"” and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021,~~2, 2022, filed with the SEC on May ~~18, 2021,~~27, 2022, and other periodic filings with the SEC, any of which could affect our estimates for future financial needs and sources of working capital.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides us with financing and liquidity support, market risk, or credit risk support.

Unconditional Purchase Obligations

The Company's off-balance sheet unconditional purchase obligations are comprised of third-party manufacturing, component purchases, and other general and administrative commitments.

~~$615.5 million, including off-balance sheet consigned inventories of~~ ~~$65.3 million~~.

A substantial portion of the raw materials, components, and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our condensed consolidated balance sheets until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the risk of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results.

As of July 2, 2022, our unconditional purchase obligations were primarily comprised of third-party manufacturing and component purchase commitments, including $77.4 million of consigned inventories. We expect to consume unconditional purchase obligations in the normal course of business, net of an immaterial purchase commitments reserve. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs in partnering with our suppliers given the current environment.

Except as described above, there have been no material changes in our contractual obligations as described in our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021.~~2, 2022.

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CRITICAL ACCOUNTING ESTIMATES

For a complete description of what we believe to be the critical accounting estimates used in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021.~~2, 2022. There have been no material changes to our critical accounting estimates during Fiscal Year ~~2022.~~2023.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the ~~Financial Accounting Standards Board ("FASB")~~FASB did not and are not expected to have a material impact on the Company's financial position, results of operations, or cash flows.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The discussion of our exposure to market risk related to changes in interest rates and foreign currency exchange rates 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 discussed in Part I, ~~"Item~~“Item 1A. Risk Factors"” in our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021,~~2, 2022, which could materially affect our business, financial position, or future results of operations.

INTEREST RATE RISK

Our exposure to market risk for changes in interest rates relates primarily to our floating-rate interest payments under our $1.275 billion term loan facility. Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) the prime rate publicly announced from time to time by Wells Fargo Bank, National Association, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR plus a specified margin.

On July 30, 2018, we entered into a four-year amortizing interest rate swap agreement, and on June 15, 2021, we entered into a three-year amortizing interest rate swap agreement, both with Bank of America, N.A., as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates on the $1.275 billion term loan facility. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk and we do not use derivatives for trading or speculative purposes. Our objective is to mitigate the impact of interest expense fluctuations on our profitability related to interest rate changes by minimizing movements in future debt payments with these interest rate swaps.

The first swap has an initial notional amount of $831 million and matures on July 31, 2022. The second swap has an initial notional amount of $680 million and matures on July 31, 2024. The swaps involve the receipt of floating-rate interest payments for fixed interest rate payments over the life of the agreement. We have designated these interest rate swaps as cash flow hedges. Changes in the fair value of the derivatives are recorded to other comprehensive income on the condensed consolidated statements of comprehensive (loss) income and are reclassified to interest expense over the life of the agreements. For additional details, refer to Note 10, Derivatives, of the accompanying notes to the condensed consolidated financial statements within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. During the ~~nine~~three months ended ~~January 1,~~July 2, 2022, we made payments of approximately ~~$7.7~~$0.7 million on our interest rate swaps and recognized $~~7.6~~0.6 million within interest expense on the condensed consolidated statement of operations. As of ~~January 1,~~July 2, 2022, we had an immaterial amount of interest accrued within accrued liabilities on the condensed consolidated balance sheet. A hypothetical 10% increase or decrease on market interest rates could result in a corresponding immaterial ~~increase~~increase or decrease in annual interest expense due to the two interest rate swaps.

Interest rates were ~~lower~~higher in the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 compared to the same period in the prior year. Interest income ~~was~~was not material in the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022 and ~~December 26, 2020.~~July 3, 2021.

FOREIGN CURRENCY EXCHANGE RATE RISK

We are a net receiver of currencies other than the United States Dollar ("(“USD."”) Accordingly, changes in exchange rates, and in particular a strengthening of the USD, could negatively affect our total net revenues and gross margins, as expressed in USD. There is a risk that we will have to adjust local currency product pricing due to competitive pressures if there is significant volatility in foreign currency exchange rates.

The primary currency fluctuations to which we are exposed are the Euro ~~("EUR"~~(“EUR”), Great Britain Pound Sterling ~~("GBP"~~(“GBP”), and Mexican Peso ("(“MXN."”) We use a hedging strategy to diminish, and make more predictable, the effect of currency fluctuations. All of our hedging activities are entered into with large financial institutions, which we periodically evaluate for credit risks. We hedge our balance sheet exposure by hedging EUR and GBP denominated cash, accounts receivable, and accounts payable balances, and our economic exposure by hedging a portion of anticipated EUR and GBP denominated sales and our MXN denominated expenditures. We can provide no assurance that our strategy will be successful in the future and that exchange rate fluctuations will not materially adversely affect our business. We do not hold or issue derivative financial instruments for speculative trading purposes. While our existing hedges cover a certain amount of exposure for the upcoming fiscal year, long-term strengthening of the USD relative to the currencies of other countries in which we sell may have a material adverse impact on our financial results. In addition, our results may be adversely impacted by future changes in foreign currency exchange rates relative to original hedging contracts.

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The impact of changes in foreign currency rates recognized in other non-operating income, net ~~was~~was immaterial in ~~both the~~the three ~~and nine~~ months ended ~~January 1,~~July 2, 2022. Although we hedge a portion of our foreign currency exchange exposure, the weakening of certain foreign currencies, particularly the EUR and GBP in comparison to the USD, could result in material foreign exchange losses in future periods.

Non-Designated Hedges

We hedge our EUR and GBP denominated cash, accounts receivable, and accounts payable balances by entering into foreign exchange forward contracts. The table below presents the impact on the foreign exchange gain (loss) of a hypothetical 10% appreciation and a 10% depreciation of the USD against the forward currency contracts as of ~~January 1,~~July 2, 2022 (in millions):


Currency - forward contracts	Currency - forward contracts	Position	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD		Currency - forward contracts	Position	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD
EUR	EUR	Sell EUR	$	28.3	$	2.8	$	(2.8)	EUR	Sell EUR	$	54.1	$	5.4	$	(5.4)
GBP	GBP	Sell GBP	14.0		1.4		(1.4)		GBP	Sell GBP	8.7		0.9		(0.9)

Cash Flow Hedges

In the ~~nine~~three months ended ~~January 1,~~July 2, 2022, approximately ~~53%~~54% of our total net revenues were derived from sales outside of the U.S. and were denominated primarily in EUR and GBP.

As of ~~January 1,~~July 2, 2022, we had foreign currency put and call option contracts with notional amounts of approximately ~~€77.4~~€84.4 million and ~~£15.7~~£17.3 million denominated in EUR and GBP, respectively. Collectively, our option contracts hedge against a portion of our forecasted foreign currency denominated sales. If the USD is subjected to either a 10% appreciation or 10% depreciation versus these net exposed currency positions, we could realize a gain of ~~$8.7~~$10.8 million or incur a loss of ~~$5.0~~$3.6 million, respectively.

The table below presents the impact on the Black-Scholes valuation of our currency option contracts of a hypothetical 10% appreciation and a 10% depreciation of the USD against the indicated option contract type for cash flow hedges as of ~~January 1,~~July 2, 2022 (in millions):


Derivative	Derivative	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD		Derivative	USD Notional Value of Net Foreign Exchange Contracts		Foreign Exchange Gain From 10% Appreciation of USD		Foreign Exchange (Loss) From 10% Depreciation of USD
Call options	Call options	$	116.3	$	0.3	$	(4.7)	Call options	$	119.5	$	0.5	$	(3.7)
Put options	Put options	107.5		7.6		(1.1)		Put options	110.1		7.7		(2.6)
Forwards	Forwards	105.9		(4.9)		(10.4)		Forwards	94.6		8.8		(8.8)

Collectively, our swap contracts hedge against a portion of our forecasted MXN denominated expenditures. As of ~~January 1,~~July 2, 2022, we had cross-currency swap contracts with notional amounts of approximately MXN ~~415.9~~363.0 million.

The table below presents the impact on the valuation of our cross-currency swap contracts of a hypothetical 10% appreciation and a 10% depreciation of the USD as of ~~January 1,~~July 2, 2022 (in millions):


Derivative	Derivative	USD Notional Value of Cross-Currency Swap Contracts		Foreign Exchange (Loss) From 10% Appreciation of USD		Foreign Exchange Gain From 10% Depreciation of USD		Derivative	USD Notional Value of Cross-Currency Swap Contracts		Foreign Exchange (Loss) From 10% Appreciation of USD		Foreign Exchange Gain From 10% Depreciation of USD
Position: Buy MXN	Position: Buy MXN	$	19.9	$	(1.9)	$	1.9	Position: Buy MXN	$	17.3	$	(1.7)	$	1.7

Except as described above, there have been no material changes in our market risk as described in our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021.~~2, 2022.

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ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are presently engaged in various legal actions arising in the normal course of business. We ~~believe that it is unlikely~~do not expect 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. For additional information about our material legal proceedings, please see Note 6, Commitments and Contingencies, of the accompanying notes to the condensed consolidated financial statements within “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors discussed in Part I, ~~"Item~~“Item 1A. Risk ~~Factors"~~Factors” in our Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021,~~2, 2022, each of which could materially affect our business, financial position, or future results of operations.

The risks described within this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the fiscal year ended April ~~3, 2021~~2, 2022 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended ~~January 1,~~July 2, 2022, we did not repurchase any shares of our common stock. As of ~~January 1,~~July 2, 2022, there remained 1,369,014 shares authorized for repurchase under the existing stock repurchase program. The following table presents information with respect to shares that were tendered to us in satisfaction of employee tax withholding obligations upon the vesting of restricted stock grants under our stock plans during the three months ended ~~January 1,~~July 2, 2022:

Total Number of Shares Purchased (4)
Average Price Paid per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3)
October 3, 2021 to October 30, 2021 15,679 N/A — 1,369,014
October 31, 2021 to November 27, 2021 9,463 N/A — 1,369,014
November 28, 2021 to January 1, 2022 5,665 N/A — 1,369,014


	Total Number of Shares Purchased (4)	Average Price Paid per Share (2)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3)
April 3, 2022 to April 30, 2022	0	N/A	—	1,369,014
May 1, 2022 to May 28, 2022	356,765	N/A	—	1,369,014
May 29, 2022 to July 2, 2022	4,676	N/A	—	1,369,014


(1)			On November 28, 2018, our Board ~~of Directors~~ approved a 1.0 million shares repurchase program expanding our capacity to repurchase shares to approximately 1.7 million shares. We may repurchase shares from time to time in open market transactions or through privately negotiated transactions. There is no expiration date associated with the repurchase activity.
(2)			"Average Price Paid per Share" reflects open market repurchases of common stock only.
(3)			These shares reflect the available shares authorized for repurchase under the expanded repurchase program approved by the Board on November 28, 2018.
(4)			Represents only shares that were tendered to us in satisfaction of employee tax withholding obligations upon the vesting of restricted stock grants under our stock plans.

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ITEM 6. EXHIBITS

We have filed the following documents as Exhibits to this Quarterly Report on Form 10-Q:

EXHIBITS INDEX

Exhibit Number Incorporation by Reference Filed Herewith
Exhibit Description Form File No. Exhibit Filing Date
10.1
Amendment No. 3 to Credit Agreement, dated as of December 29, 2021, by and among Plantronics, Inc., the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent
8-K 001-12696 10.1 12/29/2021
10.2*
Plantronics, Inc. 2002 Employee Stock Purchase Plan, as amended and restated
X
31.1
Certification of the President and CEO Pursuant to Rule 13a-14(a)/15d-14(a)
X
31.2
Certification of Executive Vice President and CFO Pursuant to Rule 13a-14(a)/15d-14(a)
X
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
X
101.INS XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
101.DEF Inline XBRL Taxonomy Definition Linkbase Document X
104 Cover Page Interactive Data File, (formatted as Inline XBRL and contained in Exhibit 101) X

* Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates.

Exhibit Number

Incorporation by Reference

Filed Herewith

Exhibit Description

Form

File No.

Exhibit

Filing Date

4.1

First Supplemental Indenture, dated as of July 25, 2022, to the Indenture, dated March 4, 2021, by and among Plantronics, Inc. the Subsidiary Guarantor party thereto and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee

8-K

001-12696

4.1

7/27/2022

31.1

Certification of the President and CEO Pursuant to Rule 13a-14(a)/15d-14(a)

31.2

Certification of Executive Vice President and CFO Pursuant to Rule 13a-14(a)/15d-14(a)

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

101.INS

XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Definition Linkbase Document

104

Cover Page Interactive Data File, (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

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 8,~~August 11, 2022	By:	/s/ Charles D. Boynton
		Name:	Charles D. Boynton
		Title:	Executive Vice President and Chief Financial Officer (on behalf of the Registrant and as principal financial officer and principal accounting officer)

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	Three Months Ended January 1, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Treasury Stock		Total Stockholders' (Deficit) Equity
	Shares	Amount
Balances at October 2, 2021	42,721	$	926	$	1,584,088	$	3,284	$	(705,259)	$	(880,806)	$	2,233
Net loss	—	—		—		—		(11,164)		—		(11,164)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		8,170		—		—		8,170

Proceeds from issuances under stock-based compensation plans	43	—		—		—		—		—		—



Stock-based compensation	—	—		12,225		—		—		—		12,225


Employees' tax withheld and paid for restricted stock and restricted stock units	—	—		—		—		—		(844)		(844)




Balances at January 1, 2022	42,764	$	926	$	1,596,313	$	11,454	$	(716,423)	$	(881,650)	$	10,620


	Three Months Ended December 26, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Stockholders' Deficit
	Shares	Amount
Balances at September 26, 2020	41,246	$	907	$	1,526,677	$	(9,650)	$	(796,324)	$	(866,615)	$	(145,005)
Net income	—	—		—		—		20,113		—		20,113

Net unrealized gains on cash flow hedges, net of tax	—	—		—		938		—		—		938

Proceeds from issuances under stock-based compensation plans	19	—		—		—		—		—		—


Stock-based compensation	—	—		11,486		—		—		—		11,486


Employees' tax withheld and paid for restricted stock and restricted stock units	(6)	—		—		—		—		(144)		(144)



Other equity changes	—	—		(3)		(409)		3		—		(409)
Balances at December 26, 2020	41,259	$	907	$	1,538,160	$	(9,121)	$	(776,208)	$	(866,759)	$	(113,021)


	Nine Months Ended January 1, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Treasury Stock		Total Stockholders' (Deficit) Equity
	Shares	Amount
Balances at April 3, 2021	41,751	$	912	$	1,556,272	$	(3,221)	$	(765,233)	$	(869,496)	$	(80,766)
Net income	—	—		—		—		48,810		—		48,810

Net unrealized gains on cash flow hedges, net of tax	—	—		—		14,675		—		—		14,675

Proceeds from issuances under stock-based compensation plans	785	11		—		—		—		—		11



Stock-based compensation	—	—		34,214		—		—		—		34,214


Employees' tax withheld and paid for restricted stock and restricted stock units	—	—		—		—		—		(12,154)		(12,154)

Proceeds from Employee Stock Purchase Program	228	3		5,827		—		—		—		5,830


Balances at January 1, 2022	42,764	$	926	$	1,596,313	$	11,454	$	(716,423)	$	(881,650)	$	10,620


	Nine Months Ended December 26, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Stockholders' Deficit
	Shares	Amount
Balances at March 28, 2020	40,406	$	896	$	1,501,340	$	(13,582)	$	(707,904)	$	(863,566)	$	(82,816)
Net loss	—	—		—		—		(68,307)		—		(68,307)

Net unrealized gains on cash flow hedges, net of tax	—	—		—		4,870		—		—		4,870

Proceeds from issuances under stock-based compensation plans	667	6		—		—		—		—		6
Repurchase of restricted common stock	(10)	—		—		—		—		—		—


Stock-based compensation	—	—		31,104		—		—		—		31,104


Employees' tax withheld and paid for restricted stock and restricted stock units	(261)	—		—		—		—		(3,193)		(3,193)

Proceeds from Employee Stock Purchase Program	457	5		5,719		—		—		—		5,724

Other equity changes	—	—		(3)		(409)		3		—		(409)
Balances at December 26, 2020	41,259	$	907	$	1,538,160	$	(9,121)	$	(776,208)	$	(866,759)	$	(113,021)


(in thousands)	Current		Non-Current		Total
Unsatisfied (or partially unsatisfied) performance obligations	$	132,498	$	66,695	$	199,193