Delaware
|
77-0207692
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
Number)
|
Large
accelerated filer S
|
Accelerated
filer £
|
Non-accelerated
filer £
(Do
not check if a smaller reporting company)
|
Smaller
reporting company £
|
PART
I. FINANCIAL INFORMATION
|
Page No.
|
|
|
Item
1. Financial Statements:
|
|
3
|
|
4
|
|
5
|
|
6
|
|
23
|
|
43
|
|
45
|
|
PART
II. OTHER INFORMATION
|
|
46
|
|
46
|
|
61
|
|
61
|
|
62
|
March
31,
|
December
31,
|
|||||||
2008
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 163,091 | $ | 153,452 | ||||
Short-term
investments
|
- | 29,965 | ||||||
Accounts
receivable, net
|
131,493 | 106,463 | ||||||
Inventory
|
127,088 | 137,563 | ||||||
Deferred
income taxes
|
13,760 | 12,472 | ||||||
Other
current assets
|
14,771 | 28,385 | ||||||
Total
current assets
|
450,203 | 468,300 | ||||||
Long-term
investments
|
25,136 | 24,016 | ||||||
Property,
plant and equipment, net
|
98,530 | 98,440 | ||||||
Intangibles,
net
|
91,511 | 27,192 | ||||||
Goodwill
|
69,171 | 13,996 | ||||||
Other
assets
|
6,842 | 9,516 | ||||||
Total
assets
|
$ | 741,393 | $ | 641,460 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 47,896 | $ | 32,157 | ||||
Accrued
liabilities
|
67,318 | 56,284 | ||||||
Total
current liabilities
|
115,214 | 88,441 | ||||||
Deferred
tax liability
|
32,570 | 5,611 | ||||||
Long-term
income taxes payable
|
14,137 | 11,925 | ||||||
Other
long-term liabilities
|
852 | 885 | ||||||
Total
liabilities
|
162,773 | 106,862 | ||||||
Stockholders'
equity:
|
||||||||
Common
stock
|
673 | 678 | ||||||
Additional
paid-in capital
|
369,655 | 389,867 | ||||||
Accumulated
other comprehensive income (loss)
|
(3,581 | ) | 9,628 | |||||
Retained
earnings
|
608,849 | 547,639 | ||||||
975,596 | 947,812 | |||||||
Less: Treasury
stock, at cost
|
(396,976 | ) | (413,214 | ) | ||||
Total
stockholders' equity
|
578,620 | 534,598 | ||||||
Total
liabilities and stockholders' equity
|
$ | 741,393 | $ | 641,460 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||
Net
revenues
|
$ | 232,824 | $ | 182,836 | $ | 647,543 | $ | 618,856 | ||||||||
Cost
of revenues
|
139,067 | 121,971 | 385,784 | 373,339 | ||||||||||||
Gross
profit
|
93,757 | 60,865 | 261,759 | 245,517 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research,
development and engineering
|
19,308 | 18,664 | 58,004 | 57,209 | ||||||||||||
Selling,
general and administrative
|
48,424 | 43,202 | 140,476 | 139,345 | ||||||||||||
Restructuring
and other related charges
|
2,882 | 1,048 | 2,882 | 1,283 | ||||||||||||
Impairment
of goodwill and long-lived assets
|
- | 117,464 | - | 117,464 | ||||||||||||
Total
operating expenses
|
70,614 | 180,378 | 201,362 | 315,301 | ||||||||||||
Operating
income (loss)
|
23,143 | (119,513 | ) | 60,397 | (69,784 | ) | ||||||||||
Interest
and other income (expense), net
|
2,184 | (1,499 | ) | 5,311 | (3,129 | ) | ||||||||||
Income
(loss) before income taxes
|
25,327 | (121,012 | ) | 65,708 | (72,913 | ) | ||||||||||
Income
tax expense (benefit)
|
6,219 | (29,003 | ) | 15,103 | (19,046 | ) | ||||||||||
Net
income (loss)
|
$ | 19,108 | $ | (92,009 | ) | $ | 50,605 | $ | (53,867 | ) | ||||||
Net
income (loss) per share - basic
|
$ | 0.39 | $ | (1.90 | ) | $ | 1.05 | $ | (1.11 | ) | ||||||
Shares
used in basic per share calculations
|
48,379 | 48,449 | 48,110 | 48,641 | ||||||||||||
Net
income (loss) per share - diluted
|
$ | 0.39 | $ | (1.90 | ) | $ | 1.03 | $ | (1.11 | ) | ||||||
Shares
used in diluted per share calculations
|
49,533 | 48,449 | 49,148 | 48,641 | ||||||||||||
Cash
dividends declared per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.15 |
Nine
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | 50,605 | $ | (53,867 | ) | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
21,012 | 20,597 | ||||||
Stock-based
compensation
|
11,946 | 12,087 | ||||||
Provision
for sales allowances and doubtful accounts
|
13 | 1,709 | ||||||
Provision
for excess and obsolete inventories
|
8,449 | 4,859 | ||||||
Benefit
from deferred income taxes
|
(7,801 | ) | (28,804 | ) | ||||
Income
tax benefit associated with stock option exercises
|
1,010 | 938 | ||||||
Excess
tax benefit from stock-based compensation
|
(1,905 | ) | (591 | ) | ||||
Loss
on disposal of property, plant, and equipment
|
21 | 129 | ||||||
Unrealized
loss on auction rate securities
|
- | 80 | ||||||
Impairment
of goodwill and long-lived assets
|
517 | 117,464 | ||||||
Non-cash
restructuring charges
|
1,064 | - | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable, net
|
(23,583 | ) | 27,469 | |||||
Inventory
|
(13,178 | ) | (15,334 | ) | ||||
Other
assets
|
(122 | ) | (6,985 | ) | ||||
Accounts
payable
|
7,093 | (15,739 | ) | |||||
Accrued
liabilities
|
8,286 | (5,732 | ) | |||||
Income
taxes payable
|
11,011 | 1,511 | ||||||
Cash
provided by operating activities
|
74,438 | 59,791 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds
from sales of short-term investments
|
254,590 | - | ||||||
Purchase
of short-term investments
|
(299,040 | ) | (29,919 | ) | ||||
Capital
expenditures and other assets
|
(16,918 | ) | (20,881 | ) | ||||
Funds
released from escrow related to the Altec acquisition
|
- | 406 | ||||||
Cash
used for investing activities
|
(61,368 | ) | (50,394 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Purchase
of treasury stock
|
- | (17,327 | ) | |||||
Proceeds
from sale of treasury stock
|
2,895 | 2,938 | ||||||
Proceeds
from issuance of common stock
|
9,117 | 6,899 | ||||||
Payment
of cash dividends
|
(7,263 | ) | (7,343 | ) | ||||
Excess
tax benefit from stock-based compensation
|
1,905 | 591 | ||||||
Cash
provided by (used for) financing activities
|
6,654 | (14,242 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
1,624 | (4,794 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
21,348 | (9,639 | ) | |||||
Cash
and cash equivalents at beginning of period
|
94,131 | 163,091 | ||||||
Cash
and cash equivalents at end of period
|
$ | 115,479 | $ | 153,452 |
March
31,
|
December
31,
|
||||||
(in
thousands)
|
2008
|
2008
|
|||||
Inventory,
net:
|
|||||||
Raw
materials
|
$ | 36,081 | $ | 46,360 | |||
Work
in process
|
3,611 | 4,090 | |||||
Finished
goods
|
87,396 | 87,113 | |||||
$ | 127,088 | $ | 137,563 |
March
31,
|
December
31,
|
||||||
(in
thousands)
|
2008
|
2008
|
|||||
Accrued
liabilities:
|
|||||||
Employee
compensation and benefits
|
$ | 25,089 | $ | 19,505 | |||
Warranty
accrual
|
10,441 | 13,378 | |||||
Accrued
advertising and sales and marketing
|
5,762 | 5,736 | |||||
Accrued
other
|
26,026 | 17,665 | |||||
$ | 67,318 | $ | 56,284 |
Warranty
obligation at March 31, 2008
|
$ | 10,441 | ||
Warranty
provision relating to products shipped during the period
|
17,391 | |||
Deductions
for warranty claims processed during the period
|
(14,454 | ) | ||
Warranty
obligation at December 31, 2008
|
$ | 13,378 |
(in
thousands)
|
Balances
at March 31, 2008
|
Balances
at December 31, 2008
|
|||||||||||||||||||||||||||||
Cost
|
Unrealized
|
Accrued
|
Fair
|
Cost
|
Unrealized
|
Accrued
|
Fair
|
||||||||||||||||||||||||
Basis
|
Gain(Loss)
|
Interest
|
Value
|
Basis
|
Gain(Loss)
|
Interest
|
Value
|
||||||||||||||||||||||||
Short-term
investments:
|
|||||||||||||||||||||||||||||||
U.S.
Treasury Bills
|
$ | - | $ | - | $ | - | $ | - | $ | 29,918 | $ | - | $ | 47 | $ | 29,965 | |||||||||||||||
Total
short-term investments
|
- | - | - | - | 29,918 | - | 47 | 29,965 | |||||||||||||||||||||||
Long-term
investments:
|
|||||||||||||||||||||||||||||||
Auction
rate securities
|
28,000 | (2,864 | ) | - | 25,136 | 24,016 | - | - | 24,016 | ||||||||||||||||||||||
Total
long-term investments
|
28,000 | (2,864 | ) | - | 25,136 | 24,016 | - | - | 24,016 | ||||||||||||||||||||||
Total
short-term and long-term investments
|
$ | 28,000 | $ | (2,864 | ) | $ | - | $ | 25,136 | $ | 53,934 | $ | - | $ | 47 | $ | 53,981 |
(in
thousands)
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||
Money
market funds
|
$ | 104,678 | $ | - | $ | - | $ | 104,678 | |||||||
Derivative
assets
|
- | 8,597 | - | 8,597 | |||||||||||
Auction
rate securities - trading securities
|
- | - | 24,016 | 24,016 | |||||||||||
Auction
rate securities - Rights agreement
|
- | - | 3,904 | 3,904 | |||||||||||
Reserve
Primary Fund
|
- | - | 364 | 364 | |||||||||||
Total
assets measured at fair value
|
$ | 104,678 | $ | 8,597 | $ | 28,284 | $ | 141,559 | |||||||
Derivative
liabilities
|
$ | 1,704 | $ | 1,125 | $ | - | $ | 2,829 |
Nine
Months ended
|
||||
(in
thousands)
|
December
31, 2008
|
|||
Balance
at March 31, 2008
|
$ | 25,136 | ||
Change
in temporary valuation adjustment included in Accumulated other
comprehensive income (loss)
|
2,864 | |||
Unrealized
loss included in Interest and other income (expense), net
|
(3,984 | ) | ||
Recognition
of Rights agreement
|
3,904 | |||
Transfer
of Reserve Primary Fund from Level 1 to Level 3
|
364 | |||
Balance
at December 31, 2008
|
$ | 28,284 |
March
31, 2008
|
December
31, 2008
|
||||||||||||||||||||||||
Gross
Carrying
|
Accumulated
|
Net
|
Gross
Carrying
|
Accumulated
|
Net
|
Useful
|
|||||||||||||||||||
(in
thousands)
|
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
Life
|
||||||||||||||||||
Technology
|
$ | 30,160 | $ | (13,883 | ) | $ | 16,277 | $ | 9,460 | $ | (5,474 | ) | $ | 3,986 |
3-10
years
|
||||||||||
State
contracts
|
1,300 | (1,161 | ) | 139 | 1,300 | (1,300 | ) | - |
7
years
|
||||||||||||||||
Patents
|
1,420 | (1,079 | ) | 341 | 1,420 | (1,231 | ) | 189 |
7
years
|
||||||||||||||||
Customer
relationships
|
18,133 | (6,308 | ) | 11,825 | 4,937 | (1,025 | ) | 3,912 |
3-8
years
|
||||||||||||||||
Trademarks
|
300 | (268 | ) | 32 | 300 | (300 | ) | - |
7
years
|
||||||||||||||||
Trade
name - inMotion
|
5,000 | (1,641 | ) | 3,359 | 500 | (14 | ) | 486 |
3
years
|
||||||||||||||||
Trade
name - Altec Lansing
|
59,100 | - | 59,100 | 18,600 | - | 18,600 |
Indefinite
|
||||||||||||||||||
OEM
relationships
|
700 | (262 | ) | 438 | 27 | (8 | ) | 19 |
7
years
|
||||||||||||||||
Total
|
$ | 116,113 | $ | (24,602 | ) | $ | 91,511 | $ | 36,544 | $ | (9,352 | ) | $ | 27,192 |
Fiscal
Year Ending March 31,
|
|||
Remainder
of 2009
|
$ | 617 | |
2010
|
2,470 | ||
2011
|
2,427 | ||
2012
|
1,643 | ||
2013
|
630 | ||
Thereafter
|
805 | ||
Total
estimated amortization expense
|
$ | 8,592 |
6.
|
RESTRUCTURING
AND OTHER RELATED CHARGES
|
(in
thousands)
|
Severance
and Benefits
|
Facilities
and Equipment
|
Other
|
Total
|
||||||||||||
Restructuring
accrual at March 31, 2008
|
$ | 292 | $ | - | $ | 514 | $ | 806 | ||||||||
Restructuring
and other related charges
|
1,257 | (153 | ) | 179 | 1,283 | |||||||||||
Cash
payments
|
(988 | ) | 107 | (693 | ) | (1,574 | ) | |||||||||
Non-cash
|
54 | 46 | - | 100 | ||||||||||||
Restructuring
accrual at December 31, 2008
|
$ | 615 | $ | - | $ | - | $ | 615 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
(in
thousands)
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Cost
of revenues
|
$ | 609 | $ | 504 | $ | 1,862 | $ | 1,784 | ||||||||
Research,
development and engineering
|
858 | 803 | 2,641 | 2,775 | ||||||||||||
Selling,
general and administrative
|
2,617 | 2,274 | 7,443 | 7,528 | ||||||||||||
Stock-based
compensation expense included in operating expenses
|
3,475 | 3,077 | 10,084 | 10,303 | ||||||||||||
Total
stock-based compensation expense
|
4,084 | 3,581 | 11,946 | 12,087 | ||||||||||||
Income
tax benefit
|
(1,191 | ) | (1,060 | ) | (3,813 | ) | (3,794 | ) | ||||||||
Total
stock-based compensation expense, net of tax
|
$ | 2,893 | $ | 2,521 | $ | 8,133 | $ | 8,293 |
Options
Outstanding
|
|||||||||||||||
Weighted
|
Weighted
|
||||||||||||||
Average
|
Average
|
Aggregate
|
|||||||||||||
Number
of
|
Exercise
|
Remaining
|
Intrinsic
|
||||||||||||
Shares
|
Price
|
Contractual
Life
|
Value
|
||||||||||||
(in
thousands)
|
(in
years)
|
(in
thousands)
|
|||||||||||||
Outstanding
at March 31, 2008
|
8,561 | $ | 26.32 | ||||||||||||
Options
granted
|
1,497 | $ | 18.80 | ||||||||||||
Options
exercised
|
(359 | ) | $ | 19.22 | |||||||||||
Options
forfeited or expired
|
(534 | ) | $ | 27.67 | |||||||||||
Outstanding
at December 31, 2008
|
9,165 | $ | 25.29 | 3.95 | $ | 63 | |||||||||
Vested
and expected to vest at December 31, 2008
|
8,946 | $ | 25.43 | 3.89 | $ | 56 | |||||||||
Exercisable
at December 31, 2008
|
6,591 | $ | 26.96 | 3.19 | $ | - |
Weighted
|
|||||||
Average
|
|||||||
Number
of
|
Grant
Date
|
||||||
Shares
|
Fair
Value
|
||||||
(in
thousands)
|
|||||||
Non-vested
at March 31, 2008
|
288 | $ | 26.77 | ||||
Granted
|
187 | $ | 14.50 | ||||
Vested
|
(79 | ) | $ | 27.07 | |||
Forfeited
|
(16 | ) | $ | 28.30 | |||
Non-vested
at December 31, 2008
|
380 | $ | 20.59 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
Employee
Stock Options
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Expected
volatility
|
39.7 | % | 56.9 | % | 39.1 | % | 51.6 | % | ||||||||
Risk-free
interest rate
|
3.9 | % | 2.7 | % | 4.1 | % | 2.9 | % | ||||||||
Expected
dividends
|
0.7 | % | 1.6 | % | 0.7 | % | 1.2 | % | ||||||||
Expected
life (in years)
|
4.1 | 4.4 | 4.2 | 4.4 | ||||||||||||
Weighted-average
grant date fair value
|
$ | 9.62 | $ | 5.53 | $ | 9.46 | $ | 7.66 |
Nine
Months Ended
|
||||||||
December
31,
|
||||||||
ESPP
|
2007
|
2008
|
||||||
Expected
volatility
|
32.1 | % | 47.7 | % | ||||
Risk-free
interest rate
|
5.1 | % | 1.9 | % | ||||
Expected
dividends
|
0.7 | % | 0.8 | % | ||||
Expected
life (in years)
|
0.5 | 0.5 | ||||||
Weighted-average
grant date fair value
|
$ | 6.72 | $ | 6.85 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
(in
thousands)
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Net
income (loss)
|
$ | 19,108 | $ | (92,009 | ) | $ | 50,605 | $ | (53,867 | ) | ||||||
Unrealized
gain (loss) on cash flow hedges, net of tax
|
607 | 4,316 | (1,670 | ) | 12,868 | |||||||||||
Foreign
currency translation gain (loss), net of tax
|
(11 | ) | (2,232 | ) | 994 | (2,522 | ) | |||||||||
Unrealized
gain on long-term investments
|
- | 3,177 | - | 2,864 | ||||||||||||
Comprehensive
income (loss)
|
$ | 19,704 | $ | (86,748 | ) | $ | 49,929 | $ | (40,657 | ) |
Local
Currency
|
USD
Equivalent
|
Position
|
Maturity
|
||||||||
EUR
|
17,000 | $ | 23,735 |
Sell
EUR
|
1
month
|
||||||
GBP
|
5,200 | $ | 7,661 |
Sell
GBP
|
1
month
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
(in
thousands, except per share data)
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Net
income (loss)
|
$ | 19,108 | $ | (92,009 | ) | $ | 50,605 | $ | (53,867 | ) | ||||||
Weighted
average shares-basic
|
48,379 | 48,449 | 48,110 | 48,641 | ||||||||||||
Dilutive
effect of employee equity incentive plans
|
1,154 | - | 1,038 | - | ||||||||||||
Weighted
average shares-diluted
|
49,533 | 48,449 | 49,148 | 48,641 | ||||||||||||
Earnings
(loss) per share-basic
|
$ | 0.39 | $ | (1.90 | ) | $ | 1.05 | $ | (1.11 | ) | ||||||
Earnings
(loss) per share-diluted
|
$ | 0.39 | $ | (1.90 | ) | $ | 1.03 | $ | (1.11 | ) | ||||||
Potentially
dilutive securities excluded from earnings (loss) per diluted share
because their effect is anti-dilutive
|
3,388 | 9,191 | 3,731 | 7,792 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
(in
thousands)
|
2007
|
2008
|
2007
|
2008
|
||||||||||||
Net
revenues
|
||||||||||||||||
Audio
Communications Group
|
$ | 195,955 | $ | 152,616 | $ | 562,574 | $ | 546,492 | ||||||||
Audio
Entertainment Group
|
36,869 | 30,220 | 84,969 | 72,364 | ||||||||||||
Consolidated
net revenues
|
$ | 232,824 | $ | 182,836 | $ | 647,543 | $ | 618,856 | ||||||||
Gross
profit
|
||||||||||||||||
Audio
Communications Group
|
$ | 89,698 | $ | 60,417 | $ | 260,358 | $ | 242,333 | ||||||||
Audio
Entertainment Group
|
4,059 | 448 | 1,401 | 3,184 | ||||||||||||
Consolidated
gross profit
|
$ | 93,757 | $ | 60,865 | $ | 261,759 | $ | 245,517 | ||||||||
Operating
income (loss)
|
||||||||||||||||
Audio
Communications Group
|
$ | 31,051 | $ | 4,905 | $ | 89,707 | $ | 67,437 | ||||||||
Audio
Entertainment Group
|
(7,908 | ) | (124,418 | ) | (29,310 | ) | (137,221 | ) | ||||||||
Consolidated
operating income (loss)
|
$ | 23,143 | $ | (119,513 | ) | $ | 60,397 | $ | (69,784 | ) |
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
December
31,
|
December
31,
|
||||||||||||||
(in
thousands)
|
2007
|
2008
|
2007
|
2008
|
|||||||||||
Net
revenues from unaffiliated customers:
|
|||||||||||||||
Office
and Contact Center
|
$ | 131,017 | $ | 101,694 | $ | 394,579 | $ | 344,027 | |||||||
Mobile
|
48,788 | 36,011 | 125,885 | 156,804 | |||||||||||
Gaming
and Computer Audio
|
10,449 | 8,531 | 25,211 | 27,129 | |||||||||||
Other
|
5,701 | 6,380 | 16,899 | 18,532 | |||||||||||
Total
segment net revenues
|
$ | 195,955 | $ | 152,616 | $ | 562,574 | $ | 546,492 |
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
December
31,
|
December
31,
|
||||||||||||||
(in
thousands)
|
2007
|
2008
|
2007
|
2008
|
|||||||||||
Net
revenues from unaffiliated customers:
|
|||||||||||||||
Docking
Audio
|
$ | 20,682 | $ | 19,088 | $ | 44,588 | $ | 38,058 | |||||||
PC
Audio
|
14,101 | 10,107 | 35,176 | 29,336 | |||||||||||
Other
|
2,086 | 1,025 | 5,205 | 4,970 | |||||||||||
Total
segment net revenues
|
$ | 36,869 | $ | 30,220 | $ | 84,969 | $ | 72,364 |
|
·
|
Be profitable
and cash flow positive.
We will monitor and align our cost structure to match the
economic reality through the economic downturn. As announced in
early January 2009, these steps include a restructuring plan to reduce our
worldwide workforce by approximately 18% compared to September 30, 2008,
which includes the restructuring actions taken in the third quarter of
fiscal 2009, along with other cost cutting measures including management
salary reductions, reduced spending on inventory and capital expenditures
and decreases in other operating
expenses.
|
|
·
|
Invest in Unified
Communications. We will continue to focus on Unified
Communications (“UC”) technologies as we believe the implementation of UC
by large corporations will be a significant long-term driver of office
headset adoption, and as a result, a key long-term driver of revenue and
profit growth.
|
|
·
|
Improve
profitability and market position in consumer
business. We are continuing development of our cost
effective high-end Bluetooth portfolio,
and, within AEG, we are developing new product lines that we believe will
help us to gain share and improve profit margins. However,
these steps will not be enough in the current environment and we are
exploring alternatives to increase the profitability of these
businesses.
|
Consolidated
|
||||||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
Three
Months Ended December 31,
|
Nine
Months Ended December 31,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 232,824 | 100.0 | % | $ | 182,836 | 100.0 | % | $ | 647,543 | 100.0 | % | $ | 618,856 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
139,067 | 59.7 | % | 121,971 | 66.7 | % | 385,784 | 59.6 | % | 373,339 | 60.3 | % | ||||||||||||||||||||
Gross
profit
|
93,757 | 40.3 | % | 60,865 | 33.3 | % | 261,759 | 40.4 | % | 245,517 | 39.7 | % | ||||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
19,308 | 8.3 | % | 18,664 | 10.2 | % | 58,004 | 9.0 | % | 57,209 | 9.3 | % | ||||||||||||||||||||
Selling,
general and administrative
|
48,424 | 20.8 | % | 43,202 | 23.7 | % | 140,476 | 21.7 | % | 139,345 | 22.5 | % | ||||||||||||||||||||
Restructuring
and other related charges
|
2,882 | 1.3 | % | 1,048 | 0.6 | % | 2,882 | 0.4 | % | 1,283 | 0.2 | % | ||||||||||||||||||||
Impairment
of goodwill and long-lived assets
|
- | 0.0 | % | 117,464 | 64.2 | % | - | 0.0 | % | 117,464 | 19.0 | % | ||||||||||||||||||||
Total
operating expenses
|
70,614 | 30.4 | % | 180,378 | 98.7 | % | 201,362 | 31.1 | % | 315,301 | 51.0 | % | ||||||||||||||||||||
Operating
income (loss)
|
23,143 | 9.9 | % | (119,513 | ) | (65.4 | %) | 60,397 | 9.3 | % | (69,784 | ) | (11.3 | %) | ||||||||||||||||||
Interest
and other income (expense), net
|
2,184 | 1.0 | % | (1,499 | ) | (0.8 | %) | 5,311 | 0.8 | % | (3,129 | ) | (0.5 | %) | ||||||||||||||||||
Income
(loss) before income taxes
|
25,327 | 10.9 | % | (121,012 | ) | (66.2 | %) | 65,708 | 10.1 | % | (72,913 | ) | (11.8 | %) | ||||||||||||||||||
Income
tax expense (benefit)
|
6,219 | 2.7 | % | (29,003 | ) | (15.9 | %) | 15,103 | 2.3 | % | (19,046 | ) | (3.1 | %) | ||||||||||||||||||
Net
income (loss)
|
$ | 19,108 | 8.2 | % | $ | (92,009 | ) | (50.3 | %) | $ | 50,605 | 7.8 | % | $ | (53,867 | ) | (8.7 | %) |
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
Three
Months Ended December 31,
|
Nine
Months Ended December 31,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 195,955 | 100.0 | % | $ | 152,616 | 100.0 | % | $ | 562,574 | 100.0 | % | $ | 546,492 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
106,257 | 54.2 | % | 92,199 | 60.4 | % | 302,216 | 53.7 | % | 304,159 | 55.7 | % | ||||||||||||||||||||
Gross
profit
|
89,698 | 45.8 | % | 60,417 | 39.6 | % | 260,358 | 46.3 | % | 242,333 | 44.3 | % | ||||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
16,544 | 8.5 | % | 16,645 | 10.9 | % | 49,522 | 8.8 | % | 50,721 | 9.3 | % | ||||||||||||||||||||
Selling,
general and administrative
|
42,103 | 21.5 | % | 38,579 | 25.3 | % | 121,129 | 21.6 | % | 123,887 | 22.6 | % | ||||||||||||||||||||
Restructuring
and other related charges
|
- | 0.0 | % | 288 | 0.2 | % | - | 0.0 | % | 288 | 0.1 | % | ||||||||||||||||||||
Total
operating expenses
|
58,647 | 30.0 | % | 55,512 | 36.4 | % | 170,651 | 30.4 | % | 174,896 | 32.0 | % | ||||||||||||||||||||
Operating
income
|
$ | 31,051 | 15.8 | % | $ | 4,905 | 3.2 | % | $ | 89,707 | 15.9 | % | $ | 67,437 | 12.3 | % |
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
Three
Months Ended December 31,
|
Nine
Months Ended December 31,
|
||||||||||||||||||||||||||||||
2007
|
2008
|
2007
|
2008
|
|||||||||||||||||||||||||||||
Net
revenues
|
$ | 36,869 | 100.0 | % | $ | 30,220 | 100.0 | % | $ | 84,969 | 100.0 | % | $ | 72,364 | 100.0 | % | ||||||||||||||||
Cost
of revenues
|
32,810 | 89.0 | % | 29,772 | 98.5 | % | 83,568 | 98.4 | % | 69,180 | 95.6 | % | ||||||||||||||||||||
Gross
profit
|
4,059 | 11.0 | % | 448 | 1.5 | % | 1,401 | 1.6 | % | 3,184 | 4.4 | % | ||||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
2,764 | 7.5 | % | 2,019 | 6.7 | % | 8,482 | 10.0 | % | 6,488 | 9.0 | % | ||||||||||||||||||||
Selling,
general and administrative
|
6,321 | 17.1 | % | 4,623 | 15.3 | % | 19,347 | 22.7 | % | 15,458 | 21.3 | % | ||||||||||||||||||||
Restructuring
and other related charges
|
2,882 | 7.8 | % | 760 | 2.5 | % | 2,882 | 3.4 | % | 995 | 1.4 | % | ||||||||||||||||||||
Impairment
of goodwill and long-lived assets
|
- | 0.0 | % | 117,464 | 388.7 | % | - | 0.0 | % | 117,464 | 162.3 | % | ||||||||||||||||||||
Total
operating expenses
|
11,967 | 32.4 | % | 124,866 | 413.2 | % | 30,711 | 36.1 | % | 140,405 | 194.0 | % | ||||||||||||||||||||
Operating
loss
|
$ | (7,908 | ) | (21.4 | %) | $ | (124,418 | ) | (411.7 | %) | $ | (29,310 | ) | (34.5 | %) | $ | (137,221 | ) | (189.6 | %) |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
Office
and Contact Center
|
$ | 131,017 | $ | 101,694 | $ | (29,323 | ) | (22.4 | %) | $ | 394,579 | $ | 344,027 | $ | (50,552 | ) | (12.8 | %) | ||||||||||||||
Mobile
|
48,788 | 36,011 | (12,777 | ) | (26.2 | %) | 125,885 | 156,804 | 30,919 | 24.6 | % | |||||||||||||||||||||
Gaming
and Computer Audio
|
10,449 | 8,531 | (1,918 | ) | (18.4 | %) | 25,211 | 27,129 | 1,918 | 7.6 | % | |||||||||||||||||||||
Other
|
5,701 | 6,380 | 679 | 11.9 | % | 16,899 | 18,532 | 1,633 | 9.7 | % | ||||||||||||||||||||||
Total
segment net revenues
|
$ | 195,955 | $ | 152,616 | $ | (43,339 | ) | (22.1 | %) | $ | 562,574 | $ | 546,492 | $ | (16,082 | ) | (2.9 | %) |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
Docking
Audio
|
$ | 20,682 | $ | 19,088 | $ | (1,594 | ) | (7.7 | %) | $ | 44,588 | $ | 38,058 | $ | (6,530 | ) | (14.6 | %) | ||||||||||||||
PC
Audio
|
14,101 | 10,107 | (3,994 | ) | (28.3 | %) | 35,176 | 29,336 | (5,840 | ) | (16.6 | %) | ||||||||||||||||||||
Other
|
2,086 | 1,025 | (1,061 | ) | (50.9 | %) | 5,205 | 4,970 | (235 | ) | (4.5 | %) | ||||||||||||||||||||
Total
segment net revenues
|
$ | 36,869 | $ | 30,220 | $ | (6,649 | ) | (18.0 | %) | $ | 84,969 | $ | 72,364 | $ | (12,605 | ) | (14.8 | %) |
|
·
|
OCC
net revenues decreased $29.3 million across all geographic
regions. Corded product net revenues decreased $14.1 million
while cordless net revenues decreased $15.2
million.
|
|
·
|
Mobile
net revenues decreased $12.8
million.
|
|
·
|
Gaming
and Computer Audio product net revenues decreased $1.9
million.
|
|
·
|
OCC
net revenues decreased $50.6 million due to weaker global economic
conditions. Corded product net revenues decreased $29.7 million
while cordless net revenues decreased $20.8
million.
|
|
·
|
Mobile
net revenues increased $30.9 million due to increased demand for Bluetooth headsets in
the first six months of fiscal year 2009. Most of the revenue
growth was in the United States and was driven by increased retail
placements as a result of an improved product portfolio as well as demand
attributable to hands-free driving legislation in the United
States.
|
|
·
|
Gaming
and Computer Audio product net revenues increased $1.9 million of which
$1.7 million is due to the transfer of responsibility of headset revenues
from AEG to ACG effective July 1, 2007. The remaining increase
is due to continued strength of the refreshed product line that was
launched in the fall of fiscal
2008.
|
|
·
|
Docking
Audio net revenues decreased $1.6 million primarily in the United States
due to weaker economic conditions and the related decision by retailers
and carriers to reduce their on-hand inventory levels in anticipation of a
weaker holiday selling season.
|
|
·
|
PC
Audio net revenues decreased by $4.0 million due to an older product
portfolio which is currently being refreshed, weaker economic conditions
in the United States and Europe, and a focus on selective product
placement with higher margin
customers.
|
|
·
|
Other
net revenues decreased $1.0 million primarily related to decreased
headphone sales in Asia and the United
States.
|
|
·
|
Docking
Audio net revenues decreased $6.5 million primarily due to a large sale to
a warehouse club in the second quarter of the prior year, the weaker
economic condition in the U.S. and reduced surplus product sales in
comparison to the prior year ago
period.
|
|
·
|
PC
Audio net revenues decreased by $5.8 million due to an older product
portfolio which is currently being refreshed, weaker economic conditions
in the United States and Europe, and a focus on selective product
placement with higher margin
customers.
|
|
·
|
Other
net revenues decreased $0.2 million primarily due to a decrease of $1.7
million due to the transfer of responsibility for headset products to ACG
in the second quarter of fiscal 2008 partially offset by increased
headphone net revenues of $1.0 million due to new product introductions in
the current fiscal year.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Net
revenues from unaffiliated customers:
|
||||||||||||||||||||||||||||||||
United
States
|
$ | 139,106 | $ | 107,799 | $ | (31,307 | ) | (22.5 | %) | $ | 396,613 | $ | 382,057 | $ | (14,556 | ) | (3.7 | %) | ||||||||||||||
Europe,
Middle East and Africa
|
59,535 | 49,994 | (9,541 | ) | (16.0 | %) | 158,902 | 147,388 | (11,514 | ) | (7.2 | %) | ||||||||||||||||||||
Asia
Pacific
|
15,804 | 11,655 | (4,149 | ) | (26.3 | %) | 48,540 | 46,430 | (2,110 | ) | (4.3 | %) | ||||||||||||||||||||
Americas,
excluding United States
|
18,379 | 13,388 | (4,991 | ) | (27.2 | %) | 43,488 | 42,981 | (507 | ) | (1.2 | %) | ||||||||||||||||||||
Total
international net revenues
|
93,718 | 75,037 | (18,681 | ) | (19.9 | %) | 250,930 | 236,799 | (14,131 | ) | (5.6 | %) | ||||||||||||||||||||
Total
consolidated net revenues
|
$ | 232,824 | $ | 182,836 | $ | (49,988 | ) | (21.5 | %) | $ | 647,543 | $ | 618,856 | $ | (28,687 | ) | (4.4 | %) |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 232,824 | $ | 182,836 | $ | (49,988 | ) | (21.5 | %) | $ | 647,543 | $ | 618,856 | $ | (28,687 | ) | (4.4 | %) | ||||||||||||||
Cost
of revenues
|
139,067 | 121,971 | (17,096 | ) | (12.3 | %) | 385,784 | 373,339 | (12,445 | ) | (3.2 | %) | ||||||||||||||||||||
Consolidated
gross profit
|
$ | 93,757 | $ | 60,865 | $ | (32,892 | ) | (35.1 | %) | $ | 261,759 | $ | 245,517 | $ | (16,242 | ) | (6.2 | %) | ||||||||||||||
Consolidated
gross profit %
|
40.3 | % | 33.3 | % | (7.0 | ) |
ppt.
|
40.4 | % | 39.7 | % | (0.7 | ) |
ppt.
|
||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 195,955 | $ | 152,616 | $ | (43,339 | ) | (22.1 | %) | $ | 562,574 | $ | 546,492 | $ | (16,082 | ) | (2.9 | %) | ||||||||||||||
Cost
of revenues
|
106,257 | 92,199 | (14,058 | ) | (13.2 | %) | 302,216 | 304,159 | 1,943 | 0.6 | % | |||||||||||||||||||||
Segment
gross profit
|
$ | 89,698 | $ | 60,417 | $ | (29,281 | ) | (32.6 | %) | $ | 260,358 | $ | 242,333 | $ | (18,025 | ) | (6.9 | %) | ||||||||||||||
Segment
gross profit %
|
45.8 | % | 39.6 | % | (6.2 | ) |
ppt.
|
46.3 | % | 44.3 | % | (2.0 | ) |
ppt.
|
||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Net
revenues
|
$ | 36,869 | $ | 30,220 | $ | (6,649 | ) | (18.0 | %) | $ | 84,969 | $ | 72,364 | $ | (12,605 | ) | (14.8 | %) | ||||||||||||||
Cost
of revenues
|
32,810 | 29,772 | (3,038 | ) | (9.3 | %) | 83,568 | 69,180 | (14,388 | ) | (17.2 | %) | ||||||||||||||||||||
Segment
gross profit
|
$ | 4,059 | $ | 448 | $ | (3,611 | ) | (89.0 | %) | $ | 1,401 | $ | 3,184 | $ | 1,783 | 127.3 | % | |||||||||||||||
Segment
gross profit %
|
11.0 | % | 1.5 | % | (9.5 | ) |
ppt.
|
1.6 | % | 4.4 | % | 2.8 |
ppt.
|
|
·
|
a
2.8 percentage point detriment from lower utilization of fixed production
costs due to lower demand and inventory reduction
efforts;
|
|
·
|
a
1.8 percentage point detriment from higher warranty expenses mostly from
Bluetooth
headsets;
|
|
·
|
a
1.0 percentage point detriment from several individually small items
including excess and obsolete expenses and royalties;
and
|
|
·
|
a
0.6 percentage point negative effect from foreign exchange as the U.S.
dollar was stronger in comparison to the Euro, Great Britain Pound and
other currencies.
|
|
·
|
a
2.9 percentage point negative effect due to unfavorable foreign exchange
rates;
|
|
·
|
a
4.9 percentage point negative effect due to higher requirements for
inventory provisions, warranty costs and adverse purchase commitments;
and
|
|
·
|
a
1.7 percentage point negative effect from several small items including
higher manufacturing expenses and air freight primarily related to
rework.
|
|
·
|
a
negative effect of 1.8 percentage points mostly due to a higher proportion
of consumer products than commercial products in the overall revenue
mix. While consumer products carry lower margins than
commercial products, the level of product margin on our consumer products
has increased significantly;
|
|
·
|
a
0.6 percentage point detriment from higher freight expenses;
and
|
|
·
|
a
0.5 percentage point benefit from improved utilization of fixed costs from
higher production levels.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 19,308 | $ | 18,664 | $ | (644 | ) | (3.3 | %) | $ | 58,004 | $ | 57,209 | $ | (795 | ) | (1.4 | %) | ||||||||||||||
%
of total consolidated net revenues
|
8.3 | % | 10.2 | % | 1.9 |
ppt.
|
9.0 | % | 9.3 | % | 0.3 |
ppt.
|
||||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 16,544 | $ | 16,645 | $ | 101 | 0.6 | % | $ | 49,522 | $ | 50,721 | $ | 1,199 | 2.4 | % | ||||||||||||||||
%
of total segment net revenues
|
8.5 | % | 10.9 | % | 2.4 |
ppt.
|
8.8 | % | 9.3 | % | 0.5 |
ppt.
|
||||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Research,
development and engineering
|
$ | 2,764 | $ | 2,019 | $ | (745 | ) | (27.0 | %) | $ | 8,482 | $ | 6,488 | $ | (1,994 | ) | (23.5 | %) | ||||||||||||||
%
of total segment net revenues
|
7.5 | % | 6.7 | % | (0.8 | ) |
ppt.
|
10.0 | % | 9.0 | % | (1.0 | ) |
ppt.
|
|
·
|
the
design and development of wireless office system
products;
|
|
·
|
Unified
Communication products;
|
|
·
|
Bluetooth products and
technology;
|
|
·
|
reusability
of significant components of products;
and
|
|
·
|
the
refresh of AEG product lines.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 48,424 | $ | 43,202 | $ | (5,222 | ) | (10.8 | %) | $ | 140,476 | $ | 139,345 | $ | (1,131 | ) | (0.8 | %) | ||||||||||||||
%
of total consolidated net revenues
|
20.8 | % | 23.7 | % | 2.9 | ppt. | 21.7 | % | 22.5 | % | 0.8 | ppt. | ||||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 42,103 | $ | 38,579 | $ | (3,524 | ) | (8.4 | %) | $ | 121,129 | $ | 123,887 | $ | 2,758 | 2.3 | % | |||||||||||||||
%
of total segment net revenues
|
21.5 | % | 25.3 | % | 3.8 | ppt. | 21.6 | % | 22.6 | % | 1.0 | ppt. | ||||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Selling,
general and administrative
|
$ | 6,321 | $ | 4,623 | $ | (1,698 | ) | (26.9 | %) | $ | 19,347 | $ | 15,458 | $ | (3,889 | ) | (20.1 | %) | ||||||||||||||
%
of total segment net revenues
|
17.1 | % | 15.3 | % | (1.8 | ) | ppt. | 22.7 | % | 21.3 | % | (1.4 | ) | ppt. |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Operating
income (loss)
|
$ | 23,143 | $ | (119,513 | ) | $ | (142,656 | ) | (616.4 | %) | $ | 60,397 | $ | (69,784 | ) | $ | (130,181 | ) | (215.5 | %) | ||||||||||||
%
of total consolidated net revenues
|
9.9 | % | (65.4 | %) | (75.3 | ) | ppt. | 9.3 | % | (11.3 | %) | (20.6 | ) | ppt. | ||||||||||||||||||
Audio
Communications Group
|
||||||||||||||||||||||||||||||||
Operating
income
|
$ | 31,051 | $ | 4,905 | $ | (26,146 | ) | (84.2 | %) | $ | 89,707 | $ | 67,437 | $ | (22,270 | ) | (24.8 | %) | ||||||||||||||
%
of total segment net revenues
|
15.8 | % | 3.2 | % | (12.6 | ) | ppt. | 15.9 | % | 12.3 | % | (3.6 | ) | ppt. | ||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Audio
Entertainment Group
|
||||||||||||||||||||||||||||||||
Operating
loss
|
$ | (7,908 | ) | $ | (124,418 | ) | $ | 116,510 | 1,473.3 | % | $ | (29,310 | ) | $ | (137,221 | ) | $ | 107,911 | 368.2 | % | ||||||||||||
%
of total segment net revenues
|
(21.4 | %) | (411.7 | %) | 390.3 | ppt. | (34.5 | %) | (189.6 | %) | 155.1 | ppt. |
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
||||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
|||||||||||||||||||||||||||
Consolidated
|
|||||||||||||||||||||||||||||||||
Interest
and other income (expense), net
|
$ | 2,184 | $ | (1,499 | ) | $ | (3,683 | ) | (168.6 | %) | $ | 5,311 | $ | (3,129 | ) | $ | (8,440 | ) | (158.9 | %) | |||||||||||||
%
of total consolidated net revenues
|
1.0 | % | (0.8 | %) | (1.8 | ) |
ppt.
|
0.8 | % | (0.5 | %) | (1.3 | ) | ppt. |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
December
31,
|
Increase
|
December
31,
|
Increase
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2008
|
(Decrease)
|
2007
|
2008
|
(Decrease)
|
||||||||||||||||||||||||||
Consolidated
|
||||||||||||||||||||||||||||||||
Income
(loss) before income taxes
|
$ | 25,327 | $ | (121,012 | ) | $ | (146,339 | ) | (577.8 | %) | $ | 65,708 | $ | (72,913 | ) | $ | (138,621 | ) | (211.0 | %) | ||||||||||||
Income
tax expense (benefit)
|
6,219 | (29,003 | ) | (35,222 | ) | (566.4 | %) | 15,103 | (19,046 | ) | (34,149 | ) | (226.1 | %) | ||||||||||||||||||
Net
income (loss)
|
$ | 19,108 | $ | (92,009 | ) | $ | (111,117 | ) | (581.5 | %) | $ | 50,605 | $ | (53,867 | ) | $ | (104,472 | ) | (206.4 | %) | ||||||||||||
Effective
tax rate
|
24.6 | % | 24.0 | % | (0.6 | ) | ppt. | 23.0 | % | 26.1 | % | 3.1 | ppt. |
Nine
Months Ended
|
||||||||
December
31,
|
||||||||
(in
thousands)
|
2007
|
2008
|
||||||
Cash
provided by operating activities
|
$ | 74,438 | $ | 59,791 | ||||
Cash
used for capital expenditures and other assets
|
(16,918 | ) | (20,881 | ) | ||||
Cash
used for other investing activities
|
(44,450 | ) | (29,513 | ) | ||||
Cash
used for investing activities
|
(61,368 | ) | (50,394 | ) | ||||
Cash
provided by (used for) financing activities
|
$ | 6,654 | $ | (14,242 | ) |
FX
|
FX
|
||||||||||||
Gain
(Loss)
|
Gain
(Loss)
|
||||||||||||
USD
Value
|
From
10%
|
From
10%
|
|||||||||||
of
Net FX
|
Appreciation
|
Depreciation
|
|||||||||||
Currency
- forward contracts
|
Position
|
Contracts
|
of
USD
|
of
USD
|
|||||||||
Euro
|
Sell
EUR
|
$ | 23.7 | $ | 2.4 | $ | (2.4 | ) | |||||
Great
Britain Pound
|
Sell
GBP
|
7.7 | 0.8 | (0.8 | ) | ||||||||
Net
position
|
$ | 31.4 | $ | 3.2 | $ | (3.2 | ) |
FX
|
FX
|
|||||||||||
Gain
(Loss)
|
Gain
(Loss)
|
|||||||||||
USD
Value
|
From
10%
|
From
10%
|
||||||||||
of
Net FX
|
Appreciation
|
Depreciation
|
||||||||||
Currency
- option contracts
|
Contracts
|
of
USD
|
of
USD
|
|||||||||
Call
options
|
$ | (104.5 | ) | $ | 1.8 | $ | (3.6 | ) | ||||
Put
options
|
99.2 | 6.8 | (4.7 | ) | ||||||||
Net
position
|
$ | (5.3 | ) | $ | 8.6 | $ | (8.3 | ) |
(a)
|
Evaluation
of disclosure controls and
procedures
|
(b)
|
Changes
in internal control over financial
reporting
|
|
·
|
our
operating results are highly dependent on the volume and timing of orders
received during the quarter, which are difficult to
forecast. Customers generally order on an as-needed basis, and
we typically do not obtain firm, long-term purchase commitments from our
customers. As a result, our revenues in any quarter depend
primarily on orders booked and shipped in that
quarter;
|
|
·
|
we
incur a large portion of our costs in advance of sales orders because we
must plan research and production, order components and enter into
development, sales and marketing, and other operating commitments prior to
obtaining firm commitments from our customers. In the event we
acquire too much inventory for certain products, the risk of future
inventory write-downs increases. In the event we have
inadequate inventory to meet the demand for particular products, we may
miss significant revenue opportunities or incur significant expenses such
as air freight, expediting shipments, and other negative variances in our
manufacturing processes as we attempt to make up for the
shortfall. When a significant portion of our revenue is derived
from new products, forecasting the appropriate volumes of production is
even more difficult;
|
|
·
|
in
the ACG segment, our prices and gross margins are generally lower for
sales to Business-to-Consumer (“B2C”) customers compared to sales to our
Business-to-Business (“B2B”) customers. In addition, our prices
and gross margins can vary significantly by product line as well as within
product lines. Therefore, our profitability depends, in part, on the
mix of our B2B to B2C customers as well as our product mix. In the
AEG segment, our prices and gross margins are generally lower for our PC
Audio products than for our Docking Audio products; therefore, our
profitability depends, in part, on our mix of PC Audio to Docking Audio
products. The size and timing of our product mix and
opportunities in these markets are difficult to
predict;
|
|
·
|
we
have substantially refreshed our AEG product line; however, market
adoption of new products is difficult to predict;
and
|
|
·
|
a
significant portion of our annual retail sales for AEG generally occurs in
the third fiscal quarter, thereby increasing the difficulty of predicting
revenues and profitability from quarter to quarter and in managing
inventory levels.
|
|
·
|
we
believe that the turnaround for AEG is largely dependent on the
development of a new product portfolio. We have placed some of
the products within our new portfolio beginning in the Fall of 2008 and
will continue into the next quarter, although ongoing
product refreshes on a routine basis after that will also be
required. The development of these new products may not evolve
as anticipated. There can be no assurance that these new
products will be successful and, during the time we are developing the new
products, our competitors are selling products to our customers and
increasing their market share;
|
|
·
|
we
announced cost reductions in the first quarter of fiscal 2009 with a
reduction in force at the Milford, Pennsylvania operations. In
addition, we took additional restructuring actions in the third quarter of
fiscal 2009 to reduce headcount and costs and have announced further
headcount reductions for the fourth quarter of fiscal 2009. We
continue to review our cost structure and may implement additional
cost-cutting initiatives in the
future;
|
|
·
|
competition
may continue to increase in the retail markets more than we
expect;
|
|
·
|
meeting
the spring and fall market windows for consumer
products;
|
|
·
|
difficulties
retaining or obtaining shelf space for consumer products in our sales
channel;
|
|
·
|
difficulties
retaining or improving the brand recognition associated with the Altec
Lansing brand during the
turnaround;
|
|
·
|
difficulties
in maintaining gross margin and uncertainties in the demand for consumer
audio products in the current economic environment;
and
|
|
·
|
the global downturn in the
economy may lessen the amount spent generally by consumers decreasing the
demand for our consumer
products.
|
|
·
|
if
forecasted demand does not develop, we could have excess inventory and
excess capacity. Over-forecast of demand could result in higher
inventories of finished products, components and sub-assemblies. In
addition, because our retail customers have pronounced seasonality, we
must build inventory well in advance of the December quarter in order to
stock up for the anticipated future demand. If we were unable
to sell these inventories, we would have to write off some or all of our
inventories of excess products and unusable components and
sub-assemblies. Excess manufacturing capacity could lead to higher
production costs and lower margins;
|
|
·
|
if
demand increases beyond that forecasted, we would have to rapidly increase
production. We currently depend on suppliers to provide additional volumes
of components and sub-assemblies, and we are experiencing greater
dependence on single source suppliers; therefore, we might not be able to
increase production rapidly enough to meet unexpected demand. There
could be short-term losses of sales while we are trying to increase
production;
|
|
·
|
the
production and distribution of Bluetooth and other
wireless headsets presents many significant manufacturing, marketing and
other operational risks and
uncertainties:
|
|
·
|
our
dependence on third parties to supply key components, many of which have
long lead times;
|
|
·
|
our
ability to forecast demand for the variety of new products within this
product category for which relevant data is incomplete or unavailable;
and
|
|
·
|
longer
lead times with suppliers than commitments from some of our
customers.
|
|
·
|
if
we are unable to deliver products on time to meet the market window of our
retail customers, we will lose opportunities to increase revenues and
profits, or we may incur penalties for late delivery. We may also be
unable to sell these finished goods, which would result in excess or
obsolete inventory;
|
|
·
|
the
use of design and manufacturing of Bluetooth headset
products at our new facilities in China is contracting or expanding in
response to demand. Development of new wireless products and
ramping of production can be complex. Unexpected difficulties
may arise. Failure to meet our planned design deadlines or
production quantities for new or existing products can adversely affect
our financial results; and
|
|
·
|
we
are working on a new initiative to re-engineer our supply chain by
implementing new product forecasting systems, increasing automation within
supply chain activities, improving the integrity of our supply chain data,
and creating dashboards to improve our ability to match production to
demand. If we are unable to successfully implement this
initiative, we may not be able to meet demand or compete effectively with
other companies who have successfully implemented similar
initiatives.
|
|
·
|
uncertain
economic conditions, including the length and severity of the domestic and
global recession, inflationary pressures, and the decline in investor
confidence in the market place;
|
|
·
|
changes
in our published forecasts of future results of
operations;
|
|
·
|
quarterly
variations in our or our competitors' results of operations and changes in
market share;
|
|
·
|
the
announcement of new products or product enhancements by us or our
competitors;
|
·
|
further
deterioration of the current economy could impact our decision to declare
future dividends;
|
|
·
|
the
loss of services of one or more of our executive officers or other key
employees;
|
|
·
|
changes
in earnings estimates or recommendations by securities
analysts;
|
|
·
|
developments
in our industry;
|
|
·
|
sales
of substantial numbers of shares of our common stock in the public
market;
|
|
·
|
our
ability to successfully complete the product refresh for the Altec Lansing
products and turn around the AEG
business;
|
|
·
|
general
economic, political, and market conditions, including market volatility;
and
|
|
·
|
other factors unrelated to our
operating performance or the operating performance of our
competitors.
|
|
·
|
anticipate
technology and market trends;
|
|
·
|
develop
innovative new products and enhancements on a timely
basis;
|
|
·
|
distinguish
our products from those of our
competitors;
|
|
·
|
create
industrial design that appeals to our customers and
end-users;
|
|
·
|
manufacture
and deliver high-quality products in sufficient volumes;
and
|
|
·
|
price
our products competitively.
|
|
·
|
rapid
increases in production levels to meet unanticipated demand for our
products could result in higher costs for components and sub-assemblies,
increased expenditures for freight to expedite delivery of required
materials, and higher overtime costs and other expenses. These
higher expenditures could lower our profit margins. Further, if production
is increased rapidly, there may be decreased manufacturing yields, which
may also lower our margins;
|
|
·
|
we
obtain certain raw materials, sub-assemblies, components and products from
single suppliers and alternate sources for these items are not readily
available. Any failure of our suppliers to remain in business
or to be able to purchase the raw materials, subcomponents and parts
required by them to produce and provide to us the parts we need could
materially adversely affect our business, financial condition and results
of operations;
|
|
·
|
although
we generally use standard raw materials, parts and components for our
products, the high development costs associated with emerging wireless
technologies permit us to work with only a single source of silicon
chip-sets on any particular new product. We, or our supplier(s) of
chip-sets, may experience challenges in designing, developing and
manufacturing components in these new technologies which could affect our
ability to meet market schedules. Due to our dependence on single
suppliers for certain chip sets, we could experience higher prices, a
delay in development of the chip-set, or the inability to meet our
customer demand for these new products. Additionally, these
suppliers or other suppliers may enter into bankruptcy, discontinue
production of the parts we depend on or may not be able to produce due to
financial difficulties or to the global recession. If this
occurs, we may have difficulty obtaining sufficient product to meet our
needs. This could cause us to fail to meet customer
expectations. If customers turn to our competitors to meet their
needs, there could be a long-term adverse impact on our revenues and
profitability. Our business, operating results and financial
condition could therefore be materially adversely affected as a result of
these factors;
|
|
·
|
because
of the lead times required to obtain certain raw materials,
sub-assemblies, components and products from certain foreign suppliers, we
may not be able to react quickly to changes in demand, potentially
resulting in either excess inventories of such goods or shortages of the
raw materials, sub-assemblies, components and products. Lead times
are particularly long on silicon-based components incorporating radio
frequency and digital signal processing technologies and such components
are an increasingly important part of our product costs. In
particular, many B2C customer orders have shorter lead times than the
component lead times, making it increasingly necessary to carry more
inventory in anticipation of those orders, which may not
materialize. Failure in the future to match the timing of
purchases of raw materials, sub-assemblies, components and products to
demand could increase our inventories and/or decrease our revenues and
could materially adversely affect our business, financial condition and
results of operations; and
|
|
·
|
most
of our suppliers are not obligated to continue to provide us with raw
materials, components and sub-assemblies. Rather, we buy most
of our raw materials, components and subassemblies on a purchase order
basis. If our suppliers experience increased demand or shortages, it
could affect deliveries to us. In turn, this would affect our
ability to manufacture and sell products that are dependent on those raw
materials, components and subassemblies. Any such shortages
would materially adversely affect our business, financial condition and
results of operations.
|
|
·
|
fluctuations
in foreign exchange rates ;
|
|
·
|
cultural
differences in the conduct of
business;
|
|
·
|
greater
difficulty in accounts receivable collection and longer collection
periods;
|
|
·
|
the
impact of the global recession;
|
|
·
|
reduced
protection for intellectual property rights in some
countries;
|
|
·
|
unexpected
changes in regulatory requirements;
|
|
·
|
tariffs
and other trade barriers;
|
|
·
|
political
conditions, civil unrest or criminal activities within each
country;
|
|
·
|
the
management and operation of an enterprise spread over various
countries;
|
|
·
|
the
burden and administrative costs of complying with a wide variety of
foreign laws; and
|
|
·
|
currency
restrictions.
|
|
·
|
if
supply or demand for iPod products decreases, demand for certain of our
Docking Audio products could be negatively
affected;
|
|
·
|
if
Apple does not renew or cancels our licensing agreement, our products may
not be compatible with iPods, resulting in loss of revenues and excess
inventories, which would negatively impact our financial
results;
|
|
·
|
if
Apple changes its iPod product design more frequently than we update
certain of our Docking Audio products, certain of our products may not be
compatible with the changed design. Moreover, if Apple makes
style changes to its products more frequently than we update certain of
our Docking Audio products, consumers may not like the look of our
products with the iPod. Both of these factors could result in
decreased demand for our products, and excess inventories could result,
which would negatively impact our financial
results;
|
|
·
|
Apple
has introduced its own line of iPod speaker products, which competes with
certain of our Altec Lansing branded speaker products. As the
manufacturer of the iPod, Apple has unique advantages with regard to
product changes or introductions that we do not possess, which could
negatively impact our ability to compete effectively against Apple’s
speaker products. Moreover, certain consumers may prefer to buy
Apple’s iPod speakers rather than other vendors’ speakers because they are
Apple branded. As a result, this could lead to decreased demand
for our products, and excess inventories could result, which would
negatively impact our financial results;
and
|
|
·
|
similar risks exist for MP3
players manufactured by companies other than
Apple.
|
PLANTRONICS,
INC.
|
||
Date:
February 5, 2009
|
By:
|
/s/ Barbara V. Scherer
|
Barbara
V. Scherer
|
||
Senior Vice President - Finance and Administration and Chief Financial Officer | ||
(Principal
Financial Officer and Duly Authorized Officer of the
Registrant)
|