Plantronics Inc. (PLT) filed Quarterly Report for the period ended 2009-09-26.
Plantronics Inc. is a leading designer manufacturer and marketer of lightweight communications headsets and headset accessories and services. In addition the company manufactures and markets specialty telephone products such as amplified telephone handsets and specialty telephones for hearing-impaired users and noise-canceling handsets for use in high-noise environments. Plantronics Inc. has a market cap of $1.18 billion; its shares were traded at around $24.2 with a P/E ratio of 44.9 and P/S ratio of 1.6. The dividend yield of Plantronics Inc. stocks is 0.8%. Plantronics Inc. had an annual average earning growth of 2.1% over the past 10 years.
Highlight of Business Operations:
Our consolidated net revenues decreased from $216.9 million in the second quarter of fiscal 2009 to $167.4 million in the second quarter of fiscal 2010. The second quarter of fiscal 2009 included a benefit in Bluetooth headsets revenues from demand attributable to hands-free driving legislation being enforced in the states of California and Washington beginning on July 1, 2008. In addition, there were revenue declines in all of our major geographies and most of our product groups due to the continued impact from the global recession. Our consolidated net income decreased from $17.6 million in the second quarter of fiscal 2009 to a net loss of $0.7 million in the second quarter of fiscal 2010 primarily due to the lower net revenues, $25.2 million in charges related to the impairment of long-lived assets in the AEG segment and $2.6 million of restructuring charges including $1.7 million of accelerated depreciation recorded in Cost of revenues related to the closure of our manufacturing operations in Suzhou, China which was announced in the fourth quarter of fiscal 2009. These decreases to consolidated net income were offset in part by reduced operating expenses as a result of our reduced cost structure.
In our Audio Communications Group (“ACG”) segment, net revenues decreased from $195.3 million in the second quarter of fiscal 2009 to $144.4 million in the second quarter of fiscal 2010, primarily driven by a decrease in sales of our Bluetooth headsets for the mobile market which decreased 42% or $24.1 million from the same quarter a year ago. The higher net revenues in these products in the prior year quarter was the result of strong demand in the first six months of fiscal 2009, particularly in the U.S., due in part to the hands-free driving laws that became enforceable on July 1, 2008 in California and Washington. In the Mobile market, particularly for consumer applications, margins are typically lower than for our enterprise applications due to the level of competition and pricing pressures. Our strategy for improving the profitability of mobile consumer products is to differentiate our products from our competitors and to provide compelling solutions under our brand with regard to features, design, ease of use, and performance. Also, to further improve Bluetooth profitability, we completed the closure of ACG s manufacturing operations in Suzhou, China in July 2009 and outsourced manufacturing of our Bluetooth products to an existing supplier in China.
In our AEG segment, net revenues increased from $21.5 million in the second quarter of fiscal 2009 to $23.0 million in the second quarter of fiscal 2010 primarily due to an increase in Docking Audio sales throughout all regions as a result of an improved product portfolio including a benefit from liquidation sales of older products. Operating losses increased to $26.6 million in the second quarter of fiscal 2010 compared to $6.2 million in the corresponding period in the prior year primarily due to an impairment charge on long-lived assets of $25.2 million offset in part by higher gross margins and reduced operating costs resulting from our cost reduction efforts. Our higher gross margins are attributable to lower amortization of intangible assets as a result of the impairment of certain long-lived assets in the third quarter of fiscal 2009 and in the second quarter of fiscal 2010. On October 2, 2009, we entered into an Asset Purchase Agreement to sale of certain assets along with the assumption of certain liabilities of the AEG segment for a purchase price of $18.0 million in cash, subject to certain post-closing adjustments. The transaction is expected to close by the beginning of December 2009. In addition, we will enter into a Transaction Service Agreement whereby, among other things, we will provide certain services to the purchaser for a limited period following the closing. As a result, all future and historical AEG segment results will be reported as discontinued operations beginning in the third quarter of fiscal 2010.
Our results for the six months ended September 30, 2009 demonstrated progress on these key corporate initiatives. In the first six months of fiscal 2010, we had consolidated net income of $9.9 million despite the $25.2 million impairment charge on long-lived assets of the AEG segment and $6.7 million in restructuring charges from our Q4 Fiscal 2009 Restructuring Action, and we generated $52.4 million in cash flows from operations. We had our second quarter of shipments of UC products which consists of the Savi(TM) product family. We also decreased net inventory by $19.3 million and, in July 2009, completed the transition of the manufacturing of our Bluetooth products to an outsourced supplier. In addition, capital expenditures were $3.0 million for the six months ended September 30, 2009, a decrease of 79% from $14.6 million in the comparable year ago period.
PLT is in the portfolios of David Dreman of Dreman Value Management, John Hussman of Hussman Economtrics Advisors, Inc., PRIMECAP Management, Richard Pzena of Pzena Investment Management LLC, Charles Brandes of Brandes Investment.
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