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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
---------------------- TO
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COMMISSION FILE NUMBER 1-12696
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PLANTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0207692
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
337 ENCINAL STREET, P.O. BOX 1802 95061-1802
SANTA CRUZ, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (408) 426-5858
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: None
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 [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of $47.625 for shares of the
registrant's Common Stock on June 5, 1998 as reported by the New York Stock
Exchange, was approximately $263,041,000. In calculating such aggregate market
value, shares of Common Stock owned of record or beneficially by officers,
directors, and persons reporting ownership of more than five percent of the
registrant's voting securities were excluded because such persons may be deemed
to be affiliates. The registrant disclaims the existence of control or any
admission thereof for any other purpose.
Number of shares of Common Stock outstanding as of June 5, 1998:
16,480,928.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in Parts I, II, III
and IV of this Annual Report on Form 10-K: (1) portions of registrant's annual
report to security holders for the fiscal year ended March 28, 1998 (Parts I, II
and IV) and (2) portions of registrant's proxy statement for its annual meeting
of stockholders to be held on July 30, 1998 (Part III).
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PLANTRONICS, INC.
1998 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 12
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security-Holders......... 13
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters..................................................... 13
Item 6. Selected Financial Data..................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 8. Financial Statements and Supplementary Data................. 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 14
PART III
Item Directors and Executive Officers of the Registrant..........
10. 14
Item Executive Compensation......................................
11. 14
Item Security Ownership of Certain Beneficial Owners and
12. Management.................................................. 14
Item Certain Relationships and Related Transactions..............
13. 14
PART IV
Item Exhibits, Financial Statement Schedules, and Reports on Form
14. 8-K......................................................... 15
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Clarity, Encore, FreeHand, Mirage, SoundGuard, StarSet, Supra, and TriStar are
registered trademarks of Plantronics, Inc. AirSet, CAT132, CHS132, CLA132,
CT-460, CT-901, E-10, Encore NC, Headset Switcher, Mirage NC, Sound-Guard Plus,
Starbase, StarSet NC, Supra NC, TriStar NC and Vista are trademarks of
Plantronics, Inc.
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PART I
ITEM 1. BUSINESS
GENERAL
Plantronics, Inc. (the "Company" or "Registrant") 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 for use in
noisy environments and specialty telephones for hearing-impaired users.
The Company's headsets, which can be worn over the head, in the ear or on
either ear, are recognized in the industry for their safety, reliability,
comfort and sound quality. The Company's headset products are used worldwide by
call center users, such as telemarketing personnel, reservation agents,
telephone operators and air traffic controllers, whose occupations involve the
constant use of a telephone or communications console. In North America and
Europe, the number of call center users has grown significantly over the last 10
years. The use of headsets by call center users has become an industry standard.
The Company believes that the number of call center users in these geographic
markets will continue to grow.
The Company has well-developed distribution channels in North America and
Europe, where growth of telemarketing activities and deregulation of the
telephone companies have led to more widespread use of telephone headsets. The
Company's headsets are also becoming more widely used in the Middle East,
Africa, Australia, the Far East and Latin America.
The Company believes that the demand for headsets in the rest of the world
offers significant growth opportunities for the Company. To date, the Company's
most significant penetration of foreign market segments has been the call center
user market segment in Europe. The potential for growth in the foreign market
segments is the result of such developments as the rapid expansion of the
telecommunications infrastructure and increasing worldwide use of call centers
for customer service applications.
The Company also sells headsets in the business and home office user market
segments, which the Company has identified as an area of long-term growth
potential. Users in these segments consist of business executives, agents,
brokers, lawyers, accountants, home office business people and other
professionals whose occupations may require intensive (but not constant) use of
a telephone. The business and home office user market segments can be divided
into users who attach their headsets to telephones, cellular telephones or to
computers. The use of headsets for mobile communications and as computer
peripherals is a significant growth area for headset sales. Potential
applications in this market segment include mobile communications, personal
computer conferencing, computer telephony integration ("CTI"), voice recognition
and multimedia applications.
The Company sells its headsets to a broad and diverse group of end-user
customers worldwide, including regional telephone operating companies, operators
of private telephone networks, and governmental agencies. The Company
distributes its products through large electronics wholesalers, specialized
headset distributors, directly to original equipment manufacturers ("OEMs"), and
through retail channels, such as office supply and consumer electronics stores,
mail order catalogs, warehouse clubs and office supply distributors.
CERTAIN FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In addition, the Company may from time to time
make oral forward-looking statements. Such forward-looking statements are based
on current expectations and entail various risks and uncertainties. The
Company's actual results could differ materially from those anticipated in such
forward looking statements as a result of a number of factors. This Annual
Report on Form 10-K should be read in conjunction with the condensed
consolidated financial statements and related notes set forth in the Company's
Annual Report to security holders for the fiscal year ended March 28, 1998, and
the section entitled Management's Discussion and
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Analysis of Financial Condition and Results of Operation, particularly including
but not limited to the subsection titled "Factors Affecting Future Operating
Results," at pages 17 through 21 of such Annual Report to security holders.
PRODUCTS
The Company's product line consists of communications headsets, headset
accessories and services, and specialty telephone products. None of the
Company's products or business is considered seasonal.
HEADSETS
Communications headsets allow users who must perform other tasks while
using a telephone to work more effectively, efficiently and comfortably than
with a telephone handset, while providing greater communications clarity and
security than a speaker phone.
Headsets consist of two distinct units. The "top," which is the portion
that the user wears and which includes the speaker and microphone, and the
"bottom," or amplifier adapter which interfaces with the telephone or other
equipment. Both units are currently required in most applications. In some
circumstances, however, the interface is built into the telephone, computer or
other equipment with which the headset is being used, allowing use of the "top"
alone.
There are five basic headset "top" styles which Plantronics manufactures:
- Over-the-head headsets with ear cushions. The Supra headset is an
over-the-head model available with sound reception in one or both
ears. Dual ear versions help block out background noise. The Company
introduced a new product in this category in fiscal year 1996, the
Encore headset, which features user-controllable tone adjustment.
- Behind-the-ear headsets with a receiver that rests on either
ear. The Mirage headset uses a miniaturized behind-the-ear capsule.
Attached to it is a small disc-shaped receiver that rotates to fit
against either ear. The receiver rests gently on the ear, not in it.
- Behind-the-ear headsets with an ear tip. The StarSet headset is the
distinctive Plantronics headset that uses a small capsule that fits
behind and in the outer portion of the ear. Sound is delivered to
the ear by an acoustic ear tip. The headset is extremely
lightweight, requiring no headband, and the ear tip's acoustic
coupling provides exceptional sound quality. The TriStar headset,
the industry's lightest commercial headset, was introduced during
fiscal year 1996. This product features maximum user adjustments for
excellent stability, comfort and sound quality.
- Headsets that rest in the outer portion of the ear. The FreeHand
headset, introduced during fiscal year 1995, offers a functional and
lightweight design that allows it to be easily and quickly placed on
or removed from its position in the outer portion of the ear with
one hand. Its adjustable microphone boom may be rotated for optimum
transmit performance. The Company's CHS132 and CAT132 models are
versions of the FreeHand headset designed for use with mobile
telephones and personal computers, respectively.
- Convertible headsets. This product can be converted from an
over-the-head to an on-the-ear headset by simply removing the
headband and replacing it with a behind-the-ear ear hook.
All basic telephone-based headset tops are designed for use with the
multitude of different phone systems currently available. Basic models offer
features such as user volume control, a mute switch and quick-disconnect, which
allows users to leave the phone without removing their headsets or disconnecting
the line. Supra NC, StarSet NC, Mirage NC, TriStar NC and Encore NC headset tops
are special versions of the Supra, StarSet, Mirage, TriStar and Encore headsets
featuring boom-mounted noise-canceling microphones.
The Company's Vista headset bottoms feature a universal modular amplifier
and interchangeable headset tops. The universal amplifier eliminates
compatibility problems with most telephones and incorporates the SoundGuard Plus
system, which provides volume control for improved audio comfort and clarity.
The
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interchangeability feature of the Vista product allows a user to connect any one
of the available Plantronics headset tops to any telephone or console equipped
with the Vista amplifier or the Company's Starbase headset telephone.
In fiscal year 1997, the Company introduced a new bottom or adapter called
the Headset Switcher adapter for use with a telephone and a computer equipped
with a soundcard. The Headset Switcher allows the user to switch back and forth
from the telephone and computer audio applications by simply flipping a switch.
In fiscal year 1997, the Company introduced the E-10 adapter, an in-line
headset amplifier, designed specifically for use with the newest generation of
carbon based automatic call distribution ("ACD") systems. The E-10 adapter
incorporates an "Agent Not Available" feature that signals the ACD system when a
call center agent is not available. The small sized unit can be clipped to the
user's clothing, permitting enhanced freedom of movement.
In addition to its traditional corded products, the Company introduced
during fiscal year 1996 the CT-460, a cordless headset telephone aimed at the
home office market segment. In fiscal 1998, the Company introduced the CT-901, a
900 megahertz cordless headset telephone designed for use in the home office and
small office market segments. Both of these products are comprised of a headset
and remote transceiver/dial pack, and a base unit which plugs into a wall jack.
These products are sold principally through retail channels.
The Company, through its Computer and Mobile Systems Division, also
provides a broad range of headset accessory products for use with mobile
telephones. The Company's CHS line of headset tops, first introduced in fiscal
1998, are designed for use with cellular/PCS and cordless phones. The tops
terminate in a standard 2.5mm plug which is compatible with cellular/PCS and
cordless phones featuring a built-in headset port. The incorporation of headset
ports in mobile telephones is a trend the company expects will continue in the
future.
For cellular/PCS phones without a headset port, the company offers two
types of adapters for a wide variety of phones. The first is a Cigarette Lighter
Adapter (CLA) which incorporates a headset port. Users can talk and drive
hands-free while charging their wireless phone. A second type of adapter, the
WTA series, introduced in fiscal 1998, is a portable adapter that plugs into the
base of a wireless phone. Again, the adapter incorporates a headset port.
The Company also introduced the AirSet cordless adapter in fiscal year 1998
for use by professionals in the office market segment. The Airset product is a
cordless telephone adapter which uses infrared technology for use in an enclosed
office environment. It is compatible with all of the Company's standard
commercial headset tops.
In addition, the Company's specialty products operation provides headsets
and other equipment for special applications that are not served by the
Company's standard product lines.
HEADSET ACCESSORIES AND SERVICES
The Company offers a complete line of headset accessories, including voice
tubes, ear cushions, ear tips and background noise suppressors. The Company's
Service Center provides customers with a sophisticated service and refurbishment
program including headset repair and remanufacturing.
SPECIALTY TELEPHONE PRODUCTS
The Company's Walker Equipment Division (the "Walker Division") is a
designer and distributor of specialty telephone products. Specialty telephone
products sold under the Walker Division name include amplified handsets,
amplified telephones and telephone amplifier accessories for the
hearing-impaired user. The Walker Division Clarity telephone is a full-featured
single-line telephone designed for hearing-impaired users. It features volume
control circuitry, oversized buttons, a ringer volume control and a light that
flashes when the phone rings. In addition, the Walker Division sells special
amplified and noise-canceling handsets for high-noise environments, as well as
for entry and elevator phones and for use in telephone booths and information
kiosks. The Walker Division also offers a device that will amplify the receive
volume of
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conventional handsets and has also introduced a portable version of that
product. The Walker Division products are currently distributed through the same
commercial and retail distribution channels as the Company's products.
In Europe, where modular telephone handsets are not currently the norm, the
Company developed the Starbase headset telephone, which is a full-featured
single-line telephone to which nearly all of the Company's headsets may be
attached. This product enables many more businesses to use headsets for
non-operator functions.
PRODUCT DEVELOPMENT
Since the introduction of the original lightweight headset in 1962, the
user has been the primary focus of the Company's design efforts. The Company
maintains an extensive database of head and ear shapes to assist in the
development of its products. The Company's concern for "human engineering" and
its efforts to "design-in" comfort and safety have resulted in such product
innovations as a behind-the-ear capsule (containing both microphone and
receiver) designed to fit all users comfortably and the SoundGuard Plus system,
which provides volume control and improved audio comfort and quality.
The Company has a number of product development programs currently
underway, including a new generation of headset systems, computer and mobile
products, a wireless product family and several core technology programs. The
Company supplements its in-house engineering capabilities through selected
outside contracting arrangements.
Research, development and engineering expenditures were $13.7 million,
$14.5 million and $17.5 million for the fiscal years ended March 30, 1996, March
29, 1997, and March 28, 1998, respectively. The Company's management believes
that substantial investment in research and development is important for the
Company to maintain its position in the industry and, therefore, intends to
increase its spending for research, development and engineering in subsequent
fiscal years.
Historically, substantially all of the Company's product development
efforts have primarily been directed toward incremental enhancements of existing
products. In the future, the Company intends both to enhance its existing
products and to develop new products that capitalize on its core technology and
expand the Company's product offerings to new user market segments. The success
of new product introductions is dependent on a number of factors, including
proper new product selection, timely completion and introduction of new product
designs, cost-effective manufacturing of such products, quality of new products
and market acceptance. To be successful in the future, the Company must be able
to develop new products, qualify these products with its customers, successfully
introduce these products to the market on a timely basis, and commence and
sustain volume production to meet customer demands. Although the Company has
attempted to determine the specific needs of the telephone, mobile telephone,
computer, individual and home office user segments of the market, there can be
no assurance that the market niches identified will in fact materialize or that
the Company's existing and future products designed for these market segments
will gain substantial market acceptance. Further, assuming the market segments
develop and the Company's products meet customer needs, there is no assurance
that such new products can be manufactured cost effectively to meet the
potential demand.
The technology of telephone headsets, both "tops" and "bottoms," has
traditionally evolved slowly. Products are currently exhibiting life cycles of
three to five years before introduction of the next generation of products,
which usually include stylistic changes and quality improvements, but have
historically been based on similar technology. The Company believes that future
changes in technology may come at a faster pace, particularly in the telephone,
cellular telephone and computer segments of the business and home office user
portions of the market. The Company's future success will be dependent in part
on its ability to develop products that utilize new technologies and to
introduce them to the marketplace successfully. In addition, in order to avoid
product obsolescence, the Company will have to monitor technological changes in
telephony, as well as users' demands for new technologies. Failure by the
Company to keep pace with future technological changes could materially
adversely affect the Company's revenues and operating results.
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SALES AND DISTRIBUTION
The Company distributes its products worldwide through large electronics
wholesalers, specialized headset distributors, OEMs, and retail channels.
Electronics wholesalers represent the single largest channel of
distribution for the Company's products. Such wholesalers are often national
organizations offering hundreds of products, including headsets, to both
resellers and end users. The Company's products are currently sold in North
America through electronics distributors, including Graybar Electric Company,
Anixter Brothers and Sprint North Supply, among others. Additional wholesale
distributors handle the Company's products in overseas market segments.
Specialized headset distributors represent a second major distribution
channel for the Company's products. These distributors, which sell on a national
basis, are generally smaller companies with total annual revenues of under $10
million, the majority of which are generated by their sales of headsets.
The Company also distributes its products on a private labelled or
co-branded basis through original equipment manufacturers ("OEMs"). OEMs supply
automatic call distributor systems and other telecommunications and computer
equipment that utilize headsets. Depending on their marketing strategies, OEMs
may purchase the Company's headsets on a private label basis. The Company
believes that it is currently the largest supplier of headsets to Lucent
Technologies (formerly part of AT&T).
Products are sold in the retail channel through office supply and consumer
electronics retailers, warehouse clubs, consumer products and office supply
distributors, and catalog and mail order companies. These retailers sell
headsets to small businesses, small offices and home offices.
Direct sales are made in a limited number of cases by the Company to
government agencies, including NASA, the FAA, and under the Company's General
Service Administration schedule contract. Direct sales are also placed with
certain very large call centers operated by regional telephone companies.
Financial Information about Industry Segments and Foreign Operations. The
Company operates in one industry segment. Financial information about foreign
and domestic operations and export sales, included in Note 9 to the Company's
Consolidated Financial Statements, appearing at page 13 of the Company's 1998
Annual Report to Stockholders is incorporated herein by this reference.
Approximately 26.8%, 30.5% and 30.6% of the Company's net sales in fiscal
1996, fiscal 1997 and fiscal 1998, respectively, were derived from sales to
foreign customers. Sales to foreign customers are generally subject to such
risks as increased tariffs and the imposition of other trade barriers. Although
the Company generally transacts business internationally in United States
currency, declines in the values of local currencies relative to the United
States dollar in countries in which the Company does business could adversely
affect the Company by resulting in less competitive pricing for the Company's
products. The Company does not currently engage in any hedging activities to
mitigate exchange rate risks and to date has not been adversely affected by
fluctuating currencies. To the extent that the Company is successful in
increasing its sales to foreign customers, or to the extent that the Company
increases its transactions in foreign currencies, the Company's results of
operations could be adversely affected by exchange rate fluctuations.
In fiscal 1996, the Company established a new wholly-owned subsidiary in
the Netherlands. This new subsidiary serves as a strategic logistics center as
well as the headquarters for international administration. In fiscal 1998, the
Company established new wholly-owned subsidiaries in Brazil and Australia, both
of which serve as sales offices.
BACKLOG
The Company's backlog of unfilled orders was $31.4 million on March 28,
1998, compared to $17.0 million on March 29, 1997. The Company includes in
backlog all purchase orders scheduled for delivery over the next 12 months. As
part of its commitment to customer service, however, the Company's goal is to
ship products within two to four weeks from receipt of an order. The Company's
backlog is generally subject to cancellation or rescheduling by the customer on
short notice with little or no penalty. While the Company has not experienced
any significant cancellations in the past, the Company's backlog as of any
particular date may
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not be indicative of actual sales for any future period and therefore should not
be used as a measure of future revenue.
COMPETITION
The Company believes the principal competitive factors in its business are
product reliability, product features, customer service and support, reputation,
distribution, ability to meet delivery schedules, warranty terms, product life
and price. The Company believes that its brand name recognition, distribution
network, large user base and large number of product variations, together with
its extensive experience in designing safe and reliable products, dealing with
regulatory agencies and servicing and repairing headsets, are the key factors
for the Company to maintain its position as a leading supplier of lightweight
communications headsets.
In the call center user segment of the market, the Company faces different
competitors depending on the channel of distribution and the geographic
location. The Company anticipates that it may face additional indirect
competition in this market segment from technological advances such as
interactive voice response systems which require no human interface for certain
applications, such as account balance inquiries or airplane arrival and
departure schedules. The Company believes that this trend will be more than
offset by the expansion of telemarketing and catalog sales.
In the business and home office user segments of the market, the same
competitors who are the Company's competitors in the call center user market
currently sell headsets to users within the telephone, cellular telephone and
computer segments of the business and home office user part of the market. The
Company's competitors sell their competing products primarily through commercial
distribution channels. There are also certain competitors who sell exclusively
outside the call center segment. As the Company develops new generations of
products and enters new market segments, including the developing business and
home office user segment of the market, the Company anticipates that it may face
additional competition from companies which currently do not offer communication
headsets. Such companies may be larger, offer broader product lines and have
substantially greater financial and other resources than the Company. Such
competition could negatively affect pricing and gross margins. Although the
Company has historically competed very successfully in the call center user
segment of the market, there can be no assurance that it will be able to
continue its leadership position in that segment of the market or that the
Company will be able to compete successfully in new market segments.
MANUFACTURING
Production of the Company's headsets and other products consists of light
manufacturing and assembly operations conducted in California, Georgia, Mexico
(the predominant manufacturing site, i.e. approximately 90%) and the United
Kingdom. A few of the Company's other products are manufactured in whole or in
part on a contract basis by third parties.
The Company purchases the components for its headset products, including
proprietary semi-custom integrated circuits, amplifier boards and other
electrical components, from suppliers in the United States, Mexico, Asia and
Europe. Although most components and subassemblies used in the Company's
manufacturing operations are obtained, or are reasonably available, from
numerous sources, certain of its products and components are currently procured
only from single suppliers in order to obtain volume pricing. In the past, the
Company has experienced only minor interruptions in the supply of these
components, none of which has adversely affected its operations. However, an
interruption in supply from any of the Company's single source suppliers in the
future could temporarily result in the Company's inability to deliver products
on a timely basis, which in turn could adversely affect its operations. In
addition, manufacturing and assembly of the Company's products could be
adversely affected by political or economic conditions in the United States or
abroad.
In order to meet the requirements of its customers for timely delivery of
products, the Company generally manufactures finished goods to meet forecasted
customer requirements. Special products and large orders submitted with short
lead times requested by the customer are manufactured to order. Since most
manufacturing occurs prior to the receipt of purchase orders, the Company
maintains an inventory of finished
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goods in addition to inventories of raw materials, work in process and
subassemblies and components. Inventories were valued at $29.7 million as of
March 28, 1998.
In fiscal 1996, the Company began the implementation of a new worldwide
management information system. The new system was implemented in April 1997. The
new management information system is intended to improve service to the
Company's customers, to control Company assets and to enhance management
information. Any difficulty in the operation of such new systems or the training
of personnel could adversely affect the Company's ability to accurately forecast
sales demand and calibrate manufacturing to such demand, to calibrate purchasing
levels, to accurately record and control inventory levels, and to record and
report financial and management information on a timely and accurate basis. The
occurrence of any of these events in the future could have a material adverse
effect on the Company's business, financial condition and results of operations.
Year 2000 Compliance Issue. As is the case with most other companies using
computers in their operations, the Company is in the process of addressing the
Year 2000 compliance issue. The Company is currently engaged in a project to
modify its software and computer applications to consistently and properly
recognize the Year 2000. Management expects to have substantially all of the
system and application changes completed by the end of the Company's fiscal year
1999 and believes that its level of preparedness is appropriate. Internal and
external resources are being used to review this issue, effect any required
modifications and test Year 2000 compliance. The total cost to the Company of
these Year 2000 compliance activities is not expected to be material. A portion
of these costs will be met from existing resources, with the remainder
representing incremental costs which will be expensed as incurred.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations, including those governing the use, discharge
and disposal of hazardous substances in the ordinary course of its manufacturing
process. Although management believes that its current manufacturing operations
comply in all material respects with applicable environmental laws and
regulations, environmental legislation has been enacted and in the future may be
enacted or interpreted to create environmental liability with respect to the
Company's facilities or operations. The Company has included in its financial
statements a reserve of $1.5 million for possible environmental remediation
related to one of its discontinued businesses. While no claims have been
asserted against the Company in connection with this matter, there can be no
assurance that such claims will not be asserted in the future or that any
resulting liability will not exceed the amount of the reserve.
PATENTS AND TRADEMARKS
The Company maintains a program of seeking patent protection for its
technology. Significant product features for which the Company has, or is
currently seeking, patent protection include the Company's StarSet II capsule
design, SoundGuard receiver gain compression integrated circuit, Mirage headset,
Clarity frequency enhancing telephone, battery-powered in-line amplifier with an
automatic by-pass feature to provide continuous receive signal when battery
power gets low, integrated circuit implementation for an audio amplifier
operating at extremely low power with an expander function for noise reduction
in telephony applications, headset receiver mechanical-acoustical tone control
devices, earbud receiver positioning mechanisms and various other products,
features including certain wireless technology and electronic components. The
existing patents expire from 2000 to 2013.
The Company's success will depend in part on its ability to obtain patents
and preserve other intellectual property rights covering the design and
operation of its products. The Company intends to continue to seek patents on
its inventions when appropriate. The process of seeking patent protection can be
lengthy and expensive, and there can be no assurance that patents will issue
from currently pending or future applications or that the Company's existing
patents or any new patents issued will be of sufficient scope or strength or
provide meaningful protection or any commercial advantage to the Company. The
Company may be subjected to, or may initiate, litigation or patent office
interference proceedings, which may require significant financial
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and management resources. The failure to obtain necessary licenses or other
rights or the advent of litigation arising out of any such claims could have a
material adverse effect on the Company's operations.
The Company owns registered trademarks with respect to its name and logo
design and many of its products, including, but not limited to, its Encore,
FreeHand, Mirage, StarSet, Supra, and TriStar products and currently has
trademark applications pending in connection with new products. The Company also
claims common law trademark rights in many of its products and/or features. The
Company also attempts to protect its trade secrets and other proprietary
information through comprehensive security measures, including agreements with
customers and suppliers, and proprietary information agreements with employees
and consultants.
EMPLOYEES
On March 28, 1998, there were 1,817 persons employed by the Company. No
employees are currently covered by collective bargaining agreements or are
members of any labor organization as far as the Company is aware. The Company
has not experienced any work stoppages and believes that its employee relations
are good.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company and their ages as of June 5, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Benjamin Brussell 37 Vice President -- Corporate Development
Robert S. Cecil 63 Chairman of the Board of Directors and Chief Executive Officer
C. Donald Cooper 53 Senior Vice President and Chief Strategy Officer
Donald S. Houston 44 Senior Vice President -- Sales
David Huddart 48 Senior Vice President -- Engineering and Technology
S. Kenneth Kannappan 38 President and Chief Operating Officer
Farhad Kashani 45 Senior Vice President -- Operations
John A. Knutson 52 Vice President -- Legal, Senior General Counsel and Secretary
H. Craig May 38 Senior Vice President -- Marketing
Barbara V. Scherer 42 Senior Vice President -- Finance & Administration and Chief
Financial Officer
</TABLE>
Mr. Brussell joined the Company in March 1998 as Vice
President -- Corporate Development and reports directly to the Chief Executive
Officer. Prior to joining the Company, Mr. Brussell was Vice President,
Corporate Development at Storage Technology Corporation, a leading provider of
enterprise and network information storage systems, from March 1992 to March
1998. From June 1990 until March 1992, Mr. Brussell acted as a consultant to
Storage Technology Corporation and other technology and health care industry
companies. From January 1985 to June 1990, Mr. Brussell held various positions
with Solomon Brothers, the last of which was Vice President, Corporate Finance,
Technology Group. Mr. Brussell has a Bachelor of Arts degree in Math/Economics
from Wesleyan University and a Masters Degree in Management from M.I.T. Sloan
School of Management.
Mr. Cecil joined the Company in March 1992 as President, Chief Executive
Officer and Director, and in September 1993 he was elected Chairman of the Board
of Directors. As of March 1998, Mr. Cecil no longer serves as President due to
the promotion of Mr. Kannappan. From 1984 to December 1991, Mr. Cecil held a
number of positions with LIN Broadcasting Corporation, a subsidiary of McCaw
Cellular Communications, Inc. that provides cellular services in North America,
including President of its Cellular Group. From 1977 to 1984, he held various
positions with Motorola, Inc., including Vice President and Corporate Director
of Marketing. Prior to that he held various senior sales and marketing
management positions with IBM Corporation. Mr. Cecil has a Bachelor of Science
degree in Engineering from the U.S. Naval Academy and a Masters of Business
Administration in Finance from the Harvard Graduate School of Business
Administra-
10
<PAGE> 11
tion. Mr. Cecil also serves on the Board of Directors of TAB Products Co., which
manufactures and markets a broad range of filing systems and supplies, systems
furniture, computer-related products and forms processing equipment; Xylan
Corporation, a provider of high bandwidth switching systems that enhance the
performance of existing local area networks and facilitate migration to
networking technologies; and GT Group Telecom Inc., a Canadian company which is
a competitive local exchange carrier.
Mr. Cooper joined the Company in February 1997 as Vice
President -- Business Development and has recently taken the position of Senior
Vice President and Chief Strategy Officer. Mr. Cooper has over 17 years of
experience in senior level executive positions. From 1989 to 1996, Mr. Cooper
held a number of positions with AT&T Paradyne, a $500 million unit of AT&T,
engaged in the business of data networking, including most recently President
and General Manager. Mr. Cooper earned a Bachelor of Science degree in
Electrical Engineering from the University of Missouri and a Master of Business
Administration degree in Marketing from the University of Houston. Mr. Cooper
reports directly to the Chief Executive Officer.
Mr. Houston joined the Company in November 1996 as Vice President -- Sales
and was promoted to Senior Vice President -- Sales in March 1998. From February
1995 through November 1996, Mr. Houston served as Vice President -- Worldwide
Sales for Proxima Corporation, a designer, developer, manufacturer and marketer
of multimedia projection products. From 1985 until January of 1995, Mr. Houston
held a number of positions at Calcomp, Inc., which is engaged in the business of
manufacturing computer peripherals for the CAD and graphic market, including
Regional Sales Manager and most recently Vice President of Sales, Service and
Marketing. Prior to 1985, Mr. Houston held various sales and marketing
management positions with IBM Corporation. Mr. Houston is a graduate of the
University of Arizona with a Bachelor of Science degree in Business/Marketing.
He reports directly to the President and Chief Operating Officer.
Mr. Huddart was appointed Vice President -- Engineering and Technology in
April 1996, and became Senior Vice President -- Engineering and Technology in
March 1998. He joined Plantronics Limited in September 1994 as Engineering
Manager. Prior to joining Plantronics Limited, he was the Technical Marketing
and Sales Director for IST Laboratories Ltd., a developer of electronic
substrate interconnections, from May 1991 through April 1994. From October 1986
through May 1991, he was employed by Tunstall Group plc and its subsidiaries,
and held various positions, including Group Technical Director of Tunstall Group
plc, and Marketing Director and Technical Director of Tunstall Telecom. From
1972 until June of 1986, he was employed by TMC Philips Ltd. as an engineer in
positions with increasing levels of responsibility. Mr. Huddart has a Bachelor
of Science degree from the University of North London Polytenic and a Management
Diploma from Ashridge Management College.
Mr. Kannappan joined the Company in February 1995 as Vice
President -- Sales, responsible for OEM Sales and International Markets for
Plantronics, Inc. He was promoted to Vice President -- Sales, responsible for
all U.S., Asian and Latin American Sales in September 1995. He was promoted to
Managing Director -- Plantronics Limited in England in March 1996. In March
1997, Mr. Kannappan returned from England and was promoted to Senior Vice
President responsible for Plantronics' Worldwide Operations, Mobile Division,
Walker Division and Plantronics Limited. In March 1998, Mr. Kannappan was
promoted to President and Chief Operating Officer. Prior to joining Plantronics,
Mr. Kannappan was Senior Vice President of Investment Banking for Kidder,
Peabody & Co. Incorporated from August 1985 through January 1995. Mr. Kannappan
has a Bachelor of Arts degree in Economics from Yale University and a Masters of
Business Administration from Stanford University.
Mr. Kashani joined the Company in February 1998 as Senior Vice
President -- Operations and reports directly to the President and Chief
Operating Officer. Prior to joining the Company, Mr. Kashani spent ten years
with Wyse Technology, and a subsidiary company, Link Technologies, in various
positions of increasing responsibility, from 1987 to February 1998. From August
1997 to February 1998, Mr. Kashani was Vice President of Operations, Service and
Quality with Wyse Technology, USA, and from December 1996 to July 1997, he was
Vice President of Operations, Wyse Technology, Hsin Chu, Taiwan. From 1994 to
1996, Mr. Kashani was Vice President of Operations, Wyse Technology, USA; from
1990 to 1994 he was Vice President of Operations for Link Technologies, a
subsidiary of Wyse Technology; from 1989 to 1990 he was Director of U.S.
Manufacturing, Wyse Technology and from 1987 to 1989 he was Director of Quality
11
<PAGE> 12
Assurance, Link Technologies. Mr. Kashani has a Bachelor of Science degree in
Agricultural Engineering from Pahlavi University and a Masters of Business
Administration from the Iran Center for Management Studies.
Mr. Knutson has served as Vice President -- Legal, Senior General Counsel
and Secretary since March 1994. Mr. Knutson was Managing Partner of the law firm
of Kenney, Burd, Knutson & Markowitz, San Francisco, California, from January
1991 until shortly before joining the Company. From August 1979 until December
1990, he practiced law with the law firm of Fisher & Hurst, San Francisco,
California, as a partner from April 1982 to December 1986, and as Managing
Partner from January 1987 to December 1990. After graduating from the University
of California -- Hastings College of Law with a Juris Doctorate degree and being
admitted to the California Bar in 1974, Mr. Knutson practiced law in San
Francisco with the Law Offices of Garrett McEnerney until August 1979.
Mr. May joined the Company in May 1998 as Senior Vice
President -- Marketing and reports directly to the President and Chief Operating
Officer. Mr. May was most recently with Dell Computer Corporation from March
1998 to May 1998, responsible for Program Management of the Work Stations
Business Unit. Prior to that Mr. May was with Siemens Business Communication
Systems, Inc., as Director of Product Management, Desktops and Mobility, from
October 1993 to May 1998. Prior to that position, Mr. May served as special
assignment to the President of Siemens Business Communications Systems, Inc.
from July 1993 to October 1993. From June 1992 to July 1993, Mr. May was ROLM
Executive Delegate for Siemens AG, Private Networks Group, Desktop Products,
Munich, Germany. Mr. May held a number of positions with ROLM from July 1987 to
June 1992, such as Director of Systems Planning, Manager of New Product Planning
and Senior Product Manager. From 1981 to June 1987 Mr. May worked for ROLM, an
IBM Company and Shell Oil Company in various product manager and engineering
positions of increasing authority. Mr. May has a Bachelor of Science degree in
Electrical Engineering from the University of Houston.
Ms. Scherer joined the Company in March 1997, and in April 1997 was named
Vice President -- Finance & Administration and Chief Financial Officer. In March
1998, Ms. Scherer was promoted to Senior Vice President -- Finance &
Administration and Chief Financial Officer. Prior to joining the Company, Ms.
Scherer was Senior Vice President and Chief Financial Officer at StreamLogic
Corporation, a developer of video delivery, digital media storage, networking
RAID and data management products, from October 1996 until March 1997; before
that she was Senior Vice President of Operations from April 1996 until October
1996. Prior to that she held various positions spanning a nine year career with
Micropolis Corporation, a disk drive manufacturer, including, from 1995 until
April 1996, Vice President Finance, Chief Financial Officer and Treasurer, and
from 1993 until 1994, Vice President, Treasurer and Video Systems Division
Controller. Ms. Scherer is a graduate of the University of California at Santa
Barbara and received her Masters from Yale School of Organization and
Management. She reports directly to the Chief Executive Officer.
Executive officers serve at the discretion of the Board of Directors. There
are no family relationships between any of the directors and executive officers
of the Company.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located in Santa Cruz,
California. The Company owns or leases a total of approximately 320,000 square
feet of manufacturing, administrative, engineering and office facilities,
including: (i) approximately 160,000 square feet of manufacturing and
administrative facilities owned by the Company in Santa Cruz, California,
approximately 38,500 square feet of which are leased to third parties as office
and warehouse space; (ii) approximately 11,600 square feet of manufacturing and
administrative facilities related to operations in Ringgold, Georgia under a
lease expiring in 1999; (iii) approximately 93,600 square feet for assembly and
related operations in Tijuana, Mexico, under a lease expiring in 2001; (iv)
approximately 38,400 square feet for assembly operations, sales and
administration in Wootton Bassett, England under a lease expiring in 2015; (v)
approximately 4,000 square feet for administrative facilities in Hoofddorp, The
Netherlands, under a lease expiring in 1999; and (vi) smaller leased or rented
facilities in Singapore, Japan, Hong Kong, France, Germany, Italy, Spain,
Brazil, Colorado
12
<PAGE> 13
and New Jersey. The Company believes that its existing properties are generally
suitable and adequate for its business with excess capacity available for
expansion.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company, nor any of its subsidiaries, is a party to any
litigation, other than non-material litigation incidental to the Company's
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the fiscal year ended March 28, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is publicly traded on the New York Stock
Exchange. Information included in the Corporate Directory appearing on the back
cover of the Company's 1998 Annual Report to Stockholders concerning the market
price of and cash dividends declared on the Company's Common Stock for each
quarterly period within the two most recent fiscal years is incorporated herein
by reference. As of June 5, 1998 there were 80 holders of record of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Financial Data"
appearing at page 23 of the Company's 1998 Annual Report to Stockholders is
incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis" appearing at pages 17 through 21 of the Company's 1998 Annual Report
to Stockholders is incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information appearing in the Company's 1998 Annual Report to
Stockholders is incorporated herein by this reference:
Consolidated Balance Sheets -- March 28, 1998 and March 29, 1997
Consolidated Financial Statements for fiscal years ended March 28, 1998,
March 29, 1997 and March 30, 1996:
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity (Deficit)
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated April 17, 1998.
With the exception of the information mentioned in Items 5, 6, 7 and 8, the
Company's 1998 Annual Report to Stockholders is not to be deemed filed as part
of this Annual Report on Form 10-K.
13
<PAGE> 14
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no disagreements with accountants on any matter of
accounting principles and practices or financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the identification and business experience of the
Company's directors under the caption "Nominees" under the main caption
"Proposal One -- Election of Directors" in the Company's definitive 1998 Proxy
Statement for the annual meeting of stockholders to be held, as filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year ended March 28, 1998, is incorporated herein by this
reference. For information regarding the identification and business experience
of the Company's executive officers, see "Executive Officers" at the end of Item
1 in Part I of this Annual Report on Form 10-K. The Registrant's Chief Financial
Officer, Barbara V. Scherer, joined the Company in March 1997, having last been
employed as Chief Financial Officer of StreamLogic Corporation. StreamLogic
Corporation filed voluntarily for protection under Chapter 11 of the Federal
Bankruptcy Code on June 26, 1997. Information concerning filing requirements
applicable to the Company's executive officers and directors under the caption
"Compliance With Section 16(a) of the Exchange Act" in the Company's 1998 Proxy
Statement is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation" and
"Compensation of Directors" in the Company's 1998 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Principal
Stockholders and Management" under the main caption "Additional Information" in
the 1998 Proxy Statement is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the 1998 Proxy
Statement is incorporated herein by this reference.
With the exception of the information specifically incorporated by
reference from the 1998 Proxy Statement in Part III of this Annual Report on
Form 10-K, the 1998 Proxy Statement shall not be deemed to be filed as part of
this Report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee of the Board of Directors" and "Company's
Stock Performance" under the main caption "Additional Information" in the 1998
Proxy Statement is not incorporated by reference in this Annual Report on Form
10-K.
14
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Incorporation by Reference. The following documents are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K:
(1) Financial Statements. The consolidated financial statements of the
Company (including the notes thereto) are incorporated by reference from
the Company's 1998 Annual Report to Stockholders as indicated in Item 8 of
this report.
(2) Financial Statement Schedules. All financial statement schedules
have been omitted because the required information is not applicable or not
present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
(3) Exhibits. The exhibits listed under Item 14(c) hereof are filed
with, or incorporated by reference into, this Annual Report on Form 10-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant
during the fourth quarter of the fiscal year ended March 28, 1998.
(c) Exhibits. The following exhibits are filed as part of, or incorporated
by reference into, this Annual Report on Form 10-K:
<TABLE>
<C> <S>
3.1 Amended and Restated By-Laws of the Registrant (incorporated
herein by reference to Exhibit (3.4) to the Registrant's
Registration Statement on Form S-1 (as amended), No.
33-70744, filed on October 20, 1993).
3.2 Restated Certificate of Incorporation of the Registrant
filed with the Secretary of State of Delaware on January 19,
1994 (incorporated herein by reference to Exhibit (3.1) to
the Registrant's Quarterly Report on Form 10-Q, SEC File
Number 1-12696, for the fiscal quarter ended December 25,
1993, filed on March 4, 1994).
3.3 Certificate of Retirement and Elimination of Preferred Stock
and Common Stock of the Registrant filed with the Secretary
of State of Delaware on January 11, 1996 (incorporated
herein by reference to Exhibit (3.3) of the Registrant's
Annual Report on Form 10-K, SEC File Number 1-12696, for the
fiscal year ended March 30, 1996, filed on June 27, 1996).
4.1 Indenture between Registrant, as issuer, and First National
Bank of Boston, as Trustee dated as of January 15, 1994
(including the form of Senior Notes) relating to
Registrant's 10% Senior Notes Due 2001 (incorporated herein
by reference to Exhibit (4.1) to the Registrant's Quarterly
Report on Form 10-Q, SEC File Number 1-12696, for the fiscal
quarter ended December 25, 1993, filed on March 4, 1994).
10.1 Quarterly Profit Sharing Plan (as amended) (incorporated
herein by reference to Exhibit (10.2) to Registrant's
predecessor, Plantronics, Inc.'s Report on Form 10-K, SEC
File Number 1-6642, for the fiscal year ended May 29, 1982,
filed on August 27, 1982).
10.2 Form of Agreement For Restricted Property in connection with
Target Benefit Plan; and Schedule of Other Documents
Omitted, (incorporated herein by reference to Exhibit
(10.19) to PI Holdings Inc.'s Transitional Report on Form
10-K for the transition period ended April 1, 1989, SEC file
number 33-26770, filed on August 21, 1989).
10.3 Form of Indemnification Agreement between the Registrant and
certain directors and executives and Schedule of Other
Documents Omitted (incorporated herein by reference to
Exhibit (10.1) to PI Holdings Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended December 26, 1992,
SEC File Number 33-26770, filed February 9, 1993).
</TABLE>
15
<PAGE> 16
<TABLE>
<C> <S>
10.4 Form of Employment Agreement, Addendum to Employment Agreement and Second Addendum to Employment
Agreement between the Registrant and certain executives; and Schedule of Other Documents Omitted
(incorporated herein by reference to Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended December 26, 1992, SEC File Number 33-26770, filed
February 9, 1993).
10.5 Executive Bonus Plan (incorporated herein by reference to Exhibit (10.4) to the Registrant's
Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993).
10.6 Board Designation Agreement dated as of October 22, 1993 between the Registrant and Citicorp
Venture Capital, Ltd. (incorporated herein by reference to Exhibit (10.21) to the Registrant's
Registration Statement on Form S-1 (as amended), No. 33-70744, filed October 20, 1993).
10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong S.A. de C.V. and Plamex, S.A. de
C.V., a subsidiary of the Registrant, for premises located in Tijuana, Mexico (translation from
Spanish original) (incorporated herein by reference to Exhibit (10.30) to the Registrant's
Registration Statement on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993).
10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited and Plantronics Limited, a
subsidiary of the Registrant, for premises located in Wootton Bassett, England (incorporated
herein by reference to Exhibit (10.32) to the Registrant's Registration Statement on Form S-1
(as amended), No.33-70744, filed on October 20, 1993).
10.9 1993 Stock Plan (incorporated herein by reference to Exhibit (10.1) to the Registrant's
Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on October 20,
1993).
Amendment effective as of April 23, 1996 to the 1993 Stock Plan (incorporated herein by
reference to Exhibit (4.2) to the Registrant's Registration Statement on Form S-8, SEC File
Number 333-14833, filed on October 25, 1996).
10.10 1993 Director Stock Option Plan (incorporated herein by reference to Exhibit (10.29) to the
Registrant's Registration Statement on Form S-1 (as amended), SEC File Number 33-70744, filed on
October 20, 1993).
Amendment Effective as of April 23, 1996 to the 1993 Director Stock Option Plan (incorporated
herein by reference to Exhibit (4.4) to the Registrant's Registration Statement on Form S-8, SEC
File Number 333-14833, filed on October 25, 1996).
10.11 Employment Agreement between the Registrant and Robert S. Cecil dated January 4, 1994
(supersedes Employment Agreement between Plantronics and Robert S. Cecil dated January 20, 1993)
(incorporated herein by reference to Exhibit (10.16) to the Registrant's Registration Statement
on Form S-1 (as amended), No. 33-70744, filed on October 20, 1993).
Amendment Number One to Employment Agreement between the Registrant and Robert S. Cecil entered
into as of January 4, 1995 (incorporated herein by reference to Exhibit (10.6) of the
Registrant's Annual Report on Form 10-K, SEC File Number 1-12696, for the fiscal year ended
March 30, 1996, filed on June 27, 1996).
Letter agreement between Registrant and Robert S. Cecil dated April 10, 1996 (incorporated
herein by reference to Exhibit (10.6) of the Registrant's Annual Report on Form 10-K, SEC File
Number 1-12696, for the fiscal year ended March 30, 1996, filed on June 27, 1996).
Amendment Number Two to Employment Agreement between the Registrant and Robert S. Cecil entered
into as of January 1, 1998.
</TABLE>
16
<PAGE> 17
<TABLE>
<C> <S>
10.12 Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (incorporated herein by
reference to Exhibit (4.1) to the Registrant's Registration Statement on Form S-8, SEC File
Number 333-19351, filed on January 7, 1997).
Amendment Number One to the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan
(incorporated herein by reference to Exhibit (4.2) to the Registrant's Registration Statement on
Form S-8, SEC File Number 333-19351, filed on January 7, 1997).
10.13 Trust Agreement Establishing the Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan
Trust (incorporated herein by reference to Exhibit (4.3) to the Registrant's Registration
Statement on Form S-8, SEC File Number 333-19351, filed on January 7, 1997).
10.14 Resolutions of the Board of Directors of Plantronics, Inc. Concerning Executive Stock Purchase
Plan (incorporated herein by reference to Exhibit (4.4) to the Registrant's Registration
Statement on Form S-8 (as amended), SEC File Number 333-19351, filed on March 25, 1997).
10.15 Plantronics, Inc. Basic Deferred Compensation Plan, as amended August 8, 1996 (incorporated
herein by reference to Exhibit (4.5) to the Registrant's Registration Statement on Form S-8 (as
amended), SEC File Number 333-19351, filed on March 25, 1997).
10.16 Trust Agreement Under the Plantronics, Inc. Basic Deferred Stock Compensation Plan (incorporated
herein by reference to Exhibit (4.6) to the Registrant's Registration Statement on Form S-8 (as
amended), SEC File Number 333-19351, filed on March 25, 1997).
10.17 Plantronics, Inc. Basic Deferred Compensation Plan Participant Election (incorporated herein by
reference to Exhibit (4.7) to the Registrant's Registration Statement on Form S-8 (as amended),
SEC File Number 333-19351, filed on March 25, 1997).
10.18 Credit Agreement dated as of February 19, 1997 between Registrant and Bank of America National
Trust and Savings Association (incorporated by reference to Exhibit (10.22) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 29, 1997, filed on June 27, 1997).
First Amendment to Credit Agreement, dated as of May 15, 1997 (incorporated by reference to
Exhibit (10.22) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March
29, 1997, filed on June 27, 1997).
Second Amendment to Credit Agreement, dated as of February 18, 1998.
10.19 Lease dated May 8, 1997 between Royal Liver Assurance Limited and Plantronics Limited, a
subsidiary of the Registrant, for premises located in Wootton Bassett, England.
13.1 Information incorporated by reference from the Registrant's Annual Report to Stockholders for
the fiscal year ended March 28, 1998.
21 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
27 Financial Data Schedule.
</TABLE>
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ ROBERT S. CECIL
---------------------------------------------------------------------
Robert S. Cecil
Chief Executive Officer
Dated: June 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ ROBERT S. CECIL Chairman of the Board, Chief June 23, 1998
- --------------------------------------------------- Executive Officer, and Director
(Robert S. Cecil) (Principal Executive Officer)
/s/ BARBARA V. SCHERER Senior Vice President, and Chief June 5, 1998
- --------------------------------------------------- Financial Officer (Principal
(Barbara V. Scherer) Financial Officer, Principal
Accounting Officer)
/s/ ROBERT F.B. LOGAN Director June 23, 1998
- ---------------------------------------------------
(Robert F.B. Logan)
/s/ M. SALEEM MUQADDAM Director June 23, 1998
- ---------------------------------------------------
(M. Saleem Muqaddam)
/s/ JOHN O'MARA Director June 23, 1998
- ---------------------------------------------------
(John Mowbray O'Mara)
/s/ TRUDE C. TAYLOR Director June 23, 1998
- ---------------------------------------------------
(Trude C. Taylor)
/s/ J. SIDNEY WEBB Director June 23, 1998
- ---------------------------------------------------
(J. Sidney Webb)
/s/ DAVID A. WEGMANN Director June 23, 1998
- ---------------------------------------------------
(David A. Wegmann)
</TABLE>
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<C> <S>
3.1 Amended and Restated By-Laws of the Registrant (incorporated
herein by reference to Exhibit (3.4) to the Registrant's
Registration Statement on Form S-1 (as amended), No.
33-70744, filed on October 20, 1993).
3.2 Restated Certificate of Incorporation of the Registrant
filed with the Secretary of State of Delaware on January 19,
1994 (incorporated herein by reference to Exhibit (3.1) to
the Registrant's Quarterly Report on Form 10-Q, SEC File
Number 1-12696, for the fiscal quarter ended December 25,
1993, filed on March 4, 1994).
3.3 Certificate of Retirement and Elimination of Preferred Stock
and Common Stock of the Registrant filed with the Secretary
of State of Delaware on January 11, 1996 (incorporated
herein by reference to Exhibit (3.3) of the Registrant's
Annual Report on Form 10-K, SEC File Number 1-12696, for the
fiscal year ended March 30, 1996, filed on June 27, 1996).
4.1 Indenture between Registrant, as issuer, and First National
Bank of Boston, as Trustee dated as of January 15, 1994
(including the form of Senior Notes) relating to
Registrant's 10% Senior Notes Due 2001 (incorporated herein
by reference to Exhibit (4.1) to the Registrant's Quarterly
Report on Form 10-Q, SEC File Number 1-12696, for the fiscal
quarter ended December 25, 1993, filed on March 4, 1994).
10.1 Quarterly Profit Sharing Plan (as amended) (incorporated
herein by reference to Exhibit (10.2) to Registrant's
predecessor, Plantronics, Inc.'s Report on Form 10-K, SEC
File Number 1-6642, for the fiscal year ended May 29, 1982,
filed on August 27, 1982).
10.2 Form of Agreement For Restricted Property in connection with
Target Benefit Plan; and Schedule of Other Documents
Omitted, (incorporated herein by reference to Exhibit
(10.19) to PI Holdings Inc.'s Transitional Report on Form
10-K for the transition period ended April 1, 1989, SEC file
number 33-26770, filed on August 21, 1989).
10.3 Form of Indemnification Agreement between the Registrant and
certain directors and executives and Schedule of Other
Documents Omitted (incorporated herein by reference to
Exhibit (10.1) to PI Holdings Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended December 26, 1992,
SEC File Number 33-26770, filed February 9, 1993).
10.4 Form of Employment Agreement, Addendum to Employment
Agreement and Second Addendum to Employment Agreement
between the Registrant and certain executives; and Schedule
of Other Documents Omitted (incorporated herein by reference
to Exhibit (10.2) to PI Holdings Inc.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended December 26, 1992,
SEC File Number 33-26770, filed February 9, 1993).
10.5 Executive Bonus Plan (incorporated herein by reference to
Exhibit (10.4) to the Registrant's Registration Statement on
Form S-1 (as amended), No. 33-70744, filed on October 20,
1993).
10.6 Board Designation Agreement dated as of October 22, 1993
between the Registrant and Citicorp Venture Capital, Ltd.
(incorporated herein by reference to Exhibit (10.21) to the
Registrant's Registration Statement on Form S-1 (as
amended), No. 33-70744, filed October 20, 1993).
10.7 Lease Agreement dated July 1993 between Inmobiliara Mexhong
S.A. de C.V. and Plamex, S.A. de C.V., a subsidiary of the
Registrant, for premises located in Tijuana, Mexico
(translation from Spanish original) (incorporated herein by
reference to Exhibit (10.30) to the Registrant's
Registration Statement on Form S-1 (as amended), No.
33-70744, filed on October 20, 1993).
10.8 Lease dated December 7, 1990 between Canyge Bicknell Limited
and Plantronics Limited, a subsidiary of the Registrant, for
premises located in Wootton Bassett, England (incorporated
herein by reference to Exhibit (10.32) to the Registrant's
Registration Statement on Form S-1 (as amended),
No.33-70744, filed on October 20, 1993).
</TABLE>
<PAGE> 20
<TABLE>
<C> <S>
10.9 1993 Stock Plan (incorporated herein by reference to Exhibit
(10.1) to the Registrant's Registration Statement on Form
S-1 (as amended), SEC File Number 33-70744, filed on October
20, 1993).
Amendment effective as of April 23, 1996 to the 1993 Stock
Plan (incorporated herein by reference to Exhibit (4.2) to
the Registrant's Registration Statement on Form S-8, SEC
File Number 333-14833, filed on October 25, 1996).
10.10 1993 Director Stock Option Plan (incorporated herein by
reference to Exhibit (10.29) to the Registrant's
Registration Statement on Form S-1 (as amended), SEC File
Number 33-70744, filed on October 20, 1993).
Amendment Effective as of April 23, 1996 to the 1993
Director Stock Option Plan (incorporated herein by reference
to Exhibit (4.4) to the Registrant's Registration Statement
on Form S-8, SEC File Number 333-14833, filed on October 25,
1996).
10.11 Employment Agreement between the Registrant and Robert S.
Cecil dated January 4, 1994 (supersedes Employment Agreement
between Plantronics and Robert S. Cecil dated January 20,
1993) (incorporated herein by reference to Exhibit (10.16)
to the Registrant's Registration Statement on Form S-1 (as
amended), No. 33-70744, filed on October 20, 1993).
Amendment Number One to Employment Agreement between the
Registrant and Robert S. Cecil entered into as of January 4,
1995 (incorporated herein by reference to Exhibit (10.6) of
the Registrant's Annual Report on Form 10-K, SEC File Number
1-12696, for the fiscal year ended March 30, 1996, filed on
June 27, 1996).
Letter agreement between Registrant and Robert S. Cecil
dated April 10, 1996 (incorporated herein by reference to
Exhibit (10.6) of the Registrant's Annual Report on Form
10-K, SEC File Number 1-12696, for the fiscal year ended
March 30, 1996, filed on June 27, 1996).
Amendment Number Two to Employment Agreement between the
Registrant and Robert S. Cecil entered into as of January 1,
1998.
10.12 Plantronics, Inc. Annual Profit Sharing/Individual Savings
Plan (incorporated herein by reference to Exhibit (4.1) to
the Registrant's Registration Statement on Form S-8, SEC
File Number 333-19351, filed on January 7, 1997).
Amendment Number One to the Plantronics, Inc. Annual Profit
Sharing/Individual Savings Plan (incorporated herein by
reference to Exhibit (4.2) to the Registrant's Registration
Statement on Form S-8, SEC File Number 333-19351, filed on
January 7, 1997).
10.13 Trust Agreement Establishing the Plantronics, Inc. Annual
Profit Sharing/Individual Savings Plan Trust (incorporated
herein by reference to Exhibit (4.3) to the Registrant's
Registration Statement on Form S-8, SEC File Number
333-19351, filed on January 7, 1997).
10.14 Resolutions of the Board of Directors of Plantronics, Inc.
Concerning Executive Stock Purchase Plan (incorporated
herein by reference to Exhibit (4.4) to the Registrant's
Registration Statement on Form S-8 (as amended), SEC File
Number 333-19351, filed on March 25, 1997).
10.15 Plantronics, Inc. Basic Deferred Compensation Plan, as
amended August 8, 1996 (incorporated herein by reference to
Exhibit (4.5) to the Registrant's Registration Statement on
Form S-8 (as amended), SEC File Number 333-19351, filed on
March 25, 1997).
10.16 Trust Agreement Under the Plantronics, Inc. Basic Deferred
Stock Compensation Plan (incorporated herein by reference to
Exhibit (4.6) to the Registrant's Registration Statement on
Form S-8 (as amended), SEC File Number 333-19351, filed on
March 25, 1997).
</TABLE>
<PAGE> 21
<TABLE>
<C> <S>
10.17 Plantronics, Inc. Basic Deferred Compensation Plan
Participant Election (incorporated herein by reference to
Exhibit (4.7) to the Registrant's Registration Statement on
Form S-8 (as amended), SEC File Number 333-19351, filed on
March 25, 1997).
10.18 Credit Agreement dated as of February 19, 1997 between
Registrant and Bank of America National Trust and Savings
Association (incorporated by reference to Exhibit (10.22) to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 29, 1997, filed on June 27, 1997).
First Amendment to Credit Agreement, dated as of May 15,
1997 (incorporated by reference to Exhibit (10.22) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 29, 1997, filed on June 27, 1997).
Second Amendment to Credit Agreement, dated as of February
18, 1998.
10.19 Lease dated May 8, 1997 between Royal Liver Assurance
Limited and Plantronics Limited, a subsidiary of the
Registrant, for premises located in Wootton Bassett,
England.
13.1 Information incorporated by reference from the Registrant's
Annual Report to Stockholders for the fiscal year ended
March 28, 1998.
21 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.11
AMENDMENT NUMBER TWO
TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement dated as of January 4, 1994,
between Plantronics, Inc., a Delaware corporation (the "Company") and Robert S.
Cecil (the "Executive") is entered into as of January 1, 1998.
RECITALS
A. The Company and the Executive are parties to an Employment Agreement
entered into as of January 4, 1994, as amended pursuant to Amendment Number One
entered into as of January 4, 1995 (the "Employment Agreement").
B. The Company and the Executive desire to clarify and amend the
Employment Agreement effective January 1, 1998.
In consideration of the foregoing and the respective covenants and
agreements of the parties contained herein, the Company and the Executive agree
as follows:
1. Paragraph 4 - Base Salary: Shall be amended to provide as follows:
"For all services to be rendered by the Executive pursuant to this
Agreement, the Company agrees to pay the Executive during the Employment
Period a base salary (the "Base Salary") at an annual rate of not less than
$526,350, effective January 1, 1998. The Base Salary shall be paid in
periodic installments in accordance with the Company's regular payroll
practices. The Company agrees to review the Base Salary at least annually
as of the payroll payment date nearest each anniversary of the Amended
Effective Date (beginning in 1998), and to make such increases therein as
the Board of Directors may approve."
2. In all other respects, the Employment Agreement shall continue in
full force and effect without change.
3. This Amendment may be executed in one or more counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the undersigned representative of the Company, on
behalf of the Company and the Company's Board of Directors and Compensation
Committee, and the Executive have executed this Amendment as of the date set
forth above.
PLANTRONICS, INC. EXECUTIVE
By: /s/ J. SIDNEY WEBB By: /s/ ROBERT S. CECIL
--------------------------------- ------------------------------------
J. Sidney Webb Robert S. Cecil
<PAGE> 1
EXHIBIT 10.18
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
February 18, 1998, is entered into by and between PLANTRONICS, INC. a Delaware
corporation (the "Company") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated as
of February 19, 1997, as amended by a First Amendment to Credit Agreement dated
as of May 15, 1997, effective as of February 19, 1997 (as so amended, the
"Credit Agreement") pursuant to which the Bank has extended certain credit
facilities to the Company.
B. The Company has requested that the Bank agree to certain amendments
of the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended by
amending and restating the definition of "Applicable Rate" in its entirety to
read as follows:
"Applicable Rate" means, for any day, with respect to any
Offshore Rate Loan, CD Rate Loan or Base Rate Loan and the commitment and
standby letter of credit fees payable hereunder, as the case may be, the
applicable rate per annum set forth in the chart below under the caption
"Offshore Rate Margin," "CD Rate Margin," "Base Rate Margin," "Commitment Fee,"
and "Standby Letter of Credit Fee," as the case may be, based upon the
respective Performance Levels in effect on such day as set forth below.
<PAGE> 2
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Offshore Base Standby
CD Rate Rate Rate Commit- Letter of
Margin Margin Margin ment Fee Credit Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Performance Level 1 0.6250% 0.5000% 0.0000% 0.1000% 0.5000%
Net Funded Debt to EBITDA
Ratio
< 1.50 to 1.00
- -------------------------------------------------------------------------------------------------------
Performance Level 2 0.7500% 0.6250% 0.0000% 0.1500% 0.6250%
Net Funded Debt to EBITDA
Ratio
< 2.00 to 1.00 but
>1.50 to 1.00
- -
- -------------------------------------------------------------------------------------------------------
Performance Level 3 1.1250% 1.0000% 0.0000% 0.2000% 1.0000%
Net Funded Debt to EBITDA
Ratio
< 2.50 to 1.00 but
>2.00 to 1.00
- -------------------------------------------------------------------------------------------------------
Performance Level 4 1.3750% 1.2500% 0.2500% 0.3000% 1.2500%
Net Funded Debt to EBITDA
Ratio
>2.50 to 1.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
The applicable Performance Level as of any day shall be
determined by reference to the Net Funded Debt to EBITDA Ratio as of the
last day of the fiscal quarter most recently ended on or prior to such
day, and any change in the Performance Level shall become effective upon
the delivery to the Bank of the Compliance Certificate required to
accompany the financial statements delivered pursuant to Section 7.01
upon which such change is based, which Compliance Certificate shall set
forth in reasonable detail the calculation of the Net Funded Debt to
EBITDA Ratio.
Each change in the Applicable Rate shall apply during the
period commencing on the effective date of such change and ending on the
date immediately preceding the effective date of the next such change.
Notwithstanding the foregoing, at any time prior to the time the first
delivery of financial statements under Section 7.01 after the Closing
Date, the Applicable Rate shall be determined as if the Net Funded Debt
to EBITDA Ratio were at Performance Level 1.
(b) Section 1.01 of the Credit Agreement shall be amended by
amending and restating the definition of "Revolving Termination Date" in its
entirety to read as follows:
"Revolving Termination Date" means the earlier to occur of:
2
<PAGE> 3
(a) February 17, 1999; and
(b) the date on which the Commitment shall terminate in
accordance with the provisions of this agreement.
(c) Section 8.13 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
8:13 Tangible Net Worth. The company shall not permit Tangible
Net Worth on a consolidated basis as of the last day of any fiscal
quarter to be less than the sum of (a) 90% of Tangible Net Worth as
of the quarter ended September 30, 1997 minus (b) the lesser of (i)
the amount of its stock repurchased by the Company after September
30, 1997; provided that such repurchases are otherwise permitted
hereunder, and (ii) $25,000,000 plus (c) 50% of the Company's
consolidated net income (but not less any net losses for any period)
earned in each fiscal quarter starting with the quarter ended
December 31, 1997 plus (d) 75% of the net proceeds of any equity
securities issued after September 30,1997 plus (e) 75% of any
increase in stockholders' equity resulting from the conversion of
debt securities to equity securities after September 30, 1997.
(d) Schedule 2 to Exhibit C to the Credit Agreement (the form of
Compliance Certificate) is hereby amended and restated in its entirety to read
as set forth in Schedule 2 attached hereto.
3. Representations and Warranties. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
(c) All representations and warranties of the Company contained
in the Credit Agreement are true and correct in all material respects as of the
date hereof, except to the extent such representations and warranties expressly
refer to an earlier date, in which case they are true and correct in all
material respects as of such date.
(d) The Company is entering into this Amendment on the basis of
its own investigation and for its own reasons, without reliance upon the Bank
or any other Person.
3
<PAGE> 4
4. Effective Date. This Amendment will become effective as of February
18, 1998 (the "Effective Date"), provided that each of the following conditions
precedent is satisfied:
(a) The Bank has received from the Company a duly executed
original (or, if elected by the Bank, an executed facsimile copy) of this
Amendment.
(b) The Bank has received from the Company a copy of a resolution
passed by the board of directors of such corporation, certified by the
Secretary or an Assistant Secretary of such corporation as being in full force
and effect on the date hereof, authorizing the execution, delivery and
performance of this Amendment, along with an incumbency certificate.
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to execute similar
amendments under the same or similar circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein and in the other Credit Documents to such
Credit Agreement shall henceforth refer to the Credit Agreement as amended by
this Amendment. This Amendment shall be deemed incorporated into, and a part
of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit
of the parties hereto and thereto and their respective successors and assigns.
No third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Bank of a
facsimile transmitted document purportedly bearing the signature of the Company
shall bind the Company with the same force and effect as the delivery of a hard
copy original. Any failure by the Bank to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document which hard copy
page was not received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains
the entire and exclusive agreement of the parties hereto with reference to the
matters discussed
4
<PAGE> 5
herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended except
in accordance with the provisions of Section 10.01 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) Company covenants to pay or reimburse the Bank, within 30
Business Days after demand, for all reasonable costs and expenses (including
allocated costs of in-house counsel) incurred in connection with the
development, preparation, negotiation, execution and delivery of this Amendment.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
PLANTRONICS, INC.
By: /s/ BARBARA V. SCHERER
---------------------------------
Title: Barbara V. Scherer, Vice President
of Administration & Finance, Chief
Financial Officer
By: /s/ JOHN A. KNUTSON
---------------------------------
Title: John A. Knutson, Vice President
Legal, Senior General Counsel, Secretary
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
---------------------------------
Title:
---------------------------------
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
PLANTRONICS, INC.
By:
---------------------------------
Title:
---------------------------------
By:
---------------------------------
Title:
---------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ JAMES P. JOHNSON
---------------------------------
Title: JAMES P. JOHNSON
---------------------------------
Managing Director
6
<PAGE> 8
Date: ,
-------------- -------
For the fiscal quarter/year
ended ,
-------------- -------
PLANTRONICS, INC.
SCHEDULE 2
to the Compliance Certificate
($ in 000's)(1)
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
1. Section 8.12 Net Funded Debt to
EBITDA Ratio.
The ratio of:
A. Net Funded Debt:
the difference of:
(i) Indebtedness(2)
-------
plus
----
(ii) Guaranty Obligations(2)
-------
less
----
(iii) cash and Cash
Equivalents(3)
-------
(i)+(ii)-(iii)
-------
B. EBITDA(4)
the sum of:
(i) net income or loss(5)
-------
plus
----
(ii) depreciation
-------
plus
----
(iii) amortization
-------
plus
----
(iv) interest
-------
plus
----
(v) taxes on income
-------
plus
----
(vi) non-cash expenses or
charges for
management stock
compensation
-------
</TABLE>
- --------------------
(1) All items determined on a consolidated basis and in accordance with GAAP,
consistently applied.
(2) See definition of Net Funded Debt for certain items excluded.
(3) Not subject to any Lien, and to extent exceeding $5,000,000.
(4) Calculated on a rolling four-quarter basis.
(5) Without giving effect to extraordinary losses or gains.
1
<PAGE> 9
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
(i)+(ii)+(iii)+(iv)+(v)+(vi)
-----
A
---
B ===== Not more than 3.00
2. Section 8.13 Tangible Net Worth.
Tangible Net Worth: Not to be less than the sum of:
(i) gross book value of assets _____ A. Tangible Net Worth as of 9/30/97.
less (1) gross book value of assets _____
----
(ii) goodwill, licensing agreements, less
patents, trademarks, trade names, ----
organization expenses, treasury stock, (ii) goodwill, licensing agreements, trademarks,
unamortized debt discount and premium, trade names, organization expenses, treasury
deferred charges and other like intangibles _____ stock, unamortized debt discount and premium,
deferred charges and other like intangibles. _____
less less
---- ----
(iii) reserves applicable to assets (including (iii) reserves applicable to assets (including
reserves for depreciation and amortization) _____ reserves for depreciation and amortization) _____
less less
---- ----
(iv) all liabilities (including accrued and (iv) all liabilities (including accrued and
deferred income taxes and any subordinated deferred income taxes and subordinated
liabilities) _____ liabilities) _____
(i)-(ii)-(iii)-(iv) = (i)-(ii)-(iii)-(iv) =
===== =====
x 90%
(6)
=====
LESS
----
B. Stock repurchases after 9/30/97 (not to exceed
$25,000,000) _____
plus
----
- -------------------------
(6) Calculation will need to be done for first compliance certificate only; thereafter this number will be inserted.
</TABLE>
2
<PAGE> 10
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
C. 50% of net income after Income taxes (without
Subtracting losses) Earned after 9/30/97 ____
plus
----
D. 75% of net proceeds from any equity security
issued after 9/30/97 ____
plus
----
E. 75% of any increase in stockholder's equity
resulting from the conversion of debt
securities to equity securities after 9/30/97 ____
A - B + C + D + E =
====
3. Section 8.14 Interest Coverage Ratio.(7)
The ratio of:
A. Adjusted EBITDA
(i) EBITDA (from 1(B) above) _____
less
----
(ii) Capital Expenditures _____
(i) - (ii) _____
B. Cash Interest Expense
(i) Total interest expense (including
commissions, discounts, fees and other
charges in connection with standby
letters of credit and similar
instruments _____
less
----
(ii) Non-cash items included in
(i) _____
(i) - (ii) _____
A
-
B Not less than 3.00
=====
- ---------------
(7) Calculated on a rolling four-quarter basis.
</TABLE>
3
<PAGE> 1
EXHIBIT 10.19
DATE May 8th, 1997
ROYAL LIVER ASSURANCE LIMITED
and
PLANTRONICS LIMITED
LEASE
of premises known as
Unit C Plot 5 Interface Business Park Bincknoll Lane
Wootton Bassett Wiltshire
PHILIP G OWEN
3RD FLOOR, ROYAL LIVER BUILDING
PIER HEAD
LIVERPOOL L3 1JH
<PAGE> 2
THIS LEASE is made the eight day of May 1997
BETWEEN ROYAL LIVER ASSURANCE LIMITED whose registered office is at Royal Liver
Building Pier Head Liverpool L3 1HT (hereinafter called the "Landlord" which
expression shall where the context so admits include the estate owner for the
time being of the reversion of the premises hereby demised expectant on the term
hereby granted) of the one part and PLANTRONICS LIMITED whose registered office
is at 236 Grays Inn Road London WCIX 8HB Company Registration Number: 1773891
(hereinafter called the "Tenant" which expression shall where the context so
admits include the estate owner for the time being in respect of the term hereby
granted) of the other part
1 DEFINITIONS
1.1 "Demised Premises" means the premises described in the First
Schedule hereto
1.2 "the Plan" means the plan annexed to this lease
1.3 "Term" shall be a term of years commencing on the date hereof
and expiring on the 28th September 2015
1.4 "Service Media" means the common watercourses water supply pipes
waste water pipes soil pipes drains sewers gutters downpipes gas
pipes fuel pipes oil pipes electricity cables telephone cables
sprinklers ducts conduits flues wires and all other conducting
media plant equipment and apparatus for the provision or supply
of services serving the Development or any part thereof
including (but not serving exclusively) the Demised Premises and
where applicable serving in common any adjoining or adjacent
building or premises
1.5 "Planning Law" means every law for the time being in force by
virtue of the Town and Country Planning Act 1990, the Planning
(Listed Buildings and Conservation Areas) Act 1990, the Planning
(Consequential Provisions) Act 1990, the Planning (Hazardous
Substances) Act 1990, and the Planning and Compensation Act 1991
1.6 "Interest" means an amount or amounts equivalent to Four per
cent per annum above the Base Rate of National Westminster Bank
PLC for the time being in force (except in respect of Clause 7 )
where the rate shall be the base rate as aforesaid) (or if such
Base Rate shall no longer be readily ascertainable a rate of
interest of at least Ten per cent per
2
<PAGE> 3
annum specified by the Landlord as representing its opinion of
the equivalent rate) calculated on a daily basis from the due
date for payment to the day of actual payment thereof (whether
before or after judgement) compounded quarterly on each usual
quarter day (and so in proportion for part of a quarter)
1.7 "Common Parts" means all car parking areas forecourts and
loading and unloading and service areas (whether used
exclusively or otherwise) and also all parts of the Development
which do not from time to time comprise Lettable Units and which
are intended for general use or use by more than one occupier of
the Development including without prejudice to the generality of
the foregoing all the following which may from time to time be
comprised in or appurtenant to the Development the roadways
paths pavements vehicular and pedestrian ways court yards
loading unloading and parking areas the Service Media retaining
party and perimeter walls palisades landscaped areas gates
fences fire escape ways ramps signs and notice boards storage
areas refuse collection and disposal areas and parking areas
1.8 "Service Charge" means:-
1.8.1 43 per cent of any service charge payments demanded of
the Landlord or paid or incurred by the Landlord
pursuant to the terms of the Transfer dated the 2nd
January 1990 made between (1) Trafalgar House Business
Parks Limited and (2) Canynge Bicknell Limited
1.8.2 43 per cent of all sums incurred by or demanded of the
Landlord for the maintenance repair renewal cleansing
and lighting of the roadway shown coloured brown on the
Plan and also all service media which serve the
Development
1.9 "Development" means the land (of which the Demised Premises form
part) and all buildings and other structures of whatsoever
nature from time to time erected thereon or on some part or
parts thereof and the appurtenances thereof which land is known
as Plot 5 Interface Business Park Bincknoll Lane Wootton Bassett
and for the purpose of identification only is shown edged green
on the Plan
1.10 "Lettable Unit" means any unit of accommodation forming part of
the Development which is or is intended by the Landlord at any
material time to be the subject matter of a separate letting
3
<PAGE> 4
1.11 "Landlord's Surveyors" means such surveyors or other staff
(whether or not retained or employed by the Landlord) who shall
fulfil the functions allocated to them by this Lease
1.12 "Insured Risks" means loss or damage (other than in the case of
war invasion ionising and other radiation or other similar cause
for which the Demised Premises or any premises of which the
Demised Premises form part are not covered under the Landlord's
insurance policy or policies for the time being and subject to
such exclusions and limitations as may be imposed by the
insurers) by fire explosion storm tempest flood impact malicious
damage property owners liability and (in times of peace)
aircraft and articles dropped or falling therefrom and also
against third party risks and such other risks and perils as the
Landlord shall in its absolute discretion determine including
three years loss of rent (including estimated increases upon
review) and an additional sum to cover the cost of debris
removal demolition site clearance Architects and Surveyors fees
liability to pay charges or fees upon the submission of
applications for planning permission or other consents which may
be required for reinstatement and Value Added Tax thereon
including insurance revaluation fees
1.13 "the 1995 Act" means the Landlord and Tenant (Covenants) Act
1995
1.14 "Unit A" means Unit A Plot 5 Interface Business Park Bincknoll
Lane edged blue on the Plan
2 IN CONSIDERATION of the rents hereby reserved and the covenants and
conditions herein contained on the part of the Tenant the Landlord
HEREBY DEMISES unto the Tenant the Demised Premises which expression
shall include all alterations additions and improvements at any time and
from time to time made thereto and all fixtures and fittings plant and
machinery and any new buildings erected thereon during the Term TOGETHER
WITH so far as the Landlord has power to grant the same (in common with
the Landlord and all other persons authorised by the Landlord or
entitled thereto) the rights (if any) set out in the Second Schedule
hereto EXCEPTING AND RESERVING to the Landlord the rights set out in the
Third Schedule hereto and SUBJECT TO and with the benefit of any matters
contained or referred to in the registers of title number WT 111772 TO
HOLD the same unto the Tenant for the Term YIELDING AND PAYING THEREFOR
FIRST from the 15th day of December 1997 until the first Date of Review
(as that expression is hereinafter defined) the yearly rent of Ninety
six thousand pounds (pound sterling96,000) and for the remainder of the
Term the yearly rent to be agreed or determined as hereinafter appearing
such rent to be paid in advance without any deduction or set
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off by equal quarterly payments on the four usual quarter days in every
year save that the first of such payments or a proportionate part
thereof shall be made on the 15th day of December 1997 and shall be the
appropriate proportion of the said yearly rent from the 15th day of
December 1997 to next succeeding quarter day AND SECONDLY by way of
additional rent on demand a fair proportion to be determined by the
Landlord or the Landlord's Surveyors for the time being of all sums of
money (including any increased premium payable as a result of the use of
the Demised Premises by the Tenant or other occupiers thereof) as may be
expended by the Landlord in effecting or maintaining the insurance of
the Demised Premises against the Insured Risks provided that in
particular no deduction shall be allowed to or made by the Tenant in
respect of any agency allowance or other commission or discount whether
paid or allowed to the Landlord itself or otherwise and the full nominal
or gross amount of each sum or premium (before deduction of any such
allowance commission or discount) shall be treated as expended by the
Landlord for the said insurance and the Landlord shall be entitled to
retain for its own benefit the said agency allowance other commission or
discount so allowed AND THIRDLY also by way of additional rent payable
in accordance with Clause 3.30 the Service Charge PROVIDED THAT if and
whenever the Tenant shall pay the said rent or rents after the day on
which the same shall become due the Tenant shall pay to the Landlord
Interest and the amount of Interest so payable shall at the option of
the Landlord be recoverable by action or as rent in arrear
3 THE TENANT HEREBY COVENANTS with the Landlord as follows:
3.1 RENTS
To pay the respective rents herein reserved including any increased rent
at the times and in the manner provided by Banker's Standing Order or
Direct Debit or such other means as the Landlord may require provided
that any payment made by Standing Order or Direct Debit will not be
treated as having been made until the monies are received by the
Landlord's bank TOGETHER WITH any tax now or hereafter imposed on the
payments of rents other than one required by statute to be borne by the
Landlord and without prejudice to any other rights of the Landlord to
pay to the Landlord on demand an amount equal to Interest on any rent or
other payment of whatsoever nature due from the Tenant to the Landlord
(including any rent or other payment not demanded nor if demanded not
accepted by the Landlord because of the Tenant's breach of covenant) in
respect of the period from the due date until payment is received or
accepted
3.2 OUTGOINGS
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To pay and discharge all existing and future rates taxes duties charges
assessments impositions and outgoings of any description whatsoever
which are now or may at any time hereafter be assessed charged or
imposed upon or be payable in respect of the Demised Premises or any
part thereof or on the owner or occupier thereof (save only for any
occasioned by any disposition or dealing with or the ownership of any
estate or interest expectant on the reversion on the termination of the
term) PROVIDED ALWAYS THAT where such rate tax duty charge or assessment
is assessed or levied on the Landlord the Tenant shall have the right to
require the Landlord to appeal such rate tax duty charge or assessment
and to conduct such appeal as reasonably directed by the Tenant subject
to the Tenant indemnifying the Landlord against all costs expenses
claims and liability directly or indirectly incurred by the Landlord in
respect of such appeal and without prejudice to the generality of the
foregoing to pay to the Landlord the amount of any rates or surcharge
payable by the Landlord after the date of termination of the term
through the Landlord's ability to claim void rate relief for the maximum
period (commencing on the date of termination of the term) which would
have been allowed had the Demised Premises been occupied up to the date
of the termination of the term up to a maximum amount payable by the
Tenant to the Landlord under this sub-clause equal to one half of the
total relief available
3.3 JOINT OUTGOINGS
In the event of any rates taxes duties charges assessments impositions
or outgoings being assessed charged or imposed upon or being payable
during the Term in respect of any premises of which the Demised Premises
or any part thereof form part or jointly with other premises to bear and
pay to or by the direction of the Landlord the proportions of the same
which are fairly and properly attributable to the Demised Premises or
any part thereof as certified by the Landlord or the Landlord's
Surveyors and to keep the Landlord effectually indemnified against the
same
3.4 COST OF SERVICES CONSUMED
To pay for all (or where applicable a due proportion of the cost of) gas
and electricity and other fuel or power consumed and water telephone and
any other services in or to the Demised Premises and the rent of all
meters and any other charges for the supply thereof and to comply with
all regulations and requirements of the Boards or other Authorities and
Companies supplying the same
3.5 REPAIR AND DECORATION
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3.5.1 At all times (except in the case of damage by any of the
Insured Risks save to the extent that such policies
shall have been vitiated or payment refused in
consequence of some act or default of the Tenant) to the
satisfaction of the Landlord or the Landlord's Surveyors
well and substantially to maintain cleanse repair and
keep in good and substantial repair order and condition
(and renew by way of repair) the whole of the Demised
Premises and every part thereof including without
prejudice to the generality of the foregoing the
sanitary water heating cooling and ventilating apparatus
the fire escapes roadways paths walls sewers drains
conduits gutters watercourses pipes cables wires ducts
and mains and apparatus associated therewith and any
equipment fixtures and fittings ancillary thereto
forming part of the Demised Premises and as and when
required by the Landlord to clean and repoint any
external stone and brickwork of the Demised Premises
3.5.2 To paint with three coats of good quality paint in
colours approved by the Landlord in a proper and
workmanlike manner or to treat with appropriate
materials all the wood iron stucco and cement work and
other parts of the Demised Premises heretofore or
usually or properly painted or otherwise treated as to
the external work in every third year of the Term and in
the last year of the Term or on sooner determination
(howsoever determined) of the Term and as to the
internal work in every fifth year and in the last year
of the Term or on sooner determination (howsoever
determined) of the Term and after every painting to
grain polish varnish wash stop whiten and colour all
such parts as are usually so treated and to repaper with
suitable paper of good quality the parts usually papered
3.5.3 To clean the inside and outside of all windows of the
Demised Premises as often as necessary
3.5.4 To enter into specialist contracts for the proper
servicing and maintenance at intervals of not less than
once a year of any boiler heating and hot water systems
lifts plant sprinklers fire alarms and air conditioning
such contracts or copies thereof to be produced to the
Landlord on request
3.5.5 To keep all landscaped areas of the Demised Premises in
a neat and tidy condition and duly tended
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3.5.6 To maintain repair cleanse and light that part of the
roadway and pathway within the Development coloured
purple on the Plan
3.6 WORKS
At the Tenant's own expense to execute all such works as may under any
Act of Parliament or bye-law of any local or other Public Authority
already or hereafter to be passed be required by any Local or Public
Authority to be executed whether by the Landlord or Tenant thereof at
any time during the Term upon or in respect of the Demised Premises or
the user thereof authorised by this Lease or for the benefit of the
persons employed therein AND not to do or omit any act or thing by
reason of which the Landlord may incur or have imposed on it or become
liable to pay any penalty and at all times as well after as before the
determination of the Term to keep the Landlord indemnified against all
liability loss damages costs and expenses arising out of or incidental
to any contravention of or non-compliance with the provisions of this
sub-clause and to conform in all respects with the provisions of and
regulation under any Act of Parliament or bye-law which may be
applicable to the Demised Premises
3.7 NOTICES
Forthwith to give notice in writing to the Landlord of any defect in the
state of the Demised Premises which would or might give rise to an
obligation on the Landlord to do or refrain from doing any act or thing
in order to comply with any duty of care imposed on the Landlord
pursuant to the Defective Premises Act 1972 and to indemnify and to keep
indemnified the Landlord from and against all loss claims actions costs
or demands arising from any failure to give such notice and at all times
to display and maintain any notices (including the wording thereof)
which the Landlord may from time to time display or require to be
displayed at the Demised Premises
3.8 ENTRY
3.8.1 To permit the Landlord and the Landlord's Surveyors with
or without workmen and others at all reasonable times in
the daytime after first giving reasonable notice to the
Tenant to enter the Demised Premises to view the
condition thereof and to take inventories of the
Landlord's fixtures and fittings and to make inspections
in order to value the Demised Premises for insurance
sale rent review or other reasonable purposes
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3.8.2 To permit the Landlord and the lessees of the Landlord
and their respective employees workmen and agents and
any other persons entitled thereto to enter upon the
Demised Premises upon forty-eight hours notice (except
in emergency) without compensation (beyond making good
damage to the Demised Premises) to exercise the rights
set out at paragraphs 3, 4 and 5 the Third Schedule
hereto
3.9 FAILURE TO REPAIR
To comply with any notice in writing which the Landlord shall give to
the Tenant or leave for the Tenant upon the Demised Premises specifying
any want of repair or decoration for which the Tenant is liable under
the covenants herein contained and if the Tenant shall not within three
calendar months after the date of such notice complete the execution of
all work necessary to make good such wants of repair or decoration to
permit the Landlord (but without prejudice to the right of re-entry
hereinafter contained) to enter the Demised Premises and carry out such
work and all expenses thereby incurred shall on demand be paid by the
Tenant to the Landlord and if the same shall not be so paid within ten
days of the date of demand they shall be added to the rent hereinbefore
reserved and be recoverable as rent and shall carry Interest from the
date of demand to the date of actual payment
3.10 ALTERATIONS
3.10.1 Not to make any addition or alteration to the exterior
or structure or to any principal or load bearing wall
beam or girder or to any means of access or to the
elevation external design appearance or external
decorative scheme of the Demised Premises nor to erect
any new building or structure of any kind on any part of
the Demised Premises
3.10.2 Subject to the preceding sub-clause hereof not without
the Landlord's previous written consent such consent not
to be unreasonably withheld to make any addition or
alteration to the interior or to the internal
arrangement partitioning design or appearance of the
Demised Premises or to the electrical wiring or to the
heating or air conditioning plant equipment and
apparatus (if any) or sprinkler system (if any) in the
Demised Premises except in accordance with plans and
specifications thereof previously submitted at the
Tenant's expense in quadruplicate to and approved in
writing by the Landlord and in a manner approved by the
Landlord and in accordance with any relevant terms
conditions
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recommendations and regulations of the Institution of
Electrical Engineers and the electricity and water
supply and fire control authorities and the insurance
company with whom the Demised Premises are for the time
being insured PROVIDED ALWAYS THAT no such alterations
additions modifications or erections shall be carried
out until the Landlord has issued its consent in writing
to which the Tenant shall if required by the Landlord
join as a party in order to give such covenants
including those relating to reinstatement as the
Landlord may reasonably require (such consent subject to
compliance with the foregoing not to be unreasonably
withheld)
3.10.3 To submit to the Landlord such other plans elevations
sections and specifications necessary to enable the
Landlord to consider any application for such approval
and to pay the costs fees and disbursements (including
fees paid for professional advice) whether such approval
be granted or not incurred by the Landlord consequent
upon any such application or upon any reinstatement
3.10.4 Before the end of the Term or forthwith upon sooner
determination thereof or the determination of any
extension thereof if so required by the Landlord to
reinstate the Demised Premises to the reasonable
satisfaction of the Landlord's Surveyors to the state
and condition as that existing at the commencement of
the Term
3.10.5 Notwithstanding the above the Tenant shall be entitled
(with the consent of the Landlord) to install alter or
remove demountable partitions which do not affect the
structure of the Demised Premises
3.11 INSURANCE
Not to do or permit or suffer to be done anything whereby the policy or
policies of insurance in respect of the Demised Premises or of any
adjoining or nearby property may become void or voidable and to repay to
the Landlord all sums paid by way of increased premiums and all expenses
incurred by the Landlord in or about any renewal of such policy or
policies rendered necessary by a breach of this covenant and in the
event of the Tenant doing anything which shall increase the rate of
premium for insuring the Demised Premises or any adjoining premises of
the Landlord to a rate higher than that previously charged in respect of
premises similar to the Demised Premises or any adjoining premises of
the Landlord to pay the revised premium for insuring the Demised
Premises or any adjoining premises of the Landlord and if such sums
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expenses and premiums shall not be paid within Fourteen days of the date
of demand they shall be added to the rent hereinbefore reserved and be
recoverable as rent and shall carry Interest from the date of demand to
the date of actual payment
3.12 DEALINGS
3.12.1 The Tenant must not hold the Demised Premises on trust
for another. The Tenant must not part with possession of
the Demised Premises or any part of them or permit
another to occupy them or any part of them except
pursuant to a transaction permitted by and effected in
accordance with the provisions of this Lease
3.12.2 The Tenant must not assign sublet or charge part only of
the Demised Premises nor charge the whole of the Demised
Premises
3.12.3 Subject to clauses 3.12.4 and 3.12.5 the Tenant must not
assign the whole of the Demised Premises without the
consent of the Landlord whose consent may not be
unreasonably withheld or delayed
3.12.4 If any of the following circumstances which are
specified for the purposes of the Landlord and Tenant
Act 1927 section 19(1A) applies either at the date when
application for consent to assign is made to the
Landlord or after that date but before the Landlord's
consent is given the Landlord may withhold his consent
and if after the Landlord's consent has been given but
before the assignment has taken place any such
circumstances apply the Landlord may revoke his consent,
whether his consent is expressly subject to a condition
as referred to in subclause 3.12.5.4 or not. The
circumstances are:
3.12.4.1 that any sum due from the Tenant under this
Lease remains unpaid or if the reasonable
opinion of the Landlord there is a subsisting
material breach of covenant in this lease on the
part of the Tenant
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3.12.4.2 that in the Landlord's reasonable opinion the
assignee is not a person who is likely to be
able to comply with the tenant covenants of this
Lease and to continue to be able to comply with
them following the assignment
3.12.4.3 that the proposed assignee is an associated
company of the Tenant
3.12.4.4 that the proposed assignee is not resident in
Great Britain
provided that whilst the Tenant remains Plantronics
Limited clauses 3.12.4.3 and 3.12.4.4. shall not apply
3.12.5 The Landlord may impose any or all of the following
conditions which are specified for the purposes of the
Landlord and Tenant Act 1927 section 19(1A) on giving
any consent for an assignment by the Tenant, and any
such consent is to be treated as being subject to each
of the following:
3.12.5.1 a condition that on or before any assignment
and before giving occupation to the assignee the
Tenant requesting consent to assign, together
with any former tenant who by virtue of the 1995
Act section 11 was not released on an earlier
unauthorised assignment of this Lease must enter
into an authorised guarantee agreement in favour
of the Landlord in the terms set out in the
Fifth Schedule
3.12.5.2 a condition that if reasonably so required by
the Landlord on an assignment to an individual
or body corporate or partnership or other person
not being a Government Department the assignee
must ensure that a guarantor or guarantors
reasonably acceptable to the Landlord enter into
a guarantee of the covenants of the assignee the
guarantee to be in the terms set out in the
Fifth Schedule
3.12.5.3 a condition that upon or before any assignment
the Tenant making the request for consent to
assign must give to the Landlord a copy of the
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health and safety file required to be maintained
under the Construction (Design and Management)
Regulations 1994 containing full details of all
works undertaken to the Demised Premises by that
Tenant and
3.12.5.4 a condition that if at any time before the
assignment the circumstances specified in clause
3.12.4, or any of them apply the Landlord may
revoke the consent by written notice to the
Tenant
3.12.6 The Tenant must not sublet the whole of the Demised
Premises without the consent of the Landlord whose
consent may not be unreasonably withheld or delayed
3.12.7 Every permitted sublease must be granted, without a fine
or premium at a rent not less than the open market rent
payable in respect of the Demised Premises to be
approved by the Landlord before the sublease or in
default of any such approval as may be determined by a
single arbitrator in accordance with the Arbitration Act
1996 or by an expert (as the Landlord shall elect) and
as additional yearly rents amounts equivalent to and
consistent with the additional rents hereby reserved and
the open market rent to be payable in advance on the
days on which such rent is payable under this Lease.
Every permitted sublease must contain provisions
approved by the Landlord
3.12.7.1 for the upwards only review of the rent
reserved by it on the basis set out in clause 7
and on the Dates of Review
3.12.7.2 prohibiting the subtenant from doing or
allowing anything in relation to the Demised
Premises inconsistent with or in breach of the
provisions of this Lease
3.12.7.3 for re-entry by the sublandlord on breach of
any covenant by the subtenant
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3.12.7.4 imposing an absolute prohibition against all
dealings with the Demised Premises other than
assignment of the whole
3.12.7.5 prohibiting assignment of the whole of the
Demised Premises without the consent of the
Landlord under this Lease
3.12.7.6 requiring the assignee on any assignment of the
sublease to enter into direct covenants with the
Landlord to the same effect as those contained
in clause 3.12.8
3.12.7.7 prohibiting the subtenant from holding on trust
for another or permitting another to share or
occupy the whole or any part of the Demised
Premises
3.12.7.8 imposing in relation to any permitted
assignment the same obligations for registration
with the Landlord as are contained in this Lease
in relation to dispositions by the Tenant
3.12.8 Before any permitted subletting the Tenant must ensure
that the subtenant enters into a direct covenant with
the Landlord that while the subtenant is bound by the
tenant covenants of the sublease and while he is bound
by an authorised guarantee agreement the subtenant will
observe and perform the tenant covenants contained in
this Lease except the covenant to pay the rent reserved
by this Lease and in that sublease
3.12.9 In relation to any permitted sublease, the Tenant must
enforce the performance and observance by every
subtenant of the provisions of the sublease and must not
at any time either expressly or by implication waive any
breach of the covenants or conditions on the part of any
subtenant or assignee of any sublease, or without the
consent of the Landlord, whose consent may not be
unreasonably withheld or delayed vary the terms of any
permitted sublease
3.13 SHARING OF OCCUPATION
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Not to share the occupation of the whole or part of the Demised Premises
PROVIDED ALWAYS THAT any Tenant for the time being being a limited
company may with the consent of the Landlord (such consent not to be
unreasonably withheld) share the occupation of the Demised Premises with
a company within the same group (as that expression is defined in
Section 42 of the Landlord and Tenant Act 1954) PROVIDED FURTHER THAT no
such sharing of occupation shall be effected so as to afford the
relevant company security of tenure in the relevant premises nor to
create a relationship of lessor and lessee
3.14 REGISTRATION
Within twenty-one days from the date thereof to produce of every
assignment underlease transfer mortgage charge probate letters of
administration order instrument or other writing effecting or evidencing
any transmission or devolution of any estate or interest (derivative or
otherwise) in the Demised Premises to the Landlord or its solicitors for
registration and to leave a certified copy of the same to pay to the
Landlord or its solicitors a reasonable registration fee (being not less
than ten pounds)
3.15 USER
3.15.1 Not to use the Demised Premises or any part thereof
otherwise than for purposes within Classes BI and B8 of
The Town and Country Planning (Use Classes) Order 1987
together with ancillary car parking
3.15.2 In the event of the Demised Premises remaining
unoccupied for seven days to give notice to that effect
to the Landlord and to ensure that the premises are
properly locked and secured and to make such other
provisions for supervision and security of the Demised
Premises as the Landlord shall reasonably consider
necessary
3.16 STATUTORY REQUIREMENTS
3.16.1 To comply at all times during the Term with all
statutory and other requirements for ensuring the health
safety and welfare of the persons (including disabled
persons) using or employed in or about the Demised
Premises or any part thereof and in particular but
without prejudice to the generality of the foregoing the
Factory Act 1961 the Offices Shops and Railway Premises
Act 1963 and the
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Health and Safety at Work Act 1974 or any statutory
modification or re-enactment thereof for the time being
in force and all regulations and orders made thereunder
and to indemnify and keep the Landlord indemnified
against any breach or non observance thereof or any
liability in respect thereof and also to produce to the
Landlord on demand sufficient evidence of compliances as
aforesaid
3.16.2 Without prejudice to the generality of clause 3.16.1 the
Tenant must comply with the provisions of the
Construction (Design and Management) Regulations 1994
('the CDM Regulations'), be the only client as defined
in the provisions of the CDM Regulations, fulfil, in
relation to all and any works, all the obligations of
the client as set out in or reasonably to be inferred
from the CDM Regulations, and make a declaration to that
effect to the Health and Safety Executive in accordance
with the Approved Code of Practice published from time
to time by the Health and Safety Executive in relation
to the CDM Regulations.
3.16.3 At the end of the Term, the Tenant must forthwith
deliver to the Landlord any and all health and safety
files relating to the Demised Premises in accordance
with the CDM Regulations
3.17 NUISANCE
3.17.1 Not to do on the Demised Premises or any part thereof or
on adjoining or neighbouring premises any act matter or
thing whatsoever nor cause any smoke effluvia vapour
grit smells or odour which shall in the opinion of the
Landlord be or become a nuisance danger damage annoyance
inconvenience or disturbance to the Landlord or the
owners tenants or occupiers of any adjoining or
neighbouring property And not to hold any sale by
auction on the Demised Premises And not to carry on upon
the Demised Premises or any part thereof any offensive
or noisy trade business manufacture or occupation or use
the Demised Premises for any illegal or immoral or
political purpose and not to allow any person to reside
or sleep in the Demised Premises nor to cook or re-heat
or prepare in any way any food therein save as a minor
facility to those employed within the Demised Premises
and not to play any loud music on the Demised Premises
3.17.2 To pay all costs charges and expenses incurred by the
Landlord in abating any nuisance public or private
caused by the Tenant or any occupant of the Demised
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Premises or its or their servants agents licensees and
invitees whether emanating from the Demised Premises or
otherwise affecting the Demised Premises and executing
all such works as may be necessary for abating any such
nuisance or for remedying any other matter in connection
with the Demised Premises whether or not in obedience to
a notice served by a Local Authority
3.17.3 Not to form any refuse dump or rubbish or scrap heap on
the Demised Premises but to keep all waste materials and
other discarded matter in suitable receptacles and to
remove or cause to be removed daily all perishable or
malodorous refuse and not less frequently than once a
week all other refuse rubbish or scrap which may have
accumulated on the Demised Premises and all used tins
cans boxes and other containers and comply with such
directions and regulations as the Landlord may prescribe
for the disposal of rubbish and generally to keep the
Demised Premises and any pavement or forecourt space
between the Demised Premises and any adjoining premises
in a clean and tidy condition free from deposits of
materials or refuse and not to bring or keep upon the
Demised Premises anything which is or may become in the
opinion of the Landlord untidy unclean unsightly or in
any way detrimental to the amenity of the neighbourhood
3.17.4 Not to allow to pass into the sewers drains or
watercourses serving the Demised Premises any noxious or
deleterious effluent or other substance which will cause
an obstruction in or injure the said sewers drains or
watercourses and in the event of obstruction or injury
forthwith to make good such damage to the reasonable
satisfaction of the Landlord's Surveyors
3.17.5 Not for any reason to store or stack any goods on any
part of the Demised Premises which may for the time
being be unbuilt upon or use any part thereof as a
stacking area or for carrying out any industrial process
or for the repair and maintenance of motor vehicles
3.18 WEIGHT
Not to allow any article of excessive weight to be placed on the floors
or to be hung from the walls or roof or roof members or ceilings of the
Demised Premises so as to be likely to cause damage to the Demised
Premises or other premises or which may be in excess of the weight which
such floors walls roof and ceilings are calculated to bear with due
margin for safety and in case of any
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dispute arising out of this sub-clause the decision of the Landlord's
Surveyors shall be binding on the Tenant
3.19 EASEMENTS
Not to stop up or obstruct any windows or light belonging to the Demised
Premises or to any other building belonging to the Landlord nor
knowingly to permit or suffer any encroachment upon the Demised Premises
or any part thereof or the acquisition of any new right of light passage
drainage or other easement to be acquired on over or under the Demised
Premises or any part thereof and if any such encroachment or easement
shall be made or threatened to be made forthwith to give written notice
to the Landlord and at the request and cost of the Landlord to do all
such things as may be proper for the purpose of preventing the making of
such encroachment or the acquisition of such easement or right and if
the Tenant shall omit or neglect forthwith to do all such things as
aforesaid it shall be lawful for the Landlord or its agents officers
servants and workmen to enter upon the Demised Premises and to do the
same
3.20 SIGNS
Not to place or expose upon any part of the exterior or in any windows
or upon the exterior of any walls of the Demised Premises any
advertisement hoarding notice name-plate board sign or inscription
(whether illuminated or otherwise) except such as shall be previously
approved by or on behalf of the Landlord such approval not to be
unreasonably withheld or delayed
3.21 PLANNING
3.21.1 Within seven days of receipt to give full particulars to
the Landlord of any notice or order or a proposal for a
notice or order made given or issued to the Tenant by a
Planning Authority under or by virtue of Planning Law
and if so required by the Landlord to produce such
notice order or proposal for a notice or order to the
Landlord and also without delay to take all reasonable
or necessary steps to comply with any such notice or
order and also at the request and cost of the Landlord
to make or join with the Landlord in making such
objection or objections or representation or
representations against or in respect of any such notice
order or proposal as the Landlord shall reasonably deem
expedient
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3.21.2 Not to do or omit or suffer to be done or omitted any
act or thing in on or respecting the Demised Premises
required to be omitted or done (as the case may be) by
Planning Law and at all times hereafter to indemnify and
to keep indemnified the Landlord against all actions
proceedings costs claims demands and expenses in respect
of such act or thing contravening the provisions of
Planning Law
3.21.3 to carry out before the expiration or sooner
determination of the Term any works stipulated to be
carried out to the Demised Premises as a condition of
any planning permission which may have been granted
(other than to the Landlord) and implemented (in part or
whole) during the Term
3.21.4 if the Tenant shall receive or shall have been entitled
to receive any compensation in relation to its leasehold
interest in the Demised Premises resulting from any
restriction imposed upon the use of the Demised Premises
under or by virtue of Planning Law the Tenant shall on
the determination or expiration of its leasehold
interest forthwith make such provision as is just and
equitable for the Landlord to receive its due benefit
from such compensation
3.21.5 not to make any planning application relating to the
Demised Premises without the Landlord's prior written
consent such consent not to be unreasonably withheld or
delayed
3.21.6 if and when called upon so to do to produce to the
Landlord all such plans documents and other evidence as
the Landlord may require in order to satisfy itself that
the provisions of this sub-clause have been complied
with in all respects
3.22 LETTING BOARDS
Provided the Tenant has not made an application to the Court for the
renewal of this Lease under the Landlord and Tenant Act 1954 to permit
the Landlord to place and maintain in prominent positions notice boards
indicating that the Demised Premises are to be sold or (during the last
six months of the Term) let and to allow intending purchasers or lessees
reasonable facilities for viewing the Demised Premises
3.23 YIELD UP
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To yield up to the Landlord or as it may direct at the end of the Term
the Demised Premises with full vacant possession together with all
additions and improvements made thereto (unless the Landlord shall
require reinstatement of the Demised Premises to their original
condition) and all fixtures (other than Tenant's fixtures) all in such
repair order and condition in accordance with the Tenant's covenants
herein contained having replaced any of the Landlord's fixtures and
fittings as require replacement with those of similar quality and value
and having removed all signs and made good any damage thereby caused
3.24 DANGEROUS SUBSTANCES
Not to keep or to permit or suffer to be kept on the Demised Premises
any materials of a dangerous noxious combustible or explosive nature the
keeping of which may contravene any statute or order or local regulation
or bye-law or constitute a nuisance to the occupiers of neighbouring
property and not to carry on or to permit or suffer to be carried on
upon the Demised Premises any trade of a noxious or offensive nature
3.25 INDEMNITY
To indemnify and keep the Landlord indemnified from and against all
actions proceedings costs claims demands expenses and liability in
respect of the death of or any injury to any person and in respect of
any damage to any property movable or immovable or in respect of the
infringement disturbance or destruction of any right easement or
privilege or otherwise by reason of or arising in any way directly or
indirectly out of the repair or state of repair of the Demised Premises
or any part thereof or the execution by the Tenant of any alteration or
addition to the Demised Premises or the non-performance or breach of any
of the Tenant's covenants or the conditions herein contained and to
insure and keep insured in the joint names of the Tenant and the
Landlord with an insurance company of repute and approved by the
Landlord a reasonable amount (not being less than any amount from time
to time to be approved by the Landlord such approval not to be
unreasonably withheld or delayed) in respect of such expenses costs
claims damages demands and any other liability aforesaid and to pay all
premiums therefor when required and to produce to the Landlord whenever
required a copy of the policy and of the receipt for the last premium
due thereunder
3.26 VAT
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3.26.1 If Value Added Tax shall be chargeable by the Landlord
in respect of any rents fees and charges payable
hereunder or otherwise in respect of any supplies (as
defined in the Value Added Tax legislation from time to
time in force) made to the Tenant to pay to the Landlord
in addition to any amounts otherwise payable the amount
of the Value Added Tax so chargeable
3.26.2 if any payment hereunder (not being a payment to which
Value Added Tax is added pursuant to sub-clause (a)
hereof) shall be in reimbursement of any expenditure by
or on behalf of the Landlord which includes Value Added
Tax to pay also so much of the Value Added Tax as is not
recoverable by the Landlord as an input
3.27 COSTS
To pay:
3.27.1 to the Landlord all costs charges and expenses
(including legal costs and fees payable to a Surveyor)
which may be incurred by the Landlord in or in
contemplation of any proceedings under Sections 146 and
147 of the Law of Property Act 1925 (whether or not any
right of re-entry or forfeiture has been waived by the
Landlord or the Tenant has been relieved under the
provisions of the said Act) or in connection with any
application to any Planning Authority or under Planning
Law or of any application to the Landlord for any
consent pursuant to the covenants herein contained and
of any Schedule of Dilapidations whether prepared or
served before or after the expiry or sooner
determination of this Lease and to keep the Landlord
fully and effectually indemnified against all costs
expenses claims and demands whatsoever in respect of the
said applications consents and proceedings
3.27.2 the legal charges and surveyors' fees incurred by the
Landlord resulting from all applications by the Tenant
for any consent required by this Lease including legal
charges and surveyors' and other professional fees
incurred in consequence of such applications in cases
where consent is refused or the application is withdrawn
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3.27.3 all legal and other costs incurred by the Landlord in
recovering or attempting to recover whether by any legal
process including distress or by correspondence or
otherwise rent and items being treated as rent
3.28 VEHICLES
Not to park or permit or suffer any kind of vehicle to be parked on any
access road or loading bay or obstruct in any way any access the use of
which is common to the Demised Premises and any adjoining or nearby
property of the Landlord nor to load or unload or permit or suffer the
loading or unloading of goods except as permitted by the terms of the
Second Schedule
3.29 REGULATIONS
To comply with the regulations set out in the Fourth Schedule hereto and
any other reasonable regulations made by the Landlord from time to time
for the management of the Demised Premises and any land or premises used
or to be used in common or jointly with any other person
3.30 SERVICE CHARGE
To pay to the Landlord on written demand as further and additional rent
the Service Charge
3.31 TITLE COVENANTS
To comply with the covenants contained or referred to in the charges
register of title number WT 111772 hereto in so far as they relate to
the Demised Premises and to indemnify and keep indemnified the Landlord
against all costs claims and demands in respect of any breach or
non-performance thereof
3.32 CONSENT TO LANDLORD'S RELEASE
Not to unreasonably withhold consent to a request made by the Landlord
under the 1995 Act section 8 for a release from all or any of the
landlord's covenants of this Lease
4 THE LANDLORD HEREBY COVENANTS with the Tenant (subject to payment by the
Tenant of the rents hereby reserved and compliance by the Tenant of all
covenants and conditions
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hereunder and not so as to impose any liability upon the Landlord after
it has parted with its interest in the Demised Premises) as follows:-
4.1 QUIET ENJOYMENT
That the Tenant paying the rents and performing and observing the
several covenants and conditions herein contained and on the Tenant's
part to be performed and observed shall (subject to all rights of entry
hereunder for the Landlord and others authorised by it) peaceably and
quietly hold and enjoy the Demised Premises during the Term hereby
without any interruption or disturbance from or by the Landlord or any
person or persons claiming under or in trust for them or by virtue of
title paramount
4.2 TO INSURE
At all times during the Term to keep the Demised Premises or any
premises of which the Demised Premises form part insured (unless such
insurance shall be vitiated by any act of the Tenant or any other
occupier of such premises or any part thereof or their respective
servants agents licensees or invitees) against loss or damage by the
Insured Risks in some Insurance Office of repute to be nominated by the
Landlord for the Landlord's opinion of the full cost of reinstatement
thereof and to pay all premiums necessary for that purpose and if the
Tenant so demands at its cost to produce to the Tenant details of the
terms of the policy of insurance and evidence that the current year's
premium has been paid and to use all reasonable endeavours to procure
that the interest of the Tenant is noted on the policy and to notify the
Tenant of any material changes in the risks covered by the policy and
further that in case of destruction or damage to the Demised Premises or
any premises of which the Demised Premises form part by way of the
Insured Risks will subject to the provisions of any Act of Parliament or
local bye-law for the time being in force with all due speed apply for
and diligently pursue an application for planning permission for the
Works of reinstatement and upon receipt of the same with all due speed
spend and lay out all monies received in respect of such insurance
(except sums in respect of loss of rent) in rebuilding or reinstating in
a good and substantial manner those premises so destroyed or damaged and
making good any shortfall in the insurance money Provided that if the
rebuilding or reinstatement of the Demised Premises or any premises of
which the Demised Premises form part shall be prevented or frustrated
all such insurance monies shall belong absolutely to the Landlord and
shall be paid to the Landlord accordingly PROVIDED that in any
reinstatement after damage by any of the insured risks the Landlord
shall not be obliged to reinstate in accordance with the plans sections
elevations and specifications of the existing building but (so far as is
reasonably
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practicable) and consistent with planning and all other relevant
statutes bye-laws and regulations) shall provide the Tenant with
accommodation reasonably equivalent to that hereby demised the covenants
and conditions contained in this Lease to apply thereto in all respects
mutatis mutandis as they apply to the Demised Premises
4.3 SERVICES
4.3.1 To use its best endeavours to procure that the roadways
coloured brown and coloured yellow on the Plan and
Service Media are kept in good repair and condition (and
shall renew the same whenever necessary) and properly
cleansed and lit as appropriate
4.3.2 To use its best endeavours at the Tenants request to
enforce the covenants on the part of Interface (Wootton
Bassett) Management Company Limited contained in a deed
of covenant dated 1st April 1992 referred to in entry
No. 6 of the charges register of title number WT 111772
5 PROVISOS
PROVIDED ALWAYS and these presents are upon the following express
conditions
5.1 FORFEITURE
If the said rents or any part thereof shall at any time be unpaid for
Fourteen days after the same shall have become due (whether any legal
demand therefor shall have been made or not) or if the Tenant shall at
any time fail to perform or observe any of the covenants by the Tenant
or the conditions herein contained or shall enter into any arrangement
or composition for the benefit of the Tenant's creditors or permit any
execution to be levied on the Demised Premises or if the Tenant being a
person or persons shall become bankrupt or have a receiving order made
against him or them or if the Tenant being a company shall enter into
liquidation whether compulsory or voluntary (save voluntarily when
solvent for the purpose of amalgamation or reconstruction) then and in
any such case it shall be lawful for the Landlord or any person duly
authorised by the Landlord to re-enter the Demised Premises or any part
thereof in the name of the whole and peaceably to hold the Demised
Premises thenceforth as if these presents had not been made without
prejudice to any right of action or remedy of the Landlord in respect of
any breach of any of the covenants by the Tenant or the conditions
herein contained
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5.2 EXCLUSION OF RIGHTS
5.2.1 Neither the Tenant nor the Demised Premises is nor shall
become entitled to any right of light or air or to any
other right easement or quasi-easement whatsoever (other
than those expressly hereby granted) which would or
might restrict or interfere with the use for building or
any other purposes of any adjoining or neighbouring
property and nothing herein contained or implied shall
give the Tenant the benefit of or the right to enforce
or to have enforced or to prevent the release or
modification of any right easement covenant condition or
stipulation enjoyed or entered into by any lessee of the
Landlord in respect of property not demised by this
Lease or prevent or restrict the development or use of
any land not demised by this Lease and Section 62 of the
Law of Property Act 1925 shall not apply to this Lease
and no interest in the soil or premises below or about
the Demised Premises is or shall deemed to be included
in the demise hereinbefore contained
5.2.2 The exercise of the easements and rights hereby granted
is and shall be subject to due compliance by the Tenant
of its covenants herein contained
5.3 DISPUTES
Any dispute arising as between the Tenant and any occupier of any
adjoining or neighbouring property of the Landlord relating to any
easement right or privilege in connection with the Demised Premises or
relating to the amount of any contribution towards the expenses of works
or to services used in common shall be referred to the Landlord whose
decision shall be binding upon the parties to the dispute
5.4 REMOVAL OF PROPERTY
If at such time as the Tenant has vacated the Demised Premises on the
determination of the Term either by effluxion of time or otherwise any
property of the Tenant shall remain in or on the Demised Premises and
the Tenant shall fail to remove the same within fourteen days after
being requested by the Landlord so to do the Landlord may as the agent
of the Tenant (and the Landlord is hereby appointed by the Tenant to act
in that behalf) sell such property and shall then hold the proceeds of
the sale after deducting the costs and expenses of removal storage and
sale reasonably and properly incurred by it and any other monies due
from the Tenant to the Landlord
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to the order of the Tenant or apply the same towards sums owed by the
Tenant to the Landlord PROVIDED ALWAYS THAT if such proceeds of sale
shall be insufficient to meet the costs and expenses as aforesaid the
Tenant shall pay the amount of the deficiency on demand and will
indemnify the Landlord against any claim or liability in respect thereof
PROVIDED FURTHER THAT the Tenant will indemnify the Landlord against any
liability incurred by it to any third party whose property shall have
been sold by the Landlord in the bona fide mistaken belief (which shall
be presumed unless the contrary be proved) that such property belonged
to the Tenant
5.5 EXCLUSION OF LIABILITY
The Landlord shall not be liable beyond any sum which may be recovered
under any policy or policies of insurance maintained by the Landlord for
any loss accident damage or injury which may at any time during the said
term be suffered by the Tenant or the Tenant's employees servants agents
invitees or licensees or which may be done to the Demised Premises or to
any of the goods or property thereon as a result of any neglect or
default of the employees servants or agents of the Landlord or of the
defective working accidental stoppage or breakage of the Service Media
or any part thereof
5.6 LACK OF WARRANTY
Nothing contained in this Lease shall be deemed to constitute any
warranty by the Landlord that the Demised Premises or any part thereof
are authorised for use under Planning Law or are fit or otherwise usable
for any specific purpose
5.7 FEES AND EXPENSES
The fees expenses and value added tax thereon of any arbitrator incurred
in any arbitration proceedings arising directly or indirectly out of
this Lease may be paid to the arbitrator by the Landlord notwithstanding
that part or all of such fees and expenses are ultimately to be borne by
the Tenant and the Tenant shall forthwith upon demand reimburse the
Landlord in respect of such payment
5.8 LANDLORD'S LIABILITY
Notwithstanding any other provision herein contained the Landlord shall
not be liable to the Tenant in respect of any interruption in any
service provided pursuant to clause 4.3 of this lease by
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reason of repair or maintenance of the Common Parts the Service Media or
any other premises or damage thereto or destruction thereof by any of
the Insured Risks or any breakdown or suspension of any such services or
any closure of any of the Common Parts due to any cause beyond the
Landlord's control
5.9 RENT CESSER
5.9.1 If during the Term the Demised Premises or any part
thereof shall at any time during the Term be so damaged
or destroyed as to be unfit for occupation and use then
(save to the extent that the Insurance monies shall be
irrecoverable by reason of any act or default of the
Tenant or any underlessee servant visitor agent or
licensee of the Tenant) the rent hereby first reserved
or a fair proportion thereof according to the nature and
extent of the damage sustained shall be suspended for
the period of 3 years or until the Demised Premises
shall again be rendered fit for occupation and use
(whichever is the sooner) and any dispute with reference
to this proviso shall be referred to arbitration in
accordance with the Arbitration Act 1996
5.9.2 Notwithstanding the terms of clause 5.9.1 above the
Landlord shall be entitled to determine this Lease by
six months notice in writing to the Tenant to be given
at any time after the expiration of 3 years from the
date of such damage or destruction if the Landlord is
prevented from re-building or reinstating the Demised
Premises as a result of its inability to obtain the
relevant Planning Permission bye-laws or other necessary
consents or as a result of some other circumstance
beyond the Landlord's control or if the Lease is legally
frustrated and in any such case the term hereby created
shall cease and determine the Tenant in any event paying
the rents hereby reserved up to the date of such damage
or destruction and all Insurance monies shall belong
absolutely to the Landlord and shall be paid to the
Landlord accordingly
5.9.3 At any time on or after a date being six months prior to
the expiration of a period of 3 years after the date of
such damage or destruction the Tenant shall be entitled
to serve six months notice in writing on the Landlord
determining this Lease provided that any such notice
shall be effective only if the re-building or
reinstatement of the Demised Premises has not commenced
by the date upon which the six months notice shall
expire and in any such case the Tenant shall
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pay the rents hereby reserved up to the date of such
damage or destruction and all insurance monies shall
belong absolutely to the Landlord and shall be paid to
the Landlord accordingly
5.9.4 The determination of this Lease by the Landlord or the
Tenant in accordance with subclauses 5.9.2 and 5.9.3
above shall be without prejudice to the claim of either
party for any earlier breach of covenant by the other
5.10 EXCLUSION OF COMPENSATION
Subject to Section 38(2) of the Landlord and Tenant Act 1954 the Tenant
shall not be entitled on the termination hereof to compensation under
Section 37 of the said Act
5.11 NOTICES
A notice shall be deemed duly served on the Tenant if addressed to the
Tenant and left at or sent by registered post or recorded delivery to
the Demise Premises and shall be deemed to be duly served on the
Landlord if addressed to the Landlord and left at or sent by registered
post or recorded delivery to its registered office for the time being or
if the Landlord at the time is not a corporate body to the last known
address of the Landlord and every such notice shall be deemed to have
been served on the day on which it is so left or if posted the day
immediately following that on which it is so posted
5.12 HEADINGS
All clause headings herein are descriptive only and shall not affect the
construction or interpretation of this Lease.
5.13 NEW LEASE
This Lease is a new tenancy for the purposes of the 1995 Act section 1
6 INTERPRETATION
IN this Lease
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6.1.1 where there are two or more persons included in the
expression "Tenant" covenants contained in this Lease
which are expressed to be made by the Tenant shall be
deemed to be made by such persons jointly and severally
6.1.2 words importing the neuter gender only shall include the
masculine and feminine gender and words importing the
masculine gender only shall include the feminine gender
and words importing the singular number only include the
plural number and vice versa and
6.1.3 references in this Lease to any Statute Rule and Order
shall be deemed to include every statutory amendment
re-enactment and replacement thereof for the time being
in force and every statutory instrument rule order
notice direction and regulation from time to time in
force thereunder save that any references to the Town
and Country Planning (Use Classes) Order 1987 herein
shall be a reference to the said order excluding any
future amendment re-enactment and replacement thereof
6.1.4 every covenant by the Tenant herein and every other
provision hereof that the Tenant will not do or omit to
be done or allow any act matter or thing is deemed to be
a covenant or (as the case may require) a provision that
the Tenant will not permit or suffer the doing or (as
the case may require) the omission or allowance thereof
and every reference herein (whether expressed or
implied) to a consequence of the Tenant having done or
having omitted to do or having allowed any act matter or
thing is deemed to be a reference extending the
consequence of any act or omission or allowance of or by
the Tenant's employees servants agents licensees and
invitees and any person claiming under the Tenant and
that person's employees servants agents licensees and
invitees or any of them
7 RENT REVIEW
7.1 THE yearly rent payable by the Tenant from the expiration of the
fifth year of the Term and from the expiration of each period of
five years thereafter during the Term (the time in each case
being computed from the date of the commencement of the Term and
the date of expiration of each such period being herein referred
to as "the Date of Review") shall be whichever shall be the
higher of:-
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7.1.1 the yearly rent payable by the Tenant immediately before
the Date of Review
7.1.2 an amount equal to the rental value (as hereinafter
defined) of the Demised Premises at the Date of Review
7.2 The rental value of the Demised Premises at the Date of Review
shall be such an amount as may be agreed between the Landlord
and the Tenant or determined in accordance with sub-clause 7.3
of this Clause as representing the best yearly rack rent at
which the Demised Premises might reasonably be expected to be
let as a whole at the Date of Review in the open market without
a fine or premium and with vacant possession by a willing lessor
to a willing lessee disregarding any rent free period
concessional rent or other financial incentive of any nature
which the Tenant might receive or expect to receive in the open
market assuming a term equivalent to the residue of the Term at
the Date of Review or a term of 15 years (whichever is the
longer) and on the assumption (if not a fact) that the lessee
has complied in all respects with all the obligations imposed
upon the Tenant hereunder (but without prejudice to any rights
or remedies of the Landlord in relation thereto) on the same
terms and conditions (other than the amount of the rent (but
including the provisions for the review thereof)) as this Lease
and on the further assumptions that:-
7.2.1 the user permitted by the lease complies with Planning
Law
7.2.2 the Demised Premises are fit for immediate beneficial
occupation and use by the lessee
7.2.3 if the Demised Premises have been destroyed or damaged
they have been fully restored
but there being disregarded (if applicable):-
7.2.4 any goodwill attributable to the Demised Premises by
reason of any trade or business carried on thereat by
the Tenant or any permitted under tenant
7.2.5 any effect of any works carried out to the Demised
Premises prior to the Date of Review and whether before
or after the commencement of the term for which the
Landlord shall have given written consent (where
required) in accordance with the
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provisions herein contained carried out by the Tenant or
any permitted under tenant (or on their behalf) wholly
at its own expense otherwise than in pursuance of an
obligation to the Landlord or a requirement by any local
statutory or public authority
7.2.6 any effect on rental value of any work carried out by
the Tenant or any under tenant or their or its
predecessors in title that has diminished such rental
value
7.2.7 any effect on rent of the fact that the Tenant or any
permitted under tenant may have been in occupation of
the Demised Premises
7.2.8 (so far as may be permitted by law) all restrictions
whatsoever relating to rent or to security of tenure
contained in any statute or orders rules or regulations
made thereunder
7.2.9 The Tenants initial fitting out works carried out at its
expense pursuant to the agreement to grant this lease
made between the parties hereto
7.3 If by the date one month before the Date of Review the Landlord
and the Tenant shall not have agreed on the amount of the rental
value as aforesaid then the same shall be determined by an
Arbitrator or an Expert (as the Landlord shall direct) who shall
in either case be agreed upon by the parties hereto or in
default of agreement within fourteen days before the Date of
Review by an Arbitrator or Expert to be nominated by the
President for the time being of The Royal Institution of
Chartered Surveyors upon the application of either party and the
decision of such Arbitrator or Expert shall be binding on both
the Landlord and the Tenant and the cost of appointment and the
fees payable to any such Arbitrator or Expert in respect of any
decision made by him shall be borne and paid by the parties
hereto in such shares and in such manner as he shall determine
7.4 In the event that the rental value shall not have been agreed or
determined by or before the Date of Review then:
7.4.1 in respect of the period of time (hereinafter called the
"said interval") beginning with the Date of Review and
ending on the rent payment day immediately following the
date upon which the rental value of the Demised Premises
shall
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have been agreed or determined as aforesaid the rent
hereby first reserved shall continue to be paid at the
rate payable immediately before the Date of Review
7.4.2 at the expiration of the said interval there shall be
due as additional rent payable by the Tenant to the
Landlord a sum of money equal to the amount whereby the
yearly rent so agreed or determined as aforesaid shall
exceed the yearly rent payable immediately before the
Date of Review duly apportioned in respect of the said
interval together with Interest thereon calculated from
the rent payment days upon which the Landlord would have
received such amounts had the rental value been agreed
before the Date of Review and expiring on the day of
payment to the Landlord
7.5 Notwithstanding the decision of the Arbitrator or Expert
hereinbefore referred to in no event shall the rent payable by
the Tenant to the Landlord after the Date of Review be less than
the rent payable by the Tenant to the Landlord immediately
before the Date of Review
7.6 If at the Date of Review the Landlord shall be obliged legally
or otherwise to comply with any enactment or directive (which
expression shall include any Act of Parliament now or hereafter
in force and any instrument regulation or order made thereunder
or deriving validity therefrom) dealing with control of rent and
which shall restrict or modify the Landlord's right to revise
the rent in accordance with the terms of these presents then the
Landlord shall on each occasion that any such enactment or
directive is removed relaxed or modified be entitled on giving
not less than one month's notice in writing to the Tenant
expiring after the date of each such removal relaxation or
modification to introduce an intermediate review date
(hereinafter called "the Intermediate Review Date") and the rent
payable hereunder from the Intermediate Review Date to the next
succeeding Date of Review or Intermediate Review Date or until
the expiration of the Term (whichever shall first occur) shall
be determined in like manner as the rent payable from each Date
of Review but substituting for the Date of Review for the
purpose of fixing the date upon which the open market rental
value is to be fixed the Intermediate Review Date
7.7 A memorandum recording the yearly rent payable from each Date of
Review shall as soon as reasonably possible be endorsed on this
Lease and the Counterpart thereof and executed by the Landlord
and the Tenant respectively
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7.8 Time shall not be of the essence of the contract in agreeing or
determining the open market rental value of the Demised Premises
under this Lease and the right of the Landlord to a review of
the yearly rent payable hereunder shall not be prejudiced by any
failure to give or receive any notice or to appoint an
independent Arbitrator or Expert under sub-clause 7.3 hereof
8 It is certified that this Lease gives effect to an Agreement for Lease
dated _________ 1997
IN WITNESS whereof the parties hereto have executed this Lease as their deed the
day and year first before written
THE FIRST SCHEDULE
Description of Demised Premises
ALL THOSE PREMISES known as Unit C Interface Business Centre Bincknoll Lane
Wootton Bassett in the County of Wiltshire including all structural parts
thereof as the said premises are shown for the purpose of identification only
edged red on the Plan and (for the purpose of obligation but not of grant) all
service media exclusively serving the same
THE SECOND SCHEDULE
Rights Included
1 Full and free right and liberty in connection with the use hereby
authorised and enjoyment of the Demised Premises for the Tenant its
servants and duly authorised agents invitees and visitors for the
purpose only of access and egress to and from the Demised Premises at
all times to pass and repass with or without vehicles over the roadways
shown coloured brown and coloured yellow on the Plan and the estate
roads between the Demised Premises and the public highway known as
Bincknoll Lane and to pass and repass on foot only over all pavements
comprised in the Common Parts and over any forecourt between the same
and the Demised Premises subject however to the reasonable rules and
regulations for the use thereof as prescribed from time to time by the
Landlord
2 The right of passage of gas electricity telephone water and soil
drainage air smoke or other effluvia from and to the Demised Premises
through the Service Media passing along or through or
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over upon or under the Development or adjoining land between the Demised
Premises and the public highway
3 The right of support and protection for the benefit of the Demised
Premises as is now enjoyed thereby from any contiguous premises
4 The right to enter on Unit A after reasonable notice and at reasonable
times (except in case of emergency) for the purpose of carrying out any
necessary repairs and maintenance to any roadway paths or Service Media
used jointly by the Demised Premises and Unit A the Tenant being
responsible for making good all damage caused to Unit A by the exercise
of this right as quickly as possible
THE THIRD SCHEDULE
Rights Reserved
1 The right to build upon or to heighten alter or extend (whether
vertically or laterally) any building notwithstanding that the access of
light and air or either of them to the Demised Premises and the light
windows and openings thereof may be affected
2 The right to the passage of water and soil drainage gas electricity
telephone and all other services or supplies and air and smoke from and
to any land through the Service Media now or at any time hereafter in
over upon under or passing through the Demised Premises
3 The right for the Landlord and also the tenant of Unit A (with or
without workmen plant and machinery) at all reasonable times (and at any
time in the case of emergency) to enter upon the Demised Premises for
the purpose of carrying out any necessary repairs and maintenance to any
roadways pathways or Service Media used jointly by the Demised Premises
and Unit A the person exercising such right being responsible for making
good all damage caused to the Demised Premises by the exercise of this
right a quickly as possible
4 The right at all reasonable times (and at any time in the case of
emergency) to enter upon the Demised Premises with or without appliances
and workmen and others as often as may be necessary for all the purposes
for which the Tenant covenants hereunder to permit entry and for the
purposes of complying with any statutory requirement
34
<PAGE> 35
5 The right to enter upon the Demised Premises after reasonable notice and
at reasonable times (except in each case in case of emergency) in order
to build on or into any party walls and to examine repair and rebuild
any adjoining or contiguous premises the person or persons exercising
such rights making good all damage thereby occasioned to the reasonable
satisfaction of the Tenant
6 The right to any support given by the Demised Premises
7 The right at all times to pass and repass with or without vehicles over
the roadway coloured purple on the Plan
THE FOURTH SCHEDULE
Regulations
1 All loading and unloading and delivery and dispatch of goods shall be
done only within any areas designated by the Landlord for that purpose
and no unnecessary obstruction shall be caused in any part of the
Development
2 No loud speakers television sets radios or other devices shall be used
in a manner so as to be heard outside the Demised Promises.
3 The drains and all plumbing facilities shall not be used for any other
purpose than that for which they are intended and no foreign substance
of any kind shall be placed therein.
4 The Tenant will keep clear and free from obstruction all ventilation or
other ducts and flues in the Demised Premises or the Common Parts.
5 The Tenant shall not burn any refuse of any kind in or about the Demised
Premises or the Development.
6 The Tenant shall give immediate notice to the Landlord in case of fire
accident defects or structural damage in the Demised Premises.
7 The roads within or leading to the Development shall be used only for
the purpose of gaining access to and egress from the Demised Premises
and no vehicles shall be parked thereon.
35
<PAGE> 36
8 No vehicles parked on any allocated car parking areas shall be repaired
maintained or cleaned thereon apart from any emergency repairs necessary
in order to move the vehicle therefrom and no deleterious matter or
substance shall be deposited or allowed to be deposited on any car
parking spaces
FIFTH SCHEDULE
FORM OF AUTHORISE GUARANTEE AGREEMENT
1 Guarantee
1.1 The Guarantor[s] [jointly and severally] guarantee[s] to the
Landlord that the Tenant will pay the rents reserved by and
perform and observe all the Tenant's covenants in this Lease
throughout the Term and any extension by statute of the tenancy
created by this Lease and the Guarantor[s] will pay and make
good to the Landlord on demand any losses damages costs and
expenses suffered or incurred by the Landlord by reason of any
failure of the Tenant to do so
1.2 This Guarantee is to take effect immediately on the assignment
of the Lease to the Tenant and is to remain in force for so long
as and to the extent that the Tenant is not released by law from
liability for the Tenant's covenants in the Lease
1.3 In the context of these guarantee provisions, references to the
Tenant are to the assignee only (in its capacity as Tenant) with
respect to whom this guarantee is given
2 No waiver or release of liability
The Guarantor[s] is not to be released from liability under these
provisions by reason of:
2.1 any forbearance the granting of time or any other indulgence on
the part of the Landlord, including (but without affecting the
general operation of this paragraph 2) any granting or extension
of time or varying the procedure set out in seventh schedule; or
2.2 any variation of this Lease, whether or not made with the
consent of the Guarantor[s], and the guarantee of Guarantor[s]
in paragraph 1 is to operate in relation to this Lease as it may
be varied from time to time
3 Guarantor[s] to accept new lease upon disclaimer
36
<PAGE> 37
3.1 If this Lease is determined by re-entry by the Landlord or is
effectively determined by disclaimer, the Guarantor[s] shall, if
the Landlord by notice within three months after the date of
determination so requires take from the Landlord a lease of the
Premises
3.2 The Lease to be granted to the Guarantor[s] under paragraph 3.1
is to be on the following terms:
3.2.1 the term is to commence on the date of termination of
this Lease and to be equal to the residue of the Term
which would have remained unexpired at that date if this
Lease had not then been terminated
3.2.2 the yearly rent is to be the same as would have been
payable under this Lease if it had continued and, if a
rent review operative from a review date before the
grant of the lease has not been completed, the
Guarantor[s] will complete the rent review as if it had
been the Tenant under this Lease
3.2.3 the lease is otherwise to be on the same terms and
conditions as would have applied under this Lease if it
had continued undetermined; and
3.2.4 the Guarantor[s] [is][are] to succeed to the rights and
assume the liability of the Tenant under this Lease as
if the Lease had continued undetermined
4 Subordination of rights of the Guarantor[s]
4.1 With respect to any sums paid by the Guarantor[s] under this
Schedule and to any other rights which may accrue to the
Guarantor[s] in respect of any sums so paid or liabilities
incurred under this guarantee or in the observance performance
or discharge of the obligations and covenants of the Tenant in
this Lease, the Guarantor[s] shall rank and be entitled to
enforce its rights only after all obligations and covenants
under this guarantee have been fully observed and performed, and
if they have not the Guarantor[s] shall not:
4.1.1 seek to recover from the Tenant, or any third party
whether directly or by way of set-off lien counterclaim
or otherwise or accept any money or other property or
security or exercise any rights in respect of any sum
which may be or become due to the Guarantor[s] on
account of the failure by the Tenant to observe and
perform or discharge such obligations or covenants in
this Lease;
4.1.2 claim, prove or accept any payment in composition by way
of winding-up, liquidation, bankruptcy or other form of
insolvency of the Tenant in competition with
37
<PAGE> 38
the Landlord for any amount whatsoever owing to the
Guarantor[s] by the Tenant; nor
4.1.3 exercise any right or remedy in respect of any amount
paid by the Guarantor[s] under this Lease or any
liability incurred by the Guarantor[s] in observing
performing or discharging the obligations and covenants
of the Tenant
4.2 The Guarantor[s] warrant[s] that it has not taken, and
undertakes with the Landlord that it will not without the
consent of the Landlord:
4.2.1 take any security from the Tenant in respect of this
guarantee and, if any such security is so taken
notwithstanding, it shall be held on trust for the
Landlord as security for the respective liabilities of
the Guarantor[s] and the Tenant; nor
4.2.2 be entitled to any right of proof in the bankruptcy,
liquidation or other form of insolvency of the Tenant or
exercise any other right of the Guarantor[s] discharging
his liability in respect of such obligations and
covenants
THE COMMON SEAL of
ROYAL LIVER ASSURANCE LIMITED [SEAL]
was hereunto affixed in the
presence of
[SIG]
Member of the Committee of Management
[SIG]
Secretary
38
<PAGE> 1
EXHIBIT 13.1
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,262 $ 64,901
Accounts receivable, net 36,981 41,550
Inventory 20,042 29,741
Deferred income taxes 2,840 2,130
Other current assets 909 1,774
--------- ---------
Total current assets 103,034 140,096
Property, plant and equipment, net 18,970 21,255
Other assets 5,237 4,124
--------- ---------
Total Assets $ 127,241 $ 165,475
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,578 $ 8,327
Accrued liabilities 20,441 26,629
Income taxes payable 9,674 6,381
--------- ---------
Total current liabilities 39,693 41,337
Deferred tax liabilities 1,616 5,652
Long-term debt, less current maturities 65,050 65,050
--------- ---------
Total liabilities 106,359 112,039
--------- ---------
Commitments and contingencies (note 8)
Stockholders' equity:
Common stock, $0.01 par value per share; 40,000 shares authorized,
16,366 shares and 16,449 shares issued and outstanding 171 174
Additional paid-in capital 58,217 63,816
Cumulative translation adjustment (891) (891)
Retained Earnings (Deficit) (23,834) 15,355
--------- ---------
33,663 78,454
Less: Treasury stock
(common: 963 shares in fiscal year 1998, net of sales) at cost (12,781) (25,018)
--------- ---------
Total stockholders' equity 20,882 53,436
--------- ---------
Total liabilities and stockholders' equity $ 127,241 $ 165,475
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 2
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 182,959 $ 195,307 $ 236,112
Cost of sales 86,887 90,567 108,514
--------- --------- ---------
Gross profit 96,072 104,740 127,598
--------- --------- ---------
Operating expenses:
Research, development and engineering 13,718 14,503 17,543
Selling, general and administrative 34,845 39,898 47,682
--------- --------- ---------
Total operating expenses 48,563 54,401 65,225
--------- --------- ---------
Operating income 47,509 50,339 62,373
Interest expense, including amortization of debt issuance costs 7,140 7,104 6,984
Interest income and other income, net (1,385) (1,722) (2,243)
--------- --------- ---------
Income before income taxes 41,754 44,957 57,632
Income tax expense 16,284 15,286 18,443
--------- --------- ---------
Net income $ 25,470 $ 29,671 $ 39,189
========= ========= =========
Basic earnings per common share $ 1.53 $ 1.75 $ 2.38
========= ========= =========
Shares used in basic per share calculations 16,593 17,003 16,481
========= ========= =========
Diluted earnings per common share $ 1.42 $ 1.67 $ 2.15
========= ========= =========
Shares used in diluted per share calculations 17,964 17,792 18,223
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Income from operations $ 25,470 $ 29,671 $ 39,189
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property and equipment 2,367 2,935 3,632
Deferred income taxes (745) 2,789 4,746
Other non-cash charges, net 758 649 (225)
Changes in assets and liabilities:
Accounts receivable (8,310) 1,624 (5,024)
Provision for doubtful accounts 575 (50) 455
Inventory (1,150) (2,035) (9,699)
Other current assets (426) 318 (865)
Other assets 471 (459) 1,113
Accounts payable 2,206 1,194 (1,251)
Accrued liabilities 2,271 (251) 6,188
Income taxes payable 3,413 (1,769) 986
-------- -------- --------
Cash provided by operating activities 26,900 34,616 39,245
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (3,903) (8,195) (5,917)
-------- -------- --------
Cash flows from financing activities:
Purchase of treasury stock -- (12,880) (13,162)
Proceeds from sale of treasury stock -- 99 1,250
Proceeds from exercise of stock options 763 1,835 1,223
-------- -------- --------
Cash provided by (used for) financing activities 763 (10,946) (10,689)
-------- -------- --------
Effect of exchange rate changes on cash: (333) -- --
Net increase (decrease) in cash and cash equivalents 23,427 15,475 22,639
Cash and cash equivalents at beginning of year 3,360 26,787 42,262
-------- -------- --------
Cash and cash equivalents at end of year $ 26,787 $ 42,262 $ 64,901
======== ======== ========
Supplemental disclosures:
Cash paid for:
Interest $ 6,608 $ 6,577 $ 6,550
Income taxes $ 13,557 $ 14,192 $ 12,439
Noncash operating and financing activities:
Income tax benefit associated with stock options $ -- $ 597 $ 4,279
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL CUMULATIVE ACCUMULATED STOCKHOLDERS'
------------------------- PAID-IN TRANSLATION EQUITY TREASURY EQUITY
SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) STOCK (DEFICIT)
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 16,418,642 165 $ 54,652 $ (558) $ (78,975) $ -- $ (24,716)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stock option compensation
amortization -- 231 -- -- -- 231
Exercise of stock options 359,270 4 759 -- -- -- 763
Foreign currency translation
adjustment -- -- (333) -- -- (333)
Net income -- -- -- 25,470 -- 25,470
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1996 16,777,912 169 $ 55,642 $ (891) $ (53,505) $ -- $ 1,415
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stock option compensation
amortization -- 146 -- -- -- 146
Exercise of stock options 284,442 2 1,832 -- -- -- 1,834
Income tax benefit associated
with stock options 597 597
Purchase of treasury stock (701,226) -- -- (12,873) (12,873)
Sale of treasury stock 5,084 -- -- 92 92
Net income -- -- -- 29,671 -- 29,671
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1997 16,366,212 171 $ 58,217 $ (891) $ (23,834) $ (12,781) $ 20,882
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stock option compensation
amortization -- (225) -- -- -- (225)
Exercise of stock options 348,958 3 1,220 -- -- -- 1,223
Income tax benefit associated --
with stock options 4,279 4,279
Purchase of treasury stock (317,600) -- -- -- (13,162) (13,162)
Sale of treasury stock 51,072 325 -- -- 925 1,250
Net income -- -- -- 39,189 -- 39,189
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1998 16,448,642 174 $ 63,816 $ (891) $ 15,355 $ (25,018) $ 53,436
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 5
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA 1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 133,996 $ 169,923 $ 182,959 $ 195,307 $ 236,112
Income (loss) from continuing operations (40,696) 20,808 25,470 29,671 39,189
Mandatorily redeemable preferred
stock dividends (1,298) -- -- -- --
--------- --------- --------- --------- ---------
Net income (loss) $ (41,994) $ 20,808 $ 25,470 $ 29,671 $ 39,189
========= ========= ========= ========= =========
Diluted net income (loss) per common share $ (3.27) $ 1.19 $ 1.42 $ 1.67 $ 2.15
Shares used in diluted per share calculations 12,830 17,512 17,964 17,792 18,223
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------------------------------
BALANCE SHEET DATA 1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $ 67,026 $ 74,855 $ 108,661 $ 127,241 $ 165,475
Long-term debt 85,000 65,050 65,050 65,050 65,050
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31
QUARTERLY DATA 1996 1996 1996 1997 1997 1997 1997 1998
------- ------- ------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $45,584 $47,120 $50,309 $52,294 $54,023 $56,539 $62,017 $63,533
Gross profit $24,500 $25,333 $26,761 $28,146 $29,067 $30,536 $33,553 $34,442
Income from operations $11,517 $12,230 $13,104 $13,488 $15,456 $14,766 $16,632 $17,364
Net income $ 6,625 $ 7,152 $ 7,843 $ 8,051 $ 8,305 $ 9,366 $10,421 $11,097
Income per diluted share $ 0.37 $ 0.40 $ 0.44 $ 0.45 $ 0.47 $ 0.51 $ 0.57 $ 0.61
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY:
Plantronics, Inc. (the Company), which introduced the first lightweight headset
in 1962, is the world's largest designer, manufacturer and marketer of
lightweight communications headsets. 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
MANAGEMENT'S USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of financial statements and the
reported amounts of sales and expenses during the reporting period. Actual
results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary companies. Intercompany transactions and balances have been
eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year end is the Saturday closest to March 31. For purposes
of presentation, the Company has indicated its accounting year ending on March
31 or the month-end for interim quarterly periods. Results of operations for
fiscal years 1996, 1997 and 1998 each included 52 weeks.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with a maturity of 90 days
or less at the date of purchase to be cash equivalents. Pursuant to the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", management determines
the appropriate classification of debt and equity securities at the time of
purchase, and reassesses the classification at each reporting date. At March 31,
1998, all of the Company's short-term investments, consisting primarily of fixed
maturity debt securities, have been classified as "held to maturity". Under this
classification, the investments are recorded at amortized cost. The Company's
cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Cash $ 5,106 $ 9,662
Cash equivalents 37,156 55,239
------- -------
Cash and cash equivalents $42,262 $64,901
======= =======
</TABLE>
INVENTORY
Inventory is stated at the lower of cost, determined on the first-in, first-out
method, or market.
1
<PAGE> 7
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are principally
calculated using the straight-line method over the estimated useful lives of the
respective assets.
DEFERRED DEBT ISSUANCE COSTS
Debt issuance costs are assigned to the various debt instruments and amortized
over the shorter of the terms of the respective debt agreements or an estimated
period the debt will be outstanding.
REVENUE RECOGNITION
Revenue is recognized when products are shipped. Provision is made for estimated
potential customer returns and warranty costs at the time of shipment.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade receivables. The
Company's cash investment policies limit investments to those that are
short-term and low risk. Concentrations of credit risk with respect to trade
receivables are generally limited due to the large number of customers
comprising the Company's customer base, and their dispersion across different
geographic areas. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. The Company maintains an allowance for uncollectible accounts
receivable based upon expected collectibility of all accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including cash, cash
equivalents, accounts receivable, accrued expenses and liabilities, approximate
fair value due to their short maturities. The fair value of long-term debt,
including the current portion, was estimated by management based on current
rates offered on the open market for debt of the same remaining maturities. The
fair value of the long-term debt was not materially different from the carrying
value of $65.1 million at March 31, 1998.
INCOME TAXES
The Company accounts for income taxes under the liability method, which
recognizes deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the tax basis of assets and
liabilities and their financial statement reported amounts. Tax credits are
accounted for as a reduction of tax expense in the year in which the credits
reduce taxes payable.
FOREIGN OPERATIONS AND CURRENCY TRANSLATION
The Company has foreign assembly and manufacturing operations in Mexico, light
assembly, research and development and sales and marketing in the United
Kingdom, an international finance, customer service and logistics headquarters
in the Netherlands, and sales offices in Canada, Asia, Europe, Australia and
South America. For fiscal 1997 and 1998, the functional currency of all foreign
operations was the US dollar. For fiscal 1996, the functional currency of all
foreign operations was the US dollar, with the exception of the operation
located in the United Kingdom. Accordingly, gains or losses arising from the
translation of foreign currency statements and transactions, except for the
operation in the United Kingdom in fiscal 1996, are included in determining
consolidated results of operations. Aggregate exchange gains (losses) for fiscal
1996, 1997 and 1998 were $0.3 million, $0.4 million and ($0.2) million,
respectively. Gains or losses arising from the translation of the United Kingdom
statements prior to fiscal 1997 were recorded as a separate component of
stockholders' equity.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), encourages, but does not require, companies to
record compensation cost for stock-based
2
<PAGE> 8
employee compensation plans based on the fair value of options granted. The
Company has elected to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations, and
to provide additional disclosures with respect to the pro forma effects of
adoption had the company recorded compensation expense as provided in FAS 123,
(see note 10).
Effective December 27, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share", (SFAS 128). The new standard
requires presentation of both basic EPS and diluted EPS on the face of the
income statement. Basic EPS, which replaces primary EPS, is computed by dividing
net income available to common stockholders (numerator) by the weighted average
number of common shares outstanding (denominator) during the period. Unlike the
computation of primary EPS, basic EPS excludes the dilutive effect of stock
options. Diluted EPS replaces fully diluted EPS and gives effect to all dilutive
potential common shares outstanding during a period.
Following is a reconciliation of the numerators and denominators of the basic
and diluted EPS computations for the periods presented below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1996 1997 1998
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Numerator for earnings per common share - income $25,470 $29,671 $39,189
======= ======= =======
Denominator for basic earnings per common share 16,593 17,003 16,481
------- ------- -------
Effect of dilutive securities 1,371 789 1,742
------- ------- -------
Denominator for diluted earnings per common share 17,964 17,792 18,223
======= ======= =======
Net income per common share:
Basic $ 1.53 $ 1.75 $ 2.38
======= ======= =======
Diluted $ 1.42 $ 1.67 $ 2.15
======= ======= =======
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). This statement is effective for the Company's fiscal year ending March
27, 1999. The statement establishes presentation and disclosure requirements for
reporting comprehensive income. Comprehensive income includes charges or credits
to equity that are not the result of transactions with owners. The Company plans
to adopt the disclosure requirements and report comprehensive income as part of
the Consolidated Statements of Shareholders' Equity as required under SFAS 130,
and expects there to be no material impact on the Company's financial position
and results of operations as a result of the adoption of this new accounting
standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). The statement requires the
Company to report certain information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company
will adopt SFAS 131 beginning in fiscal 1999 and does not expect such adoption
to have a material effect on the consolidated financial statement disclosures.
3
<PAGE> 9
NOTE 3 - DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS:
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1997 1998
-------- --------
(in thousands)
<S> <C> <C>
Accounts receivable:
Accounts receivable from customers $ 38,278 $ 43,302
Allowance for doubtful accounts (1,297) (1,752)
-------- --------
$ 36,981 $ 41,550
======== ========
Inventory:
Finished goods $ 11,056 $ 13,224
Work in process 1,647 4,431
Purchased parts 7,339 12,086
-------- --------
$ 20,042 $ 29,741
======== ========
Property, plant and equipment:
Land $ 4,693 $ 4,693
Buildings and improvements (useful life 10-30 years) 9,104 9,486
Machinery and equipment (useful life 2-8 years) 25,949 31,484
-------- --------
39,746 45,663
Less accumulated depreciation (20,776) (24,408)
-------- --------
$ 18,970 $ 21,255
======== ========
Accruals:
Interest $ 1,394 $ 1,386
Employee benefits and other 19,047 25,243
-------- --------
$ 20,441 $ 26,629
======== ========
</TABLE>
NOTE 4 - DEBT:
Long-term debt, consisting of Senior Notes, was $65.1 million at the end of
fiscal 1996, 1997 and 1998. The Senior Notes are general unsecured obligations
of the Company that bear interest, payable semiannually, at a rate of 10% per
annum and will mature on January 15, 2001. The Senior Notes are redeemable, at
the Company's option, in whole or in part, at any time on or after January 15,
1999. Redemption prior to January 15, 2001 will be at a premium.
The Senior Note Indenture contains certain covenants that, among other things,
limit the ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, issue preferred stock of subsidiaries, engage in transactions with
affiliates, create liens, engage in mergers and consolidations, or make certain
asset sales and investments. The Senior Note Indenture also provides that
holders of the Senior Notes have the right to require that the Company
repurchase their Senior Notes in the event of a "change in control" and contain
various customary events of default.
The Company has a one-year $20.0 million revolving unsecured credit facility
with Bank of America. This facility expires on February 17, 1999. The facility
includes a $10.0 million letter of credit subfacility. Combined borrowings and
commitments under both facilities cannot exceed $20.0 million. Principal
outstanding bears interest at the Company's choice of the Bank of America base
rate, the offshore rate or a CD rate plus a margin ranging from 0.000% to
1.375%, depending on the rate choice and performance level ratios. There were no
borrowings outstanding under the facility at March 31, 1998, however, at that
date $2.3 million, associated with inventory purchases and other matters, was
committed under the letter of credit sub-facility. The revolving credit facility
includes covenants relating to, among other things, the maintenance of a maximum
net funded debt ratio, a minimum tangible net worth ratio and a maximum interest
coverage ratio. The Company was in compliance with the terms of the covenants as
of March 31, 1998.
4
<PAGE> 10
The revolving credit facility also expressly restricts the ability of the
Company to incur additional indebtedness (including contingent liabilities and
guarantees), grant additional liens, redeem stock, dispose of and acquire
assets, incur lease obligations, and make investments, including loans, joint
ventures, and acquisitions of other businesses. The Company is permitted to pay
cash dividends on shares of its capital stock in an amount not to exceed 50% of
the Company's cumulative net income (net of cumulative losses) for the period
commencing February 19, 1997 through the date of declaration.
NOTE 5 - COMMON AND TREASURY STOCK:
EFFECT OF INCREASE IN STOCK AND STOCK SPLIT
In July 1997, the Company's stockholders approved an increase in the authorized
shares of Common Stock of Plantronics, Inc., to 40,000,000. On September 2,
1997, the Company effected a two-for-one stock split in the form of a stock
dividend to stockholders of record as of August 18, 1997. All share, per share,
Common Stock, and capital in excess of par value amounts herein have been
restated to reflect the effect of this split.
During fiscal 1998 the Company purchased 317,600 shares of its Common Stock in
the open market at a total cost of $13.2 million and 51,072 shares were reissued
for $1.3 million.
NOTE 6 - INCOME TAXES:
Income tax expense for fiscal 1996, 1997 and 1998 consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------
1996 1997 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal
Current $ 13,586 $ 8,744 $ 10,109
Deferred (827) 2,789 4,746
State 1,622 1,854 1,472
Foreign 1,903 1,899 2,116
-------- -------- --------
$ 16,284 $ 15,286 $ 18,443
======== ======== ========
</TABLE>
Pre-tax earnings of the foreign subsidiaries were $2.8 million, $8.2 million and
$15.7 million for fiscal years 1996, 1997 and 1998, respectively. Cumulative
earnings of foreign subsidiaries which have been permanently reinvested as of
March 31, 1998 totaled $5.5 million.
The following is a reconciliation between statutory federal income taxes and the
total provision for taxes on pre-tax income:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------
1996 1997 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Tax expense at statutory rate $ 14,614 $ 15,735 $ 20,171
Foreign operations taxed at different rates 910 (971) (4,364)
State taxes, net of federal benefit 1,054 1,204 1,476
Other, net (294) (682) 1,160
-------- -------- --------
$ 16,284 $ 15,286 $ 18,443
======== ======== ========
</TABLE>
5
<PAGE> 11
Deferred tax liabilities (assets) represent the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Deferred gains on sales of properties $ 2,740 $ 2,476
Deferred state tax -- 314
Unremitted earnings of certain subsidiaries -- 5,749
Other deferred tax liabilities 333 1,111
------- -------
Gross deferred tax liabilities 3,073 9,650
Accruals and other reserves (2,748) (5,670)
Deferred state tax deduction (635) --
Other deferred tax assets (914) (458)
------- -------
Gross deferred tax assets (4,297) (6,128)
Total net deferred tax liabilities $(1,224) $ 3,522
======= =======
</TABLE>
NOTE 7 - EMPLOYEE BENEFIT PLANS:
Subject to eligibility requirements, substantially all domestic employees
participate in quarterly cash and annual deferred profit sharing plans.
Employees also have the option of participating in a salary deferral plan
qualified under Section 401(k) of the Internal Revenue Service Code. The
Quarterly Profit Sharing Plan benefits are paid on the basis of profitability
and the relationship of each participating employee's base salary as a percent
of the total base salaries of all participants. The Annual Profit Sharing Plan
benefits are based on 10% of the Company's results of operations before interest
and taxes, adjusted for other items, minus quarterly profit sharing cash
distributions and administrative expenses, and are allocated to employees based
on the relationship of each participating employee's base salary as a percent of
all participants' base salaries. The Annual Profit Sharing Plan distributions
include a cash distribution and a tax deferred distribution made to individual
accounts of participants held in trust. The deferred portion is subject to a two
year vesting schedule based on an employees date of hire. Total annual and
quarterly profit sharing contributions were $5.4 million, $5.5 million and $6.9
million for fiscal 1996, 1997 and 1998, respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
MINIMUM FUTURE RENTAL PAYMENTS
The Company leases certain equipment and facilities under operating leases
expiring in various years through and after 2003. Minimum future rental payments
under non-cancelable operating leases having remaining terms in excess of 1 year
as of March 31, 1998:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MARCH 31, AMOUNT
-----------
(in thousands)
<S> <C>
1999 $ 1,283
2000 1,165
2001 1,159
2002 1,174
2003 1,190
-----------
Total minimum future rental payments $ 5,971
===========
</TABLE>
Rent expense for operating leases was approximately $1.1 million in fiscal 1996,
$1.1 million in fiscal 1997 and $1.3 million in fiscal 1998.
6
<PAGE> 12
EXISTENCE OF RENEWAL OPTIONS
Certain operating leases provide for renewal options for periods from 1 to 3
years. In the normal course of business, operating leases are generally renewed
or replaced by other leases.
CLAIMS AND LITIGATION
In the opinion of management, litigation, contingent liabilities and claims
against the Company arising in the ordinary course of business are not expected
to involve any judgments or settlements which would be material to the Company's
consolidated financial condition or results of operations.
NOTE 9 - INDUSTRY SEGMENT AND FOREIGN OPERATIONS DATA:
BUSINESS SEGMENT
The Company operates in a single industry segment and is engaged in developing,
manufacturing, marketing and servicing telecommunications equipment. No one
customer accounted for 10% or more of total revenue from consolidated sales for
fiscal year 1996, 1997 or 1998.
GEOGRAPHIC SEGMENTS
In geographical reporting, revenues are attributed to the geographical location
of the sales and service organizations. Costs directly and indirectly incurred
in generating revenues are similarly assigned.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------
1996 1997 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Net revenues from unaffiliated customers:
United States $133,957 $135,664 $163,684
International 49,002 59,643 72,428
-------- -------- --------
$182,959 $195,307 $236,112
======== ======== ========
Operating income:
United States $ 35,365 $ 37,036 $ 44,916
International 12,144 13,303 17,457
-------- -------- --------
$ 47,509 $ 50,339 $ 62,373
======== ======== ========
Identifiable assets:
United States $ 91,400 $ 97,138 $121,627
International 17,261 30,103 43,848
-------- -------- --------
$108,661 $127,241 $165,475
======== ======== ========
Intercompany transfers $ 18,057 $ 49,575 $ 69,261
</TABLE>
The geographical reporting classification reflects the international
restructuring completed in fiscal 1997. The establishment of Plantronics B.V.
changed the ownership of inventory and the methodology of intercompany
transfers. In fiscal 1996 intercompany transfers were from the US to Europe.
Starting in the last quarter of fiscal 1996, intercompany transfers are from
Plantronics B.V. to the US and Japan. Intercompany transfers are at arms length
prices sufficient to recover a reasonable profit.
NOTE 10 - STOCK OPTION PLANS AND STOCK PURCHASE PLANS:
STOCK OPTION PLAN
In September 1993, the Board of Directors approved the PI Parent Corporation
1993 Stock Plan (the "1993 Stock Plan"). Under the 1993 Stock Plan, 4,159,242
shares of Common Stock (which number is subject to adjustment in the event of
stock splits, reverse stock splits, recapitalization or certain corporate
reorganizations) are reserved for issuance to employees and consultants of the
Company, as approved from time to time by the Compensation Committee of the
Board of Directors. The reserved shares include 980,000 shares which were
authorized by the Board of Directors and approved by the stockholders for
issuance in 1997. The 1993 Stock Plan, which has a term of ten years, provides
for incentive as well as
7
<PAGE> 13
nonqualified stock options to purchase shares of Common Stock. The Board of
Directors may terminate the 1993 Stock Plan at any time at its discretion.
Incentive stock options may not be granted at less than 100 percent of the
estimated fair market value, as determined by the Board of Directors, of the
Company's Common Stock at the date of grant and the option term may not exceed
10 years. For holders of 10 percent or more of the total combined voting power
of all classes of the Company's stock, incentive stock options may not be
granted at less than 110 percent of the estimated fair market value of the
Common Stock at the date of grant and the option term may not exceed five years.
Nonqualified stock options may be granted at less than fair market value.
Options generally vest over 4 years.
In September 1993 the Compensation Committee of the Board of Directors approved
nonqualified options to certain executive officers to purchase 255,792 shares of
Common Stock at an exercise price of $2.74 per share that were granted upon the
completion of the Company's initial public offering. Compensation related to
these options of $0.9 million based on the $6.25 per share offering price was
charged to expense over a four year-vesting period commencing January 1994 as
the options were granted for future services. Options to purchase an additional
289,252 shares were granted during fiscal 1994 to certain executive officers at
exercise prices ranging from $2.74 to $7.63 per share. Compensation related to
these options of $0.8 million was charged to expense over a four-year vesting
period. As of March 31, 1998, the total compensation expense was amortized.
DIRECTORS' STOCK OPTION PLAN
In September 1993, the Board of Directors adopted a Directors' Stock Option Plan
(the "Directors' Option Plan") and reserved 40,000 shares of Common Stock for
issuance to non-employee directors of the Company. An additional 20,000 shares
were authorized for issuance in 1997 under the Directors' Option Plan, pursuant
to Board of Directors' and stockholder approval. The Directors' Option Plan
provides that each non-employee director shall be granted an option to purchase
4,000 shares of Common Stock on the later of the effective date of the Company's
initial public offering or the date on which the person becomes a director.
Thereafter, each non-employee director shall be granted an option to purchase
1,000 shares of Common Stock each year. At the end of fiscal 1998, options for
45,000 shares of Common Stock were outstanding under the Directors' Option Plan.
All options were granted at fair market value and accordingly, had no
compensatory impact. Options vest generally over a four-year period.
Stock option activity under the 1993 Stock Plan and the Directors' Stock Option
Plan are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES -----------------------------
AVAILABLE WEIGHTED
FOR GRANT SHARES AVERAGE PRICE
---------- ---------- -------------
<S> <C> <C> <C>
Balance at March 31, 1995 106,780 3,094,526 $ 3.45
Options Granted (206,820) 206,820 $ 16.22
Options Exercised (359,270) $ 2.13
Options Canceled 158,794 (158,794) $ 4.35
---------- ---------- ----------
Balance at March 31, 1996 58,754 2,783,282 $ 4.52
Options Authorized 1,000,000
Options Granted (631,588) 631,588 $ 19.80
Options Exercised (284,442) $ 6.45
Options Canceled 111,048 (111,048) $ 6.49
---------- ---------- ----------
Balance at March 31, 1997 538,214 3,019,380 $ 7.46
Options Granted (654,500) 654,500 $ 27.37
Options Exercised (348,958) $ 3.49
Options Canceled 233,010 (233,010) $ 18.53
---------- ---------- ----------
Balance at March 31, 1998 116,724 3,091,912 $ 11.29
========== ========== ==========
Exercisable at March 31, 1998 1,884,602
==========
</TABLE>
8
<PAGE> 14
Significant option groups outstanding at March 31, 1998 and related weighted
average prices and lives are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------- ----------------------------------------
Number Weighted Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Price As of March 31, 1998 Contractual Life Exercise Price As of March 31, 1998 Exercise Price
- -------------- -------------------- ---------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.90 - $ 0.90 732,944 5.49 $ 0.90 732,944 $ 0.90
2.74 - 2.74 814,161 5.81 2.74 814,161 2.74
3.13 - 18.44 736,177 7.58 14.70 321,956 11.00
18.63 - 41.69 808,630 9.18 26.22 15,541 19.72
- --------------- -------------------- ---------------- -------------- -------------------- --------------
$ 0.90 - $41.69 3,091,912 7.04 $11.29 1,884,602 $ 3.57
- --------------- -------------------- ---------------- -------------- -------------------- --------------
</TABLE>
FAIR VALUE DISCLOSURES
All options in fiscal 1996, 1997 and 1998 were granted at an exercise price
equal to the fair market value of the Company's Common Stock at the date of
grant. The weighted average fair value at date of grant for options granted
during 1996, 1997 and 1998 were $5.43, $6.34 and $9.79 per share, respectively.
The fair value of options at date of grant was estimated using the Black-Scholes
model with the following assumptions for 1996; dividend yield of 0%, an expected
life of 5 years, expected volitility of 24% and risk free interest rates of
5.9%. For 1997 the assumptions were; dividend yield of 0%, an expected life of 5
years, expected volitility of 17% and risk free interest rates of 6.6%. For 1998
the assumptions were; dividend yield of 0%, an expected life of 5 years,
expected volitility of 28% and risk free interest rates of 5.6%.
Had compensation expense for the Company's stock-based compensation plans been
determined based on the methods prescribed by SFAS No. 123, the Company's net
income and net income per share would have been as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------
1996 1997 1998
------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net income:
As reported $ 25,470 $ 29,671 $ 39,189
Pro forma $ 25,390 $ 29,044 $ 37,381
Net income per share:
As reported $ 1.42 $ 1.67 $ 2.15
Pro forma $ 1.41 $ 1.63 $ 2.05
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
On April 23, 1996 the Board of Directors of the Company approved the 1996
Employee Stock Purchase Plan, (the "ESPP") which was approved by the
stockholders on August 6, 1996, to provide certain employees with an opportunity
to purchase Common Stock through payroll deductions. The plan is a qualified
plan under applicable IRS guidelines and certain highly compensated employees
are excluded from participation. Under the ESPP, the purchase price of the
Common Stock will equal 95% of the market price of the Common Stock immediately
before the beginning of the applicable participation period. Each participation
period is 6 months long. Once purchased the shares are restricted for 6 months.
During fiscal 1997, 581 shares were issued under the plan. The fair value of the
employee's purchase rights was estimated
9
<PAGE> 15
using the Black-Scholes model with the following assumptions; dividend yield of
0%, an expected life of 6 months, expected volatility of 17%, and risk free
interest rates of 5.5%. The weighted-average fair value of these purchase rights
granted in fiscal 1997 was $2.27. During fiscal 1998, 2021 shares were issued
under the plan. The fair value of the employee's purchase rights was estimated
using the Black-Scholes model with the following assumptions; dividend yield of
0%, an expected life of 6 months, expected volatility of 28%, and risk free
interest rates of 5.3%. The weighted-average fair value of these purchase rights
granted in fiscal 1998 was $4.85.
SENIOR EXECUTIVE STOCK OWNERSHIP PLAN
In November, 1996 the Board of Directors approved a Senior Executive Stock
Purchase Plan, effective January 1, 1997, to encourage ownership of the
company's Common Stock by senior executives. This is a voluntary plan in which
executives are encouraged to participate and achieve a target ownership over a 5
year period in annual increments of 20% or more. The target ownership is equal
to two times the Chief Executive Officer's base salary and one times the
individual Vice Presidents' base salary. To encourage participation, the
Company's Treasury Stock will be sold by the Company to executives under this
voluntary purchase program. The price will be equal to the greater of: 95% of
the price set by the Board of Directors on an annual basis or 85% of the fair
market value of the stock on the date of transaction. The various vehicles that
are available to executives to obtain ownership of the company's stock are as
follows: 401 (k) Plan contributions, personal IRA account purchases, Deferred
Compensation Plan contributions, outright purchase of stock or exercising and
holding vested stock options. The discounted price is not applicable to
exercising and holding of vested stock options.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CERTAIN FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements include the statement relating to the
ability to make required interest payments in the first sentence in the last
paragraph under "Financing Activities" and the statements below under "Factors
Affecting Future Operating Results." In addition, the Company may from time to
time make oral forward looking statements. These forward looking statements are
based on current expectations and entail various risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward looking statements as a result of a number of factors, including those
set forth below under "Factors Affecting Future Operating Results." The
following discussions titled "Annual Results of Operations" and "Liquidity and
Capital Resources" should be read in conjunction with the condensed consolidated
financial statements and related notes included elsewhere herein, the Company's
annual report on Form 10-K, as well as the section below entitled "Factors
Affecting Future Operating Results."
ANNUAL RESULTS OF OPERATIONS
NET SALES
Net sales in fiscal 1997 increased 6.7% to $195.3 million from $183.0 million
earned in fiscal 1996 and increased an additional 20.9% to $236.1 million in
fiscal 1998. Revenue grew consistently both domestically and internationally.
Domestic sales increased 20.7% from 1997 to 1998 while international sales
increased 21.4% in the same period. Growth came across all the Company's market
segments and is attributed to growth in the distribution channels, substantial
growth in small and large call centers, increased acceptance of headsets into
the small office/home office market segments and new products. Domestic US sales
were lead by a 50% increase in sales through retail channels, principally due to
increased penetration of headsets into the office and home office market
segments.
The Company's net sales to customers outside the United States, predominately in
Europe, were $49.0, $59.6 and $72.4 million in fiscal 1996, 1997 and 1998,
respectively, and accounted for 26.8%, 30.5% and 30.7%, respectively, of net
sales in those periods. International sales grew more strongly in Europe, with
sales increasing 24.6% year over year. Sales to customers in Asia, the Pacific
Rim and South America grew by 8.5%, reflecting, in part, the impact of the Asian
economic slowdown.
10
<PAGE> 16
GROSS PROFIT
The Company's gross profit increased 9.0% from $96.1 million earned in fiscal
1996 to $104.7 million in fiscal 1997 and increased an additional 21.9% to
$127.6 million in fiscal 1998. Gross profit as a percent of net sales was 52.5%
in fiscal 1996, 53.6% in fiscal 1997 and 54.0% in fiscal 1998. The $31.5 million
improvement in gross profit over the three year period primarily reflects the
impact of additional revenues with the balance coming from improved
manufacturing efficiencies and material and logistics cost reduction programs.
OPERATING EXPENSES
Operating expenses for the Company were $48.6 million or 26.5% of net sales in
fiscal 1996, $54.4 million or 27.9% in fiscal 1997 and $65.2 million or 27.6% of
net sales in fiscal 1998. Research and development increased by approximately $3
million in fiscal 1998 compared to fiscal 1997 due to the growth of the
engineering development team in Europe and costs associated with new product
development. Selling, general and administrative expenses increased by $7.8
million as compared to fiscal 1997 due principally to costs associated with
higher sales volume worldwide, increases in market research and planned
increases in general and administrative costs, including the Company's
investment in a new business information system that was implemented in the
first quarter of fiscal 1998.
INTEREST EXPENSE
Interest expense was $7.1 million in fiscal 1996, $7.1 million in fiscal 1997
and $7.0 million in fiscal 1998. Included in interest expense in fiscal 1996,
fiscal 1997, and fiscal 1998 was $0.5 million, $0.5 million and $0.4 million,
respectively, in non-cash deferred debt issuance costs related to the Senior
Notes and revolving credit facility. Unamortized deferred debt costs related to
the revolving credit facility and Senior Notes at March 31, 1998 were $1.0
million, which are being amortized over the remaining term of the debt.
FOREIGN CURRENCY
The Company's cash holdings are substantially US dollar denominated. However,
the Company is exposed to certain foreign currency fluctuations. Historically,
that risk has been primarily evident in Europe and Mexico. The source of
currency risk in Europe is due to receivables denominated in local currency.
This has been largely offset by payables denominated in local currency. This
natural hedging approach has substantially limited the Company's net exposure to
the effect of currency fluctuations and management believes additional hedging
has not been merited. This strategy will require review as the Company may
experience greater exposure to currency fluctuations as a result of its
increasing international activities. In the fourth quarter of fiscal 1996, the
company formed Plantronics B.V., a wholly owned subsidiary incorporated in the
Netherlands. Administrative functions, particularly with respect to the
Company's international sales, were transferred to Plantronics B.V. The Company
now incurs local expenses in its Plantronics B.V. subsidiary in Dutch guilders
and a smaller proportion of expenses in pound sterling, while recording no
revenue in Dutch guilders.
The Company's peso transaction exposure at its manufacturing subsidiary in
Tijuana, Mexico is limited mostly to payroll. The favorable effects to the
Company on the devaluation of the peso in the years reported was somewhat offset
by local currency pay raises to its employees in Mexico. Because of these
factors, management does not believe the devaluation has had a material effect
on the Company.
In fiscal 1998, the impact of foreign currency on operations was an unfavorable
($0.2) million compared to a favorable $0.4 in fiscal 1997.
INCOME TAX EXPENSE
In fiscal 1996, fiscal 1997, and fiscal 1998 income tax expense was $16.3
million, $15.3 million and $18.4 million, respectively, representing an
effective tax rate of 39%, 34% and 32%, respectively. The overall company-wide
effective tax rate has been falling due to the faster relative increase of
income in countries with tax rates lower than the United States.
11
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1996 and 1997, liquidity was provided by $26.9 million and $34.6
million, respectively, from operating activities. The Company's principal source
of liquidity in fiscal 1998 was $39.2 million of cash generated from operating
activities. Cash and cash equivalents increased from $42.3 million at March 31,
1997 to $64.9 million at March 31, 1998.
The Company has a $20.0 million credit facility, including a $10.0 million
letter of credit sub-facility, with a major bank. In the quarter ended March 31,
1997, the Company renegotiated the terms of its credit facility so that
borrowings are no longer secured and ongoing fees and costs are substantially
reduced. As of March 31, 1998, the Company had no cash borrowings under the
revolving credit facility and had $2.3 million outstanding under the letter of
credit subfacility.
OPERATING ACTIVITIES
In fiscal 1998, the $39.2 million in net cash generated from operating
activities primarily resulted from $39.2 in net income.
INVESTING ACTIVITIES
Capital expenditures were $3.9 million in fiscal 1996, $8.2 million in fiscal
1997, and $5.9 million in fiscal 1998. The decrease in fiscal 1998 from fiscal
1997 was caused by the completion of a significant upgrade to the Company's
business information systems which occurred primarily in fiscal 1997 and was
completed in the first quarter of fiscal 1998.
FINANCING ACTIVITIES
During fiscal 1996, financing activities consisted of receipt of $0.8 million in
stock option exercise proceeds. During fiscal 1997, the Company repurchased
701,226 shares of its Common Stock for $12.9 million and realized $1.8 million
in proceeds from the exercise of stock options and $0.1 million from the sale of
5,084 shares of Treasury Stock. In fiscal 1998, the Company repurchased 317,600
shares of its Common Stock for $13.2 million, received $1.2 million in proceeds
from the exercise of stock options and realized $1.3 million from the sale of
51,072 shares of Treasury Stock. For fiscal 1996, 1997, and 1998, aggregate
interest expense (including current interest payable in cash, deferred interest
payable in cash and amortization of debt issuance costs) was $7.1 million, $7.1
million and $7.0 million, respectively.
The Senior Notes that were issued during fiscal 1994, in the remaining principal
amount of $65.1 million, bear interest, payable semiannually, at a rate of 10%
per annum and mature on January 15, 2001. The Senior Notes are redeemable, at
the Company's option, in whole or in part, any time after January 15, 1999. The
Senior Note Indenture contains certain covenants that, among other things, limit
the ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, issue preferred stock of subsidiaries, engage in transactions with
affiliates, create liens, engage in mergers and consolidations, make certain
asset sales or make certain investments. The Senior Note Indenture also provides
that holders of the Senior Notes have the right to require the Company to
repurchase their Senior Notes in the event of a "change in control" and certain
various customary events of default.
The Company believes that its current cash balance and cash to be provided by
operations, together with available borrowing capacity under the revolving
credit facility, will be sufficient to make required interest payments under the
Senior Notes and to fund operations at least through the next 12 months. Subject
to the terms and conditions of the 10% Senior Note Indenture and the Company's
revolving credit facility, the Company may use cash for such purposes as
repurchasing Senior Notes, repurchasing the Company's Common Stock or acquiring
complementary businesses, products or technologies.
12
<PAGE> 18
FACTORS AFFECTING FUTURE OPERATING RESULTS
Plantronics participates in an increasingly volatile industry that is
characterized by industry-wide competition for business. Industry participants
confront aggressive pricing practices, continually changing customer demand
patterns, growing competition from new market entrants, and increasingly rapid
technological development. In accordance with the provisions of the Private
Securities Litigation Reform Act of 1995, the cautionary statements set forth
below discuss important factors that could cause actual results to differ
materially from the projected results contained in any forward-looking
statements in this report or otherwise made orally or in writing by the Company.
NEED TO SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS
The Company's net sales to date have been derived principally from the sale of
lightweight communications headsets ("tops") and associated telephone adapter
amplifier bases ("bottoms"). Historically, a substantial amount of the company's
sales have been made through distributors to call center users such as
telemarketing personnel, reservation agents, telephone operators and air traffic
controllers. The Company has recently expanded its marketing efforts to sell
lightweight communications headsets to the business, mobile and home office user
market segments. The Company's product development efforts historically have
been directed toward incremental enhancement of its existing products and
development of new products that capitalize on its core technologies and thus
expand the Company's product offerings to new user market segments. The success
of new product introductions is dependent on several factors, including proper
new product selection, timely completion and introduction of new product
designs, cost-effective manufacture of such products, quality of new products
and market acceptance. To be successful in the future, the Company must be able
to develop new products, qualify these new products with its customers,
successfully introduce these products to the market on a timely basis, and
commence and sustain volume production to meet customer demands. Although the
Company has attempted to determine the specific needs of these new market
segments, there is no assurance that the Company's present and future products
designed for these market segments will gain substantial market acceptance. As
discussed below, even if the market segments develop and the Company's products
meet the needs of the potential segment, there is no assurance that the Company
can cost effectively manufacture such products.
COMPETITION
The Company encounters aggressive competition in all areas of its business
activity. The Company competes primarily on the basis of technology,
performance, price, quality, reliability, distribution, and customer service and
support. As the Company develops new generations of products and enters new
market segments, including the developing business, computer, mobile and home
office user segments of the market, the Company anticipates that it may face
additional competition from companies which currently do not offer
communications headsets. Such companies may be larger, offer broader product
lines and have substantially greater financial and other resources than the
Company. Such competition could negatively affect pricing and gross margins.
Although the Company has historically competed very successfully in the call
center segment of the market, there can be no assurance that it will be able to
continue its leadership position in that segment of the market or that the
Company will be able to compete successfully in the previously defined new
market segments.
DEMAND OF CHANGING TECHNOLOGIES
The technology of telephone headsets, both "tops" and "bottoms," has
traditionally evolved slowly. Products have traditionally exhibited life cycles
of three to five years before introduction of the next generation of products.
Next generation products usually included stylistic changes and quality
improvements but were based on similar technology. The Company believes that
future changes in technology may come at a faster pace, particularly in the
telephone, wireless telephone and computer uses in the business and home office
market segments. In addition, in order to avoid product obsolescence, the
Company will have to monitor technological changes in telephone and computer
technologies, as well as users' demands for new technologies. The Company may
experience fluctuations in manufacturing yields that can materially affect the
Company's operations, particularly in the start-up phase of new products or
13
<PAGE> 19
new manufacturing processes. The Company's future success will be dependent in
part on its ability to develop products that utilize new technologies and to
introduce them successfully to the marketplace. Failure by the Company to keep
pace with future technological changes could materially adversely affect the
Company's revenues and operating results.
14
<PAGE> 20
RISKS RELATED TO GROSS PROFIT
The Company's gross profit percentage is a function of the product mix sold in
any period. Therefore, the gross profit percentage may fluctuate, affecting the
Company's operating results. Factors such as unit volumes, obsolescence/surplus
of inventory, heightened price competition, changes in channels of distribution,
shortages and cost increases in supplies of component parts from vendors, and
the availability and cost of labor, also may cause fluctuations in gross profit
percentages.
NEED TO MATCH PRODUCTION TO DEMAND
Historically, the Company has seen steady increases in customer demand for its
products and has generally been able to increase production to meet that demand.
Demand for the Company's products is dependent on many factors and such demand
is inherently difficult to forecast. Rapid increases in production levels could
require expenditures that may negatively affect gross margins and may result in
decreased manufacturing yields. Failure to balance demand and production could
result in excesses or shortages of components and parts and excesses or
shortages of manufacturing capacity. Failure to meet demand could result in the
inability to meet customer expectations and adversely affect the Company's
operations and operating results.
RELIANCE UPON SUPPLIERS
The Company's manufacturing operations primarily consist of assembly of
components and subassemblies that Plantronics manufactures or purchases from a
variety of sources. The cost, quality, and availability of such components are
essential to the successful production of the Company's communications products.
Most components and subassemblies used in the Company's manufacturing operations
are obtained, or are reasonably available, from numerous sources. However,
certain of its subassemblies and components are currently obtained only from
single suppliers. The Company currently purchases those goods on a purchase
order basis. The Company periodically experiences constrained supply of certain
component parts and such constraints, if persistent, may adversely affect
operating results until alternate sourcing can be developed. To date, the
Company has experienced only minor interruptions in the supply of these
components, none of which has adversely affected its operations. However, an
interruption in supply from any of the Company's single source suppliers in the
future could temporarily result in the Company's inability to deliver products
on a timely basis, which in turn could adversely affect its operations.
IMPORTANCE OF PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
The Company's success will depend in part on its ability to obtain patents and
preserve other intellectual property rights covering the design and operation of
its products. The Company currently holds certain patents and intends to
continue to seek patents on its inventions when appropriate. The process of
seeking patent protection can be lengthy and expensive, and there can be no
assurance that patents will issue from currently pending or future applications
or that the Company's existing patents or any new patents issued will be of
sufficient scope or strength or provide meaningful protection or any commercial
advantage to the Company. The Company may be subjected to, or may initiate,
litigation or patent office interference proceedings, which may require
significant financial and management resources. The failure to obtain necessary
licenses or other rights or the advent of litigation arising out of any such
claims could have a material adverse effect on the Company's operations.
RISK ASSOCIATED WITH FOREIGN OPERATIONS AND SALES
Approximately 30.7% of the Company's net sales in fiscal 1998 were derived from
customers outside the United States. In addition, the Company conducts
substantially all of its headset assembly operations in its Mexican
manufacturing facility and obtains most of the components of its products from
various foreign suppliers. Offshore operations are subject to certain inherent
risks, including delays in transportation, changes in governmental policies,
taxes, tariffs and import/export regulations, political unrest, fluctuations in
currency exchange rates and geographic limitations on management controls and
reporting. There can be no assurance that the inherent risks of offshore
operations, particularly in
15
<PAGE> 21
Mexico, will not adversely affect the Company's business, operating results and
financial condition in the future.
Although the Company generally transacts business internationally in United
States currency, declines in the values of local currencies relative to the
United States dollar in countries in which the Company sells its products could
adversely affect the Company by resulting in less competitive pricing for the
Company's products. Substantial increases in the values of local currencies
relative to the United States dollar in countries in which the Company purchases
components or assembles products could adversely affect the Company by
increasing the cost of its products, decreasing margins or possibly requiring
less competitive pricing because of resulting price increases. The Company does
not currently engage in any hedging activities to mitigate exchange rate risks
and to date has not been adversely affected by fluctuating currencies. To the
extent that the Company is successful in increasing its sales to foreign
customers, or to the extent that the Company increases its transactions in
foreign currencies, the Company's results of operations could be adversely
affected by exchange rate fluctuations.
DEPENDENCE UPON SENIOR MANAGEMENT
The Company believes that it has benefited substantially from the leadership of
Robert S. Cecil, the Chairman of the Board and Chief Executive Officer of the
Company, and the other current members of senior management, and that the loss
of their services could have a material adverse effect on the Company's business
and future operations. Although the Company has an employment agreement with Mr.
Cecil, such agreement permits him to voluntarily terminate his employment at any
time. In addition, although Mr. Cecil's agreement contains a five-year
non-compete covenant which takes effect upon termination of his employment, such
covenants are generally not enforceable under California law.
CONCLUSION
Because of the foregoing factors, as well as other variables affecting or which
could affect the Company's operating results, past financial performance should
not be considered a reliable indicator of future performance. Investors should
not rely upon historical trends to anticipate results or trends in future
periods.
16
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Plantronics, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
statements of operations, of cash flows and of stockholders' equity present
fairly, in all material respects, the financial position of Plantronics, Inc.
and its subsidiaries at March 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
/s/ PRICE WATERHOUSE LLP
San Jose, California
April 17, 1998
<PAGE> 23
BOARD OF DIRECTORS
Robert S. Cecil
Chairman of the Board and
Chief Executive Officer
Robert F.B. Logan
Private Investor
M. Saleem Muqaddam
Vice President
Citicorp Venture Capital, Ltd.
John Mowbray O'Mara
Management Consultant
Trude C. Taylor
Private Investor
J. Sidney Webb
Chairman of the Board
The Titan Corporation
David A. Wegmann
Private Investor
EXECUTIVE OFFICERS
Robert S. Cecil
Chairman of the Board and
Chief Executive Officer
S. Kenneth Kannappan
President and Chief Operating Officer
Benjamin Brussell
Vice President-Corporate
Development
C. Donald Cooper
Senior Vice President and Chief
Strategy Officer
Donald S. Houston
Senior Vice President-Sales
David Huddart
Senior Vice President-
Engineering and Technology
Farhad Kashani
Senior Vice President-Operations
John A. Knutson
Vice President-Legal, Senior General
Counsel and Secretary
H. Craig May
Senior Vice President-Marketing
Barbara V. Scherer
Senior Vice President-Finance and
Administration and Chief Financial
Officer
CORPORATE INFORMATION
Corporate Headquarters
337 Encinal Street
Santa Cruz, California 95060
Telephone: 408-426-6060
Fax: 408-426-6098
http://www.plantronics.com
Registrar and Transfer Agent
Boston EquiServe, L.P.
Shareholder Services
MailStop: 45-01-06
P.O. Box 644
Boston, Massachusetts 02102-0644
Independent Accountants
Price Waterhouse LLP
San Jose, California
Corporate Counsel
Wilson Sonsini Goodrich & Rosati
Palo Alto, California
FORM 10-K
A copy of the Annual Report on Form
10-K filed with the Securities and
Exchange Commission that contains
additional information about the
Company may be obtained without
charge by writing to:
Investor Relations
Plantronics, Inc.
P.O. Box 1802
Santa Cruz, CA 95061-1802
MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock, $.01
par value, has traded on the New
York Stock Exchange, under the
symbol "PLT," since the Company's
initial public offering on January
19, 1994. The initial offering
price was $6.25 per share.
The following table sets forth the
high and low daily sales prices for
the Common Stock for the Company's
1997 and 1998 fiscal years.
<TABLE>
<CAPTION>
FY 1997 Low High
<S> <C> <C>
First Quarter $17 11/16 $20 1/4
Second Quarter $18 1/2 $19 3/4
Third Quarter $18 5/16 $22
Fourth Quarter $21 1/2 $24 7/8
</TABLE>
<TABLE>
<CAPTION>
FY 1998 Low High
<S> <C> <C>
First Quarter $20 1/4 $25 3/16
Second Quarter $25 $38 3/4
Third Quarter $33 15/16 $41 7/16
Fourth Quarter $39 1/4 $44 3/4
</TABLE>
No cash dividends were declared or
paid during fiscal 1997 and fiscal
1998, and the Company has no
current intention to pay dividends.
As of March 31, 1998, there were
approximately 84 holders of record
of the Company's Common Stock.
PLANTRONICS WORLDWIDE OPERATIONS
Computer and Mobile Systems Division
345 Encinal Street
Santa Cruz, California 95060
Telephone: 408-426-5858
Fax: 408-458-7787
Plamex, S.A. de C.V.
Avenida Produccion, #12
Parque Industrial Internacional Tijuana
Mesa de Otay
Tijuana, Baja California 22390
Mexico
Telephone: 011-52-66-822798
Fax: 011-52-66-822796
Plantronics Acoustics Italia S.r.l.
Centro Direzionale Lombardo Palazzo E/2
Via Roma 108
20060 Cassina de' Pecchi
Milano, Italy
Telephone: 011-39-295-11900-1-2
Fax: 011-39-295-11903
Plantronics A.G.
c/o Plantronics Limited
Interface Business Park
Bincknoll Lane
Wootton Bassett, Wiltshire
SN4 8QQ England
Telephone: 011-44-1793-848999
Fax: 011-44-1793-848853
Plantronics B.V.
Antareslaan 9
2132 JE Hoofddorp
Netherlands
Telephone: 011-31-23-5648010
Fax: 011-31-23-5626790
Plantronics Canada Limited
c/o Andrews & Associates
225 Hymus Boulevard, Suite 10
Pointe Claire, Quebec
H9R 1G4 Canada
Telephone: 514-694-3185
Fax: 514-694-7770
Plantronics France S.A.R.L.
Parc Technologique "La Corvette"
142-176 Avenue de Stalingrad
92700 Colombes, France
Telephone: 011-33-1-46-49-83-00
Fax: 011-33-1-46-49-83-09
Plantronics GmbH
Mail: Postfach 7146
50342 Hurth, (Cologne) Germany
Telephone: 011-49-2233-932340
Fax: 011-49-2233-373274
Plantronics Hong Kong
Ste. 1111, Tower II
Silvercord Bldg., 30 Canton Road
Tsim Sha Tsui, Kowloon
Hong Kong
Telephone: 011-852-2375-8480
Fax: 011-852-2377-0573
Plantronics International do Brasil LTDA
Rua Jesuino Arruda, 676-154
04532-082 Sao Paulo, SP Brazil
Telephone: 011-55-11-282-8759
Fax: 011-55-11-3064-5309
Plantronics K.K.
1-22-7, Naka-Cho, Musashino-shi
Tokyo 180, Japan
Telephone: 011-81-422-55-0805
Fax: 011-81-422-55-0806
<PAGE> 24
Plantronics Limited
Interface Business Park
Bincknoll Lane
Wootton Bassett, Wiltshire
SN4 8QQ England
Telephone: 011-44-1793-848999
Fax: 011-44-1793-848853
Plantronics Nordic
Oskarsvagen 10
S-702 14 Orebro
Sweden
Telephone: 011-46-19-121930
Fax: 011-46-19-121933
Plantronics Pty Limited
Level 27
530 Collins St.
Melbourne, Victoria 3000 Australia
Plantronics Singapore
391 A Orchard Road
#12-01 Ngee Ann City, Tower A
Singapore 238873
Telephone: 011-65-838-5239
Fax: 011-65-235-1447
Plantronics Spain
Calle Orense 8
(Oficinas) First Floor
28020 Madrid, Spain
Telephone: 011-34-91-514-94-06
Fax: 011-34-91-514-94-66
Walker Equipment Division
4009 Cloud Springs Road
Ringgold, Georgia 30736
Telephone: 706-861-2212
Fax: 706-861-5069
Copyright (C) 1998, Plantronics, Inc.
All rights reserved. Printed in U.S.A.
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARIES OF REGISTRANT INCORPORATION
- ------------------------------------------------------------------------- ------------------
<S> <C>
Plamex, S.A.............................................................. Mexico
Plantronics A.G......................................................... Cham, Switzerland
Plantronics Holdings Limited*............................................ Canada
Plantronics Canada Limited(1)............................................ Canada
Plantronics GmbH(2)...................................................... Germany
Plantronics Limited(2).................................................. England
Plantronics Acoustics Italia S.r.l.(2).................................. Italy
Plantronics France S.A.R.L.(3)........................................... France
Plantronics B.V.(1)...................................................... Netherlands
Plantronics International do Brasil LTDA(4).............................. Brazil
Pacific Plantronics, Inc.(1)*............................................ California
Frederick Electronics Corporation*....................................... Maryland
Emtel, S.A.(1)*.......................................................... Mexico
Plantronics K.K.(4)...................................................... Japan
Plantronics Pty Limited.................................................. Australia
</TABLE>
- ---------------
* Inactive
(1) 100% owned by Plantronics Holdings Limited, except for qualifying shares, if
any.
(2) 100% owned by Plantronics, A.G., except for qualifying shares, if any.
(3) 100% owned by Plantronics Limited, except for qualifying shares, if any.
(4) 99% owned by Plantronics, Inc. and 1% owned by Plantronics B.V.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-19351; 333-14833; and 33-81980) and in the
Prospectus constituting part of the Registration Statement on Form S-3 (No.
33-70744) of Plantronics, Inc. of our report dated April 17, 1998 appearing on
page 22 of the Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
San Jose, California
June 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31,1998 AND THE STATEMENT OF INCOME FOR THE FISCAL YEAR THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND ACCOMPANYING NOTES APPEARING IN THE COMPANY'S 1998 ANNUAL
REPORT TO STOCKHOLDERS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-START> MAR-30-1997
<PERIOD-END> MAR-28-1998
<EXCHANGE-RATE> 1
<CASH> 64,901
<SECURITIES> 0
<RECEIVABLES> 43,302
<ALLOWANCES> 1,752
<INVENTORY> 29,741
<CURRENT-ASSETS> 140,096
<PP&E> 45,663
<DEPRECIATION> 24,408
<TOTAL-ASSETS> 165,475
<CURRENT-LIABILITIES> 41,337
<BONDS> 65,050
0
0
<COMMON> 174
<OTHER-SE> 53,262
<TOTAL-LIABILITY-AND-EQUITY> 165,475
<SALES> 236,112
<TOTAL-REVENUES> 236,112
<CGS> 108,514
<TOTAL-COSTS> 108,514
<OTHER-EXPENSES> 65,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,984
<INCOME-PRETAX> 57,632
<INCOME-TAX> 18,443
<INCOME-CONTINUING> 39,189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,189
<EPS-PRIMARY> 2.38<F1>
<EPS-DILUTED> 2.15
<FN>
<F1>For Purpose of This Exhibit, Primary means Basic.
</FN>
</TABLE>
