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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 27, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12696
PLANTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0207692
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
345 ENCINAL STREET, P.O. BOX 1802
SANTA CRUZ, CALIFORNIA 95061-1802
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (831) 426-5858
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
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 $61.94 for shares of the
registrant's Common Stock on June 4, 1999 as reported by the New York Stock
Exchange, was approximately $673,156,983. In calculating such aggregate market
value, shares of Common Stock owned of record or beneficially by officers,
directors, and persons known to the registrant to own more than five percent of
the registrant's voting securities (other than such persons of whom the Company
became aware only through the filing of a Schedule 13G filed with the Securities
and Exchange Commission) 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 4, 1999: 16,716,922.
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 27, 1999 (Parts I, II
and IV) and (2) portions of registrant's proxy statement for its annual meeting
of stockholders to be held on July 20, 1999 (Part III).
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PLANTRONICS, INC.
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Item 1. Business....................................................................................... 3
Item 2. Properties..................................................................................... 13
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........................... 14
Item 6. Selected Financial Data........................................................................ 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 14
Item 8. Financial Statements and Supplementary Data.................................................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 21
PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 22
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 22
Item 13. Certain Relationships and Related Transactions................................................. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 23
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Plantronics, the logo design, Plantronics and the logo design together, Clarity,
Encore, FreeHand, Mirage, PLX, Silent Sentry, SoundGuard, StarSet, Supra and
TriStar are registered United States trademarks of Plantronics, Inc. AirSet,
DuoSet, Headset Switcher, Practica, Quick Disconnect, SoundGuard Plus, the clear
color and the curvature of the Plantronics voice tube, Vista and Walker are
trademarks of Plantronics, Inc. Certain of the foregoing trademarks are
registered trademarks in certain foreign countries. This report also includes
trademarks of companies other than Plantronics.
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PART I
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. Such statements include, our belief that the
number of call center users will continue to grow (at page 3 of this Annual
Report), our belief that the current level of adoption of headsets in the office
presents a long-term opportunity to increase headset sales to office workers (at
page 4), our intent to ship a full line of headsets for use with computers (at
page 8), our intent to increase our spending for research, development and
engineering in subsequent fiscal years (at page 8), our belief that
technological advances in managing telephone calls will be more than offset by
the expansion of telemarketing and catalog sales (at page 9), the belief that
our experience in design and manufacture of comfortable and well fitting
headsets for use in the call center will assist us in our efforts to sell
headset products in the office and residential market segments (at page 9), and
our intent to continue to seek patents on our inventions when appropriate (at
page 10). In addition, we 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. Our actual results could differ
materially from those anticipated in such forward-looking statements as a result
of a number of factors, including without limitation those factors discussed in
the Risk Factors section of this Report commencing at page 14. This Annual
Report on Form 10-K and should be read in conjunction with the condensed
consolidated financial statements and related notes set forth in our Annual
Report to security holders for the fiscal year ended March 27, 1999, and the
section titled Management's Discussion and Analysis of Financial Condition and
Results of Operation of such Annual Report to security holders.
ITEM 1. BUSINESS
GENERAL
Plantronics, Inc. ("we", the "Company" or the "Registrant") is a leading
designer, manufacturer and marketer of lightweight communications headsets and
headset accessories and services. In addition, we manufacture and market
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.
Our headsets, which can be worn over the head, in the ear or on either ear,
are recognized in the industry for their safety, quality and reliability. Our
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. While we believe that the number of call center
users in these geographic markets will continue to grow, we expect that the
primary source of future sales in this market segment will result from repeat
sales to existing customers, including the replacement of products presently in
use with new and improved products.
We have 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. Our headsets
are also becoming more widely used in the Middle East, Africa, Australia, the
Far East and Latin America. 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 telemarketing
techniques.
We also sell headsets in the business and home office user market segment,
which we have identified as an area of long-term growth potential. Users in this
market segment 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 segment 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, voice recognition, personal computer
conferencing, computer telephony integration ("CTI"), and multimedia
applications.
We sell our headsets to a broad and diverse group of end-user customers
worldwide, including regional telephone operating companies worldwide, operators
of private telephone networks, and governmental agencies in the United States.
We distribute our products through large electronics wholesalers, specialized
headset distributors, directly to original equipment manufacturers
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("OEMs"), and through retail channels, such as office supply and consumer
electronics stores, mail order catalogs, warehouse clubs and office supply
distributors.
INDUSTRY BACKGROUND
Headsets are used in call centers, offices, cars and homes and with various
terminal devices such as wireline, cellular and cordless telephones and
computers. Specifically, headsets:
- allow people to have both hands free to use a computer, take notes,
organize files, drive a car, complete household tasks or perform other
tasks while they talk on the telephone;
- provide increased sound quality to telephone users by reducing
background noise;
- relieve the repetitive stress and discomfort associated with placing a
telephone handset between the shoulder and neck; o allow people to use
speech recognition software instead of keyboards for faster, more
convenient writing with a computer; and
- provide greater privacy than speakerphones.
The largest group of headset users are call center agents who are on the
telephone throughout their work day. The number of call center agents has grown
as companies have sought to (i) focus on customer service to provide a
competitive advantage, (ii) reduce costs through the use of real-time
centralized information exchange and customer interaction, and (iii) make
greater use of cost-effective direct distribution models. As the benefits of
call centers become more widely recognized and the system cost per agent
declines, the establishment of call centers is spreading to smaller
organizations and international firms. Agent productivity in call centers is
important in minimizing costs and reducing customer wait time, and, therefore,
the ability to effectively and simultaneously use a telephone and keyboard is
critical. As the call center market segment has grown, the benefits of headsets
have become widely recognized as an essential component of a productive and safe
workplace.
The office market segment, both corporate and small office/home office
("SOHO"), has become an increasingly important market segment for headsets over
the last five years. The increasing and simultaneous use of telephones and
computers by office workers and a growing awareness of the benefits of headsets
have contributed to the growth of this market segment. Professionals who spend
significant time on the telephone have been early adopters of headset products.
These professionals include securities brokers, insurance agents, sales
executives, credit controllers, and purchasing agents. We believe that the level
of headset use in the office is low, providing a long-term opportunity to
increase headset sales to office workers.
Headset demand is also emerging in the mobile, computer and residential
market segments. Drivers increasingly seek the hands-free benefits of headsets,
as the use of mobile phones in cars continues to grow worldwide. Headsets are
also an important interface for computerized speech recognition programs, which
broaden the application of headsets from voice to written communication by
substituting voice for keyboard entry. Finally, the availability of low-cost
cordless phones with headset ports is beginning to facilitate headset adoption
in the residential market segment by individuals who want the ability to perform
multiple tasks while speaking on the telephone.
INDUSTRY SEGMENTS AND FOREIGN OPERATIONS
We operate in one industry segment. Financial information about foreign and
domestic operations and export sales, included in Note 9 to our Consolidated
Financial Statements, appearing at page 19 of our 1999 Annual Report to
Stockholders is incorporated herein by this reference.
In each of the past three fiscal years (fiscal 1999, 1998 and 1997)
approximately 30.5% of our net sales were derived from sales to foreign
customers. Sales to foreign customers are generally subject to such risks as
fluctuations in exchange rates, increased tariffs and the imposition of other
trade barriers. We do not currently engage in any hedging activities to mitigate
exchange rate risks and to date have not been adversely affected by fluctuating
currencies. To the extent that we are successful in increasing our sales to
foreign customers, or to the extent that we increase our transactions in foreign
currencies, our results of operations could be adversely affected by exchange
rate fluctuations.
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PRODUCTS
Our product line consists of lightweight communications headsets, headset
accessories and services, and specialty telephone products. Our headsets
incorporate unique features that we believe offer compelling performance
advantages:
- Comfort. We maintain what we believe is the industry's most extensive
database for the design of comfortable headsets. Our database includes
measurements from over 800 physical molds taken of different ear
types. The measurements are digitized and stored in a CAD/CAM database
along with critical head contour measurements. In addition, we study
weight drag to determine optimum weight distribution on the ear. We
believe our focus on ergonomics has been critical to our success in
designing products which are more comfortable, including our more
recent adjustable Encore and TriStar product families.
- Sound Quality. In designing our products, we have conducted headset
sound quality (e.g. preference and intelligibility) research on
substantially all telephone systems in both listening and speaking
modes. We believe we have achieved the industry's best signal-to-noise
ratios, the most powerful noise canceling performance (to block out
background sounds in unusually loud environments) and the only design
(the trademark clear and curved Plantronics Voice Tube - the "Voice
Tube") which does not require the microphone boom to be positioned
precisely for proper functioning and is ideal for most office and call
center environments. The Voice Tube design has the additional benefits
of a more attractive appearance, easy hygienic replacement, and
lighter weight. The Encore product family also incorporates what we
believe is the industry's only tone control in a headset top.
- Durability. We have over 37 years of experience understanding headset
durability and have successfully incorporated this knowledge into
certain product designs which we believe generally last longer than
the best comparable competitive products.
In addition to the features incorporated into our products, we provide
service, support, supplies and accessories. We believe our customer support and
service program provides our end users and customers with easier access to
Plantronics and is an important competitive advantage.
HEADSETS
Headsets consist of two distinct units. The "top," which is the portion
that the user wears and which is comprised of the receiver capsule and voice
tube, 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 four basic headset "top" styles:
- 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, and the unit's dual ear cushions help block out background
noise. We introduced a new product in this category in fiscal
year 1996, the Encore headset, with a design developed from data
in our human factors database. The Encore headset features all of
the qualities of the Supra headset, plus 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
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performance. Our CAT132 and CHS132 models are versions of the
FreeHand headset designed for use with personal computers and
mobile telephones, respectively.
We manufacture a broad line of headset top styles, which can be worn over
the head, in the ear or on either ear. Most of our headsets offer either the
proprietary Plantronics Voice Tube (our most popular solution, suitable for the
majority of environments) or a noise-canceling microphone (appropriate for users
in very loud environments). All telephone-based headset tops, in conjunction
with their associated bases, are designed for use with substantially all of the
different telephone systems currently available. Basic models include 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 their
call.
Our principal headset top styles and major products in each category are as
follows:
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PRODUCT DESCRIPTION FEATURES
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OVER-THE-HEAD HEADSETS WITH EAR CUSHIONS
SUPRA Our most popular headset, ideal for Engineered for sound quality and durability.
phone-intensive jobs and call center Sound reception in one or both ears.
environments.
ENCORE Also used in call centers; designed for User-controllable tone adjustment and powerful
near-universal fit and all-day comfort. noise canceling performance.
BEHIND-THE-EAR HEADSETS
MIRAGE Uses a miniaturized behind-the-ear capsule Rests gently on the ear, not in the ear. Can be
with an adjustable receiver. worn on either ear.
STARSET Has an acoustic eartip that fits gently in Ultra-lightweight, with an acoustic seal to block
the outer portion of the ear. out unwanted background noise.
TRISTAR Stylish design for phone intensive jobs and Feather-weight ( 1/2 ounce), with maximum user
call center environments. adjustments designed for stability, comfort and
sound quality.
IN-THE-OUTER-PORTION-OF-THE-EAR HEADSET
FREEHAND Designed for business professionals, this Small and unobtrusive, easy to put on and
headset features a small earbud which rests take off.
comfortably in the ear.
CONVERTIBLE HEADSET
DUOSET Appropriate for business professionals who Easily convertible from over-the-head to
want a headband for longer calls as well as over-the-ear for greater versatility.
an over-the-ear headset for intermittent
phone use.
COMPUTER HEADSETS
SR1 Speech recognition headset for use with Monaural headset with noise canceling
speech recognition applications and general microphone in a lightweight over-the-head
use with the computer. form.
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LS1 Multimedia stereo headset for use with Lightweight stereo headset with noise
speech recognition applications and canceling microphone and an inline control
multimedia applications. module for speaker volume and microphone
mute.
HS1 Gaming headset for use with all multimedia High fidelity speakers with dynamic bass
applications and computer games, as well as response, a noise canceling microphone
voice recognition and voice command swings out of the way when not needed.
applications. Complete with an inline control module for
speaker volume and microphone mute.
MOBILE HEADSETS
CHS LINE Available in various styles, including Reduces background noise and can be used
over-the-head and over-the-ear. with both cellular and PCS phones.
CORDLESS HEADSET
CT-901-HS 900 MHz cordless headset telephone. Provides extended cordless mobility with
hands-free convenience.
BUNDLED HEADSETS
SP/PLX SERIES Designed specially for the SOHO user; sold Offers comfort and ease of use.
with an adapter or telephone.
PRACTICA SERIES Designed for low to medium intensive phone Offers good sound quality and durability at
users who require a less expensive headset; an attractive retail price.
sold with an adapter or telephone.
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HEADSET AMPLIFIERS AND TELEPHONES
We sell a full range of amplifiers or "bases" designed to work with
substantially all telephone systems. Our amplifiers include the following:
- Vista Universal Modular Amplifier -- compatible with single or
multi-line telephones; features the SoundGuard Plus system, which
provides volume control for improved audio comfort and clarity.
- Plug Prong Amplifier -- designed for automatic call distribution
systems.
- Headset Switcher Multimedia Amplifier -- allows for use with a
telephone or computer by simply flipping a switch.
- E-10 In-Line Amplifier -- designed for use directly on the
telephone line to reduce desk clutter.
- SP/PLX Series - single and two-line amplifiers or headset
telephones, bundled with a headset
- Practica Series - entry level amplifier or telephone system,
bundled with a headset
- Wireless Amplifier - the CT-901 900 MHz cordless amplifier
- Mobile Phone Adapters -- designed for use with cellular and PCS
phones lacking built-in headset ports.
Our Walker Equipment Division also sells the Clarity telephone, 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 telephone rings.
HEADSET ACCESSORIES AND SERVICES
Headset accessories include replacement voice tubes, training cords, ear
cushions, eartips, in-use indicators, theft protection devices and background
noise suppressors. These products allow end users to revitalize their headset
tops to maintain maximum performance and comfort. We support our product
offering with a service center which addresses consumer questions and provides
access to our full suite of product offerings and refurbishment accessories.
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SPECIALTY PRODUCTS
Through our Walker Equipment Division we also manufacture and sell
specialty telephone products including amplified telephones and handsets and
telephone amplifier accessories for the hearing-impaired and line test
equipment. The Walker Equipment 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.
In addition, our specialty products operation provides headsets and other
equipment for special applications that are not served by our standard headset
product lines.
In Europe we developed the StarBase headset telephone, which is a
full-featured single-line telephone to which nearly all of our 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 our design efforts. We maintain an extensive
database of head and ear shapes to assist in the development of our products.
Our concern for "human engineering" and our 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.
We have 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. In April 1999, we
announced the creation of a new division, the Computer Audio Systems Division
("CASD"). CASD was founded to develop headset solutions for an emerging
generation of speech applications. We have developed and will be shipping in
fiscal year 2000 a full line of headsets for use with personal computers. The
product line includes a speech recognition headset for office use, a speech
recognition/stereo headset for both office and home entertainment and a
multimedia/gaming headset for use with multimedia applications.
Most of our research and development is carried out by our in-house
engineering staff in the United States, England and Mexico. We supplement our
in-house engineering capabilities through selected outside contracting
arrangements. Research, development and engineering expenditures were $14.5
million, $17.5 million and $19.5 million for the fiscal years ended March 29,
1997, March 28, 1998 and March 27, 1999, respectively. We believe that
substantial investment in research and development is important for the Company
to maintain our position in the industry and, therefore, intend to increase our
spending for research, development and engineering in subsequent fiscal years.
Our product development efforts are directed toward both enhancing our
existing products and developing new products that capitalize on our core
technology and expand our 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, we must be
able to develop new products, qualify these products with our customers,
successfully introduce these products to the market on a timely basis, and
commence and sustain volume production to meet customer demands. Although we
have 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 our existing and future products designed for these market
segments will gain substantial market acceptance. Further, assuming the market
segments develop and our 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. We believe 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. Our future success will be dependent in part on our ability to
develop products that utilize new technologies and to introduce them to the
marketplace successfully. In addition, in order to avoid product obsolescence,
we 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 our revenues and
operating results.
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SALES AND DISTRIBUTION
Our principal customers are distributors, OEM partners and telephony
service providers who primarily sell our products in the call center and office
end-user market segments. Additionally, we sell into retail channels primarily
for the office market segment. We sell products to over 250 customers in more
than 60 countries.
Specialized headset distributors represent our largest distribution
channel. These distributors generally sell on a national basis, and the bulk of
their revenues are from headset sales. Electronics wholesalers represent our
second largest channel. They typically offer a wide variety of products from
multiple vendors to both resellers and end users.
OEMs supply to their customers automatic call distributor systems and other
telecommunications and computer equipment that utilize headsets. OEMs do not
typically manufacture their own headsets, and therefore they often distribute
Plantronics headsets on a private label or co-branded basis. We believe that we
are currently the predominant supplier of headsets to Lucent Technologies
(formerly part of AT&T) and, although Lucent Technologies does not account for
ten percent (10%) or more of our consolidated revenues, we believe that the loss
of that customer could have a material adverse effect on our business and
results of operations.
The telephony service provider channel is comprised of former Regional Bell
Operating Companies and other telephone service providers which purchase
headsets from us for use by their own agents. Certain of these service providers
also resell headsets to their customers.
The retail channel encompasses office supply and consumer electronics
retailers, warehouse clubs, consumer products and office supply distributors,
and catalog and mail order companies. Retailers primarily sell headsets to small
businesses, small offices and home offices.
We also make direct sales to certain government agencies, including NASA
and the FAA. In addition, certain of our distributors are authorized resellers
under a GSA schedule price list and sell our products to government customers
under that agreement.
We maintain a sales force in the United States and in various overseas
countries to provide ongoing customer support and service. We also employ
manufacturers' representatives to assist in selling through the retail channel.
BACKLOG
Our backlog of unfilled orders was $11.1 million on March 27, 1999,
compared to $31.4 million on March 28, 1998. This reduction in backlog is the
result of our efforts to increase customer service by reducing lead times,
defined as the average length of time between our receipt of an order and the
date which we ship the order. Generally, we are shipping products within two to
four weeks from receipt of an order, compared to longer lead times as of the end
of fiscal 1998. We include in backlog all purchase orders scheduled for delivery
over the next 12 months. Our backlog is generally subject to cancellation or
rescheduling by the customer on short notice with little or no penalty. While we
have not experienced any significant cancellations in the past, we do not
believe our backlog as of any particular date is indicative of actual sales for
any future period and therefore should not be used as a measure of future
revenue. Our business is not seasonal.
COMPETITION
We compete in several different market segments, specifically the call
center, the office and for residential use. There are a number of different
competitors in each of the market segments in which we compete. We believe the
principal competitive factors in our business are product reliability; product
features, comfort and fit; customer service and support; reputation;
distribution; ability to meet delivery schedules; warranty terms; product life;
and price. We believe that our brand name recognition, distribution network,
large user base and large number of product variations, together with our
extensive experience in designing safe, comfortable and reliable products,
dealing with regulatory agencies and servicing and repairing headsets, are the
key factors for the Company to maintain our position as a leading supplier of
lightweight communications headsets.
In the call center user segment of the market, we face different
competitors depending on the channel of distribution and the geographic
location. We anticipate that we 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. We
believe that this trend will be more than offset by the expansion of
telemarketing and catalog sales. Although we have historically competed very
successfully in the call center user segment of the market, there can be no
assurance that we will be able to continue our leadership position in that
segment of the market.
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Our market in the office, including both traditional offices and the small
or home office, and residential segments involves the sale of headsets for
connection to single line or office telephone systems, cellular telephones and
computers. Certain of the entities which are our competitors in the call center
user market currently sell headsets for use in the office and residential
segments. There are also certain competitors who sell exclusively outside the
call center segment. As we develop new generations of products and enter new
market segments, including the developing business and home office user segment
of the market, we anticipate that we 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. We believe that our experience in
design and manufacture of comfortable and well fitting headsets for use in the
call center will assist us in our efforts to sell headset products in the office
and residential market segments. However, there is no assurance that we will be
able to compete successfully in these newly developing market segments.
MANUFACTURING AND SOURCES OF MATERIALS
The majority of our manufacturing operations consists of assembly and
testing, substantially all of which is performed at our facility in Mexico. We
have smaller manufacturing operations in California, Georgia and the United
Kingdom. In addition, we outsource the manufacture of a limited number of
products to third parties.
We purchase the components for our 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 our manufacturing operations
are obtained, or are reasonably available, from numerous sources, certain of our
products and components are currently procured only from single suppliers in
order to obtain volume pricing.
We generally manufacture our products to meet forecasted customer
requirements. Special products and large orders submitted with short lead times
are manufactured to order. Since most manufacturing occurs prior to the receipt
of purchase orders, Plantronics maintains an inventory of finished goods in
addition to inventories of raw materials, work in process and subassemblies and
components.
ENVIRONMENTAL MATTERS
We are subject to various federal, state, local and foreign environmental
laws and regulations, including those governing the use, discharge and disposal
of hazardous substances in the ordinary course of our manufacturing process.
Although management believes that our 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 our facilities or
operations. We have included in our financial statements a reserve of $1.5
million for possible environmental remediation related to one of our
discontinued businesses. While no claims have been asserted against us 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
We maintain a program of seeking patent protection for our technology.
Significant product features for which we have, or is currently seeking, patent
protection include our 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, self-configuring telephone interface units and various other
products and features including certain wireless technology and electronic
components. We presently have thirty-four patents in force, expiring in 2000 to
2018.
Our success will depend in part on our ability to obtain patents and
preserve other intellectual property rights covering the design and operation of
our products. We intend to continue to seek patents on our 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 our 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. We may be subjected to, or may
initiate, litigation or patent office
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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 our operations.
We own registered trademarks with respect to our name and logo design and
many of our products, including, but not limited to, our Encore, FreeHand,
Mirage, StarSet, Supra, and TriStar products and currently has trademark
applications pending in connection with new products. We also claim common law
trademark rights in many of our products and/or features. We also attempt to
protect our 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 27, 1999, there were 1,824 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. We have not
experienced any work stoppages and believe that our 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 4, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Benjamin Brussell 38 Vice President-- Corporate Development
Robert S. Cecil 64 Chairman of the Board of Directors
Donald S. Houston 45 Senior Vice President-- Sales
David Huddart 49 Senior Vice President-- Engineering and Technology
S. Kenneth Kannappan 39 President, Chief Executive Officer and Director
Farhad Kashani 46 Senior Vice President-- Operations
John A. Knutson 53 Vice President-- Legal, Senior General Counsel and Secretary
H. Craig May 39 Senior Vice President-- Marketing
Barbara V. Scherer 43 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 President and 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. Brussell is a director of Box Hill Systems
Corporation, a manufacturer of high performance data storage systems.
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. Mr. Cecil ceased serving as President of the Company in March 1998
and ceased serving as Chief Executive Officer in January 1999, due to the
promotion of Mr. Kannappan. Mr. Cecil has announced that he will not seek
re-election to the Plantronics Board of Directors at the Company's 1999 Annual
Stockholders Meeting to be held on July 20, 1999, and will no longer serve as
Chairman of the Board of Directors or as an employee of the Company as of that
date. 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 Administration. Mr. Cecil also serves on the
Board of Directors of Xantrex Technology, Inc., a Canadian company which designs
and manufactures programmable DC power supply systems and CW Saskfund III Ltd.,
a Canadian investment fund.
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
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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
Executive 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 Polytechnic and a
Management Diploma from Ashridge Management College. Mr. Huddart reports
directly to the President and Chief Executive Officer.
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 and in January 1999, Mr. Kannappan was promoted to Chief
Executive Officer and was appointed to the Board of Directors. 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. Kannappan also
serves on the Board of Directors of Mattson Technology, Inc., a supplier of
advanced process equipment for the semiconductor industry.
MR. KASHANI joined the Company in February 1998 as Senior Vice President --
Operations and reports directly to the President and Chief Executive 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 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 Executive Officer. Mr.
May was most recently 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 on 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
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<PAGE> 13
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 President and 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
Our principal executive offices are located in Santa Cruz, California. We
own or lease 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 52,200 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 2000; (iii) approximately 93,600
square feet for assembly and related operations in Tijuana, Mexico, under a
lease expiring in 2002; (iv) approximately 38,400 square feet for assembly
operations, sales and administration in Wootton Bassett, England under leases
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, Australia, Taiwan, Colorado and New Jersey. We
believe that our existing properties are generally suitable and adequate for our
business with excess capacity available for expansion.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company, nor any of our subsidiaries, is a party to any
litigation, other than non-material litigation incidental to our 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 27, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our Common Stock is publicly traded on the New York Stock Exchange. As of
June 4, 1999 there were ninety (90) holders of record of our Common Stock.
Information included in the Corporate Directory appearing on the back cover of
our 1999 Annual Report to Stockholders concerning the market price of and cash
dividends declared on our Common Stock for each quarterly period within the two
most recent fiscal years is incorporated herein by reference. The market price
of our stock as of the close of the New York Stock Exchange on June 14, 1999 was
$61 1/2 per share. Our Credit Agreement with Bank of America restricts us from
paying cash dividends on shares of our capital in an amount in excess of 50% of
our cumulative net income (net of cumulative losses) for the period commencing
February 19, 1997 through the date of declaration of any such dividend.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Financial Data"
appearing at page 30 of our 1999 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 25 through 29 of our 1999 Annual Report to
Stockholders is incorporated herein by this reference.
RISK FACTORS AFFECTING FUTURE OPERATING RESULTS
Investors or potential investors in the stock of Plantronics should carefully
consider the risks described below. The business, financial condition and
results of operations of Plantronics could be materially adversely affected if
any of the risks occur. If the risks occur, the trading price of Plantronics
stock could decline and an investor could lose all or part of his or her
investment.
DEPENDENCE ON CALL CENTER MARKET SEGMENT
We have historically derived, and continue to derive, a substantial majority of
our net sales from the call center market segment. This market segment has grown
significantly in recent years as new call centers have proliferated and existing
call centers have expanded. While we believe this market segment is continuing
to grow, in the future this growth could slow or revenues from this market
segment could decline due to various factors. For example, technological
advances such as automated interactive voice response systems could reduce or
eliminate the need for call center agents in certain applications. In addition,
consumer resistance to telemarketing could adversely affect growth in the call
center market segment. Due to our reliance on the call center market segment, we
will be affected more by changes in the rate of call center establishment and
expansion and the communications products that call center agents use than would
a company serving a broader market. We believe that our sales growth in fiscal
1999 may have been favorably affected by call centers upgrading their automatic
call distribution systems in order to be year 2000 compliant. Since our products
are sometimes bundled with new call distribution systems, this may have
accelerated some headset sales. If this has occurred, it could adversely affect
our net sales in future periods, once call centers have completed their system
upgrades. Any decrease in the demand for call centers and related headset
products could cause a decrease in the demand for our products, which would
materially adversely affect our business, financial condition and results of
operations.
FAILURE OF THE OFFICE, MOBILE, COMPUTER AND RESIDENTIAL MARKET SEGMENTS TO
DEVELOP
While the call center market segment is still the most significant part of our
business, we believe that our future prospects will depend in large part on the
growth in demand for headsets in the office, mobile, computer and residential
market segments. These communications headset market segments are relatively new
and undeveloped. Moreover, we do not have extensive experience in selling
headset products to customers in these market segments. If the demand for
headsets in these market segments fails to develop, or develops more slowly than
we currently anticipate, or if we are unable to effectively market our products
to customers in these market segments, it would have a material adverse effect
on the potential demand for our products and on our business, financial
condition and results of operations.
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OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
Our quarterly results of operations may vary significantly in the future for a
variety of reasons, including the following:
- changes in demand for our products;
- timing and size of orders from customers;
- cancellations or delays of deliveries of components and subassemblies
by our suppliers;
- variances in the timing and amount of engineering and operating
expenses;
- distribution channel volume variations;
- delays in shipments of our products;
- product returns and customer credits;
- new product introductions by us or our competitors;
- entrance of new competitors;
- increases in the costs of our components and subassemblies;
- price erosion;
- changes in the mix of products sold by us;
- seasonal fluctuations in demand; and
- general economic conditions.
Each of the above factors is difficult to forecast and thus could have a
material adverse effect on our business, financial condition and results of
operations.
We generally ship most orders during the quarter in which they are received,
and, consequently, we do not have a significant backlog of orders. As a result,
quarterly net sales and operating results depend primarily on the volume and
timing of orders received during the quarter. It is difficult to forecast orders
for a given quarter. Since a large portion of our operating expenses, including
rent, salaries and certain manufacturing expenses, are fixed and difficult to
reduce or modify, if net sales do not meet our expectations, our business,
financial condition and results of operations could be materially adversely
affected.
Our operating results can also vary substantially in any period depending on the
mix of products sold and the distribution channels through which they are sold.
In the event that sales of lower margin products or sales through lower margin
distribution channels in any period represent a disproportionate share of total
sales during such period, our operating results would be materially adversely
affected.
We believe that period-to-period comparisons of our operating results are not
necessarily meaningful and should not be relied upon as indicative of future
operating results. In addition, our operating results in a future quarter or
quarters may fall below the expectations of securities analysts or investors,
and, as a result, the price of our common stock might fall.
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WE MUST MATCH PRODUCTION TO DEMAND
Historically, we have seen steady increases in customer demand for our products
and have generally been able to increase production to meet that demand.
However, the demand for our products is dependent on many factors and such
demand is inherently difficult to forecast. Significant unanticipated
fluctuations in demand could cause the following operating problems, among
others:
- - If demand increases beyond that forecasted, we would have to rapidly
increase production. We depend on suppliers to provide additional volumes
of components and subassemblies, and, therefore, might not be able to
increase production rapidly enough to meet unexpected demand. This could
cause us to fail to meet customer expectations. There could be short-term
losses of sales while we are trying to increase production. If customers
turn to competitive sources of supply to meet their needs, there could be a
long-term impact on our revenues.
- - Rapid increases in production levels to meet unanticipated demand could
result in higher costs for components and subassemblies and higher overtime
costs and other expenses. These higher expenditures could lower our profit
margins. Further, if production is increased rapidly, there may be
decreased manufacturing yields, which may also lower our margins.
- - If forecasted demand does not develop, we could have excess production or
excess capacity. Excess production could result in higher inventories of
finished products, components and subassemblies. If we were unable to sell
these inventories, we would have to write off some or all of our
inventories of obsolete products and unusable components and subassemblies.
Excess manufacturing capacity could lead to higher production costs and
lower margins.
Any of the foregoing problems could materially adversely affect our business,
financial condition and results of operations.
WE DEPEND ON OUR SUPPLIERS
We buy components and subassemblies from a variety of suppliers and assemble
them into finished products. The cost, quality, and availability of such
components are essential to the successful production and sale of our products.
Obtaining components and subassemblies entails various risks, including the
following:
- - Prices of components and subassemblies may rise. If this occurs and we are
not able to pass these increases on to our customers or to achieve
operating efficiencies that would offset the increases, it would have a
material adverse effect on our business, financial condition and results of
operations.
- - We obtain certain subassemblies and components from single suppliers, and
alternate sources for these items are not readily available. To date, we
have experienced only minor interruptions in the supply of these components
and subassemblies, none of which has significantly affected our results of
operations. However, an interruption in supply from any of our single
source suppliers in the future would materially adversely affect our
business, financial condition and results of operations.
- - Most of our suppliers are not obligated to continue to provide us with
components and subassemblies. Rather, we buy most components and
subassemblies on a purchase order basis. If our suppliers experience
increased demand or shortages, it could affect deliveries to us. In turn,
this would affect our ability to manufacture and sell products that are
dependent on those components and subassemblies. This would materially
adversely affect our business, financial condition and results of
operations.
THE HEADSET MARKET IS HIGHLY COMPETITIVE
The market for our products is highly competitive. We compete with a variety of
companies in various segments of the communications headset market. In the call
center segment, the largest market segment in which we compete, our two largest
competitors, GN Netcom and ACS Wireless, Inc., merged to form a single company.
Although it is unclear how this merger will affect us, the merged entity will
have a broader product offering and greater marketing presence than either of
the two entities had separately. Moreover, the economies of scale that may
result from the merger could lead to increased pricing pressures in our market.
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We also anticipate that we will face additional competition from companies that
currently do not offer communications headsets. This is particularly true in the
office, mobile, computer and residential market segments. As these market
segments mature, we will face increased competition from consumer electronics
companies and other companies that currently manufacture and sell mobile phones
or computer peripheral equipment. These new competitors are likely to be larger,
offer broader product lines, bundle or integrate with other products
communications headset tops and bases manufactured by them or others, offer
products containing bases that are incompatible with our headset tops and have
substantially greater financial, marketing and other resources than we do.
We believe that important competitive factors for us are product reliability,
product features, customer service and support, reputation, distribution,
ability to meet delivery schedules, warranty terms, product life and price. If
we do not compete successfully with respect to any of these or other factors it
could materially adversely affect our business, financial condition and results
of operations. If we do not successfully develop and market products that
compete successfully with those of our competitors it would materially adversely
affect our business, financial condition and results of operations.
NEW PRODUCT DEVELOPMENT IS RISKY; WE MUST RESPOND TO CHANGING CUSTOMER
REQUIREMENTS AND TECHNOLOGIES
Our product development efforts historically have been directed toward
enhancement of existing products and development of new products that capitalize
on our core capabilities. The success of new product introductions is dependent
on several factors, including the proper selection of new product features,
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, we must develop new products, qualify these new
products, successfully introduce these products to the market on a timely basis,
and commence and sustain low-cost, volume production to meet customers' demands.
Although we attempt to determine the specific needs of headset users in our
target market segments, because almost all of our sales are indirect, we may not
always be able to timely and accurately predict end-user requirements. As a
result, our products may not be timely developed, designed to address current or
future end-user requirements, offered at competitive prices or accepted, which
could materially adversely affect our business, financial condition and results
of operations. Moreover, we generally incur substantial research and development
costs before the technical feasibility and commercial viability of a new product
can be ascertained. Accordingly, revenues from new products may not be
sufficient to recover the associated development costs.
Historically, the technology used in lightweight communications headsets has
evolved slowly. New products have primarily offered stylistic changes and
quality improvements, rather than significant new technologies. We anticipate
that the technology used in hands-free communications devices, including our
products, will begin to evolve more rapidly in the future. We believe that this
is particularly true of the office, mobile and residential market segments,
which may require us to develop new headset technologies to support cordless and
wireless operation and to interface with new communications and computing
devices. As a result, our success depends upon our ability to enhance existing
products, to respond to changing market requirements, and to develop and
introduce in a timely manner new products that keep pace with technological
developments. If we are unable to develop and introduce enhanced products or new
products in a timely manner in response to changing market conditions or
customer requirements, it will materially and adversely affect our business,
financial condition and results of operations.
WE DEPEND ON OUR DISTRIBUTION CHANNELS
We sell substantially all of our products through distributors, OEMs, retailers
and telephony service providers. Our existing relationships with these parties
are nonexclusive and can be terminated by either party without cause. Our
channel partners also sell or can potentially sell products offered by our
competitors. To the extent that our competitors offer our channel partners more
favorable terms, such partners may decline to carry, de-emphasize or discontinue
carrying our products. In the future, we may not be able to retain or attract a
sufficient number of qualified channel partners. Further, such partners may not
recommend, or continue to recommend, our products. The inability to establish or
maintain successful relationships with distributors, OEMs, retailers and
telephony service providers or to expand our distribution channels could
materially adversely affect our business, financial condition or results of
operations.
WE DEPEND ON S. KENNETH KANNAPPAN AND OTHER KEY PERSONNEL
Our success depends to a significant extent upon the services of a limited
number of executive officers and other key employees. On January 4, 1999, S.
Kenneth Kannappan was promoted to Chief Executive Officer of our company,
succeeding Robert S. Cecil in that capacity, and was appointed to our Board of
Directors. Mr. Kannappan joined our company in February 1995 and has held a
number
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of executive management positions, including President and Chief Operating
Officer. The unanticipated loss of the services of Mr. Kannappan or one or more
of our other executive officers or key employees could have a material adverse
effect upon our business, financial condition and results of operations.
We also believe that our future success will depend in large part upon our
ability to attract and retain additional highly skilled technical, management,
sales and marketing personnel. Competition for such personnel is intense. We may
not be successful in attracting and retaining such personnel, and, our failure
to do so could have a material adverse effect on our business, operating results
or financial condition.
CITICORP VENTURE CAPITAL RETAINS SIGNIFICANT CONTROL
Our largest stockholder, Citicorp Venture Capital, Ltd. ("CVC"), beneficially
owns 4,509,168 shares of our common stock (excluding any shares that may be
owned by employees of CVC or its affiliates), which represents approximately 27%
of our outstanding common stock as of June 4, 1999. We also have an agreement
with CVC under which it is entitled to have up to three of its designees serve
on our Board of Directors, depending on the level of CVC's continuing stock
ownership. Messrs. Robert F. B. Logan, M. Saleem Muqaddam and John Mowbray
O'Mara are currently serving as CVC's designees under that agreement.
Accordingly, CVC has the ability to exert substantial influence on the full
Board of Directors, which currently consists of seven members. In addition, our
bylaws contain provisions that require a two-thirds (66 2/3 %) supermajority
vote of the Board of Directors to approve certain transactions, including
amendments of our Certificate of Incorporation, certain provisions of our
bylaws, mergers and sales of substantial assets, acquisitions of other companies
and sales of capital stock. These provisions may have the effect of giving a
small number of directors the ability to block such transactions.
FUTURE SALES OF OUR COMMON STOCK
As of June 4, 1999, we had 16,716,922 shares of common stock outstanding. All of
these shares are freely tradable except for approximately 5,100,000 shares held
by affiliates of Plantronics. These approximately 5,100,000 shares may only be
sold in reliance on Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to an effective registration statement filed with
the Securities and Exchange Commission. Some of our current stockholders,
including CVC, Citigroup Foundation and certain of our officers, directors and
key employees, also have certain contractual rights to require Plantronics to
register their shares for public sale. An additional approximately 2,580,848
shares are subject to outstanding stock options as of June 4, 1999. Mrs. Louise
Cecil holds vested options on 628,696 shares of our common stock (assigned to
her by her husband Robert S. Cecil) and has in place an effective registration
statement filed with the Securities Exchange Commission, which allows her to
sell any or all of such shares at any time without reliance upon Rule 144.
Sales of a substantial number of shares of common stock in the public market by
CVC, Mrs. Cecil, or any of our officers, directors or other stockholders could
adversely affect the prevailing market price of the common stock and impair our
ability to raise capital through the sale of equity securities.
RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS
Approximately 30.5% of our net sales in both fiscal 1998 and fiscal 1999 were
derived from customers outside the United States. In addition, we conduct
substantially all of our headset assembly operations in our manufacturing
facility located in Mexico, and we obtain most of the components and
subassemblies used in our products from various foreign suppliers. The inherent
risks of international operations, particularly in Mexico, could materially
adversely affect our business, financial condition and results of operations.
The types of risks faced in connection with international operations and sales
include:
- cultural difference in the conduct of business;
- greater difficulty in accounts receivable collection;
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
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<PAGE> 19
- economic and political conditions in each country;
- management and operation of an enterprise spread over various
countries; and
- burden of complying with a wide variety of foreign laws.
A significant portion of our business is conducted in currencies other than the
U.S. dollar. As a result, fluctuations in exchange rates creates risk to us in
both the sale of our products and our purchase of supplies. Fluctuations in the
value of the currencies in which we conduct our business relative to the U.S.
dollar have caused and will continue to cause currency transaction gains and
losses. Although we do not currently engage in any hedging activities to
mitigate exchange rate risks, we continually evaluate programs to reduce our
foreign currency exposure. However, there can be no assurance that we will not
continue to experience currency losses in the future, nor can we predict the
effects of future exchange rate fluctuations on future operating results. To the
extent that sales to our foreign customers increase or transactions in foreign
currencies increase, our business, financial condition and results of operations
could be materially adversely affected by exchange rate fluctuations. In
addition, we cannot predict the potential consequences to our business of the
adoption of the Euro as a common currency in Europe.
WE DEPEND ON OUR PRINCIPAL MANUFACTURING FACILITY
Substantially all of our manufacturing operations are currently performed in a
single facility in Tijuana, Mexico. A fire, flood or earthquake, political
unrest or other disaster or condition affecting our facility could have a
material adverse effect on our business, financial condition and results of
operations. While we have developed a disaster recovery plan and believe we are
adequately insured with respect to this facility, we may not be able to
implement the plan effectively or on a timely basis or recover under applicable
insurance policies.
FAILURE OF ELECTRONIC SYSTEMS TO RECOGNIZE THE YEAR 2000
Many existing electronic systems, including computer systems, use only the last
two digits to refer to a year. Therefore, these systems may recognize a date
using "00" as 1900 rather than the year 2000. If not corrected, many computer
and other electronic applications and systems could fail or create erroneous
results when addressing dates on and after January 1, 2000. Our products do not
address or utilize dates in their operation, and, accordingly, our products
should not fail due to the year 2000 problem. However, we use and depend on
information technology systems (including business information computer systems
and design and manufacturing computer systems) and other machinery and equipment
that includes embedded date sensitive technology. We also depend on the proper
functioning of date sensitive electronic systems of third parties, such as
customers and suppliers. The failure of any of these systems to appropriately
interpret the year 2000 could have a material adverse effect on our business,
financial condition and results of operations. We are undertaking efforts to
ensure that our business systems and those of our suppliers and customers are
compliant with the requirements of the year 2000. You should refer to the
Section titled "Year 2000" in the 1999 Annual Report to Stockholders for a more
complete discussion of our Year 2000 compliance efforts. However, our year 2000
program may not be effective or we may not be able to implement it in a timely
and cost-effective manner. Our year 2000 efforts may not, therefore, ensure
against disruptions caused by the approach or advent of the year 2000. The year
2000 problem is potentially very widespread, and it is not possible to determine
all the potential risks that we may face. Our inability to remedy our own year
2000 problems or the failure of third parties to do so may cause business
interruptions or shutdowns, financial loss, regulatory actions, harm to our
reputation and exposure to liability.
RISKS OF INADEQUATE PROTECTION OF INTELLECTUAL PROPERTY AND INFRINGEMENT OF
RIGHTS OF OTHERS
Our success will depend in part on our ability to protect our proprietary
technology. We rely primarily on a combination of nondisclosure agreements and
other contractual provisions as well as patent, trademark, trade secret, and
copyright laws to protect our proprietary rights. We currently hold thirty-four
(34) United States patents and additional foreign patents and intend to continue
to seek patents on our inventions when we believe it to be appropriate. The
process of seeking patent protection can be lengthy and expensive. Patents may
not be issued in response to our applications, and patents that are issued may
be invalidated, circumvented or challenged by others. If we are required to
enforce our patents or other proprietary rights through litigation, the costs
and diversion of management's attention could be substantial. In addition, the
rights granted under any patents may not provide us competitive
19
<PAGE> 20
advantages or be adequate to safeguard and maintain our proprietary rights.
Moreover, the laws of certain countries do not protect our proprietary rights to
the same extent as do the laws of the United States. If we do not enforce and
protect our intellectual property rights, it could materially adversely affect
our business, financial condition and results of operations.
From time to time, third parties, including our competitors, may assert patent,
copyright and other intellectual property rights against us. Such claims, if
they are asserted, could result in costly litigation and diversion of
management's attention. In addition, we may not ultimately prevail in any such
litigation or be able to license any valid and infringed patents from such third
parties on commercially reasonable terms, if at all. Any infringement claim or
other litigation against us could materially adversely affect our business,
financial condition and results of operations.
PRODUCT LIABILITY EXPOSURE
The use of our products exposes us to the risk of product liability claims.
Product liability claims have in the past been, and are currently being,
asserted against us. None of the previously resolved claims have materially
affected our business, financial condition or results of operations, nor do we
believe that any of the pending claims will have such an effect. Although we
maintain product liability insurance, the coverage provided under our policies
could be unavailable or insufficient to cover the full amount of any such claim.
Therefore, successful product liability claims brought against us could have a
material adverse effect upon our business, financial condition and results of
operations.
OUR STOCK PRICE MAY BE VOLATILE
The market price for our common stock may be affected by a number of factors,
including the announcement of new products or product enhancements by us or our
competitors, the loss of services of one or more of our executive officers or
other key employees, quarterly variations in our or our competitors' results of
operations, changes in earnings estimates or recommendation by securities
analysts, developments in our industry, sales of substantial numbers of shares
of our common stock in the public market, general market conditions and other
factors, including factors unrelated to our operating performance or the
operating performance of our competitors. In addition, stock prices for many
companies in the technology sector have experienced wide fluctuations that have
often been unrelated to the operating performances of such companies. Such
factors and fluctuations, as well as general economic, political and market
conditions, such as recessions, may materially adversely affect the market price
of our common stock.
ENVIRONMENTAL MATTERS
We are subject to various federal, state, local and foreign environmental laws
and regulations, including those governing the use, discharge and disposal of
hazardous substances in the ordinary course of our manufacturing process.
Although we believe that our current manufacturing operations comply in all
material respects with applicable environmental laws and regulations,
environmental legislation has been enacted and may in the future be enacted or
interpreted to create environmental liability with respect to our facilities or
operations. We have included in our financial statements a reserve of $1.5
million for possible environmental remediation of the site of one of our
previous businesses. While no claims have been asserted against us in connection
with this matter, such claims could be asserted in the future and any liability
that might result could exceed the amount of the reserve.
EFFECTS OF ANTITAKEOVER PROVISIONS
Our Board of Directors has the authority to issue preferred stock and to
determine the price, rights, preferences, privileges and restrictions, including
voting and conversion rights, of those shares without any further vote or action
by the stockholders. The issuance of our preferred stock could have the effect
of making it more difficult for a third party to acquire us. In addition, we are
subject to the antitakeover provisions of Section 203 of the Delaware General
Corporation Law, which could also have the effect of delaying or preventing our
acquisition by a third party. Further, certain provisions of our Certificate of
Incorporation and bylaws could delay or make more difficult a merger, tender
offer or proxy contest, which could adversely affect the market price of our
common stock.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information appearing in our 1999 Annual Report to
Stockholders is incorporated herein by this reference:
Consolidated Balance Sheets -- March 27, 1999 and March 28, 1998
Consolidated Financial Statements for fiscal years ended March 27,
1999, March 28, 1998 and March 29, 1997:
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
Report of Independent Accountants, dated April 16, 1999.
With the exception of the information mentioned in Items 5, 6, 7 and 8,
our 1999 Annual Report to Stockholders is not to be deemed filed as part of this
Annual Report on Form 10-K.
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.
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<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the identification and business experience of
our directors under the caption "Nominees" under the main caption "Proposal One
- -- Election of Directors" in our definitive 1999 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 our fiscal year ended March 27,
1999, is incorporated herein by this reference. For information regarding the
identification and business experience of our 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 our executive officers and
directors under the caption "Compliance With Section 16(a) of the Exchange Act"
in our 1999 Proxy Statement is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation" and
"Compensation of Directors" in our 1999 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 1999 Proxy Statement is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the 1999
Proxy Statement is incorporated herein by this reference.
With the exception of the information specifically incorporated by
reference from the 1999 Proxy Statement in Part III of this Annual Report on
Form 10-K, the 1999 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 1999
Proxy Statement is not incorporated by reference in this Annual Report on Form
10-K.
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<PAGE> 23
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 our 1999 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. During the fourth quarter of the fiscal year
ended March 27, 1999, the Registrant filed a Current Report on Form 8-K on
January 12, 1999.
(c) Exhibits. The following exhibits are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K:
3.1 Amended and Restated By-Laws of the Registrant (as
amended to date).
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).
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).
Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant filed with the Secretary
of State of Delaware on August 7, 1997 (incorporated
herein by reference to Exhibit (3.1) to the Registrant's
Quarterly Report on Form 10-Q, SEC File Number 1-12696,
for the fiscal quarter ended June 28, 1997, filed on
August 8, 1997).
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 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), Reg. No. 33-70744, filed October 20, 1993).
10.3 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), Reg. No. 33-70744, filed on October 20, 1993).
10.4 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), Reg. No. 33-70744, filed on
October 20, 1993).
10.5 1993 Stock Plan (incorporated herein by reference to
Exhibit (10.1) to the Registrant's Registration Statement
on Form S-1 (as amended), Reg. No. 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, Reg. No. 333-14833, filed on October 25, 1996).
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<PAGE> 24
Amendment Number Two to the 1993 Stock Plan effective as
of July 30, 1998.
10.6 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), Reg. No.
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, Reg. No. 333-14833,
filed on October 25, 1996).
10.7 1996 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit (4.5) to the Registrant's
Registration Statement on Form S-8, Reg. No. 333-14833,
filed on October 25, 1996).
10.8 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, Reg. No. 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, Reg. No. 333-19351,
filed on January 7, 1997).
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, Reg No.
333-19351, filed on January 7, 1997).
Amendment Number Two to the Plantronics, Inc. Annual
Profit Sharing/Individual Savings Plan.
10.9 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), Reg. No. 333-19351, filed on March 25, 1997).
10.10 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), Reg. No. 333-19351,
filed on March 25, 1997).
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), Reg.
No. 333-19351, filed on March 25, 1997).
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), Reg. No. 333-19351, filed on
March 25, 1997).
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), Reg. 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 (incorporated herein by reference to Exhibit
(10.11) to the Registrant's Annual Report on Form 10-K,
SEC File Number 1-12696, for the fiscal year ended March
30, 1998, filed on June 24, 1998).
Amendment Number Three to Employment Agreement between
the Registrant and Robert S. Cecil entered into as of
March 22, 1999.
10.12 Credit Agreement dated as of February 19, 1997 between
Registrant and Bank of America National Trust and Savings
Association and First Amendment to Credit Agreement,
dated as of May 15, 1997 (incorporated herein by
reference to Exhibit (10.22) to the Registrant's Annual
Report on Form 10-K , SEC File Number 1-12696, for the
fiscal year ended March 30, 1997, filed on June 25,
1997).
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<PAGE> 25
Second Amendment to Credit Agreement, dated as of
February 18, 1998, between Registrant and Bank of America
National Trust and Savings Association (incorporated
herein by reference to Exhibit (10.18) to the
Registrant's Annual Report on Form 10-K, SEC File Number
1-12696, for the fiscal year ended March 30, 1998, filed
on June 24, 1998).
Third Amendment to Credit Agreement, dated as of November
30, 1998, between Registrant and Bank of America National
Trust and Savings Association.
13 Sections of the Registrant's annual report to security
holders for the fiscal year ended March 27, 1999, as
referenced in Parts I, II and IV of this Annual Report on
Form 10-K.
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27 Financial Data Schedule.
25
<PAGE> 26
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.
Dated: June 15, 1999 By: /s/ S. KENNETH KANNAPPAN
-------------------------
S. Kenneth Kannappan,
Chief Executive Officer
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/ S. KENNETH KANNAPPAN President, Chief Executive Officer June 15, 1999
- ------------------------------------- and Director
(S. Kenneth Kannappan) (Principal Executive Officer)
/s/ BARBARA V. SCHERER Senior Vice President and Chief Financial June 15, 1999
- ------------------------------------- Officer (Principal Financial Officer and
(Barbara V. Scherer) Principal Accounting Officer)
/s/ ROBERT S. CECIL Chairman of the Board and Director June 15, 1999
- -------------------------------------
(Robert S. Cecil)
/s/ ROBERT F.B. LOGAN Director June 15, 1999
- -------------------------------------
(Robert F.B. Logan)
/s/ M. SALEEM MUQADDAM Director June 15, 1999
- -------------------------------------
(M. Saleem Muqaddam)
/s/ JOHN MOWBRAY O'MARA Director June 15, 1999
- -------------------------------------
(John Mowbray O'Mara)
/s/ TRUDE C. TAYLOR Director June 15, 1999
- -------------------------------------
(Trude C. Taylor)
/s/ DAVID A. WEGMANN Director June 15, 1999
- -------------------------------------
(David A. Wegmann)
</TABLE>
26
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Document Description
- ------- --------------------
<S> <C>
3.1 Amended and Restated By-Laws of the Registrant (as
amended to date).
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).
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).
Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant filed with the Secretary
of State of Delaware on August 7, 1997 (incorporated
herein by reference to Exhibit (3.1) to the Registrant's
Quarterly Report on Form 10-Q, SEC File Number 1-12696,
for the fiscal quarter ended June 28, 1997, filed on
August 8, 1997).
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 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), Reg. No. 33-70744, filed October 20, 1993).
10.3 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), Reg. No. 33-70744, filed on October 20, 1993).
10.4 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), Reg. No. 33-70744, filed on
October 20, 1993).
10.5 1993 Stock Plan (incorporated herein by reference to
Exhibit (10.1) to the Registrant's Registration Statement
on Form S-1 (as amended), Reg. No. 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, Reg. No. 333-14833, filed on October 25, 1996).
Amendment Number Two to the 1993 Stock Plan effective as
of July 30, 1998.
10.6 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), Reg. No.
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, Reg. No. 333-14833,
filed on October 25, 1996).
10.7 1996 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit (4.5) to the Registrant's
Registration Statement on Form S-8, Reg. No. 333-14833,
filed on October 25, 1996).
10.8 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, Reg. No. 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, Reg. No. 333-19351,
filed on January 7, 1997).
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, Reg No.
333-19351, filed on January 7, 1997).
Amendment Number Two to the Plantronics, Inc. Annual
Profit Sharing/Individual Savings Plan.
10.9 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), Reg. No. 333-19351, filed on March 25, 1997).
10.10 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), Reg. No. 333-19351,
filed on March 25, 1997).
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), Reg.
No. 333-19351, filed on March 25, 1997).
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), Reg. No. 333-19351, filed on
March 25, 1997).
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), Reg. 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 (incorporated herein by reference to Exhibit
(10.11) to the Registrant's Annual Report on Form 10-K,
SEC File Number 1-12696, for the fiscal year ended March
30, 1998, filed on June 24, 1998).
Amendment Number Three to Employment Agreement between
the Registrant and Robert S. Cecil entered into as of
March 22, 1999.
10.12 Credit Agreement dated as of February 19, 1997 between
Registrant and Bank of America National Trust and Savings
Association and First Amendment to Credit Agreement,
dated as of May 15, 1997 (incorporated herein by
reference to Exhibit (10.22) to the Registrant's Annual
Report on Form 10-K , SEC File Number 1-12696, for the
fiscal year ended March 30, 1997, filed on June 25,
1997).
Second Amendment to Credit Agreement, dated as of
February 18, 1998, between Registrant and Bank of America
National Trust and Savings Association (incorporated
herein by reference to Exhibit (10.18) to the
Registrant's Annual Report on Form 10-K, SEC File Number
1-12696, for the fiscal year ended March 30, 1998, filed
on June 24, 1998).
Third Amendment to Credit Agreement, dated as of November
30, 1998, between Registrant and Bank of America National
Trust and Savings Association.
13 Sections of the Registrant's annual report to security
holders for the fiscal year ended March 27, 1999, as
referenced in Parts I, II and IV of this Annual Report on
Form 10-K.
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
[EXECUTION COPY]
AMENDED AND RESTATED
BY-LAWS
OF
PLANTRONICS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - OFFICES............................................................................ 1
Section 1. Registered Office........................................................ 1
Section 2. Other Offices............................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.......................................................... 1
Section 1. Place and Time of Meetings............................................... 1
Section 2. Special Meetings......................................................... 1
Section 3. Place of Meetings........................................................ 2
Section 4. Notice................................................................... 2
Section 5. Stockholders List........................................................ 2
Section 6. Quorum................................................................... 3
Section 7. Adjourned Meetings....................................................... 3
Section 8. Vote Required............................................................ 3
Section 9. Voting Rights............................................................ 3
Section 10. Proxies.................................................................. 4
Section 11. Prohibitions on Action by Written Consent................................ 4
ARTICLE III - DIRECTORS........................................................................ 4
Section 1. General Powers........................................................... 4
Section 2. Number, Election and Term of Office...................................... 4
Section 3. Removal and Resignation.................................................. 4
Section 4. Vacancies................................................................ 5
Section 5. Annual Meetings.......................................................... 5
Section 6. Other Meetings and Notice................................................ 5
Section 7. Quorum, Required Vote and Adjournment.................................... 6
Section 8. Committees............................................................... 7
Section 9. Committee Rules.......................................................... 8
Section 10. Communications Equipment................................................. 8
Section 11. Waiver of Notice and Presumption of Assent............................... 8
Section 12. Action by Written Consent................................................ 9
ARTICLE IV - OFFICERS.......................................................................... 9
Section 1. Number................................................................... 9
Section 2. Election and Term of Office.............................................. 9
Section 3. Removal.................................................................. 9
Section 4. Vacancies................................................................ 9
Section 5. Compensation............................................................ 10
Section 6. The President........................................................... 10
Section 7. Vice-Presidents......................................................... 10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 8. The Secretary and Assistant Secretaries................................. 10
Section 9. The Treasurer and Assistant Treasurer.................................... 11
Section 10. Other Officers, Assistant Officers and
Agents.............................................................. 11
Section 11. Absence or Disability of Officers........................................ 11
ARTICLE V - INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS.................................. 12
Section 1. Nature of Indemnity...................................................... 12
Section 2. Procedure for Indemnification of Directors
and Officers........................................................ 12
Section 3. Article Not Exclusive.................................................... 13
Section 4. Insurance................................................................ 13
Section 5. Expenses................................................................. 14
Section 6. Employees and Agents..................................................... 14
Section 7. Contract Rights.......................................................... 14
Section 8. Merger or Consolidation.................................................. 14
ARTICLE VI - CERTIFICATES OF STOCK............................................................. 15
Section 1. Form..................................................................... 15
Section 2. Lost Certificate......................................................... 16
Section 3. Fixing a Record Date for Stockholder
Meetings............................................................ 16
Section 4. Fixing a Record Date for Other Purposes.................................. 16
Section 5. Registered Stockholders.................................................. 17
Section 6. Subscriptions for Stock.................................................. 17
ARTICLE VII - GENERAL PROVISIONS............................................................... 17
Section 1. Dividends................................................................ 17
Section 2. Checks, Drafts or Orders................................................. 17
Section 3. Contracts................................................................ 18
Section 4. Loans.................................................................... 18
Section 5. Fiscal Year.............................................................. 18
Section 6. Voting Securities Owned By Corporation................................... 18
Section 7. Inspection of Books and Records.......................................... 18
Section 8. Section Headings......................................................... 19
Section 9. Inconsistent Provisions.................................................. 19
ARTICLE VIII - AMENDMENTS...................................................................... 19
</TABLE>
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<PAGE> 4
AMENDED AND RESTATED
BY-LAWS
OF
PLANTRONICS, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation
in the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle. The name of the corporation's registered
agent at such address shall be The Corporation Trust Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the president
does not act, the board of directors shall determine the date, time and place of
such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the chairman of the board of directors, the
<PAGE> 5
president or the holders of twenty percent (20%) or more of the outstanding
Common Stock of the corporation. No business may be conducted at a special
meeting other than the business brought before the meeting by the Board of
Directors, the chairman of the board of directors, the president or the holders
of twenty percent (20%) or more of the outstanding Common Stock of the
corporation, as the case may be.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage pre-paid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting or,
if not so specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
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<PAGE> 6
Section 6. Quorum. The holders of the outstanding shares of capital
stock representing a majority of the voting power of the corporation, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by law or by the certificate of
incorporation. If a quorum is not present, the holders of the shares
representing a majority of the voting power present in person or represented by
proxy at the meeting, and entitled to vote at the meeting, may adjourn the
meeting to another time and/or place. When a specified item of business requires
a vote by a class or series (if the corporation shall then have outstanding
shares of more than one class or series) voting as a class, the holders of a
majority of the shares of such class or series shall constitute a quorum (as to
such class or series) for the transaction of such item of business. When a
quorum is once present to commence a meeting of stockholders, it is not broken
by the subsequent withdrawal of any stockholder or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record day is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the holders of the shares representing a majority of the voting power present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the question is one
upon which by express provisions of an applicable law or of the certificate of
incorporation a different vote is required, in which case such express provision
shall govern and control the decision of such question. Where a separate vote by
class may be required, the affirmative vote of the majority of shares of such
class present in person or represented by proxy at the meeting shall be the act
of such class.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled
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<PAGE> 7
to one vote in person or by proxy for each share of Common Stock held by such
stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
Section 11. Prohibitions on Action by Written Consent. Unless otherwise
provided in the certificate of incorporation, no action may be taken by the
stockholders of the corporation pursuant to a written consent in lieu of an
annual or special meeting of the stockholders of the corporation.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The authorized number of
directors constituting the board of directors shall be seven (7). This number
may be changed by an amendment to these by-laws adopted by (a) the vote of
66-2/3% of the outstanding Common Stock of the corporation or (b) by a
resolution of the board of directors adopted by the affirmative vote of at least
66-2/3% of such authorized number of directors. No reduction of the authorized
number of directors shall have the effect of removing any director before that
director's term expires. The directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors. The directors shall be elected in
this manner at the annual meeting of the stockholders, except as provided in
Section 4 of this Article III. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of
the shares representing a majority of the voting power of the corporation then
entitled to vote at an election of directors. Whenever the holders of any class
or series
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<PAGE> 8
are entitled to elect one or more directors by the provisions of the
corporation's certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as whole. Any director may
resign at any time upon written notice to the corporation.
Section 4. Vacancies.
(a) Vacancies in the unexpired term of any directorship shall be
filled as follows:
(i) If such vacancy has resulted from the death,
resignation or removal of a director that was designated by Citicorp Venture
Capital, Ltd. ("CVC") to serve on the Board of Directors pursuant to the terms
of that certain Board Designation Agreement between the Company and CVC (a "CVC
Designee"), such vacancy shall be filled by a majority of the remaining CVC
Designees then in office, though such directors may constitute less than a
quorum; or
(ii) If such vacancy has resulted from the death,
resignation or removal of a director that is not a CVC Designee, such vacancy
shall be filled by a majority of those remaining directors then in office that
are neither (x) a CVC Designee or (y) the Chief Executive Officer of the
corporation, though such directors may constitute less than a quorum; provided,
however, that if the Chief Executive Officer of the corporation is the sole
remaining director that is not a CVC Designee, the Chief Executive Officer shall
fill any such vacancy.
(b) Newly created directorships resulting from any increase in
the authorized number of directors shall be filled by a majority of the
directors then in office.
(c) Each director so chosen shall hold office until a successor
is duly elected and qualified or until his or her earlier death, resignation or
removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be
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<PAGE> 9
held without notice at such time and at such place as shall from time to time be
determined by resolution of the board. Special meetings of the board of
directors may be called by or at the request of the president on at least 24
hours notice to each director, either personally, by telephone, by mail or by
telegraph; special meetings shall be called by the president or the secretary in
like manner and on like notice on written request of two (2) directors unless
the board consists of only one (1) director at such time.
Section 7. Quorum, Required Vote and Adjournment.
(a) A majority of the total number of directors shall constitute
a quorum for the transaction of business. Except as otherwise set forth in
clause (b), the vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(b) The affirmative vote of at least 66 2/3% of the directors
then in office shall be required to adopt a resolution necessary to:
(i) amend, alter or repeal any provisions of the
certificate of incorporation or by-laws of the corporation;
(ii) sell, lease or convey all or substantially all of
the property or business of the corporation or permit any Subsidiary to sell,
lease or convey all or substantially all of the property or business of such
Subsidiary (other than to the corporation or another Subsidiary in a
consolidation or merger in which the corporation is the surviving person) or
permit any Subsidiary to consolidate or merge with any other corporation (other
than the corporation or a Subsidiary in a consolidation or merger in which the
corporation or such Subsidiary is the surviving person), or voluntarily
liquidate, dissolve or wind up the corporation;
(iii) issue or sell, or agree to issue or sell, or
permit any Subsidiary to issue or sell, its capital stock or any securities
consisting of or containing any options or rights to acquire any shares of
capital stock or any securities convertible or exchangeable or exercisable for
any of its capital stock, other than any issuance of capital stock (A) pursuant
to any stock split
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<PAGE> 10
or dividend effected by the corporation on a pro-rata basis to all stockholders,
(B) pursuant to a dividend on shares of Common Stock that is paid in shares of
capital stock of the corporation on a pro-rata basis to all stockholders or (C)
upon the exercise of rights or options under the 1993 Option Plan.
(iv) enter into any stock option plan, other than the
1993 Stock Option Plan dated as of September 25, 1993 or amend any stock option
plan to increase the number of shares issuable thereunder; or
(v) acquire the business or assets of, or enter into
any joint venture or partnership with, any Person (except the corporation may
acquire the business or assets of, or enter into any joint venture or
partnership with, any Subsidiary) or permit any Subsidiary to acquire the
business or assets of, or enter into any joint venture or partnership with, any
Person (except any Subsidiary may acquire the business or assets of any other
Subsidiary or enter into any joint venture or partnership with the Corporation
or any other Subsidiary) if the aggregate amount of all expenditures incurred by
the corporation (on a consolidated basis) in its then current fiscal year in
connection with acquisitions or investments in joint ventures or partnerships
would, after giving effect to expenditures to be incurred by the corporation (on
a consolidated basis) in such fiscal year in connection with such proposed
acquisition or investment in joint venture or partnership, exceed $10 million.
For purposes of this clause (b), the following terms shall have
the following respective meanings:
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Subsidiary" shall mean any corporation, at least a majority of
the total combined voting power of all classes of stock having general voting
power of which shall, at the time as of which any determination is being made,
be owned by the corporation either directly or through one or more Subsidiaries.
Section 8. Committees. Subject to the voting requirements set forth in
Article III, the board of directors may, by resolution passed by a majority of
the whole board, designate one or more committees, each committee to consist of
one or more of the directors of the corporation, which to the extent provided in
such
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<PAGE> 11
resolution or these by-laws shall have and may exercise the powers of the board
of directors in the management and affairs of the corporation except as
otherwise limited by law. The board of directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary
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<PAGE> 12
of the corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by
the certificate of incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a president, one or more
vice-presidents, a secretary, a treasurer, and such other offices and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any meeting
of the board of directors. Each officer shall hold office until a successor is
duly elected and qualified or until his or her earlier death, resignation or
removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
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<PAGE> 13
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he or she is present; subject to the powers of
the board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
Section 7. Vice-Presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, act with all of
the powers and be subject to all the restrictions of the president. The
vice-presidents shall also perform such other duties and have such other powers
as the board of directors, the president or these by-laws, from time to time,
prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his or her signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his or her signature.
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<PAGE> 14
The assistant secretary, or if there be more than one, the assistant secretaries
in the order determined by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors, the president, or secretary may, from time to time,
prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by the
board of directors, the treasurer shall give the corporation a bond (which shall
be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 11. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place
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during such officer's absence or disability, the board of directors may by
resolution delegate the powers and duties of such officer to any other officer
or to any director, or to any other person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article V shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly,
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and in any event within thirty (30) days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation fails to respond within sixty (60) days to a written request
for indemnity, the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, of if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation,
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partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not the corporation would have the power to indemnify such person
against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
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with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2) by
a registrar, other than the corporation or its employee, the signature of any
such president, vice-president, secretary or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate of certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to issue
a new certificate to the person entitled thereto, cancel the old certificate or
certificates, and record the transaction on its books. The board of directors
may appoint a bank or trust company organized under the laws of the United
States or any state thereof to act as its transfer agent or registrar, or both
in connection with the transfer of any class or series of securities of the
corporation.
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Section 2. Lost Certificate. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjournment meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to written action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close
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of business on the day on which the board of directors adopts the resolution
relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares all be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner,
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as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. No loans shall be made or contracted on behalf
of the corporation and no evidences of indebtedness shall be issued in its name
unless authorized by resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 6. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president or
the secretary, unless the board of directors specifically confers authority to
vote with respect there to, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
Section 7. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In
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every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in the State of Delaware or at its
principal place of business.
Section 8. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
Except as set forth in the next sentence, these by-laws may be amended,
altered, or repealed and new by-laws adopted at any meeting of the board of
directors by a majority vote. The provisions set forth in Article III, Section
2, Article III, Section 7(b) and this Article VIII may only be amended, altered
or repealed upon the affirmative of at least 66 2/3% of the directors then in
office. The fact that the power to adopt, amend, alter, or repeal the by-laws
has been conferred upon the board of directors shall not divest the stockholders
of the same powers.
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EXHIBIT 10.5
AMENDMENT NO. 2 TO THE
PLANTRONICS, INC. 1993 STOCK PLAN
The Plantronics, Inc. 1993 Stock Plan (the "Plan") is hereby amended
effective as of July 30, 1998, as follows:
FIRST: Section 3 of the Plan is hereby amended in its entirety to read
as follows:
"Stock Subject to the Plan. Subject to the provisions of Section
11 of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 5,459,242 Shares. The 5,459,242 Share amount reflects (i)
the 1,589,621 Shares originally authorized, (ii) the 490,000 Share increase on
April 23, 1996 (reflected in Amendment No. 1 to the 1993 Stock Plan), (iii) the
2:1 stock split effected September 1, 1997 and (iv) the 1,300,000 share increase
approved by the Company's stockholders on July 30, 1998. The Shares may be
authorized, but unissued, or reacquired Common Stock, or both.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. However, should the Company reacquire Shares which
were issued pursuant to the exercise of an Option, such Shares shall not become
available for future grant under the Plan."
SECOND: In all other respects, the Plan is hereby ratified and
confirmed.
<PAGE> 1
EXHIBIT 10.8
AMENDMENT NUMBER TWO
TO THE
PLANTRONICS, INC.
ANNUAL PROFIT SHARING/INDIVIDUAL SAVINGS PLAN
The Plantronics, Inc. Annual Profit Sharing/Individual Savings Plan (the
"Plan") is amended as follows:
FIRST: Section 3.1(a) of the Plan shall read in its entirety as follows:
"(a) Except as otherwise provided in Section 4.3(f)(iii), relating
to eligibility to receive an Employer Profit Sharing Contribution, each
Eligible Employee becomes a Participant in the Plan on the first Entry
Date following his or her completion of ninety (90) days of service,
provided that he or she is an Eligible Employee on said Entry Date;
otherwise the Employee shall become a Participant immediately on again
becoming an Eligible Employee."
SECOND: Section 4.3(f)(iii), paragraph 1 is amended to read as follows:
"(iii) QUALIFIED PARTICIPANT. A Participant who is credited with at
least one (1) Year of Service on the last day of the Plan Year and who is
an Eligible Employee of a Participating Employer on the last day of such
Plan Year; provided, however, that an Employee who first becomes an
Eligible Employee of a Participating Employer after the first day of a
Plan Year and who is an Eligible Employee of a Participating Employer on
the last day of such Plan Year shall be considered a Qualified Participant
for such Plan Year beginning on the first day of the fiscal quarter of the
Company immediately following the Employee's Employment Commencement Date."
The foregoing Amendment shall be effective as of July 30, 1998, provided
that Amendment SECOND above shall be effective as to Employees whose Employment
Commencement Date is on or after July 30, 1998.
Dated: 9/30, 1998 PLANTRONICS, INC.
By: /s/ JOHN A. KNUTSON
------------------------------------
John A. Knutson
Vice President Legal, Senior General
Counsel and Secretary
<PAGE> 1
Exhibit 10.11
AMENDMENT NUMBER THREE
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 March 22, 1999.
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 and Amendment Number Two entered into as of
January 1, 1998 (the "Employment Agreement").
B. The Company and the Executive desire to clarify and amend the
Employment Agreement effective March 22, 1999.
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 16 - Relocation Expenses: The second full paragraph of
Section 16 shall be replaced in its entirety with the following:
"If the Executive's employment terminates other than for cause, then
the Company will pay or reimburse the Executive, or his designated
beneficiaries or estate, for up to $100,000 of the Executive's
relocation expenses in connection with a move to more than one location
of the Executive's worldwide choice under the same or comparable terms
and conditions as provided under the Relocation Agreement."
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/ TRUDE C. TAYLOR By: /s/ ROBERT S. CECIL
------------------------- -----------------------------
Trude C. Taylor Robert S. Cecil
<PAGE> 1
EXHIBIT 10.12
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
November 30, 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, and a Second Amendment to
Credit Agreement dated as of February 18, 1998 (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 'Revolving Termination Date' in its
entirety to read as follows:
"'Revolving Termination Date' means the earlier to occur of:
(a) November 29, 1999, and
(b) the date on which the Commitment shall terminate in
accordance with the provisions of this Agreement."
(b) Section 2.01 of the Credit Agreement shall be amended by deleting
the amount "$20,000,000" and inserting the amount "$30,000,000" in place
thereof.
(c) Article VI of the Credit Agreement shall be amended by inserting
the following new Section 6.19 immediately following Section 6.18:
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6.19 Y2K Representation. The Company has performed a reasonable
review and assessment of the Company's and its Subsidiaries' systems
and equipment and is in the process of making reasonable inquiry of the
Company's and its Subsidiaries' material suppliers, vendors and
customers regarding the "Year 2000 problem" (that is, the inability of
computers, as well as embedded microchips in non-computing devices, to
perform properly date-sensitive functions with respect to certain dates
prior to and after December 31, 1999). On the basis of such internal
review and assessment and of the external inquiries made to date, the
Company reasonably believes that the Year 2000 problem, including costs
of remediation, will not result in a Material Adverse Effect. The
Company and its Subsidiaries have developed or will develop contingency
plans which the Company believes in good faith to be adequate to ensure
uninterrupted and unimpaired business operation in the event of failure
of their own or a third party's systems or equipment due to the Year
2000 problem.
(d) 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 26, 1998 minus (b) the lesser of (i) the
amount of its stock repurchased by the Company after September 26,
1998; provided that such repurchases are otherwise permitted hereunder,
and (ii) $35,000,000 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 26, 1998 plus
(d) 75% of the net proceeds of any equity securities issued after
September 26, 1998 plus (e) 75% of any increase in stockholders' equity
resulting from the conversion of debt securities to equity securities
after September 26, 1998.
(e) 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,
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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 on and 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 earlier 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.
4. Effective Date. This Amendment will become effective as of the date
first above written, 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.
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 enter into
amendments under the same, similar or any other 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 Company Documents and Loan 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. This Amendment is a Company Document and a Loan
Document.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and to the Credit Agreement 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
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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, and
the Bank is hereby authorized to make sufficient photocopies thereof to assemble
complete counterparty documents.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed 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 to 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.
4
<PAGE> 5
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
----------------------------
Name: Barbara V. Scherer
Title: Sr. Vice President,
Finance & Administration
and Chief Financial
Officer
-------------------------
By: /s/ JOHN A. KNUTSON
----------------------------
Name: John A. Knutson
Title: Vice President-Legal,
Senior General Counsel
& Secretary
-------------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ JAMES P. JOHNSON
----------------------------
Name: James P. Johnson
Title: Managing Director
5
<PAGE> 6
Date: ______________, _____
For the fiscal quarter/year
ended ______________, _____
PLANTRONICS, INC.
SCHEDULE 2
to the Compliance Certificate X
($ in 000's)(1)
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <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
</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> 7
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
(v) taxes on income ----------
plus
(vi) non-cash expenses or
charges for management
stock compensation ----------
(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:
A. Tangible Net Worth as of
9/26/98:
(i) gross book value of assets ---------- (i) gross book value
of assets ----------
less less
---- ----
(ii) goodwill, licensing agreements, (ii) goodwill, licensing
patents, trademarks, trade agreements, patents, trade-
names, organization expenses, marks, trade names, organi-
treasury stock, unamortized debt zation expenses, treasury
discount and premium, deferred stock, unamortized debt
charges and other like discount and premium, deferred
intangibles ---------- charges and other like
intangibles ----------
less less
---- ----
(iii) reserves applicable to assets (iii) reserves applicable
(including reserves for to assets (including reserves
depreciation and amortization) ---------- for depreciation and
amortization) ----------
less less
---- ----
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
(iv) all liabilities (including (iv) all liabilities (including
accrued and deferred accrued and deferred income
income taxes and any taxes and subordinated
subordinated liabilities) ---------- liabilities) -----------
(i)-(ii)-(iii)-(iv) = (i)-(ii)-(iii)-(iv) = -----------
==========
x 90%
-----------
Less
----
B. Stock repurchases after
9/26/98 (not to exceed
$35,000,000) -----------
plus
----
C. 50% of net income after
Income taxes (without
Subtracting losses)
earned after 9/26/98 -----------
plus
----
D. 75% of net proceeds
From any equity
Securities issued
After 9/26/98 -----------
plus
----
</TABLE>
- ---------------------
(6) Calculation will need to be done for first compliance certificate only;
thereafter, this number will be inserted.
3
<PAGE> 9
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
E. 75% of any increase
in stockholder's
equity resulting
from the conversion
of debt securities
to equity securities
after 9/26/98 -----------
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
</TABLE>
- ----------------------
(7) Calculated on a rolling four-quarter basis.
4
<PAGE> 1
EXHIBIT 13
FINANCIAL CONTENTS
9 CONSOLIDATED BALANCE SHEETS
10 CONSOLIDATED STATEMENTS OF OPERATIONS
11 CONSOLIDATED STATEMENTS OF CASH FLOWS
12 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24 REPORT OF INDEPENDENT ACCOUNTANTS
25 MANAGEMENT'S DISCUSSION AND ANALYSIS
30 SELECTED FINANCIAL DATA
31 CORPORATE OFFICERS AND INFORMATION
32 INVESTOR INFORMATION
<PAGE> 2
Consolidated balance sheets
<TABLE>
<CAPTION>
MARCH 31,
(IN THOUSANDS) 1998 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 64,901 $ 42,999
Accounts receivable,net 41,550 46,807
Inventory 29,741 18,889
Deferred income taxes 2,130 3,159
Other current assets 1,774 7,880
----------
Total current assets 140,096 119,734
Property,plant and equipment,net 21,255 20,323
Other assets 4,124 2,811
----------
Total assets $ 165,475 $ 142,868
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,327 $ 9,453
Accrued liabilities 26,629 33,475
Income taxes payable 6,381 510
----------
Total current liabilities 41,337 43,438
Deferred tax liability 5,652 10,025
Long-term debt 65,050 --
----------
Total liabilities 112,039 53,463
----------
Commitments and contingencies (note 8)
Stockholders' equity:
Common stock,$0.01 par value per share;40,000 shares authorized,
16,449 shares and 16,798 shares issued and outstanding 174 185
Additional paid-in capital 63,816 91,423
Accumulated other comprehensive income (891) (891)
Retained earnings 15,355 69,559
----------
78,454 160,276
Less: Treasury stock (common:963 and 1,669) at cost (25,018) (70,871)
----------
Total stockholders' equity 53,436 89,405
----------
Total liabilities and stockholders' equity $ 165,475 $ 142,868
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PLANTRONICS ANNUAL REPORT 1999 page 9
<PAGE> 3
Consolidated statements of operations
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE) 1997 1998 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 195,307 $ 236,112 $ 286,261
Cost of sales 90,567 108,514 125,698
----------
Gross profit 104,740 127,598 160,563
----------
Operating expenses:
Research,development and engineering 14,503 17,543 19,521
Selling,general and administrative 39,898 47,682 57,528
----------
Total operating expenses 54,401 65,225 77,049
----------
Operating income 50,339 62,373 83,514
Interest expense,including amortization
of debt issuance costs 7,104 6,984 5,785
Interest income and other income,net (1,722) (2,243) (3,525)
----------
Income before income taxes 44,957 57,632 81,254
Income tax expense 15,286 18,443 26,001
----------
Income before extraordinary item 29,671 39,189 55,253
Extraordinary item--retirement of debt,
net of taxes (note 4) -- -- 1,049
----------
Net income $ 29,671 $ 39,189 $ 54,204
==========
Net income per share:basic
Income before extraordinary item $ 1.75 $ 2.38 $ 3.33
Extraordinary item -- -- 0.06
==========
Basic earnings per common share $ 1.75 $ 2.38 $ 3.27
==========
Shares used in basic per share calculations 17,003 16,481 16,574
==========
Net income per share:diluted
Income before extraordinary item $ 1.67 $ 2.15 $ 3.02
Extraordinary item -- -- 0.06
----------
Diluted earnings per common share $ 1.67 $ 2.15 $ 2.96
==========
Shares used in diluted per share calculations 17,792 18,223 18,282
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
page 10 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 4
Consolidated statements of cash flows
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS) 1997 1998 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,671 $ 39,189 $ 54,204
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment 2,935 3,632 4,738
Deferred income taxes 2,789 4,746 3,344
Provision for doubtful accounts (50) 455 574
Other non-cash charges,net 649 (225) --
Changes in assets and liabilities:
Accounts receivable 1,624 (5,024) (5,831)
Inventory (2,035) (9,699) 10,852
Other current assets 318 (865) (6,106)
Other assets (459) 1,113 1,313
Accounts payable 1,194 (1,251) 1,126
Accrued liabilities (251) 6,188 6,846
Income taxes payable (1,769) 986 15,863
---------
Cash provided by operating activities 34,616 39,245 86,923
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,195) (5,917) (3,806)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt -- -- (65,050)
Purchase of treasury stock (12,880) (13,162) (46,384)
Proceeds from sale of treasury stock 99 1,250 1,275
Proceeds from exercise of stock options 1,835 1,223 5,140
---------
Cash provided by (used for) financing activities (10,946) (10,689) (105,019)
---------
Net increase (decrease) in cash and cash equivalents 15,475 22,639 (21,902)
Cash and cash equivalents at beginning of year 26,787 42,262 64,901
---------
Cash and cash equivalents at end of year $ 42,262 $ 64,901 $ 42,999
=========
Supplemental disclosures:
Cash paid for:
Interest $ 6,577 $ 6,550 $ 6,525
Income taxes $ 14,192 $ 12,439 $ 7,913
Extraordinary charge on retirement of debt -- -- $ 1,301
Noncash operating and financing activities:
Income tax benefit associated with stock options $ 597 $ 4,279 $ 21,734
Write off of unamortized debt issuance costs -- -- $ 390
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
PLANTRONICS ANNUAL REPORT 1999 page 11
<PAGE> 5
Consolidated statements of stockholders' equity
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
------------------------ ADDITIONAL OTHER TOTAL
PAID-IN COMPREHENSIVE RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL INCOME EARNINGS STOCK EQUITY
---------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------------------------------
Exercise of stock options 1,056,093 11 5,129 -- -- -- 5,140
Income tax benefit associated
with stock options -- -- 21,734 -- -- -- 21,734
Purchase of treasury stock (735,593) -- -- -- -- (46,384) (46,384)
Sale of treasury stock 29,301 -- 744 -- -- 531 1,275
Net income -- -- -- -- 54,204 -- 54,204
---------------------------------------------------------------------------------------------
Balance at March 31,1999 16,798,443 $ 185 $ 91,423 $ (891) $ 69,559 $ (70,871) $ 89,405
=============================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
page 12 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 6
Notes to consolidated financial statements
note 1. THE COMPANY:
Plantronics, Inc. (the "Company"), introduced the first lightweight
communications headset in 1962. Since that time, the Company has established
itself as a world leading designer, manufacturer and marketer of lightweight
communications headset products.
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. Results of operations for fiscal years 1997, 1998 and 1999 each included 52
weeks.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of 90 days
or less at the date of purchase to be cash equivalents. The Company's cash and
cash equivalents consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
(IN THOUSANDS) 1998 1999
------- -------
<S> <C> <C>
Cash $ 9,662 $ 7,427
Cash equivalents 55,239 35,572
-----------------------
Cash and cash equivalents $64,901 $42,999
=======================
</TABLE>
INVENTORY
Inventory is stated at the lower of cost, determined on the first-in, first-out
method, or market.
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 the estimated
period the debt will be outstanding.
PLANTRONICS ANNUAL REPORT 1999 page 13
<PAGE> 7
Notes to consolidated financial statements
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 that 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.
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, 1998 and 1999, the functional currency of all
foreign operations was the US dollar. Accordingly, gains or losses arising from
the translation of foreign currency statements and transactions are included in
determining consolidated results of operations. Aggregate exchange gains
(losses) for fiscal 1997, 1998 and 1999 were $0.4 million, ($0.2) 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 and are presented as accumulated other
comprehensive income.
COMPREHENSIVE INCOME
Effective April 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). 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. Total comprehensive income was the same
as net income for all periods presented.
SEGMENT REPORTING
In fiscal 1999, the Company adopted 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 its annual financial statements. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers (see note 9).
page 14 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 8
Notes to consolidated financial statements
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 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).
note 3. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS:
<TABLE>
<CAPTION>
MARCH 31,
(IN THOUSANDS) 1998 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Accounts receivable from customers $ 43,302 $ 49,133
Allowance for doubtful accounts (1,752) (2,326)
------------------------
$ 41,550 $ 46,807
========================
INVENTORY:
Finished goods $ 13,224 $ 9,425
Work in process 4,431 1,461
Purchased parts 12,086 8,003
------------------------
$ 29,741 $ 18,889
========================
PROPERTY, PLANT AND EQUIPMENT:
Land $ 4,693 $ 4,693
Buildings and improvements (useful life 10-30 years) 9,486 9,923
Machinery and equipment (useful life 2-8 years) 31,484 32,853
------------------------
45,663 47,469
Less accumulated depreciation (24,408) (27,146)
------------------------
$ 21,255 $ 20,323
========================
ACCRUALS:
Employee benefits 11,689 15,209
Other 14,940 18,266
------------------------
$ 26,629 $ 33,475
========================
</TABLE>
PLANTRONICS ANNUAL REPORT 1999 page 15
<PAGE> 9
Notes to consolidated financial statements
note 4. DEBT:
During 1999, the Company retired $65.1 million of 10% subordinated debentures
due in 2001. The Company paid a premium to debenture holders, and the
transaction resulted in an extraordinary loss of approximately $1.0 million
($0.06 per diluted share), net of income tax benefits of $0.7 million. The
transaction was paid out of available cash.
Effective November 30, 1998, the Company increased its revolving unsecured
credit facility with Bank of America from $20.0 million to $30.0 million. The
facility expires on November 29, 1999. The facility includes a $10.0 million
letter-of-credit subfacility. 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, 1999, however, at that date $2.3 million, associated with
inventory purchases and other matters, was committed under the letter-of-credit
subfacility. 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 minimum interest coverage ratio. The Company was
in compliance with the terms of the covenants as of March 31, 1999.
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:
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.
On January 8, 1999, the Company filed with the Securities Exchange Commission a
Registration Statement on Form S-3 for the sale by certain stockholders in an
underwritten offering of 1,250,000 shares of Common Stock. Plantronics did not
receive any proceeds from this offering, other than approximately $0.8 million
(net of offering expenses) received upon the exercise of options to purchase
443,548 shares of Common Stock by two of the stockholders selling in the
offering. The offering increased outstanding shares by 443,548.
During fiscal 1999, the Board of Directors authorized the Company to repurchase
a total of 1,000,000 shares of Common Stock. During fiscal 1999, the Company
repurchased 735,593 shares of its Common Stock in the open market at a total
cost of $46.4 million and 29,301 shares for proceeds of $1.3 million were
reissued through employee benefit plans.
page 16 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 10
Notes to consolidated financial statements
note 6. INCOME TAXES:
Income tax expense for fiscal 1997, 1998 and 1999 consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS) 1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ 8,744 $10,109 $18,127
Deferred 2,789 4,746 3,344
State 1,854 1,472 1,943
Foreign 1,899 2,116 2,587
-------------------------------------------
$15,286 $18,443 $26,001
===========================================
</TABLE>
Pre-tax earnings of the foreign subsidiaries were $8.2 million, $15.7 million
and $24.5 million for fiscal years 1997,1998 and 1999, respectively. Cumulative
earnings of foreign subsidiaries that have been permanently reinvested as of
March 31, 1999 totaled $22.5 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,
(IN THOUSANDS) 1997 1998 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at statutory rate $ 15,735 $ 20,171 $ 27,847
Foreign operations taxed at different rates (971) (4,364) (3,609)
State taxes, net of federal benefit 1,204 1,476 1,263
Other, net (682) 1,160 500
----------------------------------------
$ 15,286 $ 18,443 $ 26,001
========================================
</TABLE>
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,
(IN THOUSANDS) 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred gains on sales of properties $ 2,476 $ 2,413
Deferred state tax 314 793
Unremitted earnings of certain subsidiaries 5,749 7,249
Other deferred tax liabilities 1,111 1,200
------------------------
Gross deferred tax liabilities 9,650 11,655
------------------------
Accruals and other reserves (5,670) (4,122)
Other deferred tax assets (458) (667)
------------------------
Gross deferred tax assets (6,128) (4,789)
------------------------
Total net deferred tax liabilities $ 3,522 $ 6,866
========================
</TABLE>
PLANTRONICS ANNUAL REPORT 1999 page 17
<PAGE> 11
Notes to consolidated financial statements
note 7. EMPLOYEE BENEFIT PLANS:
Subject to eligibility requirements, substantially all domestic employees
participate in quarterly cash, annual cash and annual deferred profit sharing
plans. All other employees, with the exception of direct labor in Mexico,
participate in quarterly cash profit sharing plans. Domestic employees also have
the option of participating in a salary deferral plan qualified under Section
401(k) of the Internal Revenue 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 percent of profit distributed to employees varies by
location. 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 employee's date of hire. Total annual and quarterly
profit sharing contributions were $5.5 million, $6.9 million and $9.4 million
for fiscal 1997, 1998 and 1999, 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 2004. Minimum future rental payments
under non-cancelable operating leases having remaining terms in excess of one
year as of March 31, 1999:
FISCAL YEAR ENDING MARCH 31,
<TABLE>
<CAPTION>
(IN THOUSANDS) AMOUNT
- --------------------------------------------------------------------------------
<S> <C>
2000 $1,234
2001 947
2002 427
2003 412
2004 410
Thereafter 4,510
------
Total minimum future rental payments $7,940
======
</TABLE>
Rent expense for operating leases was approximately $1.1 million in fiscal 1997,
$1.3 million in fiscal 1998 and $1.1 million in fiscal 1999.
EXISTENCE OF RENEWAL OPTIONS
Certain operating leases provide for renewal options for periods from one to
three 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.
page 18 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 12
Notes to consolidated financial statements
note 9. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION:
The Company adopted SFAS No. 131 in fiscal 1999 which changes the way the
Company reports information about its operating segments.
OPERATING SEGMENT
The Company organizes the reporting segments based on geographic areas. The
nature of products, (telecommunications equipment), development, manufacturing,
marketing and servicing are similar in each geographic area. The Company
evaluates segment performance based on profit or loss from operations before
interest expense, foreign exchange gains and losses and income taxes. No one
customer accounted for 10% or more of total revenue from consolidated sales for
fiscal year 1997, 1998 or 1999.
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,
(IN THOUSANDS) 1997 1998 1999
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET REVENUES FROM UNAFFILIATED CUSTOMERS:
United States $135,664 $164,074 $198,910
International 59,643 72,038 87,351
--------------------------------------
$195,307 $236,112 $286,261
======================================
Intersegment revenues $ 47,952 $ 80,421 $ 92,141
--------------------------------------
OPERATING PROFIT:
United States $ 36,718 $ 45,051 $ 63,169
International 13,621 17,322 20,345
--------------------------------------
$ 50,339 $ 62,373 $ 83,514
======================================
LONG LIVED ASSETS:
United States $ 97,138 $121,627 $ 76,339
International 30,103 43,848 66,529
--------------------------------------
$127,241 $165,475 $142,868
======================================
</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 intersegment
revenues. Intersegment revenues are from Plantronics B.V. to the US and are at
arms length prices sufficient to recover a reasonable profit.
PLANTRONICS ANNUAL REPORT 1999 page 19
<PAGE> 13
Notes to consolidated financial statements
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, 5,459,242
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 in 1997 and
1,300,000 in 1999, which were authorized by the Board of Directors and approved
by the stockholders for issuance in 1997 and 1999 respectively. The 1993 Stock
Plan, which has a term of ten years, provides for incentive as well as
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% 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% 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% 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 four years.
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 1999, options for
48,500 shares of Common Stock were outstanding under the Directors' Option Plan.
All options were granted at fair market value and generally vest over a
four-year period.
page 20 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 14
Notes to consolidated financial statements
Stock option activity under the 1993 Stock Plan and the Directors' Stock Option
Plan are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES --------------------------
AVAILABLE WEIGHTED AVERAGE
FOR GRANT SHARES PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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 Cancelled 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 Cancelled 233,010 (233,010) $ 18.53
---------------------------------------------
Balance at March 31, 1998 116,724 3,091,912 $ 11.29
Options Authorized 1,300,000
Options Granted (666,000) 666,000 $ 55.75
Options Exercised (1,056,093) $ 4.91
Options Cancelled 184,445 (184,445) $ 18.55
Balance at March 31, 1999 935,169 2,517,374 $ 25.19
---------------------------------------------
Exercisable at March 31, 1999 1,293,104
=========
</TABLE>
Significant option groups outstanding at March 31, 1999 and related weighted
average prices and lives are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------------------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
RANGE OF AS OF REMAINING AVERAGE AS OF AVERAGE
EXERCISE PRICE MARCH 31, 1999 CONTRACTUAL LIFE EXERCISE PRICE MARCH 31, 1999 EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.90-$ 0.90 292,216 4.50 $ 0.90 292,216 $ 0.90
2.74- 17.44 716,102 5.31 7.14 685,190 6.69
18.44- 21.06 519,093 7.82 19.74 234,849 19.61
21.13- 59.75 693,213 8.91 41.69 80,849 27.94
61.13- 81.25 297,000 9.60 63.41 0 0.00
- -------------------------------------------------------------------------------------------------------------------
$ 0.90-$81.25 2,517,374 7.23 $ 25.16 1,293,104 $ 9.06
===================================================================================================================
</TABLE>
PLANTRONICS ANNUAL REPORT 1999 page 21
<PAGE> 15
Notes to consolidated financial statements
FAIR VALUE DISCLOSURES
All options in fiscal 1997, 1998 and 1999 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 1997, 1998 and 1999 were $6.34, $9.79 and $25.25 per share, respectively.
The fair value of options at date of grant was estimated using the Black-Scholes
model with the following assumptions for 1997: dividend yield of 0%, an expected
life of 5 years, expected volatility of 17% and risk free interest rate of 6.6%.
For 1998 the assumptions were: dividend yield of 0%, an expected life of 5
years, expected volatility of 28% and risk free interest rate of 5.6%. For 1999
the assumptions were:dividend yield of 0%, an expected life of 5.6 years,
expected volatility of 39% and risk free interest rate of 5.3%.
Volatility is a measure of the amount by which a price has fluctuated over a
historical period. The higher the volatility, the more the returns on the stock
can be expected to vary. The risk free interest rate is the rate on a US
Treasury bill or bond that approximates the expected life of the option.
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,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1998 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $ 29,671 $ 39,189 $ 54,204
Pro forma $ 29,044 $ 37,381 $ 51,771
Net income per share:
As reported $ 1.67 $ 2.15 $ 2.96
Pro forma $ 1.63 $ 2.05 $ 2.83
</TABLE>
page 22 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 16
Notes to consolidated financial statements
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
six months long. Once purchased the shares are restricted for six months. During
fiscal 1997, 581 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 six months,
expected volatility of 17%, and risk free interest rate of 6.6%. During fiscal
1998, 2,021 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 six months, expected
volatility of 28%, and risk free interest rate of 5.6%. The weighted-average
fair value of these purchase rights granted in fiscal 1998 was $4.85. During
fiscal 1999, 2,531 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 six months,
expected volatility of 39%, and risk free interest rate of 4.6%. The
weighted-average fair value of these purchase rights granted in fiscal 1999 was
$5.92.
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
five 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
will sell the Company's Treasury Stock 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.
PLANTRONICS ANNUAL REPORT 1999 page 23
<PAGE> 17
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
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Plantronics,
Inc. and its subsidiaries at March 31, 1998 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999, 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.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 16, 1999
page 24 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 18
Management's discussion and analysis of
financial condition and results of operations
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, without limitation, the
statements that (i) we expect interest expenses in future periods to be minimal
discussed in the last sentence of the paragraph below titled "Interest Expense"
under Annual Results of Operations; (ii) cash from operations and available
borrowings will be sufficient to fund operations for the next 12 months
discussed in the final paragraph of the section titled "Liquidity" under
Financial Condition; (iii) we expect that the repurchase of Senior Notes will
increase diluted earnings per share by approximately $0.10 on an annual pro
forma basis discussed in the final paragraph in the section titled "Financing
Activities" under Financial Condition; and (iv) the Year 2000 readiness
statements set out in various paragraphs under Year 2000, including the expected
Year 2000 compliance of our information systems and applications by June 1999,
the expected Year 2000 certifications from our principal suppliers and customers
by July 1999 and August 1999, respectively, our belief that there will be no
material impact of Year 2000 problems due to failures of our systems or those of
third parties with whom we do business, and the expectation that we will
substantially complete our contingency planning by July 1999. 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. Our 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 "Risk Factors Affecting Future
Operating Results" set forth in the Company's Annual Report on Form 10-K filed
with the Securities Exchange Commission on or before June 25, 1999. The
following discussions titled "Results of Operations" and "Financial Condition"
should be read in conjunction with those risk factors, the consolidated
financial statements and related notes included elsewhere herein, and the
discussion and additional disclosures in our Annual Report on Form 10-K.
ANNUAL RESULTS OF OPERATIONS
Net Sales. Net sales in fiscal 1999 increased 21.2% to $286.3 million compared
to $236.1 million in fiscal 1998, which in turn increased 20.9% compared to
fiscal 1997 net sales of $195.3 million. Both domestic and international sales
contributed to the growth in net sales. Domestic sales increased 21.2% to $198.9
million in fiscal 1999, compared to an increase of 20.9% to $164.1 million in
fiscal 1998 compared to the prior year. Domestic sales growth occurred in all
our sales channels, with the largest percentage increases coming in the retail
and Original Equipment Manufacturer ("OEM") channels.
International sales in fiscal 1999 increased 21.3% to $87.4 million compared to
$72.0 million in fiscal 1998, which in turn increased 20.8% compared to the
prior year. Most of the growth in fiscal 1999 occurred in Europe, with sales in
the Asia Pacific/Latin America region and Canada growing at a slower rate.
International sales in fiscal 1999, 1998 and 1997 have accounted for
approximately 30.5% of total net sales in each of these periods.
Gross Profit. Gross profit in fiscal 1999 increased 25.8% to $160.6 million
(56.1% of net sales), compared to $127.6 million (54.0% of net sales) in fiscal
1998. Gross profit in fiscal 1998 increased 21.8% compared to gross profit of
$104.7 million (53.6% of net sales) in fiscal 1997. The increases in gross
profit as a percent of net sales in the last two fiscal years mainly reflect
reductions in product costs through design and manufacturing efficiencies and by
obtaining lower costs from our suppliers.
PLANTRONICS ANNUAL REPORT 1999 page 25
<PAGE> 19
Management's discussion and analysis of
financial condition and results of operations
Research, Development and Engineering
Research, development and engineering expenses in fiscal 1999 increased 11.3% to
$19.5 million (6.8% of net sales), compared to $17.5 million (7.4% of net sales)
in fiscal 1998. Research, development and engineering expenses in fiscal 1998
increased 21.0% compared to $14.5 million (7.4% of net sales) in fiscal 1997.
The increase in these expenses reflects continued investment in new product
development and technologies.
Selling, General and Administrative
Selling, general and administrative expenses in fiscal 1999 increased 20.6% to
$57.5 million (20.1% of net sales), compared to $47.7 million (20.2% of net
sales) in fiscal 1998. Selling, general and administrative expenses in fiscal
1998 increased 19.5% compared to $39.9 million (20.4% of net sales) in fiscal
1997. Increases in expenses in fiscal 1999 were primarily from costs associated
with the expansion of sales programs and higher worldwide sales and related
variable expenses, such as sales commissions and employee profit sharing.
General and administrative expenses also increased due to the addition of two
senior corporate executive positions.
Operating Income
Operating income in fiscal 1999 increased 33.9% to $83.5 million (29.2% of net
sales), compared to $62.4 million (26.4% of net sales) in fiscal 1998. Operating
income in fiscal 1998 increased 23.9% compared to $50.3 million (25.8% of net
sales) in fiscal 1997. The increase in operating income over the past two fiscal
years was primarily due to:(i) higher net sales, (ii) the increase in gross
margin and (iii) a concerted effort to limit the growth of operating expenses
relative to sales growth.
Interest Expense
Interest expense in fiscal 1999 decreased 17.2% to $5.8 million, compared to
$7.0 million in fiscal 1998, which in turn decreased 1.7% from $7.1 million in
fiscal 1997. Interest expense for all periods reported principally represents
interest payable on our 10% Senior Notes Due 2001 (Senior Notes) which were
redeemed on January 15, 1999. The early redemption of these Senior Notes was the
reason for the decrease in interest expense in fiscal 1999, and we expect
interest expense to be minimal in fiscal 2000.
Interest and Other Income
Interest and other income in fiscal 1999 increased 57.2% to $3.5 million
compared to $2.2 million in fiscal 1998, which in turn increased 30.3% compared
to $1.7 million in fiscal 1997. The increases were primarily attributable to
interest income derived from increases in cash and cash equivalents.
Income Tax Expense
In fiscal 1999, fiscal 1998 and fiscal 1997, income tax expense was $26.0
million, $18.4 million and $15.3 million, respectively, representing effective
tax rates of 32% in fiscal 1999 and fiscal 1998 with a 34% effective tax rate in
fiscal 1997. The decrease in the overall rate from fiscal 1997 was due to the
faster relative increase in income in countries with tax rates lower than the
United States.
FINANCIAL CONDITION
Liquidity
As of March 31, 1999, we had working capital of $76.3 million, including $43.0
million of cash and cash equivalents, compared with working capital of $98.8
million, including $64.9 million of cash and cash equivalents, as of March 31,
1998. During the fiscal year ended March 31, 1999, we generated $86.9 million of
cash from operating activities, due primarily to $54.2 million in net income,
decreases of $10.9 million in inventory, $6.8 million in accrued liabilities and
the income tax benefit associated with the exercise of options of $21.7 million.
In comparison, we generated $39.2 million in cash from operating activities for
the fiscal year ended March 31, 1998, due mainly to $39.2 million in net income
and increases of $6.2 million in accrued liabilities, partially offset by
increases of $9.7 million in inventory and $5.0 million in accounts receivable.
page 26 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 20
Management's discussion and analysis of
financial condition and results of operations
We have a $30.0 million revolving credit facility, including a $10.0 million
letter-of-credit subfacility, with a major bank, both of which expire in
November 1999. As of March 31, 1999, we had no cash borrowings under the
revolving credit facility and $2.3 million outstanding under the
letter-of-credit subfacility. The amounts outstanding under the letter-of-credit
subfacility were principally associated with purchases of inventory. The terms
of the credit facility contain covenants that materially limit our ability to
incur debt, make capital expenditures and pay dividends, among other matters.
After giving effect to the redemption of the Senior Notes, we believe that our
current cash balance and cash to be provided by operations, together with
available borrowing capacity under our revolving credit facility and
letter-of-credit subfacility, will be sufficient to fund operations for at least
the next 12 months.
Investing Activities
Capital expenditures of $3.8 million in the fiscal year ended March 31, 1999
were incurred principally in tooling to expand manufacturing capacity and
investments in computer and telephone equipment.
Financing Activities
In the fiscal year ended March 31, 1999, we sold 29,301 shares of our treasury
stock for approximately $1.3 million and repurchased 735,593 shares of our
Common Stock for approximately $46.4 million. As of March 31, 1999, we remained
authorized to repurchase approximately 452,407 shares under all repurchase
plans.
We received $5.1 million in proceeds from the exercise of stock options during
the fiscal year ended March 31, 1999. In July 1998, our stockholders approved an
increase of 1,300,000 shares of Common Stock issuable under our 1993 Stock Plan
(the "1993 Stock Plan"). This increased the maximum aggregate number of shares
that may be optioned and sold under the 1993 Stock Plan to 5,459,242 shares.
Effective January 15, 1999, we repurchased all of our Senior Notes. The
transaction resulted in a net extraordinary charge of approximately $1.0
million, or approximately $0.06 per diluted share, in the fourth quarter of
fiscal 1999. Based on current interest rates and the alternative of investing
the cash, we expect the transaction to increase diluted earnings per share by
approximately $0.10 on an annual pro forma basis.
YEAR 2000
State of Readiness
Many existing electronic systems, including computer systems, use only the last
two digits to refer to a year. Therefore, these systems may recognize a date
using "00" as 1900 rather than the year 2000. If not corrected, many computer
and other electronic applications and systems could fail or create erroneous
results when addressing dates on and after January 1, 2000. Our products do not
address or utilize dates in their operation, and, accordingly, our products
should not fail due to the year 2000 problem. However, we use and depend on
information technology systems (including business information computer systems
and design and manufacturing computer systems) and other machinery and equipment
that include embedded date sensitive technology. We also depend on the proper
functioning of date sensitive electronic systems of third parties, such as
customers and suppliers. The failure of any of these systems to appropriately
interpret the year 2000 could have a material adverse effect on our business,
financial condition and results of operations. We are undertaking efforts to
ensure that our business systems and those of our suppliers and customers are
compliant with the requirements of the year 2000.
PLANTRONICS ANNUAL REPORT 1999 page 27
<PAGE> 21
Management's discussion and analysis of
financial condition and results of operations
We have established a worldwide year 2000 task force, led by an Executive
Steering Committee of our senior management, including representatives of each
of our operating organizations and corporate functions, to oversee and regularly
review the status of our year 2000 compliance plan. Through our year 2000 task
force, we are proceeding with implementation of a formal year 2000 compliance
program. The compliance program addresses three key elements: (i) internal
infrastructure, addressing internal hardware and software and non-information
technology systems; (ii) supplier readiness, addressing the preparedness of our
suppliers of goods and services; and (iii) customer readiness, addressing the
preparedness of our customer support and the preparedness of our customers to
transact business with us. In each of those compliance areas, we are
systematically performing a global risk assessment, conducting testing,
implementing upgrades, communicating with and assisting suppliers and customers
in raising awareness of the year 2000 issues and developing contingency plans to
mitigate known and unknown year 2000 risks. The status of our compliance efforts
in those three areas is set forth below:
Internal Infrastructure
We are assessing all internal applications and computer software and hardware.
Our key business information systems have been made year 2000 compliant.
Resources have been assigned to address other applications, such as product
testing and product design hardware and software, based upon our determination
of how critical each of those systems is to our business operations and the time
required to bring them into full year 2000 compliance. We currently expect that
all our critical business information systems and other critical applications
will be fully year 2000 compliant by June 1999.
Supplier Readiness
This program focuses on minimizing the risks associated with supplier year 2000
issues in two areas: (i) the suppliers' business capability to continue
providing products and services in and after the year 2000 and (ii) the year
2000 readiness of products supplied to us for our use. Requests for information
and certification of compliance have been and are being sent to our principal
and critical suppliers. The year 2000 task force is monitoring responses from
suppliers and following up where necessary and appropriate. We expect that we
will have certification from our principal and critical suppliers of goods and
services by July 1999.
Customer Readiness
This program focuses on ensuring that customers are aware of the year 2000
issues and that customers are capable of placing orders for our products,
receiving products ordered and paying our invoices for products sold and
delivered. Requests for information and certification of year 2000 compliance
have been sent to our major customers. The year 2000 task force will follow up
with customers where necessary and appropriate. We expect that we will have
certification from our principal customers by August 1999.
Costs to Address Year 2000 Issues
We currently estimate that the aggregate cost of our year 2000 compliance
efforts will be approximately $1.2 million, of which approximately $0.7 million
has been incurred to date. The costs consist principally of (i) fees paid to
outside consultants and software programmers, (ii) purchase of telephone PBX
systems which require upgrades to be year 2000 compliant and (iii) purchase of
software and software upgrades to meet the year 2000 issue. The funds expended
and to be expended are being funded through operating cash flows. Approximately
$0.5 million of the total cost, related to the purchase of fixed assets, will be
capitalized, with the balance expensed as incurred.
page 28 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 22
Management's discussion and analysis of
financial condition and results of operations
Risks of the Year 2000 Issues
We currently believe that our internal year 2000 compliance efforts will be
successful and there will be no material impact to us by reason of the failure
or malfunction of any systems owned or operated by us or third parties with whom
we do business. However, our year 2000 program may not be effective or we may
not be able to implement it in a timely and cost-effective manner. Our year 2000
efforts may not, therefore, ensure against disruptions caused by the approach or
advent of the year 2000. The year 2000 problem is potentially very widespread,
and it is not possible to determine all the potential risks that we may face.
Our inability to remedy our own year 2000 problems or the failure of third
parties to do so may cause business interruptions or shutdowns, financial loss,
regulatory actions, harm to our reputation and exposure to liability.
Contingency Plans
We are developing contingency plans to mitigate the potential disruptions that
may result from the year 2000 issue. We expect to substantially complete our
contingency planning by July 1999. These plans may include identifying and
securing alternate suppliers of components, containers, packaging materials and
utilities; adjusting manufacturing facility production, shutdown and start-up
schedules; stockpiling of critical inventory components and other measures
considered appropriate by management. Once developed and approved, contingency
plans, and the related cost estimates, will be continually refined as additional
information becomes available.
PLANTRONICS ANNUAL REPORT 1999 page 29
<PAGE> 23
Selected financial data
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE) 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
Net sales $169,923 $182,959 $195,307 $236,112 $286,261
Income before extraordinary item 20,808 25,470 29,671 39,189 55,253
Extraordinary item, net of taxes -- -- -- -- 1,049
Net income $ 20,808 $ 25,470 $ 29,671 $ 39,189 $ 54,204
--------------------------------------------------------------------
Diluted net income per common share:
Income before extraordinary item$ 1.19 $ 1.42 $ 1.67 $ 2.15 $ 3.02
Extraordinary item,net of taxes -- -- -- -- 0.06
Net income $ 1.19 $ 1.42 $ 1.67 $ 2.15 $ 2.96
Shares used in diluted
per share calculations 17,512 17,964 17,792 18,223 18,282
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
(IN THOUSANDS) 1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Total assets $ 74,855 $108,661 $127,241 $165,475 $142,868
Long-term debt 65,050 65,050 65,050 65,050 --
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
(IN THOUSANDS, JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31
EXCEPT EARNINGS PER SHARE) 1997 1997 1997 1998 1998 1998 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
QUARTERLY DATA UNAUDITED
Net sales $54,023 $56,539 $62,017 $63,533 $70,060 $71,150 $72,038 $73,013
Gross profit 29,067 30,536 33,553 34,442 38,163 38,958 41,036 42,406
Income before
extraordinary item 8,305 9,366 10,421 11,097 12,471 13,613 14,423 14,746
Extraordinary item,
net of taxes -- -- -- -- -- -- -- 1,049
Net income $ 8,305 $ 9,366 $10,421 $11,097 $12,471 $13,613 $14,423 $13,697
Diluted net income
per common share:
Income before
extraordinary item $ 0.47 $ 0.51 $ 0.57 $ 0.61 $ 0.68 $ 0.74 $ 0.79 $ 0.81
Extraordinary item,
net of taxes -- -- -- -- -- -- -- 0.06
Net income $ 0.47 $ 0.51 $ 0.57 $ 0.61 $ 0.68 $ 0.74 $ 0.79 $ 0.75
</TABLE>
page 30 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 24
Corporate officers and information
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS
Robert S. Cecil(*) M. Saleem Muqaddam Trude C. Taylor
Chairman of the Board Vice President Private Investor
Citicorp Venture Capital, Ltd.
Robert F.B. Logan David A. Wegmann
Private Investor John Mowbray O'Mara Private Investor
Management Consultant
Ken Kannappan
President and Chief Executive Officer
EXECUTIVE OFFICERS
Robert S. Cecil(*) Donald S. Houston John A. Knutson
Chairman of the Board Senior Vice President--Sales Vice President--Legal, Senior
General Counsel and Secretary
Ken Kannappan David Huddart
President and Chief Executive Officer Senior Vice President-- H. Craig May
Engineering and Technology Senior Vice President--Marketing
Benjamin Brussell
Vice President-- Farhad Kashani Barbara V.Scherer
Corporate Development Senior Vice President--Operations Senior Vice President--
Finance and Administration and
Chief Financial Officer
CORPORATE INFORMATION
Corporate Headquarters Registrar and Transfer Agent Independent Accountants
345 Encinal Street Boston EquiServe, L.P. PricewaterhouseCoopers LLP
Santa Cruz, California 95060 Shareholder Services San Jose, California
Telephone: 831-426-5858 MailStop: 45-01-06
Fax: 831-426-6098 P.O. Box 644 Corporate Counsel
http://www.plantronics.com Boston, Massachusetts 02102-0644 Wilson Sonsini Goodrich & Rosati
Palo Alto, California
</TABLE>
(*)Mr.Cecil will not seek re-election to the Board of Directors at the Company's
1999 Annual Meeting of Stockholders.
PLANTRONICS ANNUAL REPORT 1999 page 31
<PAGE> 25
Investor information
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
Or visit the Plantronics web site at
www.plantronics.com
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 quarterly high and low sales prices for the
Common Stock for the Company's 1998 and 1999 fiscal years.
<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>
<TABLE>
<CAPTION>
FY 1999 LOW HIGH
- -----------------------------------------------------------------------
<S> <C> <C>
First Quarter $39 1/2 $59 13/16
Second Quarter $45 $65 1/2
Third Quarter $48 $72 1/4
Fourth Quarter $59 $87 1/2
</TABLE>
No cash dividends were declared or paid during fiscal 1998 and fiscal 1999, and
the Company has no current intention to pay dividends. As of March 31, 1999,
there were approximately 93 holders of record of the Company's Common Stock.
page 32 PLANTRONICS ANNUAL REPORT 1999
<PAGE> 26
Plantronics worldwide operations
COMPUTER AUDIO SYSTEMS DIVISION
345 Encinal Street
Santa Cruz, California 95060
Telephone: 831-426-5858
Fax: 831-426-3516
MOBILE COMMUNICATIONS DIVISION
345 Encinal Street
Santa Cruz, California 95060
Telephone: 831-426-5858
Fax: 831-458-7787
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 DENMARK
Andersen Nexo vej 29
2860 Soborg, Denmark
Telephone: 011-45-39-55-1051
Fax: 011-45-39-55-1052
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 IRELAND
Portmanna
Clonee, Co. Meath
Southern Ireland
Telephone: 011-353-1-878-1934
Fax: 011-353-1-825-2238
PLANTRONICS K.K.
Hibiya Central Bldg 14F
1-2-9, Nishi-Shinbashi, Minato-ku
Tokyo 105-003, Japan
Telephone: 011-813-5532-7293
Fax: 011-813-5532-7425
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 2, 200 Arden St.
North Melbourne, Victoria 3051
Australia
Telephone: 011-61-3-9321-0144
Fax: 011-61-3-9321-0162
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
PLANTRONICS TAIWAN
17F-3 No. 400 Hwang-PE1 Road
Chung-LI Taiwan R.O.C.
Telephone: 011-886-3-422-9249
Fax: 011-886-3-427-3555
WALKER EQUIPMENT DIVISION
4009 Cloud Springs Road
Ringgold, Georgia 30736
Telephone: 706-861-2212
Fax: 706-861-5069
<PAGE> 1
EXHIBIT 21
Subsidiaries of Plantronics, Inc.
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY NAME INCORPORATION
------------ -------------
<S> <C>
Emtel, S.A. Mexico
Frederick Electronics Corporation Maryland
Pacific Plantronics, Inc. California
Plamex, S.A. de C.V. Mexico
Plantronics Acoustics Italia, S.r.l. Italy
Plantronics B.V. Netherlands
Plantronics Canada Limited Canada
Plantronics France S.A.R.L. France
Plantronics Futurecomms, Inc. California
Plantronics GmbH Germany
Plantronics Holdings Limited Canada
Plantronics International do Brasil, Ltda. Brazil
Plantronics K.K. Japan
Plantronics Limited United Kingdom
Plantronics Pty. Ltd. Australia
Plantronics, A.G. Switzerland
</TABLE>
1
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 033-81980, 333-14833, 333-19351 and 333-61003) and
Form S-3 (Nos. 333-67781 and 333-77631) of Plantronics, Inc. of our report dated
April 16, 1999 relating to the financial statements, which appears in the Annual
Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
/s/ PricewaterhouseCoopers LLP
San Jose, California
June 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 42,999
<SECURITIES> 0
<RECEIVABLES> 49,133
<ALLOWANCES> 2,326
<INVENTORY> 18,889
<CURRENT-ASSETS> 119,734
<PP&E> 47,469
<DEPRECIATION> 27,146
<TOTAL-ASSETS> 142,868
<CURRENT-LIABILITIES> 43,438
<BONDS> 0
0
0
<COMMON> 185
<OTHER-SE> 89,220
<TOTAL-LIABILITY-AND-EQUITY> 142,868
<SALES> 286,261
<TOTAL-REVENUES> 286,261
<CGS> 125,698
<TOTAL-COSTS> 125,698
<OTHER-EXPENSES> 77,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,785
<INCOME-PRETAX> 81,254
<INCOME-TAX> 26,001
<INCOME-CONTINUING> 55,253
<DISCONTINUED> 0
<EXTRAORDINARY> 1,049
<CHANGES> 0
<NET-INCOME> 54,204
<EPS-BASIC> 3.27
<EPS-DILUTED> 2.96
</TABLE>
