Plantronics 1998 Annual Report Download - page 27

Management’s DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Senior Notes that were issued during fiscal 1994, in the remaining balance of $65.1 million, bear interest, payable
semiannually, at a rate of 10% per annum and mature on January 15, 2001. The Senior Notes are redeemable, at the
Company’s option, in whole or in part, any time after January 15, 1999. The Senior Note Indenture contains certain
covenants that, among other things, limit the ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, issue preferred stock of subsidiaries, engage in transactions with affiliates, create liens, engage in mergers
and consolidations, make certain asset sales or make certain investments. The Senior Note Indenture also provides
that holders of the Senior Notes have the right to require the Company to repurchase their Senior Notes in the event
of a “change in control” and certain various customary events of default.
The Company believes that its current cash balance and cash to be provided by operations, together with available
borrowing capacity under the revolving credit facility, will be sufficient to make required interest payments under the
Senior Notes and to fund operations at least through the next 12 months. Subject to the terms and conditions of
the Senior Note Indenture and the Company’s revolving credit facility, the Company may use cash for such purposes as
repurchasing Senior Notes, repurchasing the Company’s Common Stock or acquiring complementary businesses,
products or technologies.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Plantronics participates in an increasingly volatile industry that is characterized by industry-wide competition for
business. Industry participants confront aggressive pricing practices, continually changing customer demand patterns,
growing competition from new market entrants, and increasingly rapid technological development. In accordance
with the provisions of the Private Securities Litigation Reform Act of 1995, the cautionary statements set forth below
discuss important factors that could cause actual results to differ materially from the projected results contained in
any forward-looking statements in this report or otherwise made orally or in writing by the Company.
NEED TO SUCCESSFULLY DEVELOP NEW PRODUCTS AND MARKETS The Company’s net sales to date have been derived
principally from the sale of lightweight communications headsets (“tops”) and associated telephone adapter bases (“bottoms”).
Historically, a substantial amount of the Company’s sales have been made through distributors to call center users
such as telemarketing personnel, reservation agents, telephone operators and air traffic controllers. The Company has
recently expanded its marketing efforts to sell lightweight communications headsets to the business, mobile and home
office user market segments. The Company’s product development efforts historically have been directed toward
incremental enhancement of its existing products and development of new products that capitalize on its core technologies
and thus expand the Company’s product offerings to new user market segments. The success of new product introductions
is dependent on several factors, including proper new product selection, timely completion and introduction of new
product designs, cost-effective manufacture of such products, quality of new products and market acceptance. To be
successful in the future, the Company must be able to develop new products, qualify these new products with its
customers, successfully introduce these products to the market on a timely basis, and commence and sustain volume
production to meet customer demands. Although the Company has attempted to determine the specific needs of
these new market segments, there is no assurance that the Company’s present and future products designed for these
market segments will gain substantial market acceptance. As discussed below, even if the market segments develop
and the Company’s products meet the needs of the potential segments, there is no assurance that the Company can
cost-effectively manufacture such products.
COMPETITION The Company encounters aggressive competition in all areas of its business activity. The Company
competes primarily on the basis of technology, performance, price, quality, reliability, distribution, and customer
service and support. As the Company develops new generations of products and enters new market segments, including
the developing business, computer, mobile and home office user segments of the market, the Company anticipates
that it may face additional competition from companies which currently do not offer communications headsets. Such
companies may be larger, offer broader product lines and have substantially greater financial and other resources than
the Company. Such competition could negatively affect pricing and gross margins. Although the Company has historically
competed very successfully in the call center segment of the market, there can be no assurance that it will be able to
continue its leadership position in that segment of the market or that the Company will be able to compete successfully
in the previously defined new market segments.
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ANNUAL REPORT . 199 8