Plantronics 2000 Annual Report Download - page 20

MAN AGEMEN T ’ S discussion and analysis of financial
condition and results of operations
Research, Development and Engineering Research, development and engineering expenses in fiscal
2000 increased 12.0% to $21.9 million (6.9% of net sales), compared to $19.5 million (6.8% of net sales)
in fiscal 1999. Research, development and engineering expenses in fiscal 1999 increased 11.3% compared
to $17.5 million (7.4% of net sales) in fiscal 1998.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 2000 increased
22.2% to $70.3 million (22.3% of net sales), compared to $57.5 million (20.1% of net sales) in fiscal 1999.
Selling, general and administrative expenses in fiscal 1999 increased 20.6% compared to $47.7 million
(20.2% of net sales) in fiscal 1998. Retail variable selling expenses increased due to incremental retail revenue.
Marketing expenses increased substantially due to increased activities including advertising campaigns,
new product launches, international marketing and programs for our mobile and computer divisions.
Operating Income Operating income in fiscal 2000 increased 11.7% to $93.3 million (29.6% of net sales),
compared to $83.5 million (29.2% of net sales) in fiscal 1999. Operating income in fiscal 1999 increased
33.9% compared to $62.4 million (26.4% of net sales) in fiscal 1998.The increase in operating income
over the past two fiscal years was primarily due to higher net sales and the increase in gross margin.
Interest Expense Interest expense in fiscal 2000 decreased 98.5% to $.1 million, compared to $5.8 million
in fiscal 1999, which in turn decreased 17.2% from $7.0 million in fiscal 1998. Interest expense for
1999 and 1998 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 2000, and management expects interest expense to be minimal
in future periods. In November 1999, we entered into a credit agreement to borrow up to $100 million
with a major bank.We currently have no borrowings under this agreement.
Interest and Other Income Interest and other income in fiscal 2000 decreased 52.9% to $1.7 million
compared to $3.5 million in fiscal 1999, which in turn increased 57.2% compared to $2.2 million in fiscal
1998.The decrease in interest income in fiscal 2000 was primarily attributable to lower cash and cash
equivalents balances as a result of the January 15, 1999 redemption of $65 million in Senior Notes.
Income Tax Expense In fiscal 2000, fiscal 1999 and fiscal 1998, income tax expense was $30.4 million,
$26.0 million and $18.4 million, respectively, representing effective tax rates of 32% in all fiscal years.
FINANCIAL CONDITI ON:
Liquidity As of March 31, 2000, we had working capital of $78.3 million, including $45.3 million of cash
and cash equivalents and marketable securities, compared with working capital of $76.3 million, including
$43.0 million of cash and cash equivalents, as of March 31, 1999. During the fiscal year ended March 31,
2000, we generated $81.1 million of cash from operating activities, due primarily to $64.5 million in net
income, an increase of $11.3 million in income taxes payable, and an income tax benefit of $15.1 million
associated with the exercise of options, offset by a $14.9 million increase in inventory. In comparison, we
generated $86.9 million in cash from operating activities for the fiscal year ended March 31, 1999, due
mainly to $54.2 million in net income, decreases of $10.9 million in inventory and $6.8 million in accrued
liabilities, and an income tax benefit of $21.7 million associated with the exercise of options.
page 18 PLANTRONI CS ANN UAL REPORT 200 0