Plantronics 2005 Annual Report Download - page 54

The wireless market continues to grow coupled with a trend toward the convergence of audio and
entertainment. This results in a greater need to be able to communicate more freely and effectively. Our
ability to innovate enables us to create compelling communication solutions and capture these
opportunities.*
In comparison to fiscal 2003, sales for fiscal 2004 were stronger across all major product lines and were
also driven by sales of new products. Both domestic and international revenues were up, resulting in part
from increased demand due to hands-free legislation, increased demand for headsets for mobile phones
and for wireless headsets for the office, the favorable effects of foreign exchange rates on international
revenues, and the incremental sales from the additional 53rd week. Because our fiscal year always ends on
the closest Saturday following March 31, our fiscal year periodically will have 53 weeks rather than
52 weeks. In fiscal 2004, we had a 53 week fiscal calendar. The incremental effect of the 53rd week
contributed approximately $8.7 million or 2.1% of the increase year over year based on a linear
calculation. Our headsets for mobile phones include both corded headsets sold to U.S. wireless carriers
and Bluetooth based headsets sold primarily for use in Europe with yearly sales up 84.3% over the prior
fiscal year. Our office and contact center products business grew 12.1% from the prior year, primarily
driven by the continued ramp of our CS60 product in Europe. In the U.S., office and contact center
product sales were favorably affected by the launch of our CS50 product. Computer audio product sales,
which grew 28% compared to the prior year, were primarily due to expanded retail distribution channels.
Domestic sales for fiscal 2005 and fiscal 2004 as a percentage of total sales remained at approximately
67%, which compares to 68% for fiscal 2003. Domestic sales were up in fiscal 2005 in absolute dollars and
across all major channels, primarily driven by demand for office and contact center products, demand for
gaming products, and the demand for mobile products including wireless Bluetooth headsets. Interna-
tional revenues for fiscal 2005 were favorably affected by the continued strengthening of the European
exchange rates against the U.S. dollar, sales of our CS60 product, and sales related to VoIP applications
and Bluetooth.
In comparison to fiscal 2003, domestic sales in fiscal 2004 increased in all major U.S. channels, with the
most significant increase in our OEM distribution channel. International sales in fiscal 2004 compared to
fiscal 2003 increased, reflecting growth in each of the European, Asia Pacific/ Latin American and
Canadian regions. Sales were favorably affected by the continued strengthening of the Euro and the
Great British Pound against the U.S. dollar, new product introductions during the year, and sales from
the extra week in fiscal 2004.
Revenues may vary due to the timing of the introduction of new products, seasonality, discounts and
other incentives, and channel mix.* We have a ‘‘book and ship’’ business model, whereby we ship most
orders to our customers within 48 hours of receipt of those orders, thus, we cannot rely on the level of
backlog to provide visibility into potential future revenues.
Gross Profit
Fiscal Year Ended Fiscal Year Ended
March 31, March 31, Increase March 31, March 31, Increase
$ in thousands 2003 2004 (Decrease) 2004 2005 (Decrease)
Net revenues $337,508 $416,965 $79,457 23.5% $416,965 $559,995 $143,030 34.3%
Cost of sales 168,565 200,995 32,430 19.2% 200,995 271,537 70,542 35.1%
Gross profit $168,943 $215,970 $47,027 27.8% $215,970 $288,458 $ 72,488 33.6%
Gross Profit Margin 50.1% 51.8% 1.7 ppt. 51.8% 51.5% (0.3) ppt.
26 ⯗Plantronics