Plantronics 2005 Annual Report Download - page 56

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In comparison to fiscal 2003, our fiscal 2004 research, development and engineering expenses increased
due to continued support of new product introductions with particular emphasis on mobile and wireless
headset development.
Selling, General and Administrative
Fiscal Year Ended Fiscal Year Ended
March 31, March 31, Increase March 31, March 31, Increase
$ in thousands 2003 2004 (Decrease) 2004 2005 (Decrease)
Selling, general and
administrative $80,605 $95,756 $15,151 18.8% $95,756 $116,621 $20,865 21.8%
% of total revenues 23.9% 23.0% (0.9) ppt. 23.0% 20.8% (2.2) ppt.
In comparison to fiscal 2004, our fiscal 2005 selling, general and administrative expenses increased
primarily for the following reasons:
)an increase in global sales and marketing programs designed to generate demand for our wireless
office, gaming, VoIP products, and other new products;
)entrance into marketing programs to leverage hands-free regulatory laws, especially in the
Japanese market, launch new products, and start a national brand awareness program;
)costs related to work performed for our Sarbanes Oxley Section 404 compliance and attestation
fees; and
)an adverse impact from higher foreign exchange rates, particularly with the Great British Pound
and the Euro against the dollar.
These expenses were partially offset by a one-time benefit of approximately $2.8 million from a favorable
court ruling, which ended a lawsuit filed by one of our competitors during the quarter ended
September 30, 2004.
In fiscal 2004, compared to fiscal 2003, selling, general and administrative expenses were higher, mainly
driven by higher legal expenses, a larger provision for doubtful accounts, and the inclusion of a full year of
expenses relating to Ameriphone.
Total Operating Expenses and Operating Income
Fiscal Year Ended Fiscal Year Ended
March 31, March 31, Increase March 31, March 31, Increase
$ in thousands 2003 2004 (Decrease) 2004 2005 (Decrease)
Operating Expenses $114,482 $131,216 $16,734 14.6% $131,216 $161,837 $30,621 23.3%
% of total revenues 33.9% 31.5% (2.4)ppt. 31.5% 28.9% (2.6)ppt.
Operating income $ 54,461 $ 84,754 $30,293 55.6% $ 84,754 $126,621 $41,867 49.4%
% of total revenues 16.1% 20.3% 4.2 ppt. 20.3% 22.6% 2.3 ppt.
In comparison to fiscal 2004, operating income for fiscal 2005 increased primarily from higher revenues
and lower operating expenses as a percentage of revenues due to economies of scale, but was in part offset
by lower margin products as a result of the change in our product mix. As a result, operating margin
increased from 20.3% to 22.6%. We believe an operating margin goal of 20% or better is reasonable for
fiscal 2006 and probably beyond.*
28 ⯗Plantronics