Plantronics 2010 Annual Report Download - page 37

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29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere in this report. This discussion contains forward-
looking statements. Please see the "Cautionary Statement" and "Risk Factors" above for discussions of the uncertainties, risks, and
assumptions associated with these statements. Our fiscal year-end financial reporting periods are a 52 or 53 week year ending on the
Saturday closest to March 31
st
. Fiscal year 2010 had 53 weeks with the extra week occurring in the fourth quarter of the year and
ended on April 3, 2010. Fiscal year 2009 had 52 weeks and ended on March 28, 2009. Fiscal year 2008 had 52 weeks and ended on
March 29, 2008. Except as noted, financial results are for continuing operations. Altec Lansing, our former AEG segment, was sold
effective December 1, 2009 and is reported as discontinued operations
OVERVIEW
We are a leading worldwide designer, manufacturer, and marketer of lightweight communications headsets, telephone headset
systems, and accessories for the business and consumer markets under the Plantronics brand. In addition, we manufacture and market,
under our Clarity brand, specialty telephone products, such as telephones for the hearing impaired, and other related products for
people with special communication needs.
We ship a broad range of products to 70 countries through a worldwide network of distributors, retailers, wireless carriers, original
equipment manufacturers (“OEMs”), and telephony service providers. We have well-developed distribution channels in North
America, Europe, Australia and New Zealand, where use of our products is widespread. Our distribution channels in other regions of
the world are less mature, and, while we primarily serve the contact center markets in those regions, we are expanding into the office,
mobile and entertainment, digital audio, and specialty telephone markets in additional international locations.
On December 1, 2009, we sold Altec Lansing, our AEG business segment. We have classified the AEG operating results, including
the loss on sale of AEG, as discontinued operations for all periods presented.
Consolidated net revenues in fiscal 2010 were $613.8 million, which is a decrease of 9% from fiscal 2009 net revenues of $674.6
million. The year-over-year decrease was primarily attributable to the continuing effects from the global recession which resulted in
decreased demand for our products particularly with our Mobile and Office and Contact Center (“OCC”) products in the first half of
fiscal 2010. Additionally, the first half of fiscal 2009 included a benefit in mobile Bluetooth headsets revenues from demand
attributable to hands-free driving legislation being enforced in the states of California and Washington beginning July 1, 2009. This
decline from fiscal 2009 was offset in part by increased revenue from a partial recovery of the global recession in the later part of
fiscal 2010, an improved unit mix of revenues from higher price-point products and some benefit from new hands-free driving
legislation being enforced in Canada and Europe. The decrease of $25.3 million in OCC product revenues in fiscal 2010 is due to
lower volumes as a result of weaker global economic conditions.
We had income from continuing operations, net of tax, of $76.5 million in fiscal 2010 as compared to $45.3 million in fiscal 2009, an
increase of $31.1 million, primarily due to improved margins as a result of outsourcing our Bluetooth product manufacturing in the
current year together with other cost reductions which improved our gross margin, and overall reduced operating expenses from
restructuring actions taken in the prior year in an effort to reduce our cost structure and adapt to the current economic conditions.
In the Mobile market, particularly for consumer applications, margins are typically lower than for our enterprise applications due to
the level of competition and pricing pressures. Our strategy for improving the profitability of mobile consumer products is to
differentiate our products from our competitors and to provide compelling solutions under our brand with regard to features, design,
ease of use, and performance. Also, to further improve Bluetooth profitability, we outsourced manufacturing of our Bluetooth
products to an existing supplier in China and, as a result, closed our Suzhou, China manufacturing operations in the second quarter of
fiscal 2010.
Unified Communications (“UC”) is widely expected to increase the adoption and use of headsets in enterprise applications. Headsets
enable voice to be delivered naturally in UC systems. As UC is adopted by enterprises to reduce costs and improve collaboration,
headsets are expected to be an important part of the UC system.