Plantronics 2011 Annual Report Download - page 37

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 31st. Fiscal year 2011 had 52 weeks and ended on April 2, 2011. 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. 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 approximately 65 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 continue
to expand into the office, mobile and entertainment, digital audio, and specialty telephone markets in those regions and 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 and we now operate as one segment.
Consolidated net revenues in fiscal 2011 were $683.6 million, which is an increase of 11.4% from fiscal 2010 net revenues of
$613.8 million. The year-over-year increase was driven by increased demand for headsets designed for Unified Communications
("UC") together with higher sales volumes of our Office and Contact Center ("OCC") products as a result of a stronger overall
economic environment.
We had income from continuing operations, net of tax, of $109.2 million in fiscal 2011 as compared to $76.5 million in fiscal
2010, an increase of $32.8 million, due primarily to increased net revenues and higher margins due to a stronger overall product
mix driven by increased OCC net revenues as OCC products generally have higher margins along with a full year effect of
outsourcing our Bluetooth product manufacturing in the second quarter of fiscal 2010 offset in part by an increase in operating
expenses as a result of our investment in UC.
UC is widely expected to increase the adoption and use of headsets in enterprise applications. Headsets help to enable voice to
be delivered naturally in the UC environment. As UC is adopted by enterprises to reduce costs and improve collaboration, headsets
are expected to be an important part of the UC environment.
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.
Throughout fiscal 2011, we remained focused on our long-term strategy to invest in UC as a key long-term driver of revenue and
profit growth, maintain profitability in our consumer Bluetooth products and earn a return on invested capital in excess of the cost
of capital. While staying focused on our long-term strategy, we continued to distribute capital to stockholders through repurchases
of our common stock, and, subsequent to our fiscal year end, on May 2, 2011, our Board of Directors authorized the repurchase
of up to 7,000,000 shares of our outstanding common stock.
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