Plantronics 1998 Annual Report Download - page 29

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Management’s DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RISK ASSOCIATED WITH FOREIGN OPERATIONS AND SALES Approximately 30.7% of the Company’s net sales in fiscal 1998
were derived from customers outside the United States. In addition, the Company conducts substantially all of its
headset assembly operations in its Mexican manufacturing facility and obtains most of the components of its products
from various foreign suppliers. Offshore operations are subject to certain inherent risks, including delays in trans-
portation, changes in governmental policies, taxes, tariffs and import/export regulations, political unrest, fluctuations
in currency exchange rates and geographic limitations on management controls and reporting. There can be no
assurance that the inherent risks of offshore operations, particularly in Mexico, will not adversely affect the Company’s
business, operating results and financial condition in the future.
Although the Company generally transacts business internationally in United States currency, declines in the values
of local currencies relative to the United States dollar in countries in which the Company sells its products could
adversely affect the Company resulting in less competitive pricing for the Company’s products. Substantial increases
in the values of local currencies relative to the United States dollar in countries in which the Company purchases
components or assembles products could adversely affect the Company by increasing the cost of its products, decreasing
margins or possibly requiring less competitive pricing because of resulting price increases. The Company does not
currently engage in any hedging activities to mitigate exchange rate risks and to date has not been materially adversely
affected by fluctuating currencies. To the extent that the Company is successful in increasing its sales to foreign
customers, or to the extent that the Company increases its transactions in foreign currencies, the Company’s results
of operations could be adversely affected by exchange rate fluctuations.
DEPENDENCE UPON SENIOR MANAGEMENT The Company believes that it has benefited substantially from the leadership
of Robert S. Cecil, the Chairman of the Board and Chief Executive Officer of the Company, and the other current
members of senior management, and that the loss of their services could have a material adverse effect on the Company’s
business and future operations. Although the Company has an employment agreement with Mr. Cecil, such agree-
ment permits him to voluntarily terminate his employment at any time. In addition, although Mr. Cecil’s agreement
contains a five-year non-compete covenant which takes effect upon termination of his employment, such covenants
are generally not enforceable under California law.
CONCLUSION Because of the foregoing factors, as well as other variables affecting or which could affect the Company’s
operating results, past financial performance should not be considered a reliable indicator of future performance.
Investors should not rely upon historical trends to anticipate results or trends in future periods.
P.21
PLANTRONICS
ANNUAL REPORT . 199 8