Plantronics 2005 Annual Report Download - page 41

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part i
MANUFACTURING AND SOURCES OF MATERIALS
Our manufacturing operations consist primarily of assembly and testing, the majority of which is
performed at our facility in Mexico. We have substantially smaller assembly operations in California and
the United Kingdom. We outsource the manufacturing of a limited number of products to third parties,
typically in China and other Asian countries.
We purchase the components for our headset products, including proprietary semi-custom integrated
circuits, amplifier boards and other electrical components, from suppliers in Asia, Mexico, the United
States, and Europe. The majority of our components and subassemblies used in our manufacturing
operations are obtained, or are reasonably available, from dual-source suppliers, although we do have a
certain number of sole-source suppliers. Due to our dependence on single suppliers for certain chip sets,
we could experience delays in development and/or the ability to meet our customer demand for new
products. To alleviate our dependence on outsourced single suppliers, shorten our supply chain, and to
reduce delays, we are currently constructing a new facility in China to increase our manufacturing and
design capabilities in China. We expect to spend approximately $15 million in fiscal 2006 to complete a
plant and development center, with the total project currently expected to cost approximately
$20 million.*
We procure materials to meet forecasted customer requirements. Special products and large orders are
quoted for delivery after receipt of orders at specific lead times. We maintain minimum levels of finished
goods based on market demand in addition to inventories of raw materials, work in process, and sub-
assemblies and components. We reserve for inventory items determined to be either excess or obsolete.
ENVIRONMENTAL MATTERS
We are actively working to gain an understanding of the complete requirements concerning the removal
of certain potential environmentally sensitive materials from our products to comply with the European
Union Directives on Restrictions on certain Hazardous Substances on electrical and electronic equipment
(‘‘ROHS’’) and on Waste Electrical and Electronic Equipment (‘‘WEEE’’). Some of our customers are
requesting that we implement these new compliance standards sooner than the legislation would require.
While we believe that we will have the resources and ability to fully meet our customers’ requests, and
spirit of the ROHS and WEEE directives, if unusual occurrences arise or if we are wrong in our
assessment of what it will take to fully comply, there is a risk that we will not be able to meet the
aggressive schedule set by our customers or comply with the legislation as passed by the EU member
states. If that were to happen, a material negative effect on our financial results may occur.
We are subject to various federal, state, local and foreign environmental laws and regulations, including
those governing the use, discharge and disposal of hazardous substances in the ordinary course of our
manufacturing process. We believe that our current manufacturing operations comply in all material
respects with applicable environmental laws and regulations. We have included in our financial statements
a reserve of $1.5 million for possible environmental remediation related to one of our discontinued
businesses. While no claims have been asserted against us in connection with this matter, there can be no
assurance that such claims will not be asserted in the future or that any resulting liability will not exceed
the amount of the reserve. It is possible that future environmental legislation may be enacted or current
environmental legislation may be interpreted to create environmental liability with respect to our other
facilities, operations, or products.
INTELLECTUAL PROPERTY
We maintain a program of seeking patent protection for our technologies when we believe it is
commercially appropriate. As of April 30, 2005, we had 99 United States patents in force, expiring from
2005 to 2022. Some of these patents are also issued in certain foreign countries.
AR 2005 ⯗13