Plantronics 2012 Annual Report Download - page 23

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The increase in gross profit in fiscal year 2011 compared to fiscal year 2010 was due primarily to increased net revenues of $69.8
million along with improved margins on those revenues. As a percentage of net revenues, gross profit increased due primarily to
higher product margins, driven by a greater proportion of net revenues from our higher margin OCC products and improved
Bluetooth margins resulting from our decision to outsource manufacturing which commenced in July 2009, and lower depreciation
expenses in fiscal year 2011 due to accelerated depreciation expenses in fiscal year 2010 related to the closure of our Suzhou,
China manufacturing facility.
There are significant variances in gross profit percentages between our higher and lower margin products; therefore, small variations
in product mix, which can be difficult to predict, can have a significant impact on gross profit. In addition, if we do not accurately
anticipate changes in demand, we have in the past, and may in the future, incur significant costs associated with writing off excess
and obsolete inventory or incur charges for adverse purchase commitments. Gross profit may also vary based on distribution
channel, return rates, and other factors.
Research, Development and Engineering
Research, development, and engineering costs are expensed as incurred and consist primarily of compensation costs, outside
services, including legal fees associated with protecting our intellectual property, expensed materials, depreciation, and an allocation
of overhead expenses, including facilities, IT and human resources costs.
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2012
March 31,
2011 Increase (Decrease)
March 31,
2011
March 31,
2010
Increase
(Decrease)
Research, development
and engineering $ 69,664 $ 63,183 $ 6,481 10.3% $ 63,183 $ 57,784 $ 5,399 9.3%
% of total consolidated
net revenues 9.8% 9.2% 0.6 ppt. 9.2% 9.4% (0.2)ppt.
The increase in research, development and engineering expenses in fiscal year 2012 compared to fiscal year 2011was due primarily
to $4.2 million in higher compensation costs resulting from increased headcount and related costs to support investments in UC
and software and $1.8 million in increased investments in UC product development, offset partially by lower performance-based
compensation related to lower achievement of targets.
The increase in research, development and engineering expenses in fiscal year 2011 compared to fiscal year 2010 was due primarily
to increased compensation costs resulting from increased headcount and higher performance-based compensation on higher
achievement of targets, and increased project expenses, all reflecting our increased investments in UC.
Selling, General and Administrative
Selling, general and administrative expense consists primarily of compensation costs, marketing costs, travel expenses, expensed
equipment, professional service fees, and allocations of overhead expenses, including IT, facilities, and human resources costs.
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2012
March 31,
2011 Increase (Decrease)
March 31,
2011
March 31,
2010
Increase
(Decrease)
Selling, general and
administrative $173,334 $163,389 $ 9,945 6.1% $163,389 $ 143,784 $ 19,605 13.6%
% of total consolidated
net revenues 24.3% 23.9% 0.4 ppt. 23.9% 23.4% 0.5 ppt.
The increase in selling, general and administrative expenses in fiscal year 2012 compared to fiscal year 2011was due primarily to
$8.2 million in higher compensation costs resulting from increased headcount and $2.3 million in increased marketing and sales
promotions and travel-related costs associated with increased net revenues. These increases were offset in part by a $1.6 million
decrease in professional service fees related to litigation that was settled favorably in the fourth quarter of fiscal year 2011 and
lower performance-based compensation from lower achievement of targets.
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The increase in selling, general and administrative expenses in fiscal year 2011 compared to fiscal year 2010 was due primarily
to $8.9 million in increased compensation costs resulting from increased headcount and higher performance-based compensation
on higher achievement of targets, $7.1 million in increased marketing and sales promotions, travel-related expenses and external
sales representative fees and commissions associated with higher net revenues, and $2.5 million in increased legal costs due to
additional litigation that was settled favorably in fiscal year 2011. These increases were offset in part by a decrease of $1.1 million
in depreciation expense due to assets being fully depreciated during fiscal year 2010 and a majority of the current capital projects
were not completed and placed in service as of the end of fiscal year 2011.
Gain from Litigation Settlement
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2012
March 31,
2011
Increase
(Decrease)
March 31,
2011
March 31,
2010
Increase
(Decrease)
Gain from Litigation
Settlement $ — $ (5,100) $ 5,100 100.0% $ (5,100) $ — $ (5,100) 100.0%
% of total consolidated
net revenues —% (0.7)% 0.7 ppt. (0.7)% —% (0.7)ppt.
During the fourth quarter of fiscal year 2011, we entered into a binding settlement agreement to dismiss litigation involving the
alleged theft of our trade secrets by a competitor in mobile headsets, and in the same quarter, pursuant to the settlement agreement,
we received a $5.1 million payment in exchange for a full release and settlement of the claims.
Restructuring and Other Related Charges
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2012
March 31,
2011
Increase
(Decrease)
March 31,
2011
March 31,
2010 Increase (Decrease)
Restructuring and other
related charges $ — $ (428) $ 428 (100.0)% $ (428) $ 1,867 $ (2,295) (122.9)%
% of total consolidated
net revenues —% (0.1)% 0.1 ppt. (0.1)% 0.3% (0.4)ppt.
In fiscal year 2009, we announced various restructuring activities that were completed as of December 31, 2010. There were no
charges during the years ended March 31, 2012 or 2011; however, in fiscal year 2011 we recorded an immaterial net gain upon
the sale of a facility located in China in connection with the restructuring activities. In fiscal year 2010, we recorded restructuring
charges of $1.9 million, consisting of severance and benefits along with facilities and equipment charges.
Operating Income
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2012
March 31,
2011
Increase
(Decrease)
March 31,
2011
March 31,
2010
Increase
(Decrease)
Operating income $141,353 $ 140,712 $ 641 0.5% $140,712 $ 97,635 $ 43,077 44.1%
% of total consolidated
net revenues 19.8% 20.6% (0.8)ppt. 20.6% 15.9% 4.7 ppt.
In fiscal year 2012, we reported operating income of $141.4 million compared to $140.7 million in fiscal year 2011 due to increased
net revenues and higher margins resulting primarily from a favorable product mix that consisted of a greater proportion of OCC
net revenues, which generally have higher gross margins than other product categories, offset partially by higher operating expenses
reflecting our investments in UC.
In fiscal year 2011, we reported operating income of $140.7 million compared to $97.6 million in fiscal year 2010 due to increased
net revenues and higher margins resulting primarily from a favorable product mix that consisted of a greater proportion of OCC
net revenues. In addition, we experienced improved Bluetooth margins resulting primarily from lower costs as a result of outsourcing
our manufacturing operations in China, which began in July 2009.
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