Plantronics 2013 Annual Report Download - page 44

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Cost of Revenues and Gross Profit
Cost of revenues consists primarily of direct manufacturing and contract manufacturer costs, warranty expense, freight expense,
depreciation, duty expense, reserves for excess and obsolete inventory, royalties, and an allocation of overhead expenses, including
facilities, IT, and human resources costs.
Fiscal Year Ended Fiscal Year Ended
(in thousands) March 31, 2013 March 31, 2012 Change March 31, 2012 March 31, 2011 Change
Net revenues $ 762,226 $ 713,368 $ 48,858 6.8% $ 713,368 $ 683,602 $ 29,766 4.4%
Cost of revenues 359,045 329,017 30,028 9.1% 329,017 321,846 7,171 2.2%
Gross profit $ 403,181 $ 384,351 $ 18,830 4.9% $ 384,351 $ 361,756 $ 22,595 6.2%
Gross profit % 52.9% 53.9% 53.9% 52.9%
The increase in gross profit in fiscal year 2013 compared to fiscal year 2012 was due primarily to the increase in net revenues.
As a percentage of net revenues, gross profit decreased primarily from the effect of product mix being weighted more heavily to
Mobile products, resulting from demand attributable to hands-free laws enacted in the PRC during the fiscal year and to a lesser
extent, from the effect of a stronger U.S. dollar.
The increase in gross profit in fiscal year 2012 compared to fiscal year 2011 was due primarily to the increase in net revenues and
operational efficiencies. As a percentage of net revenues, gross profit increased due primarily to operational efficiencies such as
lower freight and logistics costs and the benefits from a weaker U.S. dollar, offset partially by the net effect of unfavorable
component sourcing costs, slightly higher warranty obligations, and reserves for excess and obsolete inventory.
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,
2013 March 31, 2012 Change March 31, 2012 March 31, 2011 Change
Research, development
and engineering $ 80,373 $ 69,664 $ 10,709 15.4% $ 69,664 $ 63,183 $ 6,481 10.3%
% of total net revenues 10.5% 9.8% 9.8% 9.2%
The increase in research, development and engineering expenses in fiscal year 2013 compared to fiscal year 2012 was due primarily
to $9.1 million in headcount-related costs, including increased salary expense, higher levels of performance-based compensation
related to stronger achievement against targets and, to a lesser extent, various other support costs related to higher headcount.
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 against targets.
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