Plantronics, Inc. (PLT)

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Plantronics (PLT)

Q4 2011 Earnings Call

May 03, 2011 5:00 pm ET

Executives

Barbara Scherer - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance & Administration

Greg Klaben - Investor Relations

Kenneth Kannappan - Chief Executive Officer, President and Executive Director

Analysts

Robert Crystal - Goldman Sachs

Tavis McCourt - Morgan Keegan & Company, Inc.

Mike Latimore - Northland Securities Inc.

Gregory Burns - Sidoti & Co.

Rohit Chopra - Wedbush Securities Inc.

John Bright - Avondale Partners, LLC

Presentation

Operator

Good afternoon, my name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 Fiscal Year 2011 Conference Call. [Operator Instructions] Thank you. Greg Klaben, you may begin your conference.

Greg Klaben

Thank you, Michelle. Joining me today to discuss our fourth quarter and fiscal 2011 financial results are Ken Kannappan, Plantronics President and CEO; and Barbara Scherer, Senior Vice President of Finance and Administration and CFO.

I'd like to remind you that during the course of today's conference call, we may make certain forward-looking statements that are subject to risks and uncertainties, as outlined in today's press release. As we've highlighted before, the risk factors in our press release and SEC filings are not the standard boilerplate.

We update these risk factors every quarter, adding and dropping language and changing the order depending upon the timing and potential impact of the concerns that we foresee.

We believe forecasting results of operations is difficult, and we ask you to focus particular attention on these risk factors that could cause actual results to differ materially from those anticipated by any such statements. For further information, please refer to the company's forms 10-K, 10-Q, today's press release and other SEC filing.

Please note that all financials, metrics and comparisons are stated in terms of continuing operations, which exclude Altec Lansing or the AEG division. The sale of Altec Lansing was effective as of December 1, 2009.

Plantronics' fourth quarter fiscal 2011 net revenues were $173.1 million, compared to guidance of $167 million to $172 million. Plantronics' GAAP diluted earnings per share were $0.55 in the fourth quarter, compared with $0.49 the same quarter of the prior year. Non-GAAP diluted earnings per share for the fourth quarter were $0.61, compared with $0.53 in the prior year quarter and guidance of $0.58 to $0.62.

The difference between GAAP and non-GAAP earnings per share from continuing operations for the fourth quarter includes stock-based compensation charges, purchase accounting amortization, including accelerating amortization due to the abandonment of an intangible asset, all net have associated tax impact and the tax benefit from exploration of certain statutory limitation.

I'd like to remind you that on the Investor Relations section of our website, we have an updated PowerPoint presentation, as well as an analyst metric sheet with the financials and metrics released today.

With that, I'll turn the call over to Ken.

Kenneth Kannappan

Thank you, Greg. And thank all of you, for taking the time to listen to our call. Fiscal 2011 was an outstanding year for us in many regards. Including one of the best years of financial performance in our company's 50-year history.

For the fiscal year, we achieved record earnings per share and record cash flow generation. Our gross and operating margins continued to exceed our target model, which we are raising. We continue to improve our capital structure through stock repurchases. Our philosophy has been to return cash excess to our operating needs to stockholders, and stock repurchase programs are an excellent means of executing on this philosophy.

Our management team and board of directors have a strong conviction in our growth prospects, business model and cash flow generation capability, and believe that the stock represents an attractive value relative to our future outlook. We are, thus, substantially increasing our commitment to repurchase our stock, and today announced, the largest repurchase authorization in the company's history for 7 million shares. Given this transaction, I want to maximize transparency by flagging upcoming insider transactions.

On August 23, 2007, we notified our employees that effective June 1, 2011 their 401(k) investments could no longer be held in the Plantronics stock fund. As of June 1, 2011, those holdings must be liquidated or they will automatically be mapped up to a default offering in our 401(k) plan. In light of that, all the employees' holdings in the Plantronics [ph] on will be sold during Q1.

As of Friday, April 29, 2011, there were 165,000 shares remaining in the 401(k) plan, of which approximately 26,000 shares were held by executive officers. In addition, over the next few quarters, there's substantial holdings of nonqualified stock options that are set to expire. A group of our executive officers, including Barbara and me, currently hold a total of 482,000 stock options that are set to expire between now and November 1, 2011. We expect the holders of these options will be exercising and selling those shares in the open market, potentially in substantial numbers.

In addition, between now and November 2011, both executive officers and employees will have shares of restricted stock vest, which they made them sell in the open market. Moreover, given the recent levels of the company's stock price, additional sales of the company's stock by employees and executives in amounts we cannot quantify are possible.

Plantronics has transformed itself over the past year in preparation for the approaching opportunity of Unified Communications adoption. And what will be a significantly faster growth rate of our core Office business. We continue to believe that UC will double our addressable market in the Office segment and have updated our addressable market opportunities in our IR presentation. Barbara will discuss this further in her section.

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