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Press Release: Poly Announces Third Quarter -3-

· 02/04/2021 16:05
-- Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018. -- Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company's deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. -- Consumer optimization: Represents charges related to inventory reserves and supplier liabilities for excess and obsolete inventory incurred in connection with the Company's strategic action to optimize its Consumer product portfolio. -- Stock compensation expense: Represents the non-cash expense associated with the Company's issuance of common stock and share-based awards to employees and non-employee directors. -- Restructuring and other related charges: The Company incurs costs associated with restructuring plans and reorganization actions aimed at improving the Company's overall cost structure and realigning resources consistent with its global strategy. These costs are not reflective of ongoing operations and are primarily associated with reductions in the Company's workforce, facility related charges due to the closure or consolidation of leased offices, and other related costs including legal and advisory services. -- Integration and rebranding costs: Represents charges incurred in connection with the acquisition and integration of Polycom such as system implementations, legal and accounting fees. -- Deferred compensation mark-to-market: Represents gains and losses driven by the remeasurement of assets and liabilities associated with the Company's deferred compensation plans. Gains and losses on plan liabilities are recognized within operating expenses, while the offsetting gains and losses on plan assets are recognized within other income (loss). -- Gain (loss) on litigation settlements: The Company may be involved in various litigation, claims and proceedings that result in payments or recoveries from such proceedings. The related gains and losses incurred are excluded as they are not reflective of ongoing operations. -- Other adjustments: Immaterial charges and benefits including certain executive transition costs. -- Income tax effects: Represents the tax effects of the above non-GAAPtaxes 13,068 (98,191) (75,515) (180,670) Income tax benefit (7,045) (19,708) (7,208) (31,406) Net income (loss) $20,113 $(78,483) $(68,307) $(149,264) % of net revenues 4.1 % (20.4) % (5.5) % (11.5) % Earnings (loss) per common share: Basic $0.49 $(1.97) $(1.67) $(3.78) Diluted $0.48 $(1.97) $(1.67) $(3.78) Shares used in computing earnings (loss) per common share: Basic 41,252 39,784 40,894 39,535 Diluted 42,184 39,784 40,894 39,535 Effective tax rate (53.9) % 20.1 % 9.6 % 17.4 % PLANTRONICS, INC. SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands) UNAUDITED CONSOLIDATED BALANCE SHEETS December 26, March 28, 2020 2020 ASSETS Cash and cash equivalents $ 230,065 $213,879 Short-term investments 15,280 11,841 Total cash, cash equivalents, and short-term investments 245,345 225,720 Accounts receivable, net 315,477 246,835 Inventory, net 190,468 164,527 Other current assets 62,996 47,946 Total current assets 814,286 685,028 Property, plant, and equipment, net 143,489 165,858 Goodwill 796,216 796,216 Purchased intangibles, net 372,047 466,915 Deferred tax and other assets 152,684 143,157 Total assets $ 2,278,722 $2,257,174 LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable $ 165,958 $102,159 Accrued liabilities 401,283 373,666 Total current liabilities 567,241 475,825 Long-term debt, net of issuance costs 1,576,998 1,621,694 Long-term income taxes payable 90,980 98,319 Other long-term liabilities 156,524 144,152 Total liabilities 2,391,743 2,339,990 Stockholders' deficit (113,021) (82,816) Total liabilities and stockholders' deficit $ 2,278,722 $2,257,174 PLANTRONICS, INC. SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ($ in thousands, except per share data) UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended Nine Months Ended December December December December 26, 28, 26, 28, 2020 2019 2020 2019 Cash flows from operating activities Net income (loss) $20,113 $(78,483) $(68,307) $(149,264) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 40,510 57,556 124,881 172,630 Amortization of debt issuance cost 1,302 1,340 3,962 4,062 Stock-based compensation 11,486 13,902 31,104 41,499 Deferred income taxes (11,317) (17,369) (15,373) (62,436) Provision for excess and obsolete inventories 3,609 13,394 12,767 19,076 Restructuring charges 13,977 21,725 49,477 47,096 Cash payments for restructuring charges (4,335) (6,936) (28,794) (29,885) Other operating activities (2,838) (5,694) (6,000) 3,201 Changes in assets and liabilities: Accounts receivable, net (79,066) 30,856 (71,439) 34,634 Inventory, net (12,391) 6,264 (39,941) (49,320) Current and other assets (9,301) 14,790 (15,246) 24,142 Accounts payable 29,562 (45,600) 62,454 (10,690) Accrued liabilities 24,504 (15,212) 47,529 (46,906) Income taxes 5,077 (7,744) (15,925) 18,516 Cash provided by (used in) operating activities $30,892 $(17,211) $71,149 $16,355 Cash flows from investing activities Proceeds from sale of investments 667 7 667 177 Purchase of investments (156) (166) (394) (972) Capital expenditures (5,872) (7,724) (16,753) (16,984) Proceeds from sale of property and equipment -- 2,142 1,900 2,142 Cash used for investing activities $(5,361) $(7,883) $(14,580) $(15,637) Cash flows from financing activities Employees' tax withheld and paid for restricted stock and restricted stock units (144) (388) (3,193) (9,669) Proceeds from issuances under stock-based compensation plans -- 1 5,731 6,617 Proceeds from revolving line of credit -- -- 50,000 -- Repayments of revolving line of credit -- -- (50,000) -- Repayments of long-term debt (11,417) -- (46,980) (25,000) Payment of cash dividends -- (5,988) -- (17,910) Cash used for financing activities $(11,561) $(6,375) $(44,442) $(45,962) Effect of exchange rate changes on cash and cash equivalents 2,194 1,848 4,059 (444) Net increase (decrease) in cash and cash equivalents 16,164 (29,621) 16,186 (45,688) Cash and cash equivalents at beginning of period 213,901 186,442 213,879 202,509 Cash and cash equivalents at end of period $230,065 $156,821 $230,065 $156,821

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, and non-GAAP diluted EPS. These non-GAAP measures are adjusted from the most directly comparable GAAP measures to exclude certain non-cash transactions and activities that are not reflective of our ongoing core operations as further described below. We believe the use of each of these non-GAAP measures provides meaningful supplemental information in assessing our operating performance and liquidity across reporting periods on a consistent basis and are used by management in evaluating financial performance and in strategic planning. These non-GAAP measures may differ from those used by other companies and are not intended to be considered in isolation of, or as a substitute for, financial results prepared in accordance with GAAP.

Non-GAAP Adjustments

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February 04, 2021 16:05 ET (21:05 GMT)