Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PLANTRONICS INC /CA/ (914025) 10-Q published on Feb 05, 2019 at 6:14 pm
Reporting Period: Dec 28, 2018
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 ("Securities Act") and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). Forward-looking statements may generally be identified by the use of such words as "anticipate," "believe," “could,” "expect," "intend," “may,” "plan," "potential," "shall," "will," “would,” or variations of such words and similar expressions, or the negative of these terms. Specific forward-looking statements contained within this Form 10-Q include, but are not limited to, statements regarding (i) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our position in the market, (ii) our expectations for the impact of the Acquisition as it relates to our strategic vision and additional market opportunities for our combined hardware and services offerings, (iii) our beliefs regarding future enterprise growth drivers, (iv) our expectations regarding the impact of UC&C on headset adoption and how it may impact our investment and partnering activities, (v) our expectations for new and next generation product and services offerings, (vi) our intentions regarding the focus of our sales, marketing and customer services and support teams, (vii) our expenses, including research, development and engineering expenses and selling, general and administrative expenses, (xi) fluctuations in our cash provided by operating activities as a result of various factors, including fluctuations in revenues and operating expenses, timing of product shipments, accounts receivable collections, inventory and supply chain management, and the timing and amount of taxes and other payments, (xii) our future tax rate and payments related to unrecognized tax benefits, (xiii) our anticipated range of capital expenditures for the remainder of Fiscal Year 2019 and the sufficiency of our cash, cash equivalents, and cash from operations to sustain future operations and discretionary cash requirements, (xiv) our ability to pay future stockholder dividends, (xv) our ability to draw funds on our credit facility as needed, (xvi) the sufficiency of our capital resources to fund operations, and other statements regarding our future operations, financial condition and prospects, and business strategies. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. Factors that could cause actual results and events to differ materially from such forward-looking statements are included, but not limited to, those discussed in this Quarterly Report on Form 10-Q; in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on May 9, 2018; and other documents we have filed with the SEC. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
We are a leading designer, manufacturer, and marketer of integrated communications and collaborations solutions which spans headsets, software, desk phones, audio and video conferencing, analytics and services. Our solutions are used worldwide by consumers and businesses alike. On July 2, 2018, we completed our acquisition (the “Acquisition”) of all of the issued and outstanding shares of capital stock of Polycom, Inc. (“Polycom”) for approximately $2.2 billion in stock and cash. As a result, on that date we also became a leading global provider of open, standards-based Unified Communications & Collaboration ("UC&C") solutions for voice, video and content sharing solutions, and a comprehensive line of support and services for the workplace under the Polycom brand.
We reported a net loss of $(41.7) million and an operating loss of $(24.7) million for the third quarter of Fiscal Year 2019. We reported a net loss of $(49.5) million and an operating income of $36.8 million for the third quarter of Fiscal Year 2018. The decrease in our results from operations is primarily due to $22.3 million of Acquisition and integration related expenses, $42.8 million of amortization of purchased intangibles, and $28.9 million of deferred revenue haircut incurred during the third quarter of Fiscal Year 2019. Refer to Note 3, Acquisition, Goodwill, and Acquired Intangible Assets, in the accompanying footnotes to the condensed consolidated financial statements. We continue to work on integrating Polycom into our business in order to streamline our operations and realize synergies from the combined companies. As of December 31, 2018, we achieved a total of $26 million in annual run-rate savings as a result of restructuring and integration actions taken through that date. We plan to achieve a total of $58 million in savings related to these actions and future anticipated actions by the end of fiscal year 2019.
During the quarter ended December 31, 2018, the Company received $8 million due to a net working capital adjustment agreed to with the seller as provided in the Stock Purchase Agreement. This was recognized as a reduction of the purchase price and goodwill. Other changes to the preliminary allocation of purchase price during the quarter were an adjustment for the settlement with the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”) disclosed in Note 7, Commitments and Contingencies and the corresponding indemnification by the seller; certain adjustments to revenue, inventory and warranty reserves; and deferred tax and tax liabilities adjustments that reduced goodwill by $46.4 million, which related primarily to reallocating intangible assets between tax jurisdictions and refining the estimate of foreign tax credits that could offset future income.
During the fiscal quarter ended December 31, 2018, the Company finalized its evaluation and computation of the tax act in accordance with Staff Accounting Bulletin SAB 118 (“SAB 118”), which addressed concerns about reporting entities’ ability to timely comply with the requirements to recognize the effects of the Tax Cuts and Jobs Act. During the fiscal year ended March 31, 2018, the Company recorded a provisional toll charge of $79.7 million. During the second quarter of fiscal year 2019, the Company made its first payment on the toll charge of $7 million. During the third quarter of fiscal year 2019, the toll charge was finalized resulting in a current quarter tax benefit of $0.8 million. The Company's remaining toll charge liability of $71.9 million will be paid in installments over the next seven years. During the fiscal year ended March 31, 2018, the company recorded a provisional expense of $5.0 million related to state income taxes and foreign withholding taxes for unrepatriated foreign earnings through the Tax Act’s enactment date. During the third quarter of fiscal year 2019, the computation of state and foreign withholding taxes was finalized resulting in the recognition of a tax benefit of $3.2 million. The effect of the SAB 118 measurement period adjustments to the effective tax rates for the three and nine months ended December 31, 2018 was (8.1)% and (2.8)%, respectively. Polycom recorded a toll charge which was paid in October 2018 with the filing of its 2017 tax return.