Poly Executes Interest Rate Hedge to Reduce Interest Rate Risk

Rhea-AI Summary

Poly (NYSE: POLY) announced on June 15, 2021 the execution of an interest rate hedge transaction aimed at minimizing the risk of rising interest rates. This hedge will fix the rate on much of its floating-rate term loan at 2.9% effective July 30, 2021, replacing a prior hedge at 5.3%. CFO Chuck Boynton stated this move, alongside earlier bond refinancing, significantly reduces interest rate risks, leading to a more predictable expense structure that will enhance shareholder value.

Positive

• Fixed interest rate on term loan at 2.9% reduces financial risk.
• Replacement of 5.3% hedge allows for improved cash flow management.

Negative

• None.

SANTA CRUZ, Calif., June 18, 2021 /PRNewswire/ -- Poly (NYSE: POLY), a global outfitter of professional-grade audio and video technology, today announced that on June 15, 2021 the Company entered into an interest rate hedge transaction designed to reduce the risk of rising interest rates and fix the rate on the majority of the Company's existing floating-rate term loan at 2.9% effective July 30, 2021.

Poly's term loan is a floating-rate debt instrument with an interest rate equal to LIBOR plus a 2.5% spread. The interest rate hedge is designed to convert the covered portion of the outstanding term loan from a floating rate to a fixed rate of 2.9% for the next three years. This interest rate hedge complements and will replace a prior hedge at an interest rate of 5.3% for a portion of the remainder of the term loan balance that expires in July 2022.

"By refinancing the 2023 bonds in February at a lower coupon and now removing much of the risk of the floating rate on the term loan, we have significantly reduced the interest rate risk associated with our debt", said Chuck Boynton, Poly Chief Financial Officer. "With what we believe will be a lower and more predictable interest expense going forward, we believe we have a better opportunity to maximize shareholder value and drive the business forward." 

Forward Looking Statements Safe Harbor

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our intentions, beliefs, projections, outlook, analyses or current expectations that are subject to many risks and uncertainties. Such forward-looking statements and the associated risks and uncertainties include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 (coronavirus) outbreak, and its impact across our businesses, our operations and global supply chain, including (a) our expectations that the virus has caused, and will continue to cause, a shift to a hybrid work environment and that the elevated demand we have experienced in certain product lines, including our Enterprise Headsets and Video devices, will continue over the long term, (b) our belief that we will continue to experience increased customer and partner demand in collaboration endpoints, and that we will be able to design new product offerings to meet the change in demand due to a global hybrid work environment, (c) our expectations related to our Voice product lines, as well as our Services attachment rate for such products, which have been, and may continue to be, negatively impacted as companies have delayed returning their workforces to offices in many countries due to the continued impact of COVID-19; and (d) the impact of the virus on our distribution partners, resellers, end-user customers and our production facilities, including our ability to obtain alternative sources of supply if our production facility or other suppliers are impacted by future shutdowns; (ii) our expectations related to global supply chain disruptions, including our belief that semiconductor chip shortages have impacted companies worldwide both within and outside of our industry, and that we will continue to experience a shortage of adequate component supply, including integrated circuits and manufacturing capacity, long lead times for raw materials and components, increased costs, increased purchase commitments and a delay in our ability to fulfill orders, which has had, and may continue to have, an adverse impact on our business and operating results; (iii) expectations related to our ability to fulfill the backlog generated by supply constraints and to timely supply the number of products to fulfill current and future customer demand; (iv) risks associated with our dependence on manufacturing operations conducted in our own facility in Tijuana, Mexico and through contract manufacturers, original design manufacturers, and suppliers to manufacture our products, to timely obtain sufficient quantities of materials, as well as finished products of acceptable quality, at acceptable prices, and in the quantities necessary for us to meet critical schedules for the delivery of our own products and services and fulfill our anticipated customer demand; (v) risks associated with our ability to secure critical components from sole source suppliers or identify alternative suppliers and/or buy component parts on the open market or completed goods in quantities sufficient to meet our requirements on a timely basis, affecting our ability to deliver products and services to our customers; (vi) our belief that consolidations of suppliers has occurred, and may continue to occur, which may negatively impact our ability to access certain parts and may result in higher prices which will impact our gross margins; (vii) risks related to increased cost of goods sold, including increased freight and other costs associated with expediting shipment and delivery of high-demand products to key markets in order to meet customer demand; (viii) continued uncertainty and potential impact on future quarters if sourcing constraints continue and/or price volatility occurs, which could continue to negatively affect our profitability and/or market share; (ix) our expectations regarding growth objectives related to our strategic initiatives designed to expand our product and service offerings, including expectations relating to our earnings guidance, particularly as economic uncertainty, including, without limitation, uncertainty related to the continued impact of component shortages and continued supply-chain disruptions; (x) our expectations regarding our ability to control costs, streamline operations, and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; and (xi) uncertainties regarding future interest rates and our ability to achieve expected cash flows, in addition to other matters discussed in this press release that are not purely historical data. 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.

We do not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.

About Poly

Poly (NYSE: POLY) creates premium audio and video products so you can have your best meeting -- anywhere, anytime, every time. Our headsets, video and audio-conferencing products, desk phones, analytics software and services are beautifully designed and engineered to connect people with incredible clarity. They're pro-grade, easy to use and work seamlessly with all the best video and audio conferencing services. With Poly (Plantronics, Inc. – formerly Plantronics and Polycom), you'll do more than just show up, you'll stand out. For more information visit www.Poly.com.

Poly, the propeller design, and the Poly logo are trademarks of Plantronics, Inc. All other trademarks are the property of their respective owners.

Poly Media Contact:
Shannon Shamoon
PR Manager
+1 (831) 201-9142
Shannon.Shamoon@poly.com

Investor Relations:
Mike Iburg
Vice President, IR
+1 (831) 458-7533
Mike.iburg@poly.com

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SOURCE Plantronics, Inc.

FAQ

What interest rate hedge did Poly execute on June 15, 2021?

Poly executed an interest rate hedge that fixes the majority of its floating-rate term loan at 2.9% effective July 30, 2021.

What was the previous interest rate hedge rate before the new hedge?

The previous interest rate hedge was at 5.3%.

How does the interest rate hedge impact Poly's financial stability?

The hedge reduces interest rate risk, leading to more predictable interest expenses and potentially maximizing shareholder value.

When did Poly announce the interest rate hedge transaction?

Poly announced the interest rate hedge transaction on June 18, 2021.

What is the significance of the new interest rate for Poly's debt?

The new 2.9% interest rate will significantly lower Poly's interest expense compared to the previous floating rate.