Logitech Announces Financial Results for Q2 FY 2010

October 21, 2009 10:00 PM EDT

Company Exceeds Outlook, Expects Return to Profit Growth in Q3

FREMONT, Calif. & ROMANEL-SUR-MORGES, Switzerland--(BUSINESS WIRE)-- Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the second quarter of Fiscal Year 2010.

Sales for Q2 were $498 million, a decrease of 25 percent compared to $665 million in the same quarter last year. Excluding the unfavorable impact of exchange rate changes, sales decreased by 24 percent.

Operating income for Q2 was $27 million, compared to $80 million in the same quarter a year ago. Net income for the quarter was $21 million ($0.11 per share) compared to net income of $72 million ($0.39 per share) in Q2 FY 2009. Gross margin for the second quarter was 30.5 percent compared to 34.3 percent in Q2 FY 2009.

Logitech's retail sales for Q2 declined by 19 percent year over year, with sales down by 5 percent in the Americas, 24 percent in EMEA, and 28 percent in Asia. OEM sales were down by 54 percent.

"Our Q2 results demonstrate that we continue to deliver on our plan to navigate the downturn," said Gerald P. Quindlen, Logitech president and chief executive officer. "I was pleased that we delivered the predicted return to profitability, driven by a substantial improvement in gross margin compared to Q1 and our ongoing diligence in controlling expenses. Our sales and profitability both benefited from better-than-expected sell-through of our products in the Americas and EMEA.

"Our sustained focus on working capital management resulted in cash flow from operations of $133 million for the first half of the fiscal year. This represents an improvement of 59 percent compared to the first half of the prior year, in spite of dramatically worse economic conditions.

"We've entered the second half of Fiscal Year 2010 well positioned for continued improvements in our operating performance. In both EMEA and the Americas, the reset of our channel partners' weeks of supply is essentially complete. Our new products are being well received by customers and will be well represented on retail shelves for the holiday season. Even assuming no improvement in consumer spending, we anticipate a return to year-over-year profit growth starting in Q3."

Outlook

For the third quarter of FY 2010, Logitech expects sales within the range of $575 million to $595 million, gross margin of approximately 31 percent, and operating income in the range of $45 million to $50 million.

Earnings Teleconference and Webcast

Logitech will hold an earnings teleconference on Thursday, Oct. 22, 2009 at 8:30 a.m. Eastern Daylight Time and 14:30 Central European Summer Time. A live webcast of the call, along with presentation slides, will be available on the Logitech corporate Web site at http://ir.logitech.com.

About Logitech

Logitech is a world leader in personal peripherals, driving innovation in PC navigation, Internet communications, digital music, home-entertainment control, gaming and wireless devices. Founded in 1981, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI).

This press release contains forward-looking statements, including the statements regarding anticipated sales, operating income and gross margin for Q3 FY 2010, a return to profit growth in Q3 FY 2010, and the Company being positioned for continued improvement in operating performance. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech's actual results to differ materially from that anticipated in these forward-looking statements. Factors that could cause actual results to differ materially include: our inability to predict the timing and strength of the improvement in our business, operating results and financial condition; the demand of our customers and our consumers for our products and our ability to accurately forecast it; consumer reaction to our new product lineup; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; if we fail to take advantage of long-term trends in the consumer electronics and personal computers industries; if we fail to successfully innovate in our current and emerging product categories and identify new feature or product opportunities; the sales mix among our lower- and higher-margin products and our geographic sales mix; as well as those additional factors set forth in our periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2009, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, available at www.sec.gov. Logitech does not undertake to update any forward-looking statements.

Logitech, the Logitech logo, and other Logitech marks are registered in Switzerland and other countries. All other trademarks are the property of their respective owners. For more information about Logitech and its products, visit the company's Web site at www.logitech.com.

(LOGI - IR)

LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited

                                              Quarter Ended September 30,

CONSOLIDATED STATEMENTS OF OPERATIONS         2009         2008

Net sales                                     $ 498,093    $ 664,707

Cost of goods sold                              346,305      436,633

Gross profit                                    151,788      228,074

% of net sales                                  30.5    %    34.3    %

Operating expenses:

Marketing and selling                           68,835       84,740

Research and development                        31,825       33,351

General and administrative                      23,739       29,620

Restructuring charges                           45           -

Total operating expenses                        124,444      147,711

Operating income                                27,344       80,363

Interest income, net                            639          2,775

Other income (expense), net                     (1,438  )    (853    )

Income before income taxes                      26,545       82,285

Provision (benefit) for income taxes            5,802        9,974

Net income                                    $ 20,743     $ 72,311

Shares used to compute net income per share:

Basic                                           178,395      178,630

Diluted                                         180,989      183,509

Net income per share:

Basic                                         $ 0.12       $ 0.41

Diluted                                       $ 0.11       $ 0.39

LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited

                                              Six Months Ended September 30,

CONSOLIDATED STATEMENTS OF OPERATIONS         2009         2008

Net sales                                     $ 824,203    $ 1,173,418

Cost of goods sold                              594,593      771,772

Gross profit                                    229,610      401,646

% of net sales                                  27.9    %    34.2      %

Operating expenses:

Marketing and selling                           127,773      162,020

Research and development                        63,185       66,610

General and administrative                      44,920       62,929

Restructuring charges                           1,494

Total operating expenses                        237,372      291,559

Operating income (loss)                         (7,762  )    110,087

Interest income, net                            1,231        5,327

Other income (expense), net                     (636    )    (292      )

Income (loss) before income taxes               (7,167  )    115,122

Provision (benefit) for income taxes            9,455        13,505

Net income (loss)                             $ (16,622 )  $ 101,617

Shares used to compute net income (loss) per
share:

Basic                                           179,058      178,835

Diluted                                         179,058      184,154

Net income (loss) per share:

Basic                                           ($0.09  )  $ 0.57

Diluted                                         ($0.09  )  $ 0.55

LOGITECH INTERNATIONAL S.A.

(In thousands) - Unaudited

CONSOLIDATED BALANCE     September 30, 2009  March 31, 2009  September 30, 2008
SHEETS

Current assets

Cash and cash            $ 524,844           $ 492,759       $ 455,231
equivalents

Short term investments     -                   1,637           3,418

Accounts receivable        259,776             213,929         467,499

Inventories                239,904             233,467         323,673

Other current assets       60,104              56,884          68,138

Total current assets       1,084,628           998,676         1,317,959

Property, plant and        97,664              104,132         105,244
equipment

Intangible assets

Goodwill                   243,108             242,909         218,776

Other intangible assets    27,505              32,109          31,460

Other assets               49,092              43,704          39,072

Total assets             $ 1,501,997         $ 1,421,530     $ 1,712,511

Current liabilities

Accounts payable         $ 291,661           $ 157,798       $ 404,356

Accrued liabilities        154,529             131,496         168,627

Total current              446,190             289,294         572,983
liabilities

Other liabilities          142,370             134,528         126,345

Total liabilities          588,560             423,822         699,328

Shareholders' equity       913,437             997,708         1,013,183

Total liabilities and    $ 1,501,997         $ 1,421,530     $ 1,712,511
shareholders' equity

LOGITECH INTERNATIONAL S.A.

(In thousands) - Unaudited

                                                  Six Months Ended September 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS             2009          2008

Cash flows from operating activities:

Net income (loss)                                 $ (16,622  )  $ 101,617

Non-cash items included in net income:

Depreciation                                        26,057        22,501

Amortization of other intangible assets             4,603         3,470

Share-based compensation expense related to
options, restricted stock units and purchase        11,166        11,710
rights

Write-down of investments                           -             979

Excess tax benefits from share-based                (1,346   )    (6,032  )
compensation

Loss (gain) on cash surrender value of life         (402     )    363
insurance policies

Deferred income taxes and other                     (274     )    3,434

Changes in assets and liabilities:

Accounts receivable                                 (39,896  )    (99,553 )

Inventories                                         (1,011   )    (83,760 )

Other assets                                        (8,585   )    (13,611 )

Accounts payable                                    130,803       118,930

Accrued liabilities                                 28,407        23,359

Net cash provided by operating activities           132,900       83,407

Cash flows from investing activities:

Purchases of property, plant and equipment          (18,144  )    (25,047 )

Acquisitions and investments, net of cash           (200     )
acquired

Proceeds from cash surrender of life insurance      813
policies

Acquisitions and investments, net of cash                         (31,832 )
acquired

Premiums paid on cash surrender value life                        (427    )
insurance policies

Net cash used in investing activities               (17,531  )    (57,306 )

Cash flows from financing activities:

Purchases of treasury shares                        (101,267 )    (76,017 )

Proceeds from sale of shares upon exercise of       12,972        22,355
options and purchase rights

Excess tax benefits from share-based                1,346         6,032
compensation

Net cash used in financing activities               (86,949  )    (47,630 )

Effect of exchange rate changes on cash and cash    3,665         (5,592  )
equivalents

Net increase (decrease) in cash and cash            32,085        (27,121 )
equivalents

Cash and cash equivalents at beginning of period    492,759       482,352

Cash and cash equivalents at end of period        $ 524,844     $ 455,231

LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited

                            Quarter Ended             Six Months Ended

                            September 30,             September 30,

SUPPLEMENTAL FINANCIAL      2009         2008         2009         2008
INFORMATION

Depreciation                $ 14,580     $ 11,906     $ 26,057     $ 22,501

Amortization of other
acquisition-related           2,270        1,865        4,603        3,470
intangibles

Operating income              27,344       80,363       (7,762  )    110,087

Operating income before
depreciation and              44,194       94,134       22,898       136,058
amortization

Capital expenditures          10,442       14,419       18,144       25,047

Net sales by channel:

Retail                      $ 442,702    $ 544,216    $ 726,468    $ 983,384

OEM                           55,391       120,491      97,735       190,034

Total net sales             $ 498,093    $ 664,707    $ 824,203    $ 1,173,418

Net sales by product
family:

Retail - Pointing Devices   $ 130,611    $ 178,089    $ 220,847    $ 324,446

Retail - Keyboards &          79,906       111,073      137,915      206,029
Desktops

Retail - Audio                121,001      116,812      193,121      200,030

Retail - Video                58,263       70,288       101,077      127,477

Retail - Gaming               28,493       39,030       45,642       69,539

Retail - Remotes              24,428       28,924       27,866       55,863

OEM                           55,391       120,491      97,735       190,034

Total net sales             $ 498,093    $ 664,707    $ 824,203    $ 1,173,418

                            Quarter Ended             Six Months Ended

Stock-based Compensation    September 30,             September 30,
Expense for

Employee Stock Options and  2009         2008         2009         2008
Employee Stock Purchases

Cost of goods sold          $ 628        $ 669        $ 1,426      $ 1,400

Marketing and selling         2,154        1,989        3,913        3,838

Research and development      1,068        1,147        1,909        2,109

General and administration    1,908        2,018        3,917        4,364

Income tax benefit            (449    )    (1,241  )    (833    )    (2,198    )

Total stock-based
compensation expense after  $ 5,309      $ 4,582      $ 10,332     $ 9,513
income taxes

Stock-based compensation
expense for employee stock
options and employee stock  $ 0.03       $ 0.02       $ 0.06       $ 0.05
purchases, net of tax, per
share (diluted)

    Source: Logitech International

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