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 SHEETS | | September 30, 2009 | | March 31, 2009 | | September 30, 2008 |
| | | | | | | |
| | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 524,844 | | $ | 492,759 | | $ | 455,231 |
| 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 equipment | | | 97,664 | | | 104,132 | | | 105,244 |
| 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 liabilities | | | 446,190 | | | 289,294 | | | 572,983 |
| 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 shareholders' equity | | $ | 1,501,997 | | $ | 1,421,530 | | $ | 1,712,511 |
| | | | | | | | | | |
| 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 rights | | | 11,166 | | | | 11,710 | |
| Write-down of investments | | | - | | | | 979 | |
| Excess tax benefits from share-based compensation | | | (1,346 | ) | | | (6,032 | ) |
| Loss (gain) on cash surrender value of life insurance policies | | | (402 | ) | | | 363 | |
| 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 acquired | | | (200 | ) | | |
| Proceeds from cash surrender of life insurance policies | | | 813 | | | |
| Acquisitions and investments, net of cash acquired | | | | | (31,832 | ) |
| Premiums paid on cash surrender value life insurance policies | | | | | (427 | ) |
| 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 options and purchase rights | | | 12,972 | | | | 22,355 | |
| Excess tax benefits from share-based compensation | | | 1,346 | | | | 6,032 | |
| Net cash used in financing activities | | | (86,949 | ) | | | (47,630 | ) |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | 3,665 | | | | (5,592 | ) |
| Net increase (decrease) in cash and cash equivalents | | | 32,085 | | | | (27,121 | ) |
| 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 INFORMATION | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | | |
| Depreciation | | $ | 14,580 | | | $ | 11,906 | | | $ | 26,057 | | | $ | 22,501 | |
| Amortization of other acquisition-related intangibles | | | 2,270 | | | | 1,865 | | | | 4,603 | | | | 3,470 | |
| Operating income | | | 27,344 | | | | 80,363 | | | | (7,762 | ) | | | 110,087 | |
| Operating income before depreciation and amortization | | | 44,194 | | | | 94,134 | | | | 22,898 | | | | 136,058 | |
| 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 & Desktops | | | 79,906 | | | | 111,073 | | | | 137,915 | | | | 206,029 | |
| 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 Expense for | | September 30, | | September 30, |
| Employee Stock Options and Employee Stock Purchases | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | | |
| 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 income taxes | | $ | 5,309 | | | $ | 4,582 | | | $ | 10,332 | | | $ | 9,513 | |
| | | | | | | | | |
| Stock-based compensation expense for employee stock options and employee stock purchases, net of tax, per share (diluted) | | $ | 0.03 | | | $ | 0.02 | | | $ | 0.06 | | | $ | 0.05 | |