Company Returns to Double-Digit Profit Growth
FREMONT, Calif. & ROMANEL-SUR-MORGES, Switzerland--(BUSINESS WIRE)--Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced financial results for the third quarter of Fiscal Year 2010.
Sales for Q3 were $617 million, a decrease of 2 percent compared to $627 million in the same quarter last year. Excluding the favorable impact of exchange rate changes, sales decreased by 7 percent.
Operating income for Q3 grew by 37 percent, to $58 million, compared to $43 million in the same quarter a year ago. Operating income for Q3 FY 2010 includes the impact of $5.8 million in one-time transaction costs related to the Company’s acquisition of LifeSize Communications in December 2009. Net income for the quarter was $57 million ($0.32 per share) compared to net income of $40 million ($0.22 per share) in Q3 FY 2009. Gross margin for the third quarter was 33.9 percent compared to 29.9 percent in Q3 FY 2009.
Logitech’s retail sales for Q3 were up 3 percent year over year, with sales up by 8 percent in the Americas and 6 percent in EMEA and down 17 percent in Asia. OEM sales were down by 38 percent.
“Q3 marks a turning point in our plan to emerge stronger from the economic downturn,” said Gerald P. Quindlen, Logitech president and chief executive officer. “There were many highlights in the quarter, starting with improved sell-through in all of our retail regions, driven by the success of our new products across multiple categories.
“We are also very pleased with our return to year-over-year profitability growth in Q3, driven by the substantial improvement in gross margin, as well as with our outstanding working capital management, which yielded cash flow from operations of $166 million. For the current quarter, we anticipate accelerating sales momentum, resulting in our return to double-digit sales growth, as well as a substantial improvement in profitability compared to Q4 FY 2009.”
Outlook
For the fourth quarter of FY 2010, Logitech expects sales within the range of $500 million to $515 million, gross margin of approximately 34 percent, and operating income in the range of $15 million to $20 million, which includes the impact of amortization of the intangible assets of LifeSize Communications, which will recur in future periods.
Earnings Teleconference and Webcast
Logitech will hold an earnings teleconference on Thursday, Jan. 21, 2010 at 8:30 a.m. Eastern Standard Time and 14:30 Central European 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 Q4 FY 2010, Q3 FY 2010 marking a turning point, and anticipated accelerating sales momentum and a return to double-digit sales growth in Q4 FY 2010. 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 products; 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; the retention of employees of LifeSize and the ability of Logitech to successfully integrate LifeSize’s market opportunities, technology, personnel and operations and to achieve anticipated results; competition in the video conferencing and communications industry, including from companies with greater resources, installed base and name recognition; as well as those additional factors set forth in Logitech’s 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 subsequent Quarterly Reports on Form 10-Q 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 December 31, |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | | | 2009 | | | 2008 |
| | | | | | |
| Net sales | | | $ | 617,101 | | $ | 627,466 |
| Cost of goods sold | | | | 408,137 | | | 439,970 |
| Gross profit | | | | 208,964 | | | 187,496 |
| % of net sales | | | | 33.9% | | | 29.9% |
| | | | | | |
| Operating expenses: | | | | | |
| Marketing and selling | | | | 87,322 | | | 86,046 |
| Research and development | | | | 32,931 | | | 32,401 |
| General and administrative (1) | | | | 30,284 | | | 26,273 |
| Total operating expenses | | | | 150,537 | | | 144,720 |
| | | | | | |
| Operating income | | | | 58,427 | | | 42,776 |
| | | | | | |
| Interest income, net | | | | 414 | | | 2,212 |
| Other income, net | | | | 3,052 | | | 8,101 |
| | | | | | |
| Income before income taxes | | | | 61,893 | | | 53,089 |
| Provision for income taxes | | | | 4,807 | | | 12,596 |
| | | | | | |
| Net income | | | $ | 57,086 | | $ | 40,493 |
| | | | | | |
| Shares used to compute net income per share: | | | |
| Basic | | | | 175,963 | | | 178,497 |
| Diluted | | | | 178,403 | | | 181,145 |
| Net income per share: | | | | | |
| Basic | | | $ | 0.32 | | $ | 0.23 |
| Diluted | | | $ | 0.32 | | $ | 0.22 |
| | | | | | |
| (1) General and administrative expenses for the quarter ended December 31, 2009 include $5.8 million for transaction, due diligence and integration costs related to our acquisition of LifeSize Communications. |
| LOGITECH INTERNATIONAL S.A. |
| | | | | | |
| (In thousands, except per share amounts) - Unaudited |
| | | | | | |
| | | | | | |
| | | | Nine Months Ended December 31, |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | | | 2009 | | | 2008 |
| | | | | | |
| Net sales | | | $ | 1,441,304 | | $ | 1,800,884 |
| Cost of goods sold | | | | 1,002,730 | | | 1,211,742 |
| Gross profit | | | | 438,574 | | | 589,142 |
| % of net sales | | | | 30.4% | | | 32.7% |
| | | | | | |
| Operating expenses: | | | | | |
| Marketing and selling | | | | 215,095 | | | 248,066 |
| Research and development | | | | 96,116 | | | 99,011 |
| General and administrative (1) | | | | 75,204 | | | 89,202 |
| Restructuring charges | | | | 1,494 | | | - |
| Total operating expenses | | | | 387,909 | | | 436,279 |
| | | | | | |
| Operating income | | | | 50,665 | | | 152,863 |
| | | | | | |
| Interest income, net | | | | 1,645 | | | 7,539 |
| Other income, net | | | | 2,416 | | | 7,809 |
| | | | | | |
| Income before income taxes | | | | 54,726 | | | 168,211 |
| Provision for income taxes | | | | 14,262 | | | 26,101 |
| | | | | | |
| Net income | | | $ | 40,464 | | $ | 142,110 |
| | | | | | |
| Shares used to compute net income per share: | | | |
| Basic | | | | 178,011 | | | 178,721 |
| Diluted | | | | 180,301 | | | 183,484 |
| Net income per share: | | | | | |
| Basic | | | $ | 0.23 | | $ | 0.80 |
| Diluted | | | $ | 0.22 | | $ | 0.77 |
| | | | | | |
| (1) General and administrative expenses for the nine months ended December 31, 2009 include $5.8 million for transaction, due diligence and integration costs related to our acquisition of LifeSize Communications. |
| LOGITECH INTERNATIONAL S.A. |
| | | | | | | |
| (In thousands) - Unaudited |
| | | | | | | |
| | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | December 31, 2009 | | March 31, 2009 | | December 31, 2008 |
| | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 281,052 | | $ | 492,759 | | $ | 480,176 |
| Short term investments | | | - | | | 1,637 | | | 2,176 |
| Accounts receivable | | | 248,625 | | | 213,929 | | | 374,968 |
| Inventories | | | 235,012 | | | 233,467 | | | 339,518 |
| Other current assets | | | 71,803 | | | 56,884 | | | 73,070 |
| Total current assets | | | 836,492 | | | 998,676 | | | 1,269,908 |
| Property, plant and equipment | | | 92,452 | | | 104,132 | | | 107,217 |
| Intangible assets | | | | | | |
| Goodwill | | | 547,816 | | | 242,909 | | | 247,171 |
| Other intangible assets | | | 102,307 | | | 32,109 | | | 34,467 |
| Other assets | | | 66,798 | | | 43,704 | | | 40,117 |
| Total assets | | $ | 1,645,865 | | $ | 1,421,530 | | $ | 1,698,880 |
| | | | | | | |
| Current liabilities | | | | | | |
| Accounts payable | | $ | 316,651 | | $ | 157,798 | | $ | 360,891 |
| Accrued liabilities | | | 192,234 | | | 131,496 | | | 168,296 |
| Total current liabilities | | | 508,885 | | | 289,294 | | | 529,187 |
| Other liabilities | | | 155,811 | | | 134,528 | | | 127,533 |
| Total liabilities | | | 664,696 | | | 423,822 | | | 656,720 |
| | | | | | | |
| Shareholders' equity | | | 981,169 | | | 997,708 | | | 1,042,160 |
| | | | | | | |
| Total liabilities and shareholders' equity | | $ | 1,645,865 | | $ | 1,421,530 | | $ | 1,698,880 |
| LOGITECH INTERNATIONAL S.A. |
| | | | | | |
| (In thousands) - Unaudited |
| | | | | | |
| | | | Nine Months Ended December 31, |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | 2009 | | | | 2008 | |
| | | | | | |
| Cash flows from operating activities: | | | | | |
| Net income | | | $ | 40,464 | | | $ | 142,110 | |
| Non-cash items included in net income: | | | | | |
| Depreciation | | | | 41,852 | | | | 33,850 | |
| Amortization of other intangible assets | | | | 7,602 | | | | 5,808 | |
| Share-based compensation expense related to options, restricted stock units and purchase rights | | | | 17,249 | | | | 17,952 | |
| Write-down of investments | | | | - | | | | 1,764 | |
| Excess tax benefits from share-based compensation | | | | (1,708 | ) | | | (6,641 | ) |
| Loss (gain) on cash surrender value of life insurance policies | | | | (1,216 | ) | | | 1,440 | |
| In-process research and development | | | | - | | | | 1,000 | |
| Deferred income taxes and other | | | | (23,414 | ) | | | (3,495 | ) |
| Changes in assets and liabilities: | | | | | |
| Accounts receivable | | | | (22,470 | ) | | | (10,916 | ) |
| Inventories | | | | 19,405 | | | | (100,063 | ) |
| Other assets | | | | 12,314 | | | | (7,058 | ) |
| Accounts payable | | | | 151,042 | | | | 75,945 | |
| Accrued liabilities | | | | 58,230 | | | | 23,273 | |
| Net cash provided by operating activities | | | | 299,350 | | | | 174,969 | |
| | | | | | |
| Cash flows from investing activities: | | | | | |
| Purchases of property, plant and equipment | | | | (26,438 | ) | | | (38,631 | ) |
| Proceeds from cash surrender of life insurance policies | | | | 813 | | | | - | |
| Acquisitions and investments, net of cash acquired | | | | (388,807 | ) | | | (64,430 | ) |
| Premiums paid on cash surrender value life insurance policies | | | | - | | | | (427 | ) |
| Net cash used in investing activities | | | | (414,432 | ) | | | (103,488 | ) |
| | | | | | |
| Cash flows from financing activities: | | | | | |
| Repayment of short-term debt | | | | (13,599 | ) | | | - | |
| Purchases of treasury shares | | | | (101,267 | ) | | | (78,870 | ) |
| Proceeds from sale of shares upon exercise of options and purchase rights | | | | 15,977 | | | | 23,496 | |
| Excess tax benefits from share-based compensation | | | | 1,708 | | | | 6,641 | |
| Net cash used in financing activities | | | | (97,181 | ) | | | (48,733 | ) |
| | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | | 556 | | | | (24,924 | ) |
| Net decrease in cash and cash equivalents | | | | (211,707 | ) | | | (2,176 | ) |
| Cash and cash equivalents at beginning of period | | | | 492,759 | | | | 482,352 | |
| Cash and cash equivalents at end of period | | | $ | 281,052 | | | $ | 480,176 | |
| LOGITECH INTERNATIONAL S.A. |
| | | | | | | | | | |
| (In thousands, except per share amounts) - Unaudited |
| | | | | | | | | | |
| | | | Quarter Ended | | Nine Months Ended |
| | | | December 31, | | December 31, |
| SUPPLEMENTAL FINANCIAL INFORMATION | | | | 2009 | | | | 2008 | | | | 2009 | | | | 2008 | |
| | | | | | | | | | |
| Depreciation | | | $ | 15,795 | | | $ | 11,349 | | | $ | 41,852 | | | $ | 33,850 | |
| Amortization of other acquisition-related intangibles | | | | 2,999 | | | | 3,338 | | | | 7,602 | | | | 6,808 | |
| Operating income | | | | 58,427 | | | | 42,776 | | | | 50,665 | | | | 152,863 | |
| Operating income before depreciation and amortization | | | | 77,221 | | | | 57,463 | | | | 100,119 | | | | 193,521 | |
| Capital expenditures | | | | 8,294 | | | | 13,584 | | | | 26,438 | | | | 38,631 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net sales by channel: | | | | | | | | | |
| Retail | | | $ | 564,258 | | | $ | 545,537 | | | $ | 1,290,726 | | | $ | 1,528,921 | |
| OEM | | | | 50,502 | | | | 81,929 | | | | 148,237 | | | | 271,963 | |
| LifeSize | | | | 2,341 | | | | - | | | | 2,341 | | | | - | |
| Total net sales | | | $ | 617,101 | | | $ | 627,466 | | | $ | 1,441,304 | | | $ | 1,800,884 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Net retail sales by product family: | | | | | | | | | |
| Retail - Pointing Devices | | | $ | 166,703 | | | $ | 149,058 | | | $ | 387,550 | | | $ | 473,503 | |
| Retail - Keyboards & Desktops | | | | 104,624 | | | | 106,296 | | | | 242,539 | | | | 312,324 | |
| Retail - Audio | | | | 147,945 | | | | 152,429 | | | | 341,066 | | | | 352,459 | |
| Retail - Video | | | | 67,321 | | | | 71,153 | | | | 168,398 | | | | 198,631 | |
| Retail - Gaming | | | | 36,359 | | | | 38,111 | | | | 82,001 | | | | 107,651 | |
| Retail - Remotes | | | | 41,306 | | | | 28,490 | | | | 69,172 | | | | 84,353 | |
| Total net retail sales | | | $ | 564,258 | | | $ | 545,537 | | | $ | 1,290,726 | | | $ | 1,528,921 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Quarter Ended | | Nine Months Ended |
| | | | December 31, | | December 31, |
| Share-based Compensation Expense for Employee Stock Options, Restricted Stock Units and Employee Stock Purchases | | | | 2009 | | | | 2008 | | | | 2009 | | | | 2008 | |
| | | | | | | | | | |
| Cost of goods sold | | | $ | 709 | | | $ | 888 | | | $ | 2,135 | | | $ | 2,288 | |
| Marketing and selling | | | | 2,018 | | | | 2,070 | | | | 5,931 | | | | 5,908 | |
| Research and development | | | | 1,139 | | | | 1,157 | | | | 3,048 | | | | 3,266 | |
| General and administration | | | | 2,218 | | | | 2,126 | | | | 6,135 | | | | 6,490 | |
| Income tax benefit | | | | (3,324 | ) | | | (904 | ) | | | (4,157 | ) | | | (3,102 | ) |
| Total share-based compensation expense after income taxes | | | $ | 2,760 | | | $ | 5,337 | | | $ | 13,092 | | | $ | 14,850 | |
| | | | | | | | | | |
| Share-based compensation expense for employee stock options, restricted stock units, employee stock purchases, net of tax, per share (diluted) | | | $ | 0.02 | | | $ | 0.03 | | | $ | 0.07 | | | $ | 0.08 | |