Logitech Announces First Quarter Results for FY 2012

Company Takes $34M Q1 Charge for Planned Price Reduction on Logitech Revue

FREMONT, Calif. & MORGES, Switzerland--(BUSINESS WIRE)--Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced financial results for the first quarter of Fiscal Year 2012.

Sales for Q1 FY 2012 were $480 million compared to $479 million in Q1 FY 2011. Excluding the favorable impact of exchange rate changes, sales declined by 4 percent year over year. The Company posted an operating loss of $45 million, compared to operating income of $12 million in the same quarter a year ago. Included in Logitech’s Q1 FY 2012 operating loss is a $34 million charge to cost of goods sold due to a planned price reduction on Logitech Revue with Google TV. The net loss for Q1 FY 2012 was $30 million ($0.17 per share) compared to net income of $20 million ($0.11 per share) in Q1 of FY 2011. Gross margin for Q1 FY 2012, reflecting the charge related to repricing of Logitech Revue, was 26.1 percent, down from 35.3 percent one year ago.

Logitech’s retail sales for Q1 FY 2012 were flat year over year, with an increase in Asia of 29 percent, an increase in the Americas of 1 percent, and a decrease in EMEA of 14 percent. OEM sales decreased by 16 percent. Sales for the LifeSize division grew 34 percent.

In Q1, Logitech achieved strong growth in Asia, driven primarily by China. Also notable for the first quarter was continued sales momentum by the LifeSize division and a positive initial reception of the Company’s new tablet accessories.

While Logitech is making progress in improving operations in the Company’s EMEA sales region, the Q1 performance reflects sustained weakness in the region. The Company also experienced minimal sales growth in its Americas region, primarily due to very weak sales in the Digital Home category. Logitech’s loss in Q1 was compounded by the significant impact of the decision to reduce the price of Logitech Revue from $249 to $99 during Q2. The action was taken with the goal of accelerating adoption of the Google TV platform by removing price as a barrier to broad consumer acceptance.

In a separate announcement today, Logitech said that Chairman Guerrino De Luca has assumed the additional role of acting president and chief executive officer, succeeding departing CEO Gerald P. Quindlen.

“I resume my former role as CEO, on an acting basis, with unwavering commitment to Logitech and strong confidence in the Company’s future and growth potential,” said Guerrino De Luca. “My priorities will be to pursue our many opportunities with a strong sense of urgency and to renew the confidence in Logitech among all stakeholders.”

Outlook

For Fiscal Year 2012, ending March 31, 2012, Logitech has lowered its sales outlook from approximately $2.6 billion to approximately $2.5 billion. The Company has lowered its FY 2012 target for operating income from approximately $185 million to equal to or greater than FY 2011 operating income of $143 million.

Prepared Remarks Available Online

Logitech has made its prepared written remarks for the financial results teleconference available online on the Logitech corporate Web site at http://ir.logitech.com. The remarks are posted in the Calendar section on the Investor home page.

Financial Results Teleconference and Webcast

Logitech will hold a financial results teleconference on Thursday, July 28, 2011 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 products that connect people to the digital experiences they care about. Spanning multiple computing, communication and entertainment platforms, Logitech’s combined hardware and software enable or enhance digital navigation, music and video entertainment, gaming, social networking, audio and video communication over the Internet, video security and home-entertainment control. 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 and operating income for FY 2012 and the goal of the Logitech Revue price drop. 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: the demand of our customers and our consumers for our products and our ability to accurately forecast it; if our investment prioritization decisions do not result in the sales or profitability growth we expect, or when we expect it; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; the sales mix among our lower- and higher-margin products and our geographic sales mix; if our product introductions and marketing activities do not result in the sales and profitability growth we expect, or when we expect it; if the Logitech Revue price drop does not achieve its intended goal; if we fail to take advantage of trends in the consumer electronics and personal computers industries, including the growth of mobile computing devices such as smartphones and tablets with touch interfaces, or if significant demand for peripherals to use with tablets and other mobile devices with touch interfaces does not develop; if there is a deterioration of business and economic conditions in one or more of our sales regions, or significant fluctuations in currency exchange rates; competition in the video conferencing and communications industry, including from companies with significantly greater resources, sales and marketing organizations, 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, 2011 available at www.sec.gov. Logitech does not undertake to update any forward-looking statements, which speak as of their respective dates.

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 June 30,
CONSOLIDATED STATEMENTS OF OPERATIONS	2011			2010
Net sales	$	480,441		$	479,330
Cost of goods sold		354,834			310,301
Gross profit		125,607			169,029
% of net sales		26.1	%		35.3	%
Operating expenses:
Marketing and selling		99,793			91,477
Research and development		39,981			38,389
General and administrative		30,865			27,360
Total operating expenses		170,639			157,226
Operating income (loss)		(45,032	)		11,803
Interest income, net		690			521
Other income, net		5,191			1,796
Income (loss) before income taxes		(39,151	)		14,120
Benefit for income taxes		(9,545	)		(5,402	)
Net income (loss)	$	(29,606	)	$	19,522
Shares used to compute net income (loss) per share:
Basic		179,331			175,492
Diluted		179,331			177,358
Net income (loss) per share:
Basic	$	(0.17	)	$	0.11
Diluted	$	(0.17	)	$	0.11

LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
CONSOLIDATED BALANCE SHEETS	June 30, 2011		March 31, 2011		June 30, 2010
Current assets
Cash and cash equivalents	$	476,367	$	477,931	$	317,315
Accounts receivable		241,456		258,294		213,567
Inventories		317,548		280,814		279,800
Other current assets		90,117		59,347		63,031
Total current assets		1,125,488		1,076,386		873,713
Property, plant and equipment		81,236		84,160		87,692
Intangible assets
Goodwill		547,184		547,184		553,462
Other intangible assets		67,986		74,616		88,486
Other assets		71,183		79,210		68,137
Total assets	$	1,893,077	$	1,861,556	$	1,671,490
Current liabilities
Accounts payable	$	328,305	$	298,160	$	316,881
Accrued liabilities		189,374		172,560		175,090
Total current liabilities		517,679		470,720		491,971
Other liabilities		189,059		185,835		152,049
Total liabilities		706,738		656,555		644,020
Shareholders' equity		1,186,339		1,205,001		1,027,470
Total liabilities and shareholders' equity	$	1,893,077	$	1,861,556	$	1,671,490

LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
	Three Months Ended June 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS	2011			2010
Cash flows from operating activities:
Net income (loss)	$	(29,606	)	$	19,522
Non-cash items included in net income (loss):
Depreciation		13,172			12,338
Amortization of other intangible assets		6,630			6,911
Share-based compensation expense		9,715			8,462
Gain on disposal of fixed assets		(4,904	)		(838	)
Excess tax benefits from share-based compensation		(24	)		(421	)
Gain on cash surrender value of life insurance policies		-			(440	)
Deferred income taxes and other		(13,701	)		(292	)
Changes in assets and liabilities:
Accounts receivable		19,097			(18,404	)
Inventories		(34,810	)		(66,019	)
Other assets		(6,015	)		(4,945	)
Accounts payable		29,346			60,525
Accrued liabilities		14,844			(10,281	)
Net cash provided by operating activities		3,744			6,118
Cash flows from investing activities:
Purchases of property, plant and equipment		(10,561	)		(11,918	)
Purchases of trading investments		(3,545	)		-
Sales of trading investments		3,500			-
Proceeds from sale of property, plant and equipment		4,904			2,688
Net cash used in investing activities		(5,702	)		(9,230	)
Cash flows from financing activities:
Proceeds from sale of shares upon exercise of options and purchase rights		607			5,329
Tax withholdings related to net share settlements of RSUs		(176	)		(223	)
Excess tax benefits from share-based compensation		24			421
Net cash provided by financing activities		455			5,527
Effect of exchange rate changes on cash and cash equivalents		(61	)		(5,044	)
Net decrease in cash and cash equivalents		(1,564	)		(2,629	)
Cash and cash equivalents at beginning of period		477,931			319,944
Cash and cash equivalents at end of period	$	476,367		$	317,315

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
	Quarter Ended
	June 30,
SUPPLEMENTAL FINANCIAL INFORMATION	2011			2010
Depreciation	$	13,172		$	12,338
Amortization of other intangible assets		6,630			6,911
Operating income (loss)		(45,032	)		11,803
Operating income before depreciation and amortization		(25,230	)		31,052
Capital expenditures		10,561			11,918
Net sales by channel:
Retail	$	394,776		$	393,867
OEM		49,178			58,335
LifeSize		36,487			27,128
Total net sales	$	480,441		$	479,330
Net retail sales by product family:
Retail - Pointing Devices	$	132,062		$	131,846
Retail - Keyboards & Desktops		94,596			75,281
Retail - Audio		81,565			95,646
Retail - Video		49,845			47,057
Retail - Gaming		23,392			15,451
Retail - Digital Home		13,316			28,586
Total net retail sales	$	394,776		$	393,867
	Quarter Ended
	June 30,
Share-based Compensation Expense	2011			2010
Cost of goods sold	$	1,160		$	991
Marketing and selling		3,517			3,077
Research and development		1,808			1,776
General and administrative		3,230			2,618
Income tax benefit		(2,389	)		(1,895	)
Total share-based compensation expense after income taxes	$	7,326		$	6,567
Share-based compensation expense net of tax, per share (diluted)	$	0.04		$	0.04

Constant dollar sales (sales excluding impact of exchange rate changes)
We refer to our net sales excluding the impact of foreign currency exchange rates as constant dollar sales. Constant dollar sales are a non-GAAP financial measure, which is information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. GAAP. Our management uses these non-GAAP measures in its financial and operational decision-making, and believes these non-GAAP measures, when considered in conjunction with the corresponding GAAP measures, facilitate a better understanding of changes in net sales. Constant dollar sales are calculated by translating prior period sales in each local currency at the current period's average exchange rate for that currency.