Logitech Announces First Quarter Results for FY 2012

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

FREMONT, Calif. & MORGES, Switzerland--()--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.

Contacts

Logitech International
Joe Greenhalgh, 510-713-4430
Vice President, Investor Relations – USA
Nancy Morrison, 510-713-4948
Vice President, Corporate Communications – USA
Laura Scorza, +41-(0) 21-863-5336
Sr. Public Relations Manager – Europe

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Contacts

Logitech International
Joe Greenhalgh, 510-713-4430
Vice President, Investor Relations – USA
Nancy Morrison, 510-713-4948
Vice President, Corporate Communications – USA
Laura Scorza, +41-(0) 21-863-5336
Sr. Public Relations Manager – Europe