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Logitech Announces Second Quarter Results for FY 2013
[October 24, 2012]

Logitech Announces Second Quarter Results for FY 2013

NEWARK, Calif. & MORGES, Switzerland --(Business Wire)--

Logitech International (SIX: LOGN) (NASDAQ: LOGI) today announced financial results for the second quarter of Fiscal Year 2013.

Sales for Q2 FY 2013 were $548 million, down 7 percent from $589 million in Q2 FY 2012. Excluding the unfavorable impact of exchange rates, sales were down 4 percent compared to the same quarter in the prior year. Operating income was $24 million, up 3 percent from operating income of $23 million in the same quarter a year ago. Net income for Q2 FY 2013 was $55 million ($0.35 per share) compared to net income of $17 million ($0.10 per share) in Q2 FY 2012. Net income for Q2 FY 2013 includes a net tax benefit of $32 million from the closure of an income tax audit. Gross margin for the quarter was 35.8 percent, compared to 33.7 percent in the same quarter one year ago.

Logitech's retail sales for Q2 FY 2013 decreased by 5 percent year over year, down 3 percent in EMEA, 6 percent in the Americas and 7 percent in Asia. OEM sales decreased by 27 percent. Sales for the LifeSize division decreased by 7 percent.

"In Q2, the PC market weakened more significantly than anticipated, in advance of the launch of Windows 8," said Guerrino De Luca, Logitech chairman and chief executive officer. "This factor, as well as a general slowdown in emerging markets, negatively impacted our Q2 sales. Despite this environment, we executed effectively during the quarter, improving our gross margin and operating results. We also recently launched compelling new products for tablets, smartphones, the digital home, Macs and Windows 8 PCs in time for the holiday season.

"Looking ahead, given the uncertainty in the PC market, we are now planning for continued strong headwinds in all of our PC-related categories for the remainder of the fiscal year. We expect this weakness to more than offset the positive impact of our new product launches, and consequently, we now anticipate our sales and operating income for the second half of FY 2013 will be below that of the second half of the prior fiscal year. In addition to managing our spending in line with the current environment, we are also in the process of reassessing the strategy within each of our PC-related product categories to deliver improved performance."

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 to discuss the results for Q2 FY 2013 on Thursday, Oct. 25, 2012 at 8:30 a.m. Eastern Daylight Time and 14:30 Central European Summer Time. A live webcast of the call will be available on the Logitech corporate website 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 within the meaning of the federal securities laws, including, without limitation, statements regarding: our outlook for the remainder of FY 2013, year-over-year financial performance for the second half of FY 2013, our strategy within our product categories, and our ability to deliver improved financial performance. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech's actual results and events to differ materially from those anticipated in these forward-looking statements, including, without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; the demand of our customers and our consumers for our products and our ability to accurately forecast it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities in our new product categories and sales in emerging market geographies; if sales of PC peripherals in mature markets are less than we expect; 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 our products and marketing strategies fail to separate our products from competitors' products; if there is a deterioration of business and economic conditions in one or more of our sales regions or operating segments, or significant fluctuations in exchange rates; if the restructuring fails to produce the intended performance and cost savings results or is not implemented in the contemplated timeframe; if the reassessment of strategy within the PC-related product categories fails to deliver improved financial performance. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Logitech's periodic filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012 and our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, available at www.sec.gov., under the caption Risk Factors and elsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this press release.

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.



LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited

   
Quarter Ended September 30,
CONSOLIDATED STATEMENTS OF OPERATIONS   2012   2011
 
Net sales $ 547,693 $ 589,204
Cost of goods sold   351,698     390,783  
Gross profit   195,995     198,421  
% of net sales 35.8 % 33.7 %
 
Operating expenses:
Marketing and selling 110,522 107,446
Research and development 38,019 39,491
General and administrative 25,980 27,989
Restructuring charges (credits), net   (2,671 )   -  
Total operating expenses   171,850     174,926  
 
Operating income 24,145 23,495
 
Interest income, net 153 601
Other expense, net   (509 )   (1,763 )
 
Income before income taxes 23,789 22,333
Provision for (benefit from) income taxes   (31,076 )   4,888  
 
Net income $ 54,865   $ 17,445  
 
Shares used to compute net income per share:
Basic 156,736 176,878
Diluted 157,932 177,277
Net income per share:
Basic $ 0.35 $ 0.10
Diluted $ 0.35 $ 0.10
 

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
   
Six Months Ended September 30,
CONSOLIDATED STATEMENTS OF OPERATIONS   2012   2011
 
Net sales $ 1,016,297 $ 1,069,645
Cost of goods sold   676,050     745,617  
Gross profit   340,247     324,028  
% of net sales 33.5 % 30.3 %
 
Operating expenses:
Marketing and selling 211,419 207,239
Research and development 76,947 79,472
General and administrative 58,460 58,854
Restructuring charges   28,556     -  
Total operating expenses   375,382     345,565  
 
Operating loss (35,135 ) (21,537 )
 
Interest income, net 537 1,291
Other income (expense), net   (668 )   3,428  
 
Loss before income taxes (35,266 ) (16,818 )
Benefit from income taxes   (37,986 )   (4,657 )
 
Net income (loss) $ 2,720   $ (12,161 )
 
Shares used to compute net income (loss) per share:
Basic 158,723 178,111
Diluted 159,853 178,111
Net income (loss) per share:
Basic $ 0.02 $ (0.07 )
Diluted $ 0.02 $ (0.07 )
 
LOGITECH INTERNATIONAL S.A.          
(In thousands)
 
CONSOLIDATED BALANCE SHEETS   September 30, 2012     March 31, 2012     September 30, 2011
(Unaudited) (Audited) (Unaudited)
Current assets
Cash and cash equivalents $ 237,033 $ 478,370 $ 379,450
Accounts receivable 284,451 223,104 294,691
Inventories 321,307 297,072 325,053
Other current assets   69,016   65,990   85,004
Total current assets 911,807 1,064,536 1,084,198
Non-Current assets
Property, plant and equipment 93,854 94,884 78,416
Goodwill 561,080 560,523 560,343
Other intangible assets 41,108 53,518 66,693
Other assets   84,563   83,033   74,053
Total assets $ 1,692,412 $ 1,856,494 $ 1,863,703
 
Current liabilities
Accounts payable $ 368,509 $ 301,111 $ 342,070
Accrued liabilities   190,234   186,680   187,017
Total current liabilities 558,743 487,791 529,087
Non-current liabilities   187,372   218,462   185,277
Total liabilities 746,115 706,253 714,364
 
Shareholders' equity 946,297 1,150,241 1,149,339
     
Total liabilities and shareholders' equity $ 1,692,412 $ 1,856,494 $ 1,863,703
 
LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
   
Three Months Ended September 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS   2012 2011
 
Cash flows from operating activities:
Net income $ 54,865 $ 17,445
Non-cash items included in net income:
Depreciation 11,155 11,421
Amortization of other intangible assets 6,025 6,926
Share-based compensation expense 7,266 6,738
Excess tax benefits from share-based compensation (17 ) (6 )
Deferred income taxes and other (2,751 ) 5,147
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (64,849 ) (55,614 )
Inventories (42,178 ) (4,806 )
Other assets (7,372 ) (871 )
Accounts payable 106,283 15,742
Accrued liabilities   (52,276 )   (4,232 )
Net cash provided by (used in) operating activities   16,151     (2,110 )
 
Cash flows from investing activities:
Purchases of property, plant and equipment (10,901 ) (10,360 )
Acquisitions, net of cash acquired - (18,814 )
Investment in privately-held company (3,970 ) -
Purchases of trading investments (251 ) (991 )
Proceeds from sales of trading investments   253     1,022  
Net cash used in investing activities   (14,869 )   (29,143 )
 
Cash flows from financing activities:
Payment of cash dividends (133,462 ) -
Purchases of treasury shares - (73,134 )
Proceeds from sale of shares upon exercise of options and purchase rights 8,604 9,157
Tax withholdings related to net share settlements of restricted stock units (465 ) (9 )
Excess tax benefits from share-based compensation   17     6  
Net cash used in financing activities   (125,306 )   (63,980 )
 
Effect of exchange rate changes on cash and cash equivalents   320     (1,684 )
Net decrease in cash and cash equivalents (123,704 ) (96,917 )
Cash and cash equivalents at beginning of period   360,737     476,367  
Cash and cash equivalents at end of period $ 237,033   $ 379,450  
 
LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
   
Six Months Ended September 30,
CONSOLIDATED STATEMENTS OF CASH FLOWS   2012 2011
 
Cash flows from operating activities:
Net income (loss) $ 2,720 $ (12,161 )
Non-cash items included in net income (loss):
Depreciation 22,307 24,593
Amortization of other intangible assets 12,257 13,556
Inventory valuation adjustment - 34,074
Share-based compensation expense 13,437 16,453
Gain on disposal of property and plant - (4,904 )
Gain on sale of investments (831 ) -
Excess tax benefits from share-based compensation (22 ) (30 )
Deferred income taxes and other (3,806 ) (8,554 )
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (58,272 ) (36,517 )
Inventories (30,733 ) (59,589 )
Other assets (7,339 ) (6,886 )
Accounts payable 68,875 45,088
Accrued liabilities   (9,498 )   (3,489 )
Net cash provided by operating activities   9,095     1,634  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (30,522 ) (20,921 )
Acquisitions, net of cash acquired - (18,814 )
Investment in privately-held company (3,970 ) -
Proceeds from sale of property and plant - 4,904
Proceeds from sale of available-for-sale securities 917 -
Purchases of trading investments (1,648 ) (4,536 )
Proceeds from sales of trading investments   1,638     4,522  
Net cash used in investing activities   (33,585 )   (34,845 )
 
Cash flows from financing activities:
Payment of cash dividends (133,462 ) -
Purchases of treasury shares (89,955 ) (73,134 )
Proceeds from sale of shares upon exercise of options and purchase rights 9,008 9,764
Tax withholdings related to net share settlements of restricted stock units (635 ) (185 )
Excess tax benefits from share-based compensation   22     30  
Net cash used in financing activities   (215,022 )   (63,525 )
 
Effect of exchange rate changes on cash and cash equivalents   (1,825 )   (1,745 )
Net decrease in cash and cash equivalents (241,337 ) (98,481 )
Cash and cash equivalents at beginning of period   478,370     477,931  
Cash and cash equivalents at end of period $ 237,033   $ 379,450  
 
LOGITECH INTERNATIONAL S.A.        
(In thousands, except per share amounts) - Unaudited
 
Quarter Ended Six Months Ended
September 30, September 30,
SUPPLEMENTAL FINANCIAL INFORMATION   2012   2011 2012   2011
 
Depreciation $ 11,155 $ 11,421 $ 22,307 $ 24,593
Amortization of other intangible assets 6,025 6,926 12,257 13,556
Operating income (loss) 24,145 23,495 (35,135 ) (21,537 )
Operating income (loss) before depreciation and amortization 41,325 41,842 (571 ) 16,612
Capital expenditures 10,901 10,360 30,522 20,921
 
 
Net sales by channel:
Retail $ 476,479 $ 501,735 $ 871,580 $ 896,511
OEM 36,718 50,261 73,393 99,439
LifeSize   34,496     37,208     71,324     73,695  
Total net sales $ 547,693   $ 589,204   $ 1,016,297   $ 1,069,645  
-
 
Net retail sales by product family(**):
Retail - Pointing Devices $ 122,490 $ 133,165 $ 238,217 $ 254,914
Retail - Keyboards & Desktops 130,806 109,325 241,251 203,921
Retail - Audio 109,831 126,967 199,878 204,640
Retail - Video 47,352 57,276 84,232 106,862
Retail - Gaming 47,302 47,836 74,576 85,003
Retail - Digital Home   18,698     27,166     33,426     41,171  
Total net retail sales $ 476,479   $ 501,735   $ 871,580   $ 896,511  
 
__________________

** Certain products within the retail product families as presented in prior years have been reclassified to conform to the current year presentation, with no impact on previously reported total net retail sales.

 
Quarter Ended Six Months Ended
September 30, September 30,
Share-based Compensation Expense (*)   2012   2011 2012   2011
 
Cost of goods sold $ 608 $ 950 $ 1,397 $ 2,110
Marketing and selling 2,644 3,448 4,424 6,965
Research and development 1,763 1,754 3,588 3,562
General and administrative 2,251 586 4,028 3,816
Income tax benefit   (1,671 )   (2,276 )   (3,047 )   (4,665 )
Total share-based compensation expense after income taxes $ 5,595   $ 4,462   $ 10,390   $ 11,788  
 
__________________
* Share-based compensation expense for the quarter ended September 30, 2012 and six months ended September 30, 2012 includes a reduction of $0.6m and $2.2m in expense applicable to employees terminated as a result of the restructuring plan announced in April 2012.
 

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.

 

(LOGIIR)


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