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Logitech Increases Profitability Outlook for Fiscal Year 2015 Following Better-Than-Expected Q3 Results


    Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced financial results for the third quarter of Fiscal Year 2015.

    • Q3 sales were $634 million, up 1 percent compared to Q3 of the prior year, with retail sales up 2 percent. Excluding the unfavorable impact of currency exchange rates, Q3 retail sales grew 5 percent.
    • Q3 GAAP operating income was $65 million, with GAAP earnings per share (EPS) of $0.38, compared to $0.29 in the same quarter a year ago.
    • Q3 non-GAAP operating income was $76 million, with non-GAAP EPS of $0.41, compared to $0.35 a year ago.
    • Cash flow from operations in the quarter was $76 million. Cash flow from operations for the last twelve months was approximately $232 million, up 86 percent compared to the same period a year ago.

    “I’m excited about our strong performance in Q3,” said Bracken P. Darrell, Logitech president and chief executive officer. “We almost doubled sales in Mobile Speakers and also posted healthy growth in PC Gaming and Video Collaboration. Overall, despite the U.S. dollar’s strengthening, our retail sales and profitability continued to grow and we generated robust cash flow. Based on these better-than-expected results and the strength of our product offerings, we have increased our full-year outlook for operating income for the second time this fiscal year.”

    Outlook

    Despite the unfavorable impact of exchange rates, Logitech increased its profitability outlook for Fiscal Year 2015 from approximately $170 million to approximately $185 million in non-GAAP operating income. The Company adjusted its sales outlook for Fiscal Year 2015 from approximately $2.16 billion to approximately $2.11 billion to reflect the U.S. dollar’s appreciation compared to various other currencies.

    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.

    Financial Results Teleconference and Webcast

    Logitech will hold a financial results teleconference to discuss the results for Q3 FY 2015 on Jan. 22, 2015 at 8:30 a.m. Eastern Standard Time and 14:30 Central European Time. A live webcast of the call will be available on the Logitech corporate website at http://ir.logitech.com.

    Use of Non-GAAP Financial Information

    To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of other intangible assets, restructuring charges (credits), other restructuring-related charges, investment impairment (recovery), benefit from (provision for) income taxes, one-time special charges and other items detailed under “Supplemental Financial Information” after the tables below. Logitech also presents percentage sales growth in constant currency, a non-GAAP measure, to show performance unaffected by fluctuations in foreign currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales. Logitech believes this information will help investors to evaluate its current period performance and trends in its business. With respect to the Company’s outlook for Fiscal Year 2015 non-GAAP operating income, most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to the GAAP amount has been provided.

    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: the Company’s product offerings, Fiscal Year 2015 revenue and operating income, and currency exchange rates. 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 or our growth opportunities are more limited than we expect; if sales of PC peripherals 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 we do not fully realize our goals to lower our costs and improve our operating leverage; 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; the effect of changes to our effective income tax rates. 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2014, 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.

    Note that unless noted otherwise, comparisons are year over year.

    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.

                     

    (In thousands, except per share amounts) - Unaudited

                         

    Three Months Ended

     

    Nine Months Ended

       

    December 31,

     

    December 31,

    GAAP CONSOLIDATED STATEMENTS OF OPERATIONS

     

    2014

     

    2013 (1)

     

    2014

     

    2013 (1)

                                        Net sales   $ 634,204     $ 628,719     $ 1,646,718     $ 1,638,392   Cost of goods sold     402,921       414,418       1,028,905       1,071,867   Gross profit     231,283       214,301       617,813       566,525   % of net sales     36.5 %     34.1 %     37.5 %     34.6 %                   Operating expenses:                 Marketing and selling     103,307       94,273       290,215       288,817   Research and development     33,616       34,577       97,257       108,589   General and administrative     29,808       31,998       100,957       90,247   Restructuring charges (credit), net     (146 )     822       (146 )     8,621   Total operating expenses     166,585       161,670       488,283       496,274                     Operating income     64,698       52,631       129,530       70,251                     Interest income (expense), net     224       (1,022 )     837       (862 ) Other income (expense), net     (3,016 )     1,082       (4,099 )     1,361                     Income before income taxes     61,906       52,691       126,268       70,750   Provision for (benefit from) income taxes     (878 )     4,807       7,718       7,064                     Net income   $ 62,784     $ 47,884     $ 118,550     $ 63,686                     Net income per share:                 Basic   $ 0.38     $ 0.30     $ 0.73     $ 0.40   Diluted   $ 0.38     $ 0.29     $ 0.71     $ 0.39   Shares used to compute net income per share :               Basic     163,533       160,871       163,261       160,051   Diluted     166,321       163,388       166,076       161,509                                                   (In thousands) - Unaudited                   December 31,   March 31,   December 31, CONSOLIDATED BALANCE SHEETS   2014   2014  

    2013 (1)

                  Current assets:             Cash and cash equivalents   $ 516,613   $ 469,412   $ 379,865   Accounts receivable     306,866     182,029     312,947   Inventories     245,740     222,402     259,154   Other current assets     65,613     59,157     61,518   Total current assets   $ 1,134,832     933,000     1,013,484   Non-current assets:             Property, plant and equipment, net     90,777     88,391     92,382   Goodwill     343,437     345,010     345,036   Other intangible assets     2,728     10,529     13,319   Other assets     67,005     74,460     70,459   Total assets   $ 1,638,779   $ 1,451,390   $ 1,534,680                 Current liabilities:             Accounts payable   $ 350,335   $ 242,815   $ 325,559   Accrued and other current liabilities     224,650     211,972     236,022   Total current liabilities   $ 574,985     454,787     561,581   Non-current liabilities:     172,880     192,475     199,821   Total liabilities   $ 747,865     647,262     761,402                 Total shareholders´ equity     890,914     804,128     773,278                 Total liabilities and shareholders´ equity   $ 1,638,779   $ 1,451,390   $ 1,534,680                                           (In thousands) - Unaudited                      

    Three Months Ended

     

    Nine Months Ended

       

    December 31,

     

    December 31,

    CONSOLIDATED STATEMENTS OF CASH FLOWS

     

    2014

     

    2013 (1)

     

    2014

     

    2013 (1)

                     

    Operating activities:

                    Net income   $ 62,784     $ 47,884     $ 118,550     $ 63,686   Adjustments to reconcile net income to net cash provided by operating activities:     Depreciation     9,867       10,913       29,559       32,755   Amortization of other intangible assets     2,266       4,472       7,624       14,990   Share-based compensation expense     7,047       8,913       20,046       17,412   Impairment of investments     2,154       38       2,259       568   Loss (gain) on disposal of property, plant and equipment     (34 )     1,422       (44 )     3,878   Excess tax benefits from share-based compensation     (1,867 )     (572 )     (2,533 )     (572 ) Deferred income taxes     (793 )     340       (3,151 )     (3,561 ) Changes in operating assets and liabilities, net of acquisitions:             Accounts receivable, net     (57,465 )     (54,566 )     (131,026 )     (130,871 ) Inventories     (3,187 )     35,169       (30,171 )     13,496   Other assets     (952 )     4,173       (6,592 )     (2,968 ) Accounts payable     51,198       22,830       111,310       61,423   Accrued and other liabilities     5,336       13,374       21,227       40,463   Net cash provided by operating activities    

    76,354

         

    94,390

         

    137,058

         

    110,699

                        Investing activities:                 Purchases of property, plant and equipment     (9,813 )     (9,724 )     (34,777 )     (34,910 ) Investments in privately held companies     —       261       (2,550 )     —   Acquisitions, net of cash acquired     —       —       —       (650 ) Proceeds from return of investment from strategic investments     —       —       —       261   Purchases of trading investments     (1,233 )     (1,685 )     (3,463 )     (7,831 ) Proceeds from sales of trading investments     1,311       1,709       3,856       8,311   Net cash used in investing activities    

    (9,735

    )    

    (9,439

    )    

    (36,934

    )    

    (34,819

    )                   Financing activities:                 Payment of cash dividends     (43,767 )     —       (43,767 )     (36,123 ) Contingent cash payment of acquisition     —       —       (100 )     —   Repurchase of ESPP awards     —       —       (1,078 )     —   Proceeds from sales of shares upon exercise of options and purchase rights     933       2,330       2,466       8,465   Tax withholdings related to net share settlements of restricted stock units     (6,133 )     (2,484 )     (7,456 )     (2,937 ) Excess tax benefits from share-based compensation     1,867       572       2,533       572   Net cash provided by (used in) financing activities    

    (47,100

    )    

    418

         

    (47,402

    )    

    (30,023

    )                   Effect of exchange rate changes on cash and cash equivalents     (3,128 )     (300 )     (5,521 )     184   Net increase in cash and cash equivalents     16,391       85,069       47,201       46,041   Cash and cash equivalents, beginning of the period