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Logitech Exceeds Fiscal Year 2015 Expectations; Best Earnings in Seven Years


    Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced preliminary financial results for the fourth quarter and full year of Fiscal Year 2015. Q4 closed a strong fiscal year with better-than-expected sales of $467 million – up 1 percent in constant currency – and GAAP operating income of $12 million, with non-GAAP operating income of $14 million.

    For the full Fiscal Year 2015, ended March 31, 2015:

    • Sales were $2.11 billion, down 1 percent compared to the previous fiscal year, and up 2 percent in constant currency. Importantly, Retail Strategic – sales in the Company’s Profit Maximization and Growth categories – grew by 6 percent in constant currency.
    • GAAP operating income was $141 million, with GAAP earnings per share (EPS) of $0.81, compared to $0.46 a year ago. This was the Company’s best EPS since FY 2008.
    • Non-GAAP operating income was $191 million, with non-GAAP EPS of $1.04, up from $0.75 a year ago (also the Company’s best since FY 2008).
    • Cash flow from operations was $179 million.

    “We closed Fiscal Year 2015 with a better-than-expected performance and good momentum in spite of currency headwinds,” said Bracken Darrell, Logitech president and chief executive officer. “Our Growth category – Gaming, Tablet and Other Accessories, Mobile Speakers and Video Collaboration – sales grew by 28 percent in constant currency over the full year, accelerating in the fourth quarter to 45 percent growth, the best performance of the fiscal year.

    “Looking at Fiscal Year 2016, we’re playing offense. We will accelerate our transformation of Logitech into a simpler, faster, growing company. We will focus on our growing Retail Strategic business. Consequently, we plan to exit our OEM business and reorganize Lifesize to sharpen its focus on its cloud-based offering. We will also streamline our overall cost structure through product, overhead and infrastructure cost reductions, including a targeted resource realignment. As a result, over the coming year we expect restructuring charges of approximately $15 million to $20 million. The savings from all these actions will be used to offset currency headwinds and invest in future growth.”

    Outlook

    Logitech confirmed its FY 2016 outlook of $150 million in non-GAAP operating income, despite the stronger currency headwinds, and 7% growth for Retail Strategic sales in constant currency.

    Preliminary Statement

    These preliminary Q4 and full year FY15 results are subject to material adjustments, including completion of our evaluation of Lifesize goodwill, Lifesize asset impairment and other subsequent events that may occur through the date of filing our Annual Report on Form 10-K.

    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, in the Calendar section.

    Financial Results Teleconference and Webcast

    Logitech will hold a financial results teleconference to discuss the results for Q4 and full-year FY 2015 on Thurs., April 23, 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 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 our outlook for 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 a GAAP amount has been provided for FY 2016.

    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: Logitech’s momentum, transformation, growth, value and cost structure, exiting our OEM business, reorganizing Lifesize, product, overhead and infrastructure cost reductions, restructuring, the expected cost of and use of savings from restructuring, our ability to offset currency exchange rate fluctuations, investment in growth, and Fiscal Year 2016 operating income and sales growth. 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 Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2014 and 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.

     

    PRELIMINARY RESULTS - The following financial statements and supplemental information may be subject to material adjustment.  Please see note below the tables.

                     

    (In thousands, except per share amounts) - Unaudited

                                          Three Months Ended   Fiscal Years Ended     March 31,   March 31, GAAP CONSOLIDATED STATEMENTS OF OPERATIONS   2015   2014   2015   2014                                     Net sales   $ 467,229     $ 490,321     $ 2,113,947     $ 2,128,713   Cost of goods sold     310,845       328,977       1,339,750       1,400,844   Gross profit    

    156,384

         

    161,344

         

    774,197

         

    727,869

      % of net sales     33.5 %     32.9 %     36.6 %     34.2 %                   Operating expenses:                 Marketing and selling     88,378       90,930       378,593       379,747   Research and development     33,755       30,796       131,012       139,385   General and administrative     27,239       28,693       128,196       118,940   Restructuring charges (credit), net     (4,742 )     5,190       (4,888 )     13,811   Total operating expenses    

    144,630

         

    155,609

         

    632,913

         

    651,883

      Operating income    

    11,754

         

    5,735

         

    141,284

         

    75,986

      Interest income (expense), net     388       465       1,225       (397 ) Other income (expense), net     1,347       632       (2,752 )     1,993   Income before income taxes    

    13,489

         

    6,832

         

    139,757

         

    77,582

      Provision for (benefit from) income taxes     (3,228 )     (3,786 )     4,490       3,278   Net income  

    $

    16,717

        $

    10,618

        $

    135,267

        $

    74,304

                        Net income per share:                 Basic   $ 0.10     $ 0.07     $ 0.83     $ 0.46   Diluted   $ 0.10     $ 0.06     $ 0.81     $ 0.46   Shares used to compute net income per share :                 Basic     164,319       162,255       163,536       160,619   Diluted     166,424       165,766       166,174       162,526                                              

    PRELIMINARY RESULTS - The following financial statements and supplemental information may be subject to material adjustment.  Please see note below the tables.

              (In thousands) - Unaudited                       March 31   March 31, CONSOLIDATED BALANCE SHEETS   2015   2014           Current assets:         Cash and cash equivalents   $ 537,038   $ 469,412 Accounts receivable, net     179,823     182,029 Inventories     270,231     222,402 Other current assets     64,996     59,157 Total current assets   $ 1,052,088     933,000 Non-current assets:         Property, plant and equipment, net     91,593     88,391 Goodwill     340,782     345,010 Other intangible assets     1,866     10,529 Other assets     62,679     74,460 Total assets   $ 1,549,008   $ 1,451,390           Current liabilities:         Accounts payable   $ 299,995   $ 242,815 Accrued and other current liabilities     191,163     211,972 Total current liabilities   $ 491,158     454,787 Non-current liabilities:     173,639     192,475 Total liabilities   $ 664,797     647,262           Total shareholders´ equity     884,211     804,128           Total liabilities and shareholders´ equity   $ 1,549,008   $ 1,451,390                                

    PRELIMINARY RESULTS - The following financial statements and supplemental information may be subject to material adjustment.  Please see note below the tables.

                      (In thousands) - Unaudited                                       Three Months Ended   Fiscal Years Ended     March 31,   March 31, CONSOLIDATED STATEMENTS OF CASH FLOWS  

    2015

     

    2014

      2015   2014                   Operating activities:                 Net income   $ 16,717     $ 10,618     $ 135,267     $ 74,304   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation     11,745       16,212       41,304       48,967   Amortization of other intangible assets     737       2,781       8,361       17,771   Share-based compensation expense     5,779       8,134       25,825       25,546   Impairment of investments     39       56       2,298       624   Loss (gain) on disposal of property, plant and equipment     —       533       (44 )     4,411   Excess tax benefits from share-based compensation     (298 )     (1,674 )     (2,831 )     (2,246 ) Deferred income taxes and other     5,133       (1,267 )     1,982       (4,828 ) Changes in operating assets and liabilities, net of acquisitions:                 Accounts receivable, net     123,008       130,652       (8,018 )     (219 ) Inventories     (29,840 )     35,975       (60,011 )     49,471   Other assets     2,308       1,580       (4,284 )     (1,388 ) Accounts payable     (50,897 )     (82,745 )     60,413       (21,322 ) Accrued and other liabilities     (42,857 )     (26,133 )     (21,630 )     14,330   Net cash provided by operating activities    

    41,574

         

    94,722

          178,632       205,421                     Investing activities:                 Purchases of property, plant and equipment     (10,476 )     (11,748 )     (45,253 )     (46,658 ) Investments in privately held companies     —       (300 )     (2,550 )     (300 ) Acquisitions, net of cash acquired     (926 )     —       (926 )     (650 ) Proceeds from return of investment from strategic investments     —       —       —       261   Purchases of trading investments     (1,571 )     (619 )     (5,034 )     (8,450 ) Proceeds from sales of trading investments     1,618       683       5,474       8,994   Net cash used in investing activities    

    (11,355

    )     (11,984 )     (48,289 )     (46,803 )                   Financing activities:                 Payment of cash dividends     —       —       (43,767 )     (36,123 ) Purchase of treasury shares     (1,663 )     —       (1,663 )     —   Contingent consideration related to prior acquisition     —       —       (100 )     —   Repurchase of ESPP awards     —       —       (1,078 )     —   Proceeds from sales of shares upon exercise of options and purchase rights     1,672       8,449       4,138       16,914   Tax withholdings related to net share settlements of restricted stock units     (1,759 )     (2,781 )     (9,215 )     (5,718 ) Excess tax benefits from share-based compensation     298       1,674       2,831       2,246   Net cash provided by (used in) financing activities    

    (1,452

    )    

    7,342

         

    (48,854

    )    

    (22,681

    )                   Effect of exchange rate changes on cash and cash equivalents     (8,342 )     (533 )     (13,863 )     (349 ) Net increase in cash and cash equivalents     20,425       89,547       67,626       135,588   Cash and cash equivalents, beginning of the period     516,613       379,865