Logitech International (Nasdaq:LOGI) (SWX:LOGN) today announced
record sales and operating profit for the second quarter of Fiscal
Year 2008. Sales were $595 million, up 19 percent from $502 million in
the same quarter last year. Operating income was $80.4 million, up 54
percent from $52.2 million for the same quarter a year ago. Gross
margin was 36.3 percent, compared to 34.5 percent in Q2 of FY 2007 - a
year-over-year improvement of 180 basis points and equal to the
all-time high for the Company. Cash flow from operations was $103
million, a year-over-year improvement of $80 million.
Logitech expects to provide results below the operating income
line, as well as to present the value of its short-term investments
and shareholders equity in its balance sheet, within the next three
weeks. The Company is currently reviewing the fair value of its
short-term investments as of September 30, 2007. These consist of
structured finance instruments, with a par value of $169 million,
composed of corporate debt as well as collateralized debt obligations.
Operating Results
Logitech's retail sales for Q2 grew by 16 percent year over year,
increasing by 17 percent in the Americas and Asia Pacific and by 15
percent in EMEA. Retail sales were driven by strong demand for Harmony
remote controls, audio products, and keyboards and desktops. Harmony
remote controls increased by 47 percent, more than doubling in EMEA.
Audio products increased by 38 percent, driven by the company's best
quarter ever for PC speakers. The keyboards and desktops category,
which grew by 35 percent, achieved a record quarter, driven by robust
sales of the new Wave comfort keyboard. OEM sales grew by 40 percent,
driven by strong demand for microphones for console singing games.
"Our outstanding Q2 performance demonstrated the strength across
our product portfolio," said Guerrino De Luca, Logitech president and
chief executive officer. "Our line of Harmony remotes has returned to
strong growth, we achieved continued robust growth in audio and
keyboards, and we made progress in webcams. We also achieved
significant improvement in cash flow from operations. And, we are
particularly pleased that the progress we have made in realigning our
operating expense growth and gross profit growth positions us to
exceed our FY 2008 goal for operating income growth."
Outlook
For the current fiscal year, ending March 31, 2008, the company
confirmed its sales target of 15 percent growth and increased its
year-over-year operating income growth goal from 15 percent to 20
percent. FY 2008 gross margin is expected to be above the high end of
the Company's long-term target range of 32-34 percent.
Impairment of Short-Term Investments
The Company believes there has been significant impairment in the
value of its short-term investment portfolio due to the recent
dislocations in the credit markets. The Company's ownership of the
specific securities in this portfolio was the result of the
unauthorized actions and misrepresentations to management of its
treasurer, whose employment has been terminated. The Company expects
to record an impairment loss of between $55 million and $75 million,
which will be reported on the Q2 FY 2008 income statement as an
unrealized loss under Other Expense. Subsequent to quarter end, the
Company sold, at par, fifty per cent of each of the securities in the
portfolio. As a result, the Company will recover half of the loss and
will report it as a gain on the Q3 FY 2008 income statement under
Other Income. The sale was part of a confidential settlement agreement
and the sale price is not necessarily indicative of current market
prices or fair value for the securities.
"It is very unfortunate that due to unauthorized actions and
misrepresentations to management, Logitech has been affected by the
current dislocations in the credit markets. Since uncovering the facts
in early October, we've taken aggressive and swift action to address
this isolated incident and prevent the recurrence of a similar
situation," said Mark Hawkins, Logitech chief financial officer.
Executive Leadership Transition
In a separate announcement today, Logitech announced a transition
plan for its executive leadership. Effective January 1, 2008, Guerrino
De Luca will become chairman of the board, Gerald P. Quindlen,
currently the Company's senior vice president of worldwide sales and
marketing, will become Logitech's president and chief executive
officer, and Logitech co-founder Daniel Borel will step down from his
role as chairman, remaining a member of the board of directors.
Earnings Teleconference
Logitech will hold an earnings teleconference on Oct. 18, 2007 at
14:00 Central European Time/8:00 a.m. Eastern Daylight Time/5:00 a.m.
Pacific Daylight Time to discuss these results as well as targets for
Fiscal Year 2008. A live webcast and replay of the teleconference,
including presentation slides, will be available on the Logitech
corporate Web site at http://ir.logitech.com. Please visit the Web
site at least 10 minutes early to register for the teleconference
webcast.
About Logitech
Logitech is a world leader in personal peripherals, driving
innovation in PC navigation, Internet communications, digital music,
home-entertainment control, gaming and wireless devices. Founded in
1981, Logitech International is a Swiss public company traded on the
SWX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market
(LOGI).
The financial results as of and for the period ended September 30,
2007 reported by Logitech in this press release do not include results
below the operating income line, the value of Logitech's short-term
investments, and other line items in the balance sheet affected by the
valuation of short-term investments. Although Logitech currently
expects an impairment loss on its short-term investments of between
$55 million and $75 million as of September 30, 2007, the actual
impairment loss, once determined by Logitech, may be higher or lower
than the expected range. Given the lack of a liquid market for its
short-term investments, and the uncertainties inherent in developing
valuations for the complex structured finance instruments in
Logitech's short-term investment portfolio, the value of the
portfolio, once determined, may be higher or lower than the amount
Logitech may actually realize on any future sale of the securities.
The Company may report further gains or losses in future periods based
on subsequent sales or changes in the fair value of the securities in
the portfolio that it continues to hold. Any such gains or losses will
affect Logitech's reported results in those future periods.
This press release contains forward-looking statements in addition
to those discussed in the preceding paragraph, including the
statements regarding expected sales and operating income growth and
gross margin for Fiscal Year 2008, and the expected timing for
providing full results for Q2 Fiscal Year 2008. The forward-looking
statements in this release involve risks and uncertainties that could
cause Logitech's actual performance, results and timing of reported
results to differ materially from that anticipated in these
forward-looking statements. Factors that could cause actual results to
differ materially include those discussed in the preceding paragraph
and if we fail to successfully innovate in our current and emerging
product categories and identify new feature or product opportunities;
consumer demand for our products and our ability to accurately
forecast 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 time to develop the actual
valuation of our short-term investments as of September 30, 2007 being
longer than we expect; our ability to continue to implement our plan
to control operating expenses while growing sales; the sales mix among
our lower- and higher-margin products and our geographic sales mix; as
well as those additional factors set forth in our periodic filings
with the Securities and Exchange Commission, including our annual
report on Form 20-F for the Fiscal Year ended March 31, 2007 and our
quarterly reports on Form 6-K available at www.sec.gov. Logitech does
not undertake to update any forward-looking statements.
Logitech, the Logitech logo, and other Logitech marks are
registered in the United States 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.
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LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
Quarter Ended
September 30,
PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME 2007 2006
----------------------------------------------------------------------
Net sales $595,490 $502,041
Cost of goods sold 379,536 329,076
-----------------
Gross profit 215,954 172,965
-----------------
% of net sales 36.3% 34.5%
Operating expenses:
Marketing and selling 76,463 70,445
Research and development 30,939 26,118
General and administrative 28,149 24,225
-----------------
Total operating expenses 135,551 120,788
-----------------
Operating income 80,403 52,177
Interest income, net 3,925 1,930
Other income (expense), net (1) 1,107
-----------------
Income before income taxes (1) 55,214
Provision for income taxes (1) 6,010
-----------------
Net income (1) $ 49,204
=================
Shares used to compute net income per share:
Basic 181,459 182,502
Diluted 188,293 190,276
Net income per share:
Basic (1) $ 0.27
Diluted (1) $ 0.26
(1) The Company's preliminary consolidated statement of income for
the quarter ended September 30, 2007 does not reflect the
potential impact of an impairment loss related to short-term
investments. The impairment loss is expected to range from $55
million to $75 million.
Subsequent to the balance sheet date, the Company sold, at par,
50% of each of its short-term investments and as a result will
recover 50% of the loss that will be recorded during the second
quarter. The sale was part of a confidential settlement
agreement and the sale price is not necessarily indicative of
current market prices or fair value for the securities.
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LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
Six Months Ended
September 30,
PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME 2007 2006
----------------------------------------------------------------------
Net sales $1,025,027 $895,323
Cost of goods sold 664,287 601,446
-------------------
Gross profit 360,740 293,877
-------------------
% of net sales 35.2% 32.8%
Operating expenses:
Marketing and selling 141,250 121,643
Research and development 59,704 51,046
General and administrative 55,471 45,220
-------------------
Total operating expenses 256,425 217,909
-------------------
Operating income 104,315 75,968
Interest income, net 7,463 3,476
Other income (expense), net (1) 9,838
-------------------
Income before income taxes (1) 89,282
Provision for income taxes (1) 9,931
-------------------
Net income (1) $ 79,351
===================
Shares used to compute net income per share:
Basic 181,630 182,575
Diluted 188,699 190,466
Net income per share:
Basic (1) $ 0.43
Diluted (1) $ 0.42
(1) The Company's preliminary consolidated statement of income for the
six months ended September 30, 2007 does not reflect the
potential impact of an impairment loss related to short-term
investments. The impairment loss is expected to range from $55
million to $75 million.
Subsequent to the balance sheet date, the Company sold, at par,
50% of each of its short-term investments and as a result will
recover 50% of the loss that will be recorded during the second
quarter. The sale was part of a confidential settlement agreement
and the sale price is not necessarily indicative of current
market prices or fair value for the securities.
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LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
PRELIMINARY CONSOLIDATED September 30, March 31, September 30,
BALANCE SHEETS 2007 2007 2006
----------------------------------------------------------------------
Current assets
Cash and cash equivalents $ 265,388 $ 196,197 $ 149,831
Short term investments (1) 214,625 95,000
Accounts receivable 425,052 310,377 397,198
Inventories 263,396 217,964 258,417
Other current assets 62,437 68,257 56,599
------------- ---------- -------------
Total current assets (1) 1,007,420 957,045
Investments 14 14 11,968
Property, plant and equipment 97,414 87,054 84,962
Intangible assets
Goodwill 186,577 179,991 136,523
Other intangible assets 16,484 18,920 9,270
Other assets 32,932 34,064 26,507
------------- ---------- -------------
Total assets (1) $1,327,463 $ 1,226,275
============= ========== =============
Current liabilities
Short-term debt $ - $ 11,856 $ 12,322
Accounts payable 340,786 218,129 278,870
Accrued liabilities 161,613 235,080 181,207
------------- ---------- -------------
Total current liabilities 502,399 465,065 472,399
Other liabilities 99,505 17,874 12,389
------------- ---------- -------------
Total liabilities 601,904 482,939 484,788
Shareholders' equity (1) 844,524 741,487
Total liabilities and
shareholders' equity (1) $1,327,463 $ 1,226,275
============= ========== =============
(1) The Company's preliminary consolidated balance sheet as of
September 30, 2007 does not reflect the potential impact of an
impairment loss related to short-term investments. The impairment
loss is expected to range from $55 million to $75 million.
Refer to the Consolidated Statements of Income for more
information.
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LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
Quarter Ended Six Months Ended
September 30 September 30
SUPPLEMENTAL FINANCIAL
INFORMATION 2007 2006 2007 2006
----------------------------------------------------------------------
Depreciation $ 11,176 $ 8,765 $ 20,002 $ 16,266
Amortization of other
acquisition-related
intangibles 1,219 952 2,437 1,905
Operating income 80,403 52,177 104,315 75,968
Operating income before
depreciation and
amortization 92,798 61,894 126,754 94,139
Capital expenditures 9,945 12,309 29,917 26,058
Net sales by channel:
Retail $518,441 $446,932 $ 887,668 $788,048
OEM 77,049 55,109 137,359 107,275
--------- --------- ----------- ---------
Total net sales $595,490 $502,041 $1,025,027 $895,323
========= ========= =========== =========
Net sales by product family:
Retail - Pointing Devices $155,490 $136,796 $ 265,143 $232,819
Retail - Keyboards &
Desktops 114,500 85,087 196,089 152,313
Retail - Video 64,469 87,726 111,744 163,652
Retail - Audio 123,628 89,723 216,694 156,628
Retail - Gaming 35,726 30,831 57,928 50,348
Retail - Remotes 24,628 16,769 40,070 32,288
OEM 77,049 55,109 137,359 107,275
--------- --------- ----------- ---------
Total net sales $595,490 $502,041 $1,025,027 $895,323
========= ========= =========== =========
Quarter Ended Six Months Ended
September 30 September 30
Stock-based Compensation
Expense for Employee Stock
Options and Employee Stock
Purchases 2007 2006 2007 2006
-------------------------------------- --------- ----------- ---------
Cost of goods sold $ 636 $ 731 $ 1,340 $ 1,449
Marketing and selling 1,699 1,910 3,645 3,761
Research and development 741 819 1,507 1,606
General and administration 1,415 1,766 3,443 3,536
Income tax benefit (1,662) (1,113) (2,631) (2,031)
--------- --------- ----------- ---------
Total stock-based
compensation expense after
income taxes $ 2,829 $ 4,113 $ 7,304 $ 8,321
========= ========= =========== =========
Stock-based compensation
expense for employee stock
options and employee stock
purchases, net of tax, per
share (diluted) $ 0.02 $ 0.02 $ 0.04 $ 0.04
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