Logitech International (Nasdaq:LOGI) (SWX:LOGN) today announced
record Q2 sales and profit, posting its thirty-second consecutive
quarter of double-digit revenue growth. Sales for the second quarter
of Fiscal Year 2007, ended September 30, 2006, were $502 million, up
19 percent from $422 million for the same quarter one year ago.
For Q2, GAAP operating income was $52 million, an increase of 36
percent over Q2 last year, and includes $5.2 million in costs for
stock-based compensation. GAAP net income, including $4.1 million in
costs for stock-based compensation (net of related tax benefit), was
$49 million ($0.26 per share), up 36 percent year over year. GAAP
gross margin was 34.5 percent.
Non-GAAP operating income, which excludes stock-based
compensation, was $57 million, up 50 percent from last year's
operating income of $38.2 million. Non-GAAP net income for Q2 was $53
million ($0.28 per share), up 47 percent compared with net income of
$36.2 million ($0.18 per share) in the prior year. Non-GAAP gross
margin was 34.6 percent, compared to 31.4 percent for the same quarter
last year and 30.9 percent in Q1 FY 2007 - a year-over-year and
sequential improvement of more than 300 basis points. (See Note 1.)
Logitech's retail sales for the quarter increased by 21 percent,
growing by 23 percent in the Americas, 22 percent in EMEA, and 17
percent in Asia Pacific. Retail sales were driven by continued strong
growth in video and audio products (up 43 percent and 21 percent
respectively), and the sustained performance in cordless products (up
22 percent), primarily due to the market enthusiasm for the
breakthrough MX(TM) Revolution and VX(TM) Revolution mice. The
Company's OEM sales grew by 3 percent.
"We are delighted by these outstanding results," said Guerrino De
Luca, Logitech president and chief executive officer. "One of the
highlights of Q2 was delivering on our projected substantial
year-over-year and sequential improvement in gross margin. Our ability
to achieve one of the best gross-margin quarters in our history was
driven by the introduction of stellar products, many of which - retail
mice and keyboards in particular - deliver higher margins than the
products they replaced. With strong demand from our channel partners
for our new premium peripherals for the PC, a lineup of new video and
audio devices for Internet communications, and a set of must-haves for
digital music, Logitech is entering the holiday season with our
strongest portfolio ever and a high degree of confidence."
Outlook
Logitech increased its targets for the current fiscal year, ending
March 31, 2007. The Company now expects sales to grow 17 percent
(previously 15 percent), year over year, and non-GAAP operating income
to increase by 20-25 percent (previously 15 percent) compared with
last year. Gross margin is expected to be above the mid-point of the
Company's long-term range of 32-34 percent; the Company had expected
gross margin to be at the low end of the range. Non-GAAP operating
income excludes the costs of stock-based compensation. The Company
continues to expect the net costs of stock-based compensation for FY
2007, reflected in net income, to be between $16 and $19 million.
Acquisition of Slim Devices
In a separate announcement, Logitech today disclosed the
acquisition of Slim Devices, for a cash payment of $20 million, plus a
possible performance-based payment tied to certain revenue targets.
Slim Devices is a privately held, Mountain View, Calif. company that
specializes in network-based audio systems for digital music. The
impact of the acquisition on FY 2007 is expected to be immaterial.
According to De Luca, "The acquisition of Slim Devices builds on
our foundation of innovation in digital music to address an emerging
market, with solutions for people who want to listen to and control
their digital music and Internet radio, anywhere in the home. While
this acquisition is not expected to have a material impact on the
results for this fiscal year, we believe the long-term potential to be
very promising."
Effective Date of Logitech ADR-for-Share Exchange
Logitech also announced that it expects its previously announced
ADR-for-share exchange to be effective on Monday, October 23, 2006.
The last day of trading of Logitech ADRs will be Friday, October 20,
2006, and the first day of trading of Logitech shares on the Nasdaq
Global Select Market is expected to be Monday, October 23, 2006.
Logitech ADRs held in brokerage or bank accounts will be automatically
exchanged for Logitech shares on, or soon after, the effective date,
without any action by beneficial owners.
Earnings Teleconference
Logitech will hold an earnings teleconference on Oct. 19, 2006 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 guidance for
Fiscal Year 2007. 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
Founded in 1981, Logitech designs, manufactures and markets
personal peripherals that enable people to effectively work, play, and
communicate in the digital world. Logitech International is a Swiss
public company traded on the SWX Swiss Exchange (LOGN) and in the U.S.
on the Nasdaq Global Select Market (LOGI).
Note 1. A reconciliation between non-GAAP operating income, net
income, and gross margin, and GAAP operating income, net income, and
gross margin is set forth in the second supplemental schedule of the
attached tables along with additional information regarding the use of
these non-GAAP measures.
This press release contains forward-looking statements, including
the statements regarding expected sales, operating income and gross
margin for Fiscal Year 2007. These forward-looking statements involve
risks and uncertainties that could cause Logitech's actual performance
to differ materially from that anticipated in these forward-looking
statements. Factors that could cause actual results to differ
materially include consumer demand for our products, particularly our
newly introduced 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; our ability to match production to demand and to
coordinate the worldwide manufacturing and distribution of our
products in a timely and cost-effective manner; the sales mix among
our lower- and higher-margin products; 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, 2006 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 owned by
Logitech and may be registered. 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) - Unaudited
Quarter Ended September 30
CONSOLIDATED STATEMENTS OF INCOME 2006 2005
----------------------------------------------------------------------
Net sales $ 502,041 $ 422,101
Cost of goods sold 329,076 289,739
----------------------------
Gross profit 172,965 132,362
----------------------------
% of net sales 34.5% 31.4%
Operating expenses:
Marketing and selling 70,865 57,703
Research and development 26,118 21,491
General and administration 23,805 14,928
----------------------------
Total operating expenses 120,788 94,122
----------------------------
Operating income 52,177 38,240
Interest income, net 1,930 693
Other income, net 1,107 3,203
----------------------------
Income before income taxes 55,214 42,136
Provision for income taxes 6,010 5,899
----------------------------
Net income $ 49,204 $ 36,237
============================
Shares used to compute net income per
share:
Basic 182,502 177,377
Diluted 190,276 199,669
Net income per share:
Basic $ 0.27 $ 0.20
Diluted $ 0.26 $ 0.18
Note:
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that took effect on
July 14, 2006.
Net income for the three months ended September 30, 2006 included
share-based compensation expense under SFAS 123R of $4.1 million, net
of tax, or $0.02 per diluted share, related to employee stock options
and employee stock purchases. Net income for the three months ended
September 30, 2005 does not include the effect of share-based
compensation expense, because Logitech implemented SFAS 123R
effective April 1, 2006.
Please refer to the supplemental schedule that summarizes the share-
based compensation expense and related tax benefit recognized in
accordance with SFAS 123R for the three months ended September 30,
2006.
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LOGITECH INTERNATIONAL S.A.
(In thousands, except per share) - Unaudited
Six Months Ended September 30
CONSOLIDATED STATEMENTS OF INCOME 2006 2005
----------------------------------------------------------------------
Net sales $ 895,323 $ 756,803
Cost of goods sold 601,446 517,069
------------------------------
Gross profit 293,877 239,734
------------------------------
% of net sales 32.8% 31.7%
Operating expenses:
Marketing and selling 122,430 103,996
Research and development 51,046 42,509
General and administration 44,433 29,762
------------------------------
Total operating expenses 217,909 176,267
------------------------------
Operating income 75,968 63,467
Interest income, net 3,476 1,278
Other income, net 9,838 3,437
------------------------------
Income before income taxes 89,282 68,182
Provision for income taxes 9,931 9,548
------------------------------
Net income $ 79,351 $ 58,634
==============================
Shares used to compute net income per
share:
Basic 182,575 177,143
Diluted 190,466 198,912
Net income per share:
Basic $ 0.43 $ 0.33
Diluted $ 0.42 $ 0.30
Note:
Share and per-share data for all periods presented have been adjusted
to give effect to the two-for-one stock split that took effect on
July 14, 2006.
Net income for the six months ended September 30, 2006 included share-
based compensation expense under SFAS 123R of $8.3 million, net of
tax, or $0.04 per diluted share, related to employee stock options
and employee stock purchases. Net income for the six months ended
September 30, 2005 does not include the effect of share-based
compensation expense, because Logitech implemented SFAS 123R
effective April 1, 2006.
Please refer to the supplemental schedule that summarizes the share-
based compensation expense and related tax benefit recognized in
accordance with SFAS 123R for the six months ended September 30,
2006.
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LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
September 30, March 31, September 30,
CONSOLIDATED BALANCE SHEETS 2006 2006 2005
----------------------------------------------------------------------
---------------------------------------
Current assets
Cash and cash equivalents $ 149,831 $ 245,014 $ 254,697
Short term investments 95,000 - -
Accounts receivable 397,198 289,849 297,418
Inventories 258,417 196,864 266,899
Other current assets 56,599 34,479 55,695
------------- ----------- -------------
Total current assets 957,045 766,206 874,709
Investments 11,968 36,414 16,703
Property, plant and equipment 84,962 74,810 62,895
Intangible assets
Goodwill 136,523 135,396 135,298
Other intangible assets 9,270 11,175 13,495
Other assets 26,507 33,063 11,822
------------- ----------- -------------
Total assets $ 1,226,275 $1,057,064 $ 1,114,922
============= =========== =============
Current liabilities
Short-term debt $ 12,322 $ 14,071 $ 109,991
Accounts payable 278,870 181,290 243,051
Accrued liabilities 181,207 162,922 156,633
------------- ----------- -------------
Total current liabilities 472,399 358,283 509,675
Long-term debt - 4 25
Other liabilities 12,389 13,601 10,445
------------- ----------- -------------
Total liabilities 484,788 371,888 520,145
Shareholders' equity 741,487 685,176 594,777
------------- ----------- -------------
Total liabilities and
shareholders' equity $ 1,226,275 $1,057,064 $ 1,114,922
============= =========== =============
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LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
Quarter Ended Six Months Ended
September 30 September 30
SUPPLEMENTAL FINANCIAL
INFORMATION 2006 2005 2006 2005
----------------------------------------------------------------------
Depreciation $ 8,765 $ 8,730 $ 16,266 $ 15,755
Amortization of other
acquisition-related
intangibles 952 1,161 1,905 2,321
Operating income 52,177 38,240 75,968 63,467
Operating income before
depreciation and amortization 61,894 48,131 94,139 81,543
Capital expenditures 12,309 13,320 26,058 24,086
Net sales by channel:
Retail $446,932 $368,757 $788,048 $653,069
OEM 55,109 53,344 107,275 103,734
--------- --------- --------- ---------
Total net sales $502,041 $422,101 $895,323 $756,803
========= ========= ========= =========
Net sales by product family:
Retail - Cordless $134,241 $110,065 $223,225 $185,370
Retail - Corded 83,693 74,036 151,796 146,305
Retail - Video 87,607 61,353 163,265 109,837
Retail - Audio 89,935 74,601 157,253 129,397
Retail - Gaming 30,077 30,995 49,167 51,584
Retail - Other 21,379 17,707 43,342 30,576
OEM 55,109 53,344 107,275 103,734
--------- --------- --------- ---------
Total net sales $502,041 $422,101 $895,323 $756,803
========= ========= ========= =========
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LOGITECH INTERNATIONAL S.A.
(In thousands, except per share) - Unaudited
SUPPLEMENTAL FINANCIAL INFORMATION Quarter Ended Six Months Ended
September 30 September 30
Reconciliation of GAAP to non-GAAP
Financial Measures 2006 2006
----------------------------------------------------------------------
GAAP gross margin 34.5% 32.8%
Adjustments:
Effect of stock-based compensation 0.1% 0.2%
-------------- ----------------
Non-GAAP gross margin 34.6% 33.0%
============== ================
GAAP operating income $ 52,177 $ 75,968
Adjustments:
Effect of stock-based compensation 5,226 10,352
-------------- ----------------
Non-GAAP operating income $ 57,403 $ 86,320
============== ================
GAAP net income $ 49,204 $ 79,351
Adjustments:
Effect of stock-based compensation 4,113 8,321
-------------- ----------------
Non-GAAP net income $ 53,317 $ 87,672
============== ================
Quarter Ended Six Months Ended
September 30 September 30
Stock-based Compensation Expense for
Employee Stock Options and Employee
Stock Purchases 2006 2006
----------------------------------------------------------------------
Cost of goods sold $ 731 $ 1,449
Marketing and selling 1,910 3,761
Research and development 819 1,606
General and administration 1,766 3,536
Income tax benefit (1,113) (2,031)
-------------- ----------------
Total stock-based compensation expense
after income taxes $ 4,113 $ 8,321
============== ================
Stock-based compensation expense for
employee stock options and employee
stock purchases, net of tax, per
share $ 0.02 $ 0.04
We sometimes use information derived from consolidated financial
information but not presented in our financial statements prepared in
accordance with U.S. generally accepted accounting principles (GAAP).
Certain of these data are considered "non-GAAP financial measures"
under the U.S. Securities and Exchange Commission rules. The
adjustments between the GAAP and non-GAAP financial measures
presented above consist of share-based compensation expense for
employee stock options and employee stock purchases, and the related
income tax effect, as recognized in accordance with SFAS 123R.
Because we implemented SFAS 123R effective April 1, 2006, our
financial results for the three and six months ended September 30,
2005 do not include the effect of share-based compensation expense
and are presented in the accompanying earnings release only on a GAAP
basis. Our management uses these non-GAAP measures in its financial
and operational decision-making. Our management believes these non-
GAAP measures, when considered in conjunction with the corresponding
GAAP measures, facilitate the comparison by our investors of results
for periods subsequent to our adoption of SFAS 123R, with
corresponding prior periods for which SFAS 123R was not effective.
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(LOGI - IR)
