Logitech Announces Best Quarter Ever

January 16th, 2008 by Kristofer

Revenue Up 13%, Operating Income Up 17%, Company Increases Operating Income Goal for Full Year

FREMONT, Calif. & ROMANEL-SUR-MORGES, Switzerland–(BUSINESS WIRE)–Logitech International (SWX:LOGN) (Nasdaq:LOGI) today announced record sales and operating profit for the third quarter of Fiscal Year 2008, ended Dec. 31, 2007. Sales were $744 million, up 13 percent from $659 million in the same quarter last year. Operating income was $116 million, up 17 percent from $100 million for the same quarter a year ago. Net income was $134 million ($0.71 per share), up from $94 million ($0.49 per share) one year ago. Gross margin reached an all-time high for the company at 36.9 percent, compared to 36.2 percent in Q3 of FY 2007. Cash flow from operations was $177 million, the highest ever for a quarter.

Logitech’s retail sales for Q3 grew by 9 percent year over year, increasing by 9 percent in the Americas, 4 percent in EMEA and 44 percent in Asia Pacific. The growth in the Americas and EMEA was restrained by continued weakness in the webcam category. Retail sales in all regions were driven by strong demand for Harmony remote controls, keyboards and mice. Sales of Harmony remote controls increased by 72 percent, with strong growth in all regions. Keyboard sales increased by 32 percent and mice sales increased by 22 percent. OEM sales grew by 54 percent, driven by strong demand for microphones for console singing games.

“We are very pleased with our Q3 performance,” said Gerald. P. Quindlen, Logitech president and chief executive officer. “We delivered record sales and our best gross margin ever, despite a highly promotional retail environment, and we continued to improve the effectiveness of our working capital management as we finished Q3 with half a billion dollars in cash. The strong momentum in core categories such as keyboards and mice exemplifies how leadership in innovation stimulates continued demand and supports improved margins. And the robust sales of Harmony remotes underscores the promise of our increasing attention on the digital home. 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 to more than 20 percent. The Company’s previously stated goal for operating income growth was 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.

The Company also provided preliminary financial targets of 15 percent growth in both sales and operating income for Fiscal Year 2009, ending March 31, 2009.

Earnings Teleconference

Logitech will hold an earnings teleconference on Jan. 17, 2008 at 14:00 Central European Time/8:00 a.m. Eastern Standard Time/5:00 a.m. Pacific Standard Time to discuss these results as well as the Company’s outlook. 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).

This press release contains forward-looking statements, including the statements regarding expected sales and operating income growth and gross margin for Fiscal Year 2008, and preliminary expected sales and operating income growth for Fiscal Year 2009. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech’s actual performance and results to differ materially from that anticipated in these forward-looking statements. Factors that could cause actual results to differ materially include 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; 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.

(LOGI – IR)

LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited


	Quarter Ended December 31,
CONSOLIDATED STATEMENTS OF INCOME	2007		2006

Net sales	$	744,235	$	658,512
Cost of goods sold		469,801		419,855
Gross profit		274,434		238,657
% of net sales		36.9%		36.2%

Operating expenses:
Marketing and selling		98,512		84,146
Research and development		31,378		28,778
General and administrative		28,318		26,137
Total operating expenses		158,208		139,061

Operating income		116,226		99,596

Interest income, net		4,301		2,045
Other income, net		26,182		2,593

Income before income taxes		146,709		104,234
Provision for income taxes		13,137		9,930

Net income	$	133,572	$	94,304


Shares used to compute net income per share:
Basic		181,549		182,652
Diluted		188,813		191,145
Net income per share:
Basic	$0.74		$0.52
Diluted	$0.71		$0.49

Other income, net for the quarter ended December 31, 2007 includes net realized gain on sales of short-term investments of $27.8 million, and an impairment loss of $5.5 million.

LOGITECH INTERNATIONAL S.A.

(In thousands, except per share amounts) - Unaudited


	Nine Months Ended December 31,
CONSOLIDATED STATEMENTS OF INCOME	2007		2006

Net sales	$	1,769,262	$	1,553,835
Cost of goods sold		1,134,088		1,021,301
Gross profit		635,174		532,534
% of net sales		35.9%		34.3%

Operating expenses:
Marketing and selling		239,762		205,789
Research and development		91,082		79,824
General and administrative		83,789		71,357
Total operating expenses		414,633		356,970

Operating income		220,541		175,564

Interest income, net		11,764		5,521
Other income (expense), net		(37,522)		12,431

Income before income taxes		194,783		193,516
Provision for income taxes		24,095		19,861

Net income	$	170,688	$	173,655


Shares used to compute net income per share:
Basic		181,602		182,601
Diluted		188,748		190,655
Net income per share:
Basic	$	0.94	$	0.95
Diluted	$	0.90	$	0.91

Other income (expense), net for the nine months ended December 31, 2007 includes an impairment loss of $72.9 million related to the decline in fair value of short-term investments, and a net realized gain of $27.8 million on the sales of short-term investments.

LOGITECH INTERNATIONAL S.A.

(In thousands) - Unaudited


CONSOLIDATED BALANCE SHEETS	December 31, 2007		March 31, 2007		December 31, 2006


Current assets
Cash and cash equivalents	$	499,248	$	196,197	$	263,089
Short term investments		10,840		214,625		104,950
Accounts receivable		444,090		310,377		416,195
Inventories		252,661		217,964		234,944
Other current assets		63,510		68,257		59,024
Total current assets		1,270,349		1,007,420		1,078,202
Investments		15		14		11,131
Property, plant and equipment		96,369		87,054		85,435
Intangible assets
Goodwill		194,552		179,991		146,186
Other intangible assets		23,465		18,920		20,510
Other assets		35,976		34,064		30,345
Total assets	$	1,620,726	$	1,327,463	$	1,371,809

Current liabilities
Short-term debt	$	-	$	11,856	$	12,185
Accounts payable		354,480		218,129		293,085
Accrued liabilities		199,043		235,080		220,985
Total current liabilities		553,523		465,065		526,255
Other liabilities		105,832		17,874		18,190
Total liabilities		659,355		482,939		544,445

Shareholders’ equity		961,371		844,524		827,364

Total liabilities and shareholders’ equity	$	1,620,726	$	1,327,463	$	1,371,809

LOGITECH INTERNATIONAL S.A.

(In thousands) - Unaudited

SUPPLEMENTAL FINANCIAL INFORMATION
Reconciliation of GAAP to non-GAAP Financial Measures	Quarter Ended December 31 2007			Nine Months Ended December 31 2007

GAAP net income	$	133,572		$	170,688
Adjustments:
Impairment loss on short-term investments		5,504			72,923
Realized gain on sale of short-term investments		(33,712	)		(33,712	)
Realized loss on sale of short-term investments		5,951			5,951
		(22,257	)		45,162

Non-GAAP net income	$	111,315		$	215,850

GAAP net income per share:
Basic	$	0.74		$	0.94
Diluted	$	0.71		$	0.90

Impairment loss on short-term investments, net of realized gain per share
Basic	$	(0.12	)	$	0.25
Diluted	$	(0.12	)	$	0.24


Non-GAAP net income per share:
Basic	$	0.62		$	1.19
Diluted	$	0.59		$	1.14

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 the impact on Other Income (Expense) of the impairment loss related to an other-than-temporary decline in fair value of short-term investments during the quarters ended December 31, 2007 and September 30, 2007, and the realized gain/loss on sales of short-term investments during the quarter ended December 31, 2007. There were no adjustments to our GAAP net income during the three and nine months ended December 31, 2006 and accordingly our financial results for those periods are presented in the accompanying earnings release on a GAAP basis only. 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 better comparison by our investors of our current period results with corresponding prior periods.

LOGITECH INTERNATIONAL S.A.

(In thousands) - Unaudited
SUPPLEMENTAL FINANCIAL INFORMATION
	Quarter Ended December 31						Nine Months Ended December 31
	2007			2006			2007			2006

Depreciation	$	13,028		$	10,029		$	33,030		$	26,295
Amortization of other acquisition-related intangibles		1,218			1,380			3,655			3,285
Operating income		116,226			99,596			220,541			175,564
Operating income before depreciation and amortization		130,472			111,005			257,226			205,144
Capital expenditures		11,372			10,583			41,289			36,641


Net sales by channel:
Retail	$	652,619		$	599,142		$	1,540,287		$	1,387,190
OEM		91,616			59,370			228,975			166,645
Total net sales	$	744,235		$	658,512		$	1,769,262		$	1,553,835


Net sales by product family:
Retail - Pointing Devices	$	189,093		$	153,998		$	454,236		$	386,817
Retail - Keyboards & Desktops		145,090			109,542			341,179			261,855
Retail - Video		66,469			95,882			178,213			259,534
Retail - Audio		148,510			153,133			365,204			309,761
Retail - Gaming		55,223			58,589			113,151			108,937
Retail - Remotes		48,234			27,998			88,304			60,286
OEM		91,616			59,370			228,975			166,645
Total net sales	$	744,235		$	658,512		$	1,769,262		$	1,553,835

Stock-based Compensation Expense for Employee Stock Options and Employee Stock Purchases
	Quarter Ended December 31						Nine Months Ended December 31
	2007			2006			2007			2006

Cost of goods sold	$	662		$	628		$	2,002		$	2,077
Marketing and selling		2,143			1,633			5,788			5,394
Research and development		947			721			2,454			2,327
General and administration		1,571			1,660			5,014			5,196
Income tax benefit		(596	)		(279	)		(3,227	)		(2,310	)

Total stock-based compensation expense after income taxes	$	4,727		$	4,363		$	12,031		$	12,684

Stock-based compensation expense for employee stock options and employee stock purchases, net of tax, per share (diluted)	$	0.03		$	0.02		$	0.06		$	0.07