Retail Sales Momentum Continues with 5 Percent
Growth in Constant Currency
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
500,222 294,796 469,412
333,824
Cash and cash equivalents, end of the period
$ 516,613 $ 379,865
$ 516,613 $
379,865
(In thousands, except
per share amounts) - Unaudited
NET RETAIL SALES BY PRODUCT
CATEGORY
Three Months Ended Nine Months Ended December
31, December 31, SUPPLEMENTAL FINANCIAL
INFORMATION
2014
2013 (1)
2014
2013 (1)
Net sales by channel: Retail $ 574,025 $ 564,221 $
1,471,301 $ 1,442,085 OEM 30,297 34,542 91,323 106,581 Video
conferencing 29,882 29,956 84,094
89,726
Total net sales $ 634,204 $ 628,719
$ 1,646,718 $ 1,638,392
Net retail sales by
product family(*): PC Gaming $ 70,188 $ 58,173 $ 164,570 $
141,645 Tablet & Other Accessories 55,100 77,009 114,973
150,263 Mobile Speakers 62,264 34,198
139,631 68,032
Growth 187,552
169,380 419,174 359,940 Pointing
Devices 141,789 141,757 382,524 387,064 PC Keyboards & Desktops
114,058 108,682 325,299 311,955 Audio-PC &Wearables 58,696
69,021 166,999 195,082 Video 46,682 38,154 118,822 105,740 Remotes
25,116 26,049 56,224 53,950
Profit Maximization 386,341 383,663
1,049,868 1,053,791 Other 132
11,178 2,259 28,354
Non-Strategic 132 11,178 2,259
28,354
Total net retail sales $ 574,025 $
564,221 $ 1,471,301 $ 1,442,085
__________________
* Certain products within the retail product families as presented
in prior years have been reclassified to conform to the current
year presentation, with no impact on previously reported total net
retail sales.
(In thousands,
except per share amounts) - Unaudited GAAP TO NON
GAAP RECONCILIATION (A) Three Months Ended
Nine Months Ended December 31, December 31,
SUPPLEMENTAL FINANCIAL INFORMATION 2014
2013 1
2014
2013 1
Gross profit - GAAP $ 231,283 $ 214,301 $
617,813 $ 566,525 Share-based compensation expense 560 672 1,724
1,843 Amortization of other intangible assets 532 2,190 1,626 7,361
Restructuring-related charges — —
— 5,194
Gross profit - Non-GAAP
$ 232,375 $ 217,163 $ 621,163 $ 580,923
Gross margin - GAAP 36.5 % 34.1 % 37.5 % 34.6 % Gross margin
- Non-GAAP 36.6 % 34.5 % 37.7 % 35.5 %
Operating expenses
- GAAP $ 166,585 $ 161,670 $ 488,283 $ 496,274 Less:
Share-based compensation expense 6,487 8,241 18,322 15,569 Less:
Amortization of other intangible assets 1,734 2,282 5,998 7,629
Less: Restructuring charges (credits), net (146 ) 822 (146 ) 8,621
Less: One time special charge 2,520 —
19,520 —
Operating expenses -
Non-GAAP $ 155,990 $ 150,325 $ 444,589 $
464,455 % of net sales - GAAP 26.3 % 25.7 % 29.7 %
30.3 % % of net sales - Non - GAAP 24.6 % 23.9 % 27.0 % 28.3 %
Operating income - GAAP $ 64,698 $ 52,631 $ 129,530 $
70,251
Share-based compensation expense
7,047 8,913 20,046 17,412 Amortization of other intangible assets
2,266 4,472 7,624 14,990 Restructuring charges (credits), net (146
) 822 (146 ) 8,621 Restructuring related charges — — — 5,194 One
time special charge 2,520 —
19,520 —
Operating income - Non - GAAP
$ 76,385 $ 66,838 $ 176,574 $ 116,468
% of net sales - GAAP 10.2 % 8.4 % 7.9 % 4.3 % % of net
sales - Non - GAAP 12.0 % 10.6 % 10.7 % 7.1 %
Net income
- GAAP $ 62,784 $ 47,884 $ 118,550 $ 63,686 Share-based
compensation expense 7,047 8,913 20,046 17,412 Amortization of
other intangible assets 2,266 4,472 7,624 14,990 Restructuring
related charges — — — 5,194 Restructuring charges (credits), net
(146 ) 822 (146 ) 8,621 One time special charge 2,520 — 19,520 —
Investment impairment, net 2,154 38 2,259 568 Provision for income
taxes (8,350 ) (4,803 ) (12,257 )
(10,171 )
Net income - Non - GAAP 68,275
57,326 155,596 100,300
Net income per share: Diluted - GAAP $ 0.38 $ 0.29 $
0.71 $ 0.39 Diluted - Non - GAAP $ 0.41 $ 0.35 $ 0.94 $ 0.62
Shares used to compute net income per share: Diluted - GAAP
and Non GAAP 166,321 163,388 166,076 161,509
(In thousands, except per share amounts) -
Unaudited SHARED BASED COMPENSATION EXPENSE
Three Months Ended Nine Months Ended December
31, December 31, SUPPLEMENTAL FINANCIAL
INFORMATION 2014
2013
2014 2013 Share-based Compensation
Expense Cost of goods sold $ 560 $ 672 $ 1,724 $ 1,843
Marketing and selling 2,786 3,057 6,995 5,980 Research and
Development 1,066 1,906 2,462 3,840 General and administrative
2,635 3,278 8,865 5,749 Income tax benefit (1,623 )
(168 ) (4,720 ) (2,343 )
Total share-based
compensation expense after income taxes $ 5,424 $ 8,745
$ 15,326 $ 15,069
_______________
(1) As disclosed in the Company’s Annual Report on Form 10-K
for the year ended March 31, 2014 and in the audited consolidated
financial statements contained therein, the Company has revised its
financial statements for the fiscal year ended March 31, 2013. The
impact of the adjustments also immaterially impact the financial
statements for the first three quarters of the fiscal year ended
March 31, 2014 as previously included in the Company’s quarterly
reports on Form 10-Q for Fiscal 2014. Accordingly, the financial
statements for the three and nine months ended December 31, 2013
included in this earning release have been revised.
(A) Non-GAAP Financial Measures
To supplement our condensed consolidated financial results
prepared in accordance with GAAP, we use a number of financial
measures, both GAAP and non-GAAP, in analyzing and assessing our
overall business performance, for making operating decisions and
for forecasting and planning future periods. We consider the use of
non-GAAP financial measures helpful in assessing our current
financial performance, ongoing operations and prospects for the
future as well as understanding financial and business trends
relating to our financial condition and results of operations.
While we use non-GAAP financial measures as a tool to enhance
our understanding of certain aspects of our financial performance
and to provide incremental insight into the underlying factors and
trends affecting both our performance and our cash-generating
potential, we do not consider these measures to be a substitute
for, or superior to, the information provided by GAAP financial
measures. Consistent with this approach, we believe that disclosing
non-GAAP financial measures to the readers of our financial
statements provides useful supplemental data that, while not a
substitute for GAAP financial measures, can offer insight in the
review of our financial and operational performance and enables
investors to more fully understand trends in our current and future
performance. In assessing our business during the three and nine
months ended December 31, 2014, we excluded items in the following
general categories, each of which are described below:
Share-based compensation expenses. We
believe that providing non-GAAP measures excluding share-based
compensation expense, in addition to the GAAP measures, allows for
a more transparent comparison of our financial results from period
to period. We prepare and maintain our budgets and forecasts for
future periods on a basis consistent with this non-GAAP financial
measure. Further, companies use a variety of types of equity awards
as well as a variety of methodologies, assumptions and estimates to
determine share-based compensation expense. We believe that
excluding share-based compensation expense enhances our ability and
the ability of investors to understand the impact of non-cash
share-based compensation on our operating results and to compare
our results against the results of other companies.
Amortization of other intangible
assets. We incur intangible asset amortization expense,
primarily in connection with our acquisitions of various businesses
and technologies. The amortization of purchased intangibles varies
depending on the level of acquisition activity. We exclude these
various charges in budgeting, planning and forecasting future
periods and we believe that providing the non-GAAP measures
excluding these various non-cash charges, as well as the GAAP
measures, provides additional insight when comparing our operating
expenses and financial results from period to period.
Restructuring and restructuring-related
charges. These expenses are associated with re-aligning our
business strategies based on current economic conditions. We have
undertaken several restructurings in recent years. In connection
with our restructuring initiatives, we incurred restructuring
charges related to employee terminations, facility closures and
early cancellation of certain contracts. Our restructuring
initiatives also resulted in other costs related to restructurings
not qualifying for inclusion in restructuring charges. We believe
that providing the non-GAAP measures excluding these charges, as
well as the GAAP measures, assists our investors because such
charges are not reflective of our ongoing operating results in the
current period.
One-time special charges: costs
related to investigations. These expenses are forensic
accounting, audit, consulting and legal fees related to the Audit
Committee’s investigation and the ongoing formal investigation by
the Securities and Exchange Commission. We believe that providing
the non-GAAP measures excluding these charges, as well as the GAAP
measures, assists our investors because such charges are one-time
in nature and not reflective of our ongoing operations.
Other charges. We provided non-GAAP
measures excluding the effect of certain charges and income that
are not reflective of our ongoing operations.
In addition, Logitech 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. Retail sales for the
three months ended December 31, 2014 compared to retail sales for
the three months ended December 31, 2013 grew 5 percent in constant
currency, on a non-GAAP basis, and 2 percent on a GAAP basis, an
increase of 3 percentage points due to foreign currency exchange
rates.
Each of the non-GAAP financial measures described above, and
used in this press release, should not be considered in isolation
from, or as a substitute for, a measure of financial performance
prepared in accordance with GAAP. Further, investors are cautioned
that there are inherent limitations associated with the use of each
of these non-GAAP financial measures as an analytical tool. In
particular, these non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles and many of the
adjustments to the GAAP financial measures reflect the exclusion of
items that are recurring and may be reflected in the Company’s
financial results for the foreseeable future. We compensate for
these limitations by providing specific information in the
reconciliation included in this press release regarding the GAAP
amounts excluded from the non-GAAP financial measures. In addition,
as noted above, we evaluate the non-GAAP financial measures
together with the most directly comparable GAAP financial
information.
(LOGIIR)
Logitech InternationalJoe GreenhalghVice President, Investor
Relations – USA510-713-4430orKrista ToddSr. Director, External
Communications – USA510-713-5834orBen StarkieCorporate
Communications – Europe+41-(0) 79-292-3499
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