Logitech Announces Third Quarter Results for FY 2013

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Logitech Announces Third Quarter Results for FY 2013

New CEO Outlines Strategic Priorities

NEWARK, Calif. & MORGES, Switzerland--(BUSINESS WIRE)-- Logitech International (SIX: LOGN) (NAS: LOGI) today announced financial results for the third quarter of Fiscal Year 2013.

Sales for Q3 FY 2013 were $615 million, down 14 percent from $715 million in Q3 FY 2012, with no material impact from exchange rates. The company posted an operating loss of $180 million, which included a non-cash goodwill impairment charge, estimated to be $211 million, announced on January 22, 2013. Net loss for Q3 FY 2013 was $195 million ($1.24 per share) compared to net income of $55 million ($0.32 per share) in Q3 FY 2012. Gross margin for the quarter was 34.2 percent, compared to 36.2 percent in the same quarter one year ago. Excluding the aforementioned Q3 FY 2013 impairment charge, Q3 FY 2013 non-GAAP operating income would have been $31 million and non-GAAP net income would have been $16 million.

Logitech's retail sales for Q3 FY 2013 decreased by 14 percent year over year, down 8 percent in the Americas, 11 percent in Asia and 20 percent in EMEA. Year over year, OEM sales decreased by 23 percent and sales for the LifeSize division decreased by 4 percent.

"As we articulated when we started the third quarter, continued weakness in the global PC market was the primary factor in our disappointing Q3 results," said Bracken P. Darrell, Logitech president and chief executive officer. "These results are unacceptable and we are taking decisive action as an outcome of my strategic review. I was pleased with the continued strong demand for our Ultrathin Keyboard Cover in Q3. We plan to expand our presence in the growing tablet accessories category with the launch of a number of exciting new products later this quarter.

"We are taking immediate actions to shape a faster and more profitable Logitech," continued Mr. Darrell. "We are developing more mobility-related products, leveraging the powerful growth of tablets and smartphones. We intend to sustain our leadership in PC platform-related products where we have engineering, distribution and scale advantages. Our goal with PC-platform products is to maximize profitability, while investing selectively in growing categories. We have also identified a number of product categories that no longer fit with our current strategic direction. As a result, we have initiated the process to divest our remote controls and digital video security categories, and we plan to discontinue other non-strategic products, such as speaker docks and console gaming peripherals, by the end of Calendar Year 2013."

Mr. Darrell concluded, "As we execute our plans over the coming quarters, we will reduce costs significantly across the company beyond the $80M annual cost savings (FY 2014 over FY 2012) resulting from the restructuring we announced last April. My goal is to get Logitech back to sustained profitability as quickly as possible. This requires unwavering focus on developing great products both for large and for fast-growing markets, removing unnecessary costs and a commitment to move at least as fast as the markets in which we participate."

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. The remarks are posted in the Calendar section on the Investor home page.

Financial Results Teleconference and Webcast

Logitech will hold a financial results teleconference to discuss the results for Q3 FY 2013 on Thursday, Jan. 24, 2013 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.

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: demand for our products, expansion of our presence and growth in the tablet and smartphones accessories category, new product launches, our plans to divest or discontinue non-strategic products, our focus, and our ability to be faster and more profitable, to achieve sustained profitability, to sustain our leadership and advantages in PC platform-related products, and to reduce costs. 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 and sales in emerging market geographies; if sales of PC peripherals in mature markets are less than we expect; the effect of pricing, product, marketing and other initiatives by our competitors; if our products and marketing strategies fail to separate our products from competitors' products; if the restructuring fails to produce the intended performance and cost savings results or is not implemented in the contemplated timeframe. 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 September 30, 2012, 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.

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
Quarter Ended December 31,
Net sales $ 614,500 $ 714,596
Cost of goods sold   404,402     455,922  
Gross profit   210,098     258,674  
% of net sales 34.2 % 36.2 %
Operating expenses:
Marketing and selling 112,698 116,313
Research and development 40,393 41,911
General and administrative 26,382 30,673
Goodwill impairment 211,000 -
Restructuring charges (credits), net   (358 )   -  
Total operating expenses   390,115     188,897  
Operating income (loss) (180,017 ) 69,777
Interest income, net 114 917
Other income (expense), net   (3,670 )   6,713  
Income (loss) before income taxes (183,573 ) 77,407
Provision for income taxes   11,370     22,074  
Net income (loss) $ (194,943 ) $ 55,333  
Shares used to compute net income (loss) per share:
Basic 157,706 173,003
Diluted 157,706 173,656
Net income (loss) per share:
Basic $ (1.24 ) $ 0.32
Diluted $ (1.24 ) $ 0.32
(In thousands, except per share amounts) - Unaudited
Nine Months Ended December 31,
Net sales $ 1,630,797 $ 1,784,241
Cost of goods sold   1,080,452     1,201,539  
Gross profit   550,345     582,702  
% of net sales 33.7 % 32.7 %
Operating expenses:
Marketing and selling 324,117 323,552
Research and development 117,340 121,383
General and administrative 84,842 89,527
Goodwill impairment 211,000 -
Restructuring charges   28,198     -  
Total operating expenses   765,497     534,462  
Operating income (loss) (215,152 ) 48,240
Interest income, net 651 2,208
Other income (expense), net   (4,338 )   10,141  
Income (loss) before income taxes (218,839 ) 60,589
Provision for (benefit from) income taxes   (26,616 )   17,417  
Net income (loss) $ (192,223 ) $ 43,172  
Shares used to compute net income (loss) per share:
Basic 158,383 176,414
Diluted 158,383 177,201
Net income (loss) per share:
Basic $ (1.21 ) $ 0.24
Diluted $ (1.21 ) $ 0.24
(In thousands)
CONSOLIDATED BALANCE SHEETS   December 31, 2012     March 31, 2012     December 31, 2011
(Unaudited) (Unaudited) (Unaudited)
Current assets
Cash and cash equivalents $ 321,999 $ 478,370 $ 523,333
Accounts receivable 264,589 223,104 318,678
Inventories 277,477 297,072 295,749
Other current assets 59,808 65,990 73,498
Assets held for sale   17,697   -   -
Total current assets 941,570 1,064,536 1,211,258
Non-Current assets
Property, plant and equipment 89,128 94,884 78,055
Goodwill 345,313 560,523 560,106
Other intangible assets 35,033 53,518 59,743
Other assets   78,021   83,033   81,524
Total assets $ 1,489,065 $ 1,856,494 $ 1,990,686
Current liabilities
Accounts payable $ 339,283 $ 301,111 $ 377,132
Accrued liabilities 204,528 186,680 213,092
Liabilities held for sale   2,020   -   -
Total current liabilities 545,831 487,791 590,224
Non-current liabilities   186,663   218,462   195,956
Total liabilities 732,494 706,253 786,180
Shareholders' equity 756,571 1,150,241 1,204,506
Total liabilities and shareholders' equity $ 1,489,065 $ 1,856,494 $ 1,990,686
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(In thousands) - Unaudited
Three Months Ended December 31,
Cash flows from operating activities:
Net income (loss) $ (194,943 ) $ 55,333
Non-cash items included in net income (loss):
Depreciation 11,554 10,608
Amortization of other intangible assets 5,657 6,653
Goodwill impairment 211,000 -
Investment impairment 3,600 -
Share-based compensation expense 5,222 6,927
Gain on sale of investments - (6,118 )
Excess tax benefits from share-based compensation (4 ) (3 )
Deferred income taxes and other 13,204 7,556
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 16,962 (26,575 )
Inventories 32,177 23,869
Other assets 5,138 (4,967 )
Accounts payable (29,202 ) 36,885
Accrued liabilities   14,736     42,366  
Net cash provided by operating activities   95,101     152,534  
Cash flows from investing activities:
Purchases of property, plant and equipment (9,215 ) (10,496 )
Proceeds from sale of available-for-sale securities - 6,550
Purchases of trading investments (646 ) (1,041 )