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Logitech Delivers Record Q3 Results

Strong growth in audio, video, remotes propels quarterly revenue past half billion dollar mark for the first time in the Company's history

FREMONT, Calif., Jan. 18, 2006 and ROMANEL-SUR-MORGES, Switzerland, Jan. 19, 2006 — Logitech International (SWX: LOGN) (Nasdaq: LOGI) today posted record financial results for the third quarter of FY 2006, its twenty-ninth consecutive quarter of double-digit sales growth.

For Logitech’s third quarter of FY 2006, ended December 31, 2005, sales were $574 million, up 19 percent from $484 million in the same quarter last year. Operating income was $80.7 million, up 10 percent from $73.6 million last year. Net income for the quarter was $71.3 million ($.71 per share), up 11 percent from $64.2 million ($.66 per share) in the prior year. Gross margin was 32.3 percent, down from 34.8 percent in Q3 FY 2005, and up sequentially from 31.4 percent in Q2 FY 2006.

Logitech’s retail sales in the third quarter were up 19 percent over the prior year, driven by strong demand for audio, video and remote-control products. Retail sales growth was 15 percent in EMEA, 26 percent in the Americas and 20 percent in Asia Pacific. The Company’s OEM sales were up 15 percent over last year, primarily due to sales of mice.

“Our strong sales growth during the important holiday-buying season confirms that Logitech is successfully executing our strategy to ride the wave of key consumer trends – the popularity of digital music, the pervasiveness of broadband connectivity, and the evolving role of the PC as an entertainment and communication platform,” said Guerrino De Luca, Logitech president and chief executive officer. “Our audio and video products continue to be key growth drivers. And the Harmony remotes product line has established itself as an additional driver, with significant future opportunities.

“Even with audio representing a higher proportion of the retail product mix compared to the previous two quarters, we still achieved a sequential increase in gross margin of nearly 100 basis points, due in part to continued improvements in the audio category.”

Highlights for Logitech’s Q3 FY 2006

Outlook

For the current fiscal year, ending March 31, 2006, the Company targets sales growth of at least 20 percent for the full fiscal year, compared to its previous target of 18-20 percent. The Company continues to expect operating income growth for the full fiscal year to exceed 15 percent and gross margin to be at the low end of the company’s long-term target range of 32 to 34 percent.

The company also provided preliminary financial targets for Fiscal Year 2007, ending March 31, 2007, of 15 percent year-over-year growth in sales and operating income, excluding the impact of new accounting for expensing stock-related compensation.

Earnings Teleconference

Logitech will hold an earnings teleconference on Thursday, Jan. 19, 2006 at 14:00 Central European Time/8:00 a.m. Eastern Standard Time/5:00 a.m. Pacific Standard Time. A live webcast and replay of the teleconference, including presentation slides, will be available 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 National Market System (LOGI). The company has manufacturing facilities in Asia and offices in major cities in North America, Europe and Asia Pacific.

# # #

This press release contains forward-looking statements regarding expected sales, operating income and gross margin for Fiscal Year 2006, long-term gross margin target range and sales and operating income growth 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 our ability to introduce successful products in a timely manner, 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 between our lower- and higher-margin products, consumer demand for our products and our ability to accurately forecast it, 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, 2005, and our quarterly reports on Form 6-K, available at www.sec.gov. Logitech does not undertake to update any forward-looking statements.

The operating income target for Fiscal Year 2007 excluding stock-related compensation is a non-GAAP financial measure under new accounting rules that require the expensing of stock-related compensation effective for Logitech beginning with its next fiscal year, starting April 1, 2006. Under these rules, the Company is required to determine the appropriate fair value model to be used to value share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. Logitech is in the process of making these determinations and as a result at this time management is unable to provide a non-GAAP to GAAP reconciliation of its Fiscal Year 2007 operating income target.

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.

LOGITECH INTERNATIONAL S.A.
 
(In thousands, except per share / ADS) - Unaudited
 
 
Quarter Ended
December 31
CONSOLIDATED STATEMENTS OF INCOME
2005
2004
     
Net sales
$
573,856
$
483,816
Cost of goods sold
  388,349
315,488
Gross profit
185,507
168,328
               % of net sales
32.3%
34.8%
 
Operating expenses:
          Marketing and selling
66,380
61,020
          Research and development
22,380
19,160
          General and administration
16,074
14,547
Total operating expenses
104,834
94,727
 
Operating income
80,673
73,601
 
Interest income, net
1,182
233 
Other income, net
1,108
1,682 
 
Income before income taxes
82,963
75,516
Provision for income taxes
11,615
11,327
 
Net income
$
71,348
$
64,189
 
Shares used to compute net income per share and ADS:
          Basic
92,897
87,657
          Diluted
100,190
98,353
Net income per share and ADS:
          Basic
$
0.77
$
0.73
          Diluted
$
0.71
$
0.66
     
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 June 30, 2005.

LOGITECH INTERNATIONAL S.A.
 
(In thousands, except per share / ADS) - Unaudited
 
 
Nine Months Ended
December 31
CONSOLIDATED STATEMENTS OF INCOME
2005
2004
     
Net sales
$
1,330,659
$
1,079,978
Cost of goods sold
  905,418
711,515
Gross profit
425,241
368,463
               % of net sales
32.0%
34.1%
 
Operating expenses:
          Marketing and selling
170,376
149,822
          Research and development
64,889
53,342
          General and administration
45,836
40,575
Total operating expenses
281,101
243,739
 
Operating income
144,140
124,724
 
Interest income (expense), net
2,460
(282)
Other income, net
4,545
3,831 
 
Income before income taxes
151,145
128,273
Provision for income taxes
21,163
19,240
 
Net income
$
129,982
$
109,033
 
Shares used to compute net income per share and ADS:
          Basic
90,267
88,521
          Diluted
100,040
99,035
Net income per share and ADS:
          Basic
$
1.44
$
1.23
          Diluted
$
1.31
$
1.12
     
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 June 30, 2005.

LOGITECH INTERNATIONAL S.A.
 
(In thousands) - Unaudited
 
CONSOLIDATED BALANCE SHEETS
December 31,
2005
March 31,
2005
December 31,
2004
       
Current assets      
          Cash and cash equivalents
$
276,872
$
341,277
$
245,967

          Accounts receivable

370,048
229,234
295,816

          Inventories

257,577
175,986
186,003

          Other current assets

49,631
50,364
46,229

          Total current assets

954,128
796,861
774,015
Investments
16,703
16,793
16,715
Property, plant and equipment
68,886
52,656
47,674
Intangible assets

          Goodwill

135,399
134,286
134,807

          Other intangible assets

12,335
15,816
17,504
Other assets
1,856
2,460
3,275
Total assets
$
1,189,307
$
1,018,872
$
993,990
       
Current liabilities

          Short-term debt

$
14,061
$
9,875
$
10,283

          Accounts payable

242,641
177,748
189,063

          Accrued liabilities

174,864
156,575
157,362

          Total current liabilities

431,566
344,198
356,708
Long-term debt
16
147,788
155,485
Other liabilities
949
737
876
Total liabilities
432,531
492,723
513,069
       
Shareholders' equity
756,776
526,149
480,921
       
Total liabilities and shareholders' equity
$
1,189,307
$
1,018,872
$
993,990

LOGITECH INTERNATIONAL S.A.
 
 (In thousands) - Unaudited
 
 
Quarter Ended 
December 31
Nine Months Ended 
December 31
SUPPLEMENTAL FINANCIAL INFORMATION
2005
2004
2005
2004
         
Depreciation
$
7,720
$
6,702
$
23,475
$
18,858
Amortization of other acquisition-related intangibles
1,160
1,654
3,481
4,635
Operating income
80,673
73,601
144,140
124,724
Operating income before depreciation and amortization
89,553
81,957
171,096
148,217
Capital expenditures
13,531
9,194
37,617
27,522
 
Net sales by channel:    

          Retail

$
516,575
$
433,840
$
1,169,645
$
942,235

          OEM

57,281
49,976
161,014
137,743

               Total net sales

$
573,856
$
483,816
$
1,330,659
$
1,079,978
     
Net sales by product family:    

          Retail - Cordless

$
148,336
$
158,625
$
333,706
$
336,275

          Retail - Corded

86,821
91,000
233,126
220,201

          Retail - Video

82,401
57,309
192,238
151,188

          Retail - Audio

117,602
51,405
247,000
106,011

          Retail - Gaming

56,552
66,639
108,136
107,823

          Retail - Other

24,863
8,862
55,439
20,737

          OEM

57,281
49,976
161,014
137,743

               Total net sales

$
573,856
$
483,816
$
1,330,659
$
1,079,978

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