Logitech International S.A. (LOGI, Financial) filed Quarterly Report for the period ended 2008-12-31.
Logitech designs manufactures and markets innovative peripherals that provide people with easy access to the digital world. The Company's product family includes Internet video cameras mice and trackballs keyboards audio and telephony products interactive gaming devices and 3D controllers. Logitech International S.A. has a market cap of $1.85 billion; its shares were traded at around $9.65 with a P/E ratio of 9.5 and P/S ratio of 0.78. Logitech International S.A. had an annual average earning growth of 31.9% over the past 10 years. GuruFocus rated Logitech International S.A. the business predictability rank of 4-star.
Compared with the same periods in the prior fiscal year, total net sales of all product lines except audio and video decreased significantly during the three months ended December 31, 2008, resulting in net sales declines for the nine months ended December 31, 2008 in all product lines except pointing devices, video and gaming. Our gross margin in the three and nine months ended December 31, 2008 decreased to 29.9% and 32.7% compared with 36.9% and 35.9% in the prior fiscal year, primarily due to the rapid strengthening of the U.S. dollar and increased promotional activity. Promotional activity includes contractual customer marketing and sales incentive programs, volume and consumer rebates and price protection programs, which impact our net sales and gross margin. Net income for the three and nine months ended December 31, 2008 decreased to $40.5 million and $142.1 million compared with $133.6 million and $170.7 million in the prior fiscal year. Net income for the three and nine months ended December 31, 2007 included a net realized gain of $27.8 million on the sale of short-term investments. Net income for the nine months ended December 31, 2007 also included an unrealized loss of $72.9 million related to other-than-temporary declines in the estimated fair value of our short-term investments.
In January 2009, we announced a plan to reduce Logitechs salaried workforce globally by between 550 and 600 employees. The majority of the workforce reduction is expected to be completed by March 31, 2009. We expect to incur approximately $16 million to $18 million in pre-tax restructuring charges related
to employee termination costs, contract termination costs and other associated costs in the fourth quarter of fiscal year 2009, and an additional $4 million to $6 million in fiscal year 2010. The restructuring plan is expected to generate annual cost savings beginning in fiscal year 2010 of approximately $50 million. The size and timing of the restructuring charges and cost savings are estimates subject to significant future economic, competitive and other uncertainties.
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Logitech designs manufactures and markets innovative peripherals that provide people with easy access to the digital world. The Company's product family includes Internet video cameras mice and trackballs keyboards audio and telephony products interactive gaming devices and 3D controllers. Logitech International S.A. has a market cap of $1.85 billion; its shares were traded at around $9.65 with a P/E ratio of 9.5 and P/S ratio of 0.78. Logitech International S.A. had an annual average earning growth of 31.9% over the past 10 years. GuruFocus rated Logitech International S.A. the business predictability rank of 4-star.
Highlight of Business Operations:
The global recession significantly deepened in the three months ended December 31, 2008, which had a substantial negative impact on our financial results, particularly on our profitability. Our total net sales (retail and OEM) for the quarter decreased 16% to $627.5 million compared with the same period in the prior year, with declines of 22% in the Americas and 18% in the Europe, Middle East and Africa (EMEA) region, reflecting the deteriorating retail environment and the strengthening of the U.S. dollar relative to the Euro. Net sales in our Asia Pacific region for the three months ended December 31, 2008 increased 10%. For the nine months ended December 31, 2008, net sales increased 2% to $1,800.9 million, with growth of 24% in Asia Pacific, and declines of 1% in EMEA and 3% in the Americas.Compared with the same periods in the prior fiscal year, total net sales of all product lines except audio and video decreased significantly during the three months ended December 31, 2008, resulting in net sales declines for the nine months ended December 31, 2008 in all product lines except pointing devices, video and gaming. Our gross margin in the three and nine months ended December 31, 2008 decreased to 29.9% and 32.7% compared with 36.9% and 35.9% in the prior fiscal year, primarily due to the rapid strengthening of the U.S. dollar and increased promotional activity. Promotional activity includes contractual customer marketing and sales incentive programs, volume and consumer rebates and price protection programs, which impact our net sales and gross margin. Net income for the three and nine months ended December 31, 2008 decreased to $40.5 million and $142.1 million compared with $133.6 million and $170.7 million in the prior fiscal year. Net income for the three and nine months ended December 31, 2007 included a net realized gain of $27.8 million on the sale of short-term investments. Net income for the nine months ended December 31, 2007 also included an unrealized loss of $72.9 million related to other-than-temporary declines in the estimated fair value of our short-term investments.
In January 2009, we announced a plan to reduce Logitechs salaried workforce globally by between 550 and 600 employees. The majority of the workforce reduction is expected to be completed by March 31, 2009. We expect to incur approximately $16 million to $18 million in pre-tax restructuring charges related
to employee termination costs, contract termination costs and other associated costs in the fourth quarter of fiscal year 2009, and an additional $4 million to $6 million in fiscal year 2010. The restructuring plan is expected to generate annual cost savings beginning in fiscal year 2010 of approximately $50 million. The size and timing of the restructuring charges and cost savings are estimates subject to significant future economic, competitive and other uncertainties.
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