CA-LOGITECH

Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced financial results for the second quarter of Fiscal Year 2016.

• Q2 sales were $540 million, up 2 percent compared to Q2 of the prior year. Q2 retail sales (total sales excluding OEM and Lifesize) were $496 million and grew 12 percent in constant currency.
• Q2 GAAP operating income was $26 million. Q2 GAAP earnings per share (EPS) were $0.11, compared to $0.22 in the same quarter a year ago.
• Q2 non-GAAP operating income was $42 million, with non-GAAP EPS of $0.22, compared to $0.31 in the same quarter a year ago.

“I’m excited by our performance this quarter. We delivered our best retail sales growth in almost five years, exceeding expectations,” said Bracken P. Darrell, Logitech president and chief executive officer. “Our growth was broad-based across categories and regions. In constant currency, Americas grew 9 percent, EMEA grew 7 percent and Asia Pacific grew 26 percent. In our Growth category, Gaming, Video Collaboration and Mobile Speakers each grew more than 50 percent. Our reinvigorated innovation engine and commitment to design are delivering powerfully and we have strong momentum heading into the holiday peak season.”

Outlook

Logitech confirmed its FY 2016 outlook of $150 million in non-GAAP operating income and 7 percent growth for retail sales in constant currency.

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 Q2 FY 2016 on Oct. 22, 2015 at 8:30 a.m. Eastern Daylight Time and 2:30 p.m. Central European Summer 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 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 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 amounts has been provided for Fiscal Year 2016.

About Logitech

Logitech designs products that have an everyday place in people's lives, connecting them to the digital experiences they care about. Over 30 years ago Logitech started connecting people through computers, and now it’s designing products that bring people together through music, gaming, video and computing. 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). Find Logitech at www.logitech.com , the company blog  or @Logitech .

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation statements regarding: Logitech’s momentum, results from its innovation engine and design commitment, and Fiscal Year 2016 operating income and sales growth. 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. 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, 2015 and our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015, 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.

2015 Logitech, Logicool, Logi 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 website at www.logitech.com .

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
			Three Months Ended										Six Months Ended
			September 30										September 30
GAAP CONSOLIDATED STATEMENTS OF OPERATIONS			2015					2014					2015					2014
Net sales			$	539,862				$	530,311				$	1,010,182				$	1,012,514
Cost of goods sold				353,851					325,533					652,442					625,984
Gross profit				186,011					204,778					357,740					386,530
% of net sales				34.5	%				38.6	%				35.4	%				38.2	%
Operating expenses:
Marketing and selling				89,877					95,862					177,304					186,908
Research and development				34,898					32,325					68,731					63,641
General and administrative				26,851					34,470					57,355					71,149
Restructuring charges, net				8,696					—					21,691					—
Total operating expenses				160,322					162,657					325,081					321,698
Operating income				25,689					42,121					32,659					64,832
Interest income, net				192					355					456					613
Other expense, net				(780	)				(885	)				(1,901	)				(1,083	)
Income before income taxes				25,101					41,591					31,214					64,362
Provision for income taxes				7,004					5,501					5,680					8,596
Net income			$	18,097				$	36,090				$	25,534				$	55,766
Net income per share:
Basic			$	0.11				$	0.22				$	0.16				$	0.34
Diluted			$	0.11				$	0.22				$	0.15				$	0.34
Weighted average shares used to compute net income per share:
Basic				163,515					163,230					163,957					163,121
Diluted				165,841					166,065					166,352					165,949
Cash dividends per share				0.53					—					0.53					—

LOGITECH INTERNATIONAL S.A.
(In thousands)
			September 30					March 31,
CONSOLIDATED BALANCE SHEETS			2015					2015
			(Unaudited)
Current assets:
Cash and cash equivalents			$	365,774				$	537,038
Accounts receivable, net				274,730					179,823
Inventories				328,054					270,730
Other current assets				73,504					64,429
Total current assets				1,042,062					1,052,020
Non-current assets:
Property, plant and equipment, net				108,184					91,593
Goodwill				218,207					218,213
Other intangible assets				666					1,866
Other assets				60,656					62,988
Total assets			$	1,429,775				$	1,426,680
Current liabilities:
Accounts payable			$	356,686				$	299,995
Accrued and other current liabilities				231,688					194,912
Total current liabilities				588,374					494,907
Non-current liabilities:				172,428					173,639
Total liabilities				760,802					668,546
Total shareholders' equity				668,973					758,134
Total liabilities and shareholders' equity			$	1,429,775				$	1,426,680

LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
			Three Months Ended										Six Months Ended
			September 30										September 30
CONSOLIDATED STATEMENTS OF CASH FLOWS			2015					2014					2015					2014
Operating activities:
Net income			$	18,097				$	36,090				$	25,534				$	55,766
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation				11,721					9,741					22,237					19,692
Amortization of other intangible assets				494					2,576					1,226					5,358
Share-based compensation expense				6,508					6,061					13,257					12,999
Impairment of investments				77					105					180					105
Gain on disposal of property, plant and equipment				—					(32	)				—					(10	)
Excess tax benefits from share-based compensation				(498	)				(285	)				(1,163	)				(666	)
Deferred income taxes				7,684					(526	)				952					(2,358	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net				(54,195	)				(36,898	)				(95,403	)				(73,561	)
Inventories				(1,278	)				(8,521	)				(55,442	)				(26,984	)
Other assets				(6,128	)				(3,577	)				(8,511	)				(5,640	)
Accounts payable				15,820					19,337					50,361					60,112
Accrued and other liabilities				12,435					8,875					31,910					15,891
Net cash provided by (used in) operating activities				10,737					32,946					(14,862	)				60,704
Investing activities:
Purchases of property, plant and equipment				(15,987	)				(13,721	)				(31,277	)				(24,964	)
Investment in privately held companies				(240	)				(1,500	)				(480	)				(2,550	)
Purchase of trading investments				(1,746	)				(1,776	)				(2,649	)				(2,230	)
Proceeds from sales of trading investments				2,015					2,039					2,855					2,545
Net cash used in investing activities				(15,958	)				(14,958	)				(31,551	)				(27,199	)
Financing activities:
Payment of cash dividends				(85,915	)				—					(85,915	)				—
Contingent consideration related to prior acquisition				—					—					—					(100	)
Purchases of treasury shares				(39,988	)				—					(48,802	)				—
Repurchase of ESPP awards				—					(1,078	)				—					(1,078	)
Proceeds from sales of shares upon exercise of options and purchase rights				7,037					959					11,103					1,533
Tax withholdings related to net share settlements of restricted stock units				(2,206	)				(628	)				(3,502	)				(1,323	)
Excess tax benefits from share-based compensation				498					285					1,163					666
Net cash used in financing activities				(120,574	)				(462	)				(125,953	)				(302	)
Effect of exchange rate changes on cash and cash equivalents				(659	)				(2,285	)				1,102					(2,393	)
Net increase (decrease) in cash and cash equivalents				(126,454	)				15,241					(171,264	)				30,810
Cash and cash equivalents, beginning of the period				492,228					484,981					537,038					469,412
Cash and cash equivalents, end of the period			$	365,774				$	500,222				$	365,774				$	500,222

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
NET SALES			Three Months Ended												Six Months Ended
			September 30												September 30
SUPPLEMENTAL FINANCIAL INFORMATION			2015				2014				Change				2015				2014				Change
Net sales by channel:
Retail			$	496,263			$	473,463			5	%			$	921,651			$	897,276			3	%
OEM				22,231				28,394			(22	)				44,529				61,027			(27	)
Video Conferencing				21,368				28,454			(25	)				44,002				54,211			(19	)
Total net sales			$	539,862			$	530,311			2				$	1,010,182			$	1,012,514			—
Net retail sales by product category(*):
Mobile Speakers			$	80,550			$	48,538			66					121,094				77,367			57
Gaming				67,624				47,506			42				$	111,294			$	94,382			18
Video Collaboration				20,059				13,808			45					41,235				29,033			42
Tablet & Other Accessories				18,549				28,158			(34	)				37,358				59,874			(38	)
Growth				186,782				138,010			35					310,981				260,656			19
Pointing Devices				124,668				127,693			(2	)				241,653				240,735			—
Keyboards & Combos				102,098				105,677			(3	)				207,927				211,166			(2	)
Audio-PC & Wearables				46,342				57,191			(19	)				92,041				105,739			(13	)
PC Webcams				23,360				25,282			(8	)				45,041				45,745			(2	)
Home Control				12,610				18,776			(33	)				22,864				31,108			(27	)
Profit Maximization				309,078				334,619			(8	)				609,526				634,493			(4	)
Retail Strategic Sales				495,860				472,629			5					920,507				895,149			3
Non-Strategic				403				834			(52	)				1,144				2,127			(46	)
Total net retail sales			$	496,263			$	473,463			5				$	921,651			$	897,276			3
__________________
* Certain products within the retail product categories as presented in prior periods have been reclassified to conform to the current periods' presentation, with no impact on previously reported total net retail sales.

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
GAAP TO NON GAAP RECONCILIATION (A)			Three Months Ended										Six Months Ended
			September 30										September 30
SUPPLEMENTAL FINANCIAL INFORMATION			2015					2014					2015					2014
Gross profit - GAAP			$	186,011				$	204,778				$	357,740				$	386,530
Share-based compensation expense				580					627					1,185					1,165
Amortization of other intangible assets				279					543					787					1,093
Gross profit - Non-GAAP			$	186,870				$	205,948				$	359,712				$	388,788
Gross margin - GAAP				34.5	%				38.6	%				35.4	%				38.2	%
Gross margin - Non-GAAP				34.6	%				38.8	%				35.6	%				38.4	%
Operating expenses - GAAP			$	160,322				$	162,657				$	325,081				$	321,698
Less: Share-based compensation expense				5,928					5,434					12,065					11,834
Less: Amortization of other intangible assets				215					2,033					439					4,265
Less: Restructuring charges, net				8,696					—					21,691					—
Less: One time special charge				321					8,020					4,370		*			16,996
Operating expenses - Non-GAAP			$	145,162				$	147,170				$	286,516				$	288,603
% of net sales - GAAP				29.7	%				30.7	%				32.2	%				31.8	%
% of net sales - Non - GAAP				26.9	%				27.8	%				28.4	%				28.5	%
Operating income - GAAP			$	25,689				$	42,121				$	32,659				$	64,832
Share-based compensation expense				6,508					6,061					13,250					12,999
Amortization of other intangible assets				494					2,576					1,226					5,358
Restructuring charges, net				8,696					—					21,691					—
One time special charge				321					8,020					4,370		*			16,996
Operating income - Non - GAAP			$	41,708				$	58,778				$	73,196				$	100,185
% of net sales - GAAP				4.8	%				7.9	%				3.2	%				6.4	%
% of net sales - Non - GAAP				7.7	%				11.1	%				7.2	%				9.9	%
Net income - GAAP			$	18,097				$	36,090				$	25,534				$	55,766
Share-based compensation expense				6,508					6,061					13,250					12,999
Amortization of other intangible assets				494					2,576					1,226					5,358
Restructuring charges, net				8,696					—					21,691					—
One time special charge				321					8,020					4,370		*			16,996
Impairment of investment				77					105					180					105
Provision for income taxes				2,082					(1,803	)				(3,238	)				(3,907	)
Net income - Non - GAAP			$	36,275				$	51,049				$	63,013				$	87,317
Net income per share:
Diluted - GAAP			$	0.11				$	0.22				$	0.15				$	0.34
Diluted - Non - GAAP			$	0.22				$	0.31				$	0.38				$	0.53
Shares used to compute net income per share:
Diluted - GAAP and Non - GAAP				165,841					166,065					166,352					165,949
* These expenses include an increase of $3.5 million in the accrual for a proposed settlement of the SEC investigation and other expenses related to that investigation.

LOGITECH INTERNATIONAL S.A.
(In thousands, except per share amounts) - Unaudited
SHARED BASED COMPENSATION EXPENSE			Three Months Ended									Six Months Ended
			September 30									September 30
SUPPLEMENTAL FINANCIAL INFORMATION			2015				2014					2015					2014
Share-based Compensation Expense
Cost of goods sold			$	580			$	627				$	1,185				$	1,165
Marketing and selling				2,062				1,653					4,180					4,209
Research and Development				756				552					1,543					1,396
General and administrative				3,110				3,229					6,342					6,229
Restructuring				—				—					7					—
Income tax provision (benefit)				304				(1,913	)				(1,033	)				(3,097	)
Total share-based compensation expense, net of income taxes			$	6,812			$	4,148				$	12,224				$	9,902
__________________

(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 quarter ended September 30, 2015, 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 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. 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.

Impairment of investment. We incur investment impairment, primarily related to our investments in various privately-held companies. The investment impairment varies depending on the operational and financial performance of the privately-held companies we invested in. 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 operations.

One-time special charges: costs related to investigations and related expenses. These expenses are forensic accounting, audit, consulting and legal fees related to the Audit Committee’s investigation and the ongoing formal investigation by and settlement discussion with the Securities and Exchange Commission (SEC), together with accruals based on settlement discussion with the SEC. 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 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. Sales for the three months ended September 30, 2015 compared to sales for the three months ended September 30, 2014 grew 8 percent in constant currency and grew 2 percent in U.S. Dollars. Retail sales for the three months ended September 30, 2015 compared to retail sales for the three months ended September 30, 2014 grew 12 percent in constant currency and grew 5 percent in U.S. Dollars.

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)

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Contact:

Logitech International
Joe Greenhalgh
Vice President, Investor Relations – USA
510-713-4430
or
Krista Todd
Vice President, External Communications – USA
510-713-5834
or
Ben Starkie
Corporate Communications – Europe
+41-(0) 79-292-3499

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