Logitech Announces Q3 FY 2009 Results

Logitech’s retail sales for Q3 FY 2009 declined 16 percent year over year, with sales down in the Americas and EMEA by 21 percent and 19 percent, respectively and sales up in Asia by 8 percent. OEM sales were down by 11 percent.

“The deepening global recession had a significant impact on our operating performance as our customers continued to reduce inventory levels in the face of weaker consumer demand,” said Gerald P. Quindlen, Logitech president and chief executive officer. “Two factors primarily contributed to the decline in our gross margin from last year’s record high – the negative impact of a significantly stronger dollar and a retail environment that was highly promotional, particularly in the Americas. We believe these factors are tied to the current economic conditions and are not permanent.

“During the quarter, we were able to scale back our operating expenses in anticipation of the challenging environment. And we continued to generate positive operating cash flow, ending the quarter with nearly half a billion dollars in cash.

“All indications point to an even weaker retail environment in the coming months. Consequently, our plans assume that in Q4 we will see year-over-year declines in sales, operating income before restructuring charges and gross margin that are similar to or worse than the year-over-year declines we experienced in Q3. However, we expect to continue to generate positive cash flow from operations as we focus on preserving the strength of our balance sheet. Moreover, we believe the substantial steps we are taking to align our cost structure with the current environment, combined with our continued emphasis on product innovation, will position the Company to successfully manage through this downturn and emerge stronger when the recovery begins.”

Restructuring In addition to ongoing actions to reduce operating expenses, Logitech has initiated a restructuring that is expected to reduce the Company’s global salaried workforce by between 550 and 600 employees. This plan is expected to generate annual cost savings beginning in Fiscal Year 2010 of approximately $50 million. As a result of the restructuring, the Company expects to incur a total charge of approximately $20-24 million over the next twelve months, of which approximately $16-18 million is expected to be incurred during the fourth quarter of FY 2009.