Logitech International's CEO Discusses F1Q13 Earnings Results - Earnings Call Transcript

Logitech International, S.A. (LOGI)

F1Q13 Earnings Call

July 26, 2012 8:30 am ET

Executives

Joe Greenhaigh – Vice President Investor Relations & Corporate Treasurer

Guerrino De Luca – Chairman of the Board

Bracken P. Darrell – President & Chief Executive Officer

Erik K. Bardman – Chief Financial Officer & Senior Vice President Finance

Analyst

John Bright – Avondale Partners

[Alex Faher – Xon]

Simon Schafer – Goldman Sachs

Paul Coster – JP Morgan

Andrew Gardiner – Barclays Capital

Tavis McCourt – Raymond James

Michael Foeth – Vontobel

Andrew Humphrey – Morgan Stanley

Corey Barrett – Pacific Crest

Joern Iffert – UBS

Presentation

Operator

Welcome to the first quarter financial results conference call for Logitech. At this time all participants are in listen only mode. We will be conducting a question and answer session and instructions will follow at that time. This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech. I would now like to introduce your host for today’s call Mr. Joe Greenhaigh, Vice President of Investor Relations and Corporate Treasurer at Logitech.

Joe Greenhaigh

Welcome to the Logitech conference call to discuss the company’s results for the first quarter ended June 30, 2012. The press release, our prepared remarks and slides, and the live webcast of this call are available online at www.Logitech.com. As noted in our press release we have published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments and we will not repeat them on this call.

During the course of this call we may make forward-looking statements including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially include those set forth in Logitech’s annual report on Forms 10K dated May 30, 2012 which is available online on the SEC EDGAR database and in the final paragraphs in the press release and prepared remarks reporting first quarter results available at www.Logitech.com. The forward-looking statements made during this call represent managements’ outlook only as of today and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise.

This call is being recorded and will be available for replay on the Logitech website. Joining us today are Guerrino De Luca, Chairman and Chief Executive Officer; Bracken Darrell, President; and Erik Bardman, Senior Vice President of Finance and Chief Financial Officer. I’d now like to turn the call over to Guerrino.

Guerrino De Luca

I obviously cannot be pleased with the operating loss we generated in the quarter but I’m encouraged that our results were consistent with our expectations reflecting the modest performance of the product portfolio that is mostly made up of our older products. When I isolate some of the factors that negatively impacted our profitability it’s clear to us that our results are similar to the prior year which is what we expected at the current stage of our turnaround.

Our restructuring related costs totaled roughly $34 million in Q1. This is essentially the same amount as last year’s write down of our Logitech review of inventory. This year we also incurred $4.3 million in costs associated with the exit from our old campus in Freemont California and another $4.5 million related to the acceleration of our product portfolio simplification efforts which Bracken will address shortly. All these changes will positively impact our operating results in the future.

I want to specifically mention two highlights in the quarters. First, I was very encouraged with the growth we achieved in EMEA with sales up by 28% in local currency. We’re well positioned in EMEA for a significant improvement in sales and profitability during the remainder of the fiscal year compared to the prior year. I was also pleased with the double digit growth in both the desktop keyboard and the audio product categories. The strong initial sales of the new generations of products recently added to our portfolio were significant factors in the growth achieved in both categories.

I will now turn the call over to Bracken and I will return after him to comment on some elements of the proxy we filed earlier this week and on our strategy going forward.

Bracken P. Darrell

I want to comment briefly on the restructuring initiatives we announced in late April. As painful as the process of restructuring is for any organization I was really pleased with the speed and the quality of our execution. We moved aggressively, we moved with precision as we laid the foundation for a cost structure that will improve our profitability and support our future growth initiatives. We’re confident that the restructuring will result in the reduction of approximately $80 million in annual operating costs with the positive impact on our financials becoming fully visible in the second half of this fiscal year.

The vast majority of our restructuring actions are now behind us and we’re focused on improved performance. A critical element in our improvement efforts is the simplification of our organization and our product portfolio. There’s still much work to be done but let me update you on the progress. One example of our simplified organization involves marketing or our marketing function. We have completed the consolidation of our brand management and product portfolio management under the leadership of the business groups.

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