LOGITECH INTERNATIONAL S.A. (Exact Name of Registrant As Specified in Its Charter)
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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2018 Or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 0-29174 LOGITECH INTERNATIONAL S.A. (Exact name of registrant as specified in its charter) Canton of Vaud, Switzerland None (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Logitech International S.A. EPFL - Quartier de l'Innovation Daniel Borel Innovation Center 1015 Lausanne, Switzerland c/o Logitech Inc. 7700 Gateway Boulevard Newark, California 94560 (Address of principal executive offices and zip code) (510) 795-8500 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 1 Table of Contents Non-accelerated filer o (Do not check if a Smaller reporting company Emerging Growth Company Large accelerated filer ý Accelerated filer o smaller reporting company) o o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard s provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý As of October 10, 2018 , there were 165,670,205 shares of the Registrant’s share capital outstanding. 2 Table of Contents TABLE OF CONTENTS Page Part I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 4 Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2018 and 2017 4 Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, 5 2018 and 2017 Condensed Consolidated Balance Sheets as of September 30, 2018 and March 31, 2018 6 Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2018 and 2017 7 Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended September 30, 2018 8 and 2017 Notes to the Condensed Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 3. Quantitative and Qualitative Disclosures About Market Risk 45 Item 4. Controls and Procedures 48 Part II OTHER INFORMATION Item 1. Legal Proceedings 48 Item 1A. Risk Factors 49 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 66 Item 3. Defaults Upon Senior Securities 66 Item 4. Mine Safety Disclosures 66 Item 5. Other Information 66 Item 6. Exhibit Index 67 Signatures Exhibits In this document, unless otherwise indicated, references to the “Company” or “Logitech” are to Logitech International S.A., its consolidated subsidiaries and predecessor entities. Unless otherwise specified, all references to U.S. Dollar, Dollar or $ are to the United States Dollar, the legal currency of the United States of America. All references to CHF are to the Swiss Franc, the legal currency of Switzerland. Logitech, the Logitech logo, and the Logitech products referred to herein are either the trademarks or the registered trademarks of Logitech. All other trademarks are the property of their respective owners. The Company’s fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The second quarter of fiscal year 2019 ended on September 28, 2018. The same quarter in the prior fiscal year ended on September 29, 2017. For purposes of presentation, the Company has indicated its quarterly periods ending on the last day of the calendar quarter. 3 Table of Contents PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended September 30, September 30, 2018 2017 2018 2017 Net sales $ 691,146 $ 632,470 $ 1,299,626 $ 1,162,416 Cost of goods sold 432,063 402,722 814,234 737,496 Amortization of intangible assets and purchase accounting effect on inventory 2,966 2,011 5,338 3,515 Gross profit 256,117 227,737 480,054 421,405 Operating expenses: Marketing and selling 121,801 107,386 236,385 209,764 Research and development 39,542 36,647 78,529 71,746 General and administrative 25,206 25,266 50,679 50,675 Amortization of intangible assets and acquisition-related costs 4,317 2,491 6,838 3,881 Change in fair value of contingent consideration for business acquisition — (2,930) — (4,908) Restructuring charges (credits), net 119 (61) 10,040 (116) Total operating expenses 190,985 168,799 382,471 331,042 Operating income 65,132 58,938 97,583 90,363 Interest income 1,858 1,048 4,227 2,223 Other income (expense), net 3,389 459 1,818 (570) Income before income taxes 70,379 60,445 103,628 92,016 Provision for (benefit from) income taxes 6,203 4,087 986 (1,349) Net income $ 64,176 $ 56,358 $ 102,642 $ 93,365 Net income per share: Basic $ 0.39 $ 0.34 $ 0.62 $ 0.57 Diluted $ 0.38 $ 0.33 $ 0.61 $ 0.55 Weighted average shares used to compute net income per share: Basic 165,630 164,120 165,474 163,765 Diluted 169,234 169,078 168,996 168,710 Cash dividend per share $ 0.69 $ 0.63 $ 0.69 $ 0.63 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited) Three Months Ended Six Months Ended September 30, September 30, 2018 2017 2018 2017 Net income $ 64,176 $ 56,358 $ 102,642 $ 93,365 Other comprehensive income (loss): Currency translation gain (loss), net of taxes (2,863) 2,185 (7,826) 3,641 Defined benefit pension plans: Net gain and prior service costs, net of taxes 192 532 98 380 Amortization included in other income (expense), net (69) 52 (139) 102 Hedging gain (loss): Deferred hedging gain (loss), net of taxes 298 (2,140) 485 (5,349) Reclassification of hedging loss included in cost of goods sold 218 2,596 3,069 3,129 Other comprehensive income (loss) (2,224) 3,225 (4,313) 1,903 Total comprehensive income $ 61,952 $ 59,583 $ 98,329 $ 95,268 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (unaudited) September 30, 2018 March 31, 2018 Assets Current assets: Cash and cash equivalents $ 424,950 $ 641,947 Accounts receivable, net 459,689 214,885 Inventories 358,774 259,906 Other current assets 70,412 56,362 Total current assets 1,313,825 1,173,100 Non-current assets: Property, plant and equipment, net 83,731 86,304 Goodwill 346,548 275,451 Other intangible assets, net 130,538 87,547 Other assets 131,565 120,755 Total assets $ 2,006,207 $ 1,743,157 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 440,564 $ 293,988 Accrued and other current liabilities 434,615 281,732 Total current liabilities 875,179 575,720 Non-current liabilities: Income taxes payable 34,456 34,956 Other non-current liabilities 84,408 81,924 Total liabilities 994,043 692,600 Commitments and contingencies (Note 11) Shareholders’ equity: Registered shares, CHF 0.25 par value: 30,148 30,148 Issued shares — 173,106 at September 30 and March 31, 2018 Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2018 Additional shares that may be issued out of authorized capital — 34,621 at September 30, 2018 and none at March 31, 2018 Additional paid-in capital 33,160 47,234 Shares in treasury, at cost — 7,384 at September 30, 2018 and 8,527 at March 31, 2018 (163,481) (165,686) Retained earnings 1,210,105 1,232,316 Accumulated other comprehensive loss (97,768) (93,455) Total shareholders’ equity 1,012,164 1,050,557 Total liabilities and shareholders’ equity $ 2,006,207 $ 1,743,157 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Six Months Ended September 30, 2018 2017 Cash flows from operating activities: Net income $ 102,642 $ 93,365 Adjustments to reconcile