<PAGE>
File Number: 0-29174
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1998
LOGITECH INTERNATIONAL S.A.
(Exact name of Registrant as specified in its charter)
-----------
Not Applicable
(Translation of Registrant's name into English)
Canton of Vaud, Switzerland
(Jurisdiction of incorporation or organization)
-----------
Logitech International S.A.
Apples, Switzerland
c/o Logitech Inc.
6505 Kaiser Drive
Fremont, California 94555
(510) 795-8500
(Address and telephone number of principal executive offices)
-----------
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
X Form 20-F Form 40-F
Indicate by check mark whether registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes X No
If "Yes" is marked, indicate below the file number assigned to registrant in
connection with Rule 12g3-2(b).
Not applicable
================================================================================
<PAGE>
LOGITECH INTERNATIONAL S.A.
Form 6-K
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Information (unaudited):
Consolidated Balance Sheets at December 31, 1998 and March 31, 1998................................ 3
Consolidated Statements of Income for the three and nine months ended December 31, 1998 and 1997... 4
Consolidated Statements of Cash Flows for the nine months ended December 31, 1998 and 1997......... 5
Notes to Consolidated Financial Statements......................................................... 6
Management's Discussion and Analysis of Financial Condition and Results of Operations................ 9
Signatures........................................................................................... 21
</TABLE>
2
<PAGE>
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 32,877 $ 72,376
Accounts receivable.................................................. 115,472 62,998
Inventories.......................................................... 74,380 32,417
Other current assets................................................. 12,986 15,087
--------- ---------
Total current assets............................................. 235,715 182,878
Investments in unconsolidated companies............................... 13,175 1,878
Property, plant and equipment, net.................................... 36,689 28,845
Intangible assets, net................................................ 19,284 388
Other assets.......................................................... 1,096 712
--------- ---------
Total assets..................................................... $ 305,959 $ 214,701
========= =========
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Short-term debt...................................................... $ 30,709 $ 5,999
Accounts payable..................................................... 81,386 37,565
Accrued liabilities.................................................. 52,082 34,783
--------- ---------
Total current liabilities........................................ 164,177 78,347
Long-term debt........................................................ 3,951 3,031
Other liabilities..................................................... 709 589
--------- ---------
Total liabilities................................................ 168,837 81,967
--------- ---------
Shareholders' equity:
Registered shares, par value CHF 20 - 2,101,688 authorized,
353,312 conditionally authorized, 2,001,688 issued and
outstanding at December 31 and March 31, 1998.................... 28,738 28,738
Additional paid-in capital........................................... 75,779 75,577
Less registered shares in treasury, at cost, 80,642 at December 31,
1998 and 72,989 at March 31, 1998................................... (8,133) (6,677)
Retained earnings.................................................... 50,119 47,186
Cumulative translation adjustment.................................... (9,381) (12,090)
--------- ---------
Total shareholders' equity....................................... 137,122 132,734
--------- ---------
Total liabilities and shareholders' equity....................... $ 305,959 $ 214,701
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales....................................... $ 146,179 $ 114,826 $ 308,517 $ 304,143
Cost of goods sold.............................. 99,375 79,685 207,178 215,210
--------- --------- --------- ---------
Gross profit.................................... 46,804 35,141 101,339 88,933
Operating expenses:
Marketing and selling.......................... 19,562 15,449 46,231 40,036
Research and development....................... 8,363 6,803 22,332 20,913
General and administrative..................... 6,459 4,711 16,561 14,432
Acquired research and development.............. -- -- 6,200 --
--------- --------- --------- ---------
Operating income................................ 12,420 8,178 10,015 13,552
Interest income, net............................ 47 325 1,205 743
Gain on sale of product line.................... -- 285 -- 285
Other income (expense), net..................... (1,226) 1,065 (7,770) 2,068
--------- --------- --------- ---------
Income before income taxes...................... 11,241 9,853 3,450 16,648
Provision for income taxes...................... 1,686 740 517 1,760
--------- --------- --------- ---------
Net income...................................... $ 9,555 $ 9,113 $ 2,933 $ 14,888
========= ========= ========= =========
Net income per share:
Basic......................................... $ 4.93 $ 4.78 $ 1.51 $ 7.88
Diluted....................................... $ 4.85 $ 4.58 $ 1.48 $ 7.52
Net income per ADS (10 ADS : 1 share):
Basic......................................... $ 0.49 $ 0.48 $ 0.15 $ 0.79
Diluted....................................... $ 0.49 $ 0.46 $ 0.15 $ 0.75
Shares used to compute net income per share:
Basic......................................... 1,936 1,905 1,935 1,877
Diluted....................................... 1,970 1,988 1,983 1,972
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended
December 31,
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
(unaudited)
Cash flows from operating activities:
Net income........................................................... $ 2,933 $ 14,888
Non-cash items included in net income:
Depreciation and amortization....................................... 11,018 10,744
Acquired research and development................................... 6,200 --
Write-down of investments and note receivable....................... 5,800 42
Other............................................................... 411 (390)
Changes in current assets and liabilities:
Accounts receivable................................................. (44,834) (13,585)
Inventories......................................................... (35,175) 12,245
Other current assets................................................ (2,390) (2,274)
Accounts payable.................................................... 37,927 (4,974)
Accrued liabilities................................................. 9,552 1,774
--------- ---------
Net cash provided by (used in) operating activities.............. (8,558) 18,470
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment........................... (16,027) (10,017)
Cash proceeds from sale of product line.............................. -- 5,000
Acquisitions and investments in affiliated companies................. (39,020) 42
--------- ---------
Net cash used in investing activities............................ (55,047) (4,975)
--------- ---------
Cash flows from financing activities:
Increase (decrease) in debt.......................................... 24,329 (10,315)
Proceeds from sale of treasury shares................................ 2,206 9,962
Purchase of treasury shares.......................................... (3,044) --
--------- ---------
Net cash provided by (used in) financing activities.............. 23,491 (353)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents.......... 615 (1,114)
--------- ---------
Net decrease in cash and cash equivalents............................. (39,499) 12,028
Cash and cash equivalents at beginning of period...................... 72,376 38,504
--------- ---------
Cash and cash equivalents at end of period............................ $ 32,877 $ 50,532
========= =========
Supplemental cash flow information:
Interest paid........................................................ $ 612 $ 480
Income taxes paid.................................................... $ 1,204 $ 1,760
Non-cash investing and financing activities:
Property acquired through capital lease financing.................... $ 1,007 --
Accrued treasury shares.............................................. $ 417 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- The Company:
Logitech International S.A. (the "Company") designs, manufactures and markets
human interface devices which often serve as the primary physical interface
between users and their personal computers and other multimedia devices. The
Company's products include: input and pointing devices such as 2D, 3D, and
cordless mice, trackballs, touchpads, and keyboards; control devices for
entertainment such as joysticks, gamepads, steering wheels, and 3D game
controllers; and imaging devices such as PC video cameras and, until December
1997, personal color scanners. The Company sells its products to both original
equipment manufacturers ("OEMs") and a network of retail distributors and
retailers.
Note 2 -- Interim Financial Data:
The accompanying consolidated financial statements should be read in
conjunction with the Company's 1998 Annual Report on Form 20-F as filed with the
Securities and Exchange Commission. In the opinion of management, the
accompanying financial information includes all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows for the interim periods. The
results of operations and cash flows for the interim periods presented are not
necessarily indicative of the results of any future period.
The Company reports quarterly results on thirteen-week periods, each ending on
a Friday. For purposes of presentation, the Company has indicated its quarterly
periods as ending on the month end.
Note 3 -- Business Acquisition:
In September 1998, the Company completed the acquisition of Connectix
Corporation's QuickCam(R) PC video camera business unit for approximately $26.2
million (including closing and other costs). The Connectix business unit has
been combined with the Company's video division to offer a complete line of PC
video cameras for personal computer platforms. The transaction was accounted
for as a purchase under generally accepted accounting principles. Accordingly,
the assets and liabilities of the acquired business are included in the
consolidated balance sheet as of December 31, 1998. The results of operations
of the acquired business unit from the date of acquisition to December 31, 1998
were not significant.
In connection with the acquisition, the Company recorded approximately $19.4
million in goodwill and other intangibles, which are being amortized on a
straight-line basis over periods of two to ten years. In addition, the Company
recorded a one-time charge of approximately $6.2 million for acquired in-process
research and development in the quarter ended September 30, 1998.
Note 4 -- Equity Investments:
In June 1998, the Company acquired 49% of the outstanding shares of Space
Control GmbH, the German-based provider of Logitech's Magellan 3D Controller.
The acquisition agreement provides for an option for the Company to acquire the
remaining outstanding shares of Space Control if certain conditions are met.
The Company has used the equity method of accounting for this investment.
In April 1998, the Company acquired 10% of the outstanding stock of Immersion
Corporation, a developer of force feedback technology for PC peripherals and
software applications. The Company has used the cost method of accounting for
this investment.
6
<PAGE>
Note 5 -- Sale of Product Line:
In December 1997, the Company sold its scanner product line to Storm
Technology Inc. for $5 million in cash, a $4 million convertible note, and a 10%
common stock ownership in Storm. The Company recognized a loss on this sale in
fiscal 1998 of $3,174,000.
During the second quarter of fiscal 1999, the Company wrote off the
convertible note and common stock investment in Storm. The write-off was
prompted by changes in the personal scanner business, which in management's
opinion called into question the ability of Storm to meet its obligations to the
Company. In addition, in October 1998, Storm filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code, and in November
1998 the case was converted to a Chapter 7 case and a Chapter 7 trustee was
appointed.
Note 6 -- Initial Public Offering in the U.S.:
On March 27, 1997, the Company sold 200,000 registered shares from treasury in
a U.S. initial public offering in the form of 2,000,000 American Depositary
Shares ("ADS"). Total proceeds from the offering amounted to $32.0 million, or
$16 per ADS. Underwriting discounts and commissions, share issue and other
taxes and other offering expenses amounted to $5.2 million, which resulted in
net proceeds to the Company of $26.8 million. On April 25, 1997, the Company
sold an additional 30,000 registered shares from treasury under an option
granted to the underwriters to cover over-allotments. Such sale generated net
proceeds of $4.5 million.
Note 7 -- Net Income Per Share:
The Company adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," ("SFAS 128") for the quarter ended December 31, 1997. All
previously reported amounts were restated in accordance with SFAS 128.
Under SFAS 128, basic earnings per share is computed by dividing net income by
the weighted average number of outstanding registered shares. Diluted earnings
per share is computed using weighted average registered shares and, if dilutive,
weighted average registered share equivalents. The registered share equivalents
included in the Company's diluted earnings per share computations are registered
shares issuable upon the exercise of stock option or stock purchase plan
agreements (using the treasury stock method).
Note 8 -- Comprehensive Income
As of April 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". SFAS 130 establishes new
rules for the reporting and display of comprehensive income in the financial
statements. The adoption of SFAS 130 had no impact on net income or
stockholders' equity. For the three months ended December 31, 1998 and 1997,
comprehensive income was $8,901,000 and $11,870,000, respectively. For the nine
months ended December 31, 1998 and 1997, comprehensive income was $223,000 and
$19,970,000 respectively. The difference between net income and comprehensive
income for each period was due to foreign currency translation adjustments.
Note 9 -- Inventory
At December 31 and March 31, 1998, inventory consisted of the following:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1998
--------------------- ---------------------
(in thousands)
<S> <C> <C>
Raw materials.......................... $ 12,274 $ 5,695
Work-in-progress....................... 1,877 1,441
Finished goods......................... 60,229 25,281
-------- --------
$ 74,380 $ 32,417
======== ========
</TABLE>
7
<PAGE>
Note 10 -- Commitments and Contingencies:
In December 1996, the Company was advised of the intention to begin
implementing a value added tax ("VAT") on goods manufactured in certain parts of
China since July 1995, including where the Company's operations are located, and
intended for export. The Company has not previously paid any such VAT on its
exported Chinese manufactured products. The Company is in discussion with
Chinese officials and has been assured that, not withstanding statements made by
tax authorities, the VAT would not be applied to the Company. The Company
therefore believes this matter will not have a material adverse effect on the
Company's results of operations. Were the VAT to be applied to the Company, the
Company could incur a significant charge to operations, as well as an increase
in its cost of goods sold. As a result, the Company would seek to mitigate the
future effect by reorganizing its operations in China. There can be no
assurance that any application of the VAT to the Company would not have a
material adverse effect on the Company's current or future results of
operations, or that the Company's efforts to mitigate any impact of the VAT
would be successful.
As of December 31, 1998, a subsidiary of the Company was not in compliance
with certain debt covenants of its working capital line, and is currently
negotiating new terms. If the subsidiary and the bank are unable to agree to
revised terms, the bank could restrict further borrowings under the line, or
could accelerate the payment terms of the $8 million outstanding under the line.
The Company is involved in various legal actions and claims. In the opinion
of management, the future resolution of such actions and claims will not have a
material adverse effect on the Company's financial position or results of
operations.
8
<PAGE>
LOGITECH INTERNATIONAL S.A.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company's net sales are primarily derived from sales of its principal
product line, control devices and, to a lesser extent, imaging solutions and
other products. Control devices include mice, trackballs, touchpads, joysticks,
gamepads, steering wheels, 3D game controllers, keyboards, and remote controls.
Imaging solutions include PC video cameras and, until December 1997, color
personal scanners. Other products include partner products, as well as product
lines that are being phased out for strategic purposes.
In September 1998, the Company acquired the PC video camera business unit of
Connectix Corporation for $26.2 million (including closing and other costs).
Connectix's QuickCam(R) brand is a market leader in PC video cameras for Windows
and Macintosh. While the PC video camera market is not yet a large market, it
has been experiencing rapid growth. This acquisition is consistent with the
Company's intention to enter the PC video camera market, and its development
efforts in that area. The Connectix business unit has been combined with the
Company's video division.
In December 1997, the Company sold its scanner product line to Storm
Technology, Inc. ("Storm") for $5 million in cash, a $4 million convertible
note, and a 10% common stock ownership in Storm. The Company disposed of its
scanner product line due to fundamental changes in the scanner market. The
market had evolved from one driven by new technology and innovation, where
Logitech was a leader, to one driven by cost, with prices dropping steeply. In
addition, unit growth had been dominated by flatbed scanners, where Logitech was
a new entrant in the market, rather than by color sheetfed scanners where
Logitech was the leader. This sale allowed Logitech to focus on its profitable
control device product line and pursue new opportunities in emerging areas such
as PC video cameras.
The following table shows net sales for each of the Company's product lines in
dollars and as a percentage of total net sales:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, 1998 December 31, 1997
------------------------ ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net sales:
Control devices $ 134,787 $ 98,899 $ 294,631 $ 267,410
Imaging solutions 10,477 15,446 12,766 34,464
Other 915 481 1,120 2,269
--------- --------- --------- ---------
Total net sales $ 146,179 $ 114,826 $ 308,517 $ 304,143
========= ========= ========= =========
Net sales:
Control devices 92% 86% 95% 88%
Imaging solutions 7% 13% 4% 11%
Other 1% 1% 1% 1%
--------- --------- --------- ---------
Total net sales 100% 100% 100% 100%
========= ========= ========= =========
</TABLE>
9
<PAGE>
Initial Public Offering in the U.S.
On March 27, 1997, the Company sold 200,000 registered shares from treasury in
a U.S. initial public offering in the form of 2,000,000 American Depositary
Shares ("ADS"), with net proceeds to the Company of $26.8 million. On April 25,
1997, the Company sold an additional 30,000 shares from treasury under an option
granted to the underwriters to cover over-allotments, generating net proceeds of
$4.5 million.
Results of Operations
The following table sets forth certain consolidated financial statement
amounts as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------ ------------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...................... 68.0% 69.4% 67.2% 70.8%
------ ------ ------ ------
Gross profit............................ 32.0% 30.6% 32.8% 29.2%
Operating expenses:
Marketing and selling.................. 13.4% 13.5% 15.0% 13.2%
Research and development............... 5.7% 5.9% 7.2% 6.9%
General and administrative............. 4.4% 4.1% 5.4% 4.7%
Acquired research and development...... 0.0% 0.0% 2.0% 0.0%
------ ------ ------ ------
Operating income........................ 8.5% 7.1% 3.2% 4.4%
Interest income, net.................... 0.0% 0.3% 0.4% 0.3%
Gain on sale of product line 0.0% 0.2% 0.0% 0.1%
Other income (expense), net............. (0.8)% 0.9% (2.4)% 0.7%
------ ------ ------ ------
Income before income taxes.............. 7.7% 8.5% 1.2% 5.5%
Provision for income taxes.............. 1.2% 0.6% 0.2% 0.6%
------ ------ ------ ------
Net income.............................. 6.5% 7.9% 1.0% 4.9%
====== ====== ====== ======
</TABLE>
Comparison of three months ended December 31, 1998 and 1997
Net Sales
Net sales for the three months ended December 31, 1998 increased 27%.
Excluding the scanner line discontinued in December 1997, sales increased 46%.
Retail sales grew by over 50% excluding scanners. This growth was shared
across all product categories, and was primarily due to the Company's new
keyboard, video, and gaming products. Although prices declined in the other
product categories, revenue increased due to higher sales volumes.
OEM sales grew by over 29%. This increase was primarily due to the increase
in sales of pointing devices due to increased demand for mice from several large
PC manufacturers.
Gross Profit
Gross profit consists of net sales less cost of goods sold, which consists of
materials, direct labor and related overhead costs, costs of manufacturing
facilities, costs of purchasing finished products from outside suppliers,
distribution costs and inventory write-offs. Gross profit increased 33% to
$46.8 million.
10
<PAGE>
Gross profit as a percentage of net sales improved from 30.6% to 32.0%. This
increase reflects both a favorable product mix between retail and lower margin
OEM sales and the divestiture of the low margin scanner product line. The
Company has also been able to continue to achieve product cost reductions.
Operating Expenses
Total operating expenses increased 28%, from $26.9 million to $34.4 million.
This increase reflects intensified marketing efforts for the Company's third
quarter, as well as continued investment in research and development. As a
percentage of sales, operating expenses remained flat.
In connection with the Christmas season, the Company significantly increased
its advertising and channel marketing. This included full-page brand building
ads in a number of high profile consumer and business publications, as well as
product specific ads in trade publications. In addition, the Company continued
efforts to improve the quality of its web site, and launched a pilot program for
its e-commerce operation. The Company also increased other marketing costs in
new product areas, including the retail keyboard market, entertainment and PC
video cameras. The Company has also increased its development effort in the
game device area, and introduced a number of new devices during the Christmas
season. The integration of the QuickCam(R) acquisition proceeded as planned,
and the engineering and marketing teams are now integrated. Development efforts
have continued in the third quarter for PC video cameras. Increased costs in
the above areas have been partially offset by the elimination of research and
development costs for the scanner product line sold in December 1997. General
and administrative costs, as a percentage of sales, increased slightly from 4.1%
to 4.4% to support these ongoing marketing and development efforts.
Interest Income, Net
Interest income for the most recent quarter was $.05 million, compared to $.3
million in the same quarter last year. This was the result of a decrease in the
average balances of interest bearing cash and cash equivalents.
Other Income (Expense), Net
Other expense was $1.2 million for the current quarter, compared to income of
$1.1 million in the same quarter last year. This reduction was primarily due to
net foreign currency exchange losses this quarter compared to gains in the same
quarter last year, and scanner inventory write-offs in Europe. The currency
exchange losses were due to the impact of unfavorable exchange rate movements
during the quarter on transactions between the Company's manufacturing sites in
Asia and other sites around the world, particularly related to the strengthening
of the Japanese yen and the weakening of the U.S. dollar. The currency exchange
gains from last year were due to the strengthening of the U.S. dollar during
that quarter.
Provision for Income Taxes
The provision for income taxes consists of income and withholding taxes. The
amount recorded in each period reflects management's best estimate of the
effective tax rate for the fiscal year. Estimates are based on factors such as
management's expectations as to payments of withholding taxes on amounts
repatriated through dividends, the jurisdictions in which taxable income is
generated, changes in local tax laws and changes in valuation allowances based
upon the likelihood of recognizing deferred tax assets. The provision for
income taxes for the three months ended December 31, 1998 and 1997 represent a
15.0% and 7.5% effective tax rate for each quarter.
11
<PAGE>
Comparison of nine months ended December 31, 1998 and 1997
Net income for the nine months ended December 31, 1998 was $2.9 million
compared to net income of $14.8 million in the same period last year. During
the nine months ended December 31, 1998 net income was impacted by two non-
recurring charges, an in-process research and development write-off of $6.2
million (before tax) which was part of the Company's acquisition of the
QuickCam(R) PC video camera business unit of Connectix Corporation, and a $5.8
million (before tax) write-off of a note receivable and equity investment in
Storm Technology. The note and investment were part of the proceeds of the sale
of the scanner product line in December 1997. Since that time, the scanner
market has suffered substantial pricing and profitability pressures. The
Company's assessment was that Storm would be unlikely to meet its obligations to
the Company. In addition, in October 1998, Storm filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code, and in November
1998 the case was converted to a Chapter 7 case and a Chapter 7 trustee was
appointed.
Net Sales
Net sales for the nine months ended December 31, 1998 increased 1% (or 14%
excluding the since discontinued scanner line). Reflected in these results are
continued strong sales of control devices, which grew by 10%.
Retail sales grew by over 29%, excluding scanners. This growth was primarily
due to the Company's new keyboard, and video products, as well as increases from
the Company's new wheel enhanced mice and revitalized trackball product line.
OEM sales declined by 7% from last year primarily due to the Company's
decision in fiscal 1998 to depart from the set-top remote controller business,
and the shrinking of the Japanese OEM market.
Gross Profit
Gross profit increased 14% to $101 million in the nine months ended December
31, 1998. Gross profit as a percentage of net sales improved from 29.2% to
32.8%. This increase reflects both a favorable product mix between the retail
and lower margin OEM channels and the divestiture of the low-margin scanner
product line. The Company has also been able to continue to achieve product
cost reductions.
Operating Expenses
Excluding non-recurring charges, total operating expenses increased 13%, from
$75.4 million to $85.1 million. This increase reflects intensified product
marketing efforts in the current year in preparation for the Company's launch of
several new products, as well as continued investment in research and
development. As a percentage of sales, operating expenses, excluding non-
recurring charges, increased from 24.8% to 27.6%.
The Company has continued to invest in the Logitech brand with its new visual
marketing strategy, including new packaging, an updated web site, and new
packaging materials. The Company has increased other marketing costs in new
product areas, including the retail keyboard market, entertainment and PC video
cameras. The Company has also increased its development effort in the game
device area, and introduced a number of new devices during the Christmas season.
Development efforts have also continued for PC video cameras for the Internet.
Increased costs in the above areas have been partially offset by the elimination
of marketing and research and development costs for the scanner product line
sold in December 1997. General and administrative costs, as a percentage of
sales, increased slightly from 4.8% to 5.4% to support these ongoing marketing
and development efforts.
Interest Income, Net
Interest income for the nine months ended December 31, 1998 was $1.2 million,
compared to $.7 million in the same period last year. The improvement was the
result of an increase in the average balances of interest bearing cash and cash
equivalents.
12
<PAGE>
Other Income (Expense), Net
Before the non-recurring charge related to the write-off of an investment and
note receivable, other expense for the current period was $2.0 million, compared
to other income of $2.1 million last year. This change was primarily due to net
foreign currency exchange losses this year compared to gains last year, and
scanner inventory write-offs in Europe.
Provision for Income Taxes
The provision for income taxes for the nine months ended December 31, 1998 and
1997 represent a 15.0% and 10% effective tax rate for each period.
Liquidity and Capital Resources
Cash Balances, Available Borrowings, and Capital Resources
At December 31, 1998, the Company had cash and cash equivalents of $32.9
million. The Company also had credit lines with several European and Asian
banks totaling $58.1 million as of that date. As is common for business in
European countries, these credit lines are uncommitted and unsecured. Despite
the lack of formal commitments from its banks, the Company believes that these
lines of credit will continue to be made available because of its long-standing
relationships with these banks. In addition, the Company, through a subsidiary,
has a $20 million revolving working capital line of credit with a U.S. bank.
This facility has a two-year revolving period, is unsecured, and has a formal
bank commitment. As of December 31, 1998, the subsidiary was not in compliance
with certain debt covenants of this working capital line, and is currently
negotiating new terms. If the subsidiary and the bank are unable to agree to
revised terms, the bank could restrict further borrowings under the line, or
could accelerate the payment terms of the $8 million outstanding under the line.
As of December 31, 1998, $42.3 million was available for future borrowings under
all facilities.
The Company has financed its operations and capital requirements primarily
through cash flow from operations, bank borrowings and the sale of equity
securities. The Company's short and long-term liquidity and capital resource
requirements will be provided from three sources: ongoing cash flow from
operations, cash and cash equivalents on hand and borrowings, as needed, under
the credit facilities.
Cash Flow from Operating Activities
The Company's operating activities used cash of $8.6 million for the nine
months ended December 31, 1998, primarily due to increased working capital
requirements. The increase in working capital requirements was primarily the
result of increased accounts receivable and inventories, which grew at a faster
rate than accounts payable and accrued liabilities. Operating activities
generated cash of $18.5 million for the nine months ended December 31, 1997,
primarily from net income adjusted for depreciation, partially offset by an
increase in the Company's working capital requirements.
Cash Flow from Investing Activities
The Company's investing activities used cash of $55.0 million and $5.0 million
for the nine months ended December 31, 1998 and December 31, 1997. Cash used in
the nine months ended December 31, 1998 included $39.0 million used for three
acquisitions: the PC video camera business unit of Connectix Corporation, 49% of
the outstanding shares of Space Control GmbH, and 10% of the outstanding shares
of Immersion Corporation. The remaining amounts invested in both years were
primarily for capital expenditures.
Cash Flow from Financing Activities
Net cash provided by financing activities for the nine months ended December
31, 1998 was $23.5 million. This represents principally an increase of $24.3
million in debt primarily for working capital needs and to finance part of the
Company's acquisition of the QuickCam(R) PC video camera business unit of
Connectix.
Net cash used in financing activities for the nine months ended December 31,
1997 was $.4 million. This amount reflects cash proceeds of $4.5 million
received in April 1997 from the sale of additional registered shares under an
option granted to the underwriters of the initial public offering in the U.S. to
cover over-allotments. The
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Company had additional proceeds of $4.8 million from the sale of treasury
shares. These cash proceeds, along with part of the $26.8 million received in
March 1997 from the U.S. initial public offering, were used to pay down short-
term debt by $12.9 million in the nine months ended December 31, 1997. In
addition, the Company borrowed $6.2 million from its credit lines for capital
improvements in China and other short-term working capital needs.
Capital Commitments
The Company believes that it will continue to make capital expenditures in the
future to support ongoing and expanded operations and that such expenditures may
be substantial. The Company believes that its cash and cash equivalents, cash
from operations, and available borrowings under its bank lines of credit will be
sufficient to fund capital expenditures and working capital needs for the
foreseeable future. Fixed commitments for capital expenditures, primarily for
computer systems implementation, totaled approximately $3 million at December
31, 1998.
Certain Factors Affecting Operating Results
This quarterly report on Form 6-K contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934 relating to, among other things, i) price
competition, ii) an emerging environment in the PC video camera market, iii) the
Company's brand strategy, iv) the Company's research and development strategy,
v) bank credit line availability, vi) cash liquidity availability, vii) the
effect of the Year 2000 issue on the Company and the Company's projected costs
and strategy addressing this issue, and viii) the outcome of contingencies.
Predictions of future events involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in the forward-
looking statements due to, among others, the following risk factors:
Potential Fluctuations in Future Operating Results; Seasonality
The Company's operating results in the past have varied significantly from
quarter to quarter and these fluctuations are expected to continue in the
future. Future quarterly operating results may vary significantly due to a
number of factors, including: the volume and timing of orders received during
the quarter; the maturation of product lines; the timing of new product
introductions by the Company and its competitors and their acceptance by the
market; the impact of competition on the Company's average selling prices and
operating expenses; the availability and pricing of components for the Company's
products; inventory levels at the Company or in the distribution channels;
changes in laws or regulations; changes in product or distribution channel mix;
price protection charges; product returns from customers; deferrals of customer
orders in anticipation of new products or otherwise; changes in technologies and
their acceptance by the market; fluctuations in exchange rates; changes in the
Company's strategy; changes in personnel; the performance of the Company's
suppliers and third-party product manufacturers; the availability of key
components; and general economic conditions. Many of these factors are beyond
the Company's control. In addition, due to the short product life cycles
inherent in the Company's markets, the Company's failure to introduce new,
competitive products consistently in a timely manner would adversely affect
results of operations for one or more product cycles.
The volume and timing of orders received during a quarter are difficult to
forecast. Customers generally order on an as-needed basis. Accordingly, the
Company has operated with a relatively small backlog, and net sales in any
quarter depend primarily on orders booked and shipped in that quarter. In spite
of the difficulty in forecasting sales in advance of a quarter and the
relatively small backlog at any given time, the Company generally must plan
production, order components, and enter into development, sales and marketing,
and other operating commitments well before each quarter begins. This is
particularly acute because substantially all of the Company's products are
manufactured in Asia, and the Company relies on suppliers who are located in
many other parts of the world. Consequently, any shortfall in net sales in a
given quarter may negatively impact the Company's results of operations due to
an inability to adjust expenses during such quarter. Excess inventory may
negatively impact cash flows and result in charges associated with inventory
write-offs.
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The Company's retail sales are seasonal. Net sales are typically higher
during the Company's third fiscal quarter, due primarily to the increased demand
for the Company's products during the year-end holiday buying season, and to a
lesser extent in the fourth fiscal quarter. Net sales in the first and second
quarters can vary significantly as a result of new product introductions and
other factors.
As a result, the Company believes that quarter-to-quarter comparisons of its
results of operations should not be relied upon as indications of future
performance. In addition, due to the foregoing factors, it is possible that in
some future quarter the Company's operating results may be below the
expectations of public market analysts and investors. In such event, the price
of the Company's ADSs and registered shares would likely be materially and
adversely affected. The Company's prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by technology companies
participating in rapidly evolving markets. There can be no assurance that the
Company will be successful in addressing these concerns.
Concentration of Operations in China and Taiwan
Substantially all of the Company's manufacturing operations are located in
Suzhou, China and Hsinchu, Taiwan. These operations could be severely impacted
by national or regional political instability in China, including instability
which may occur in connection with a change in leadership in China, by evolving
interpretation and enforcement of legal standards, by strains on Chinese
transportation, communications, trade and other infrastructures related to the
rapid industrialization of an agrarian economy, by conflicts, embargoes,
increased tensions or escalation of hostilities between China and Taiwan, and by
other trade customs and practices that are dissimilar to those in the United
States. Interpretation and enforcement of China's laws and regulations
continues to evolve and the Company expects that differences in interpretation
and enforcement will continue in the foreseeable future. In addition, the
Company's Chinese employees in Suzhou are subject to a number of government
regulations regarding employment practices and customs that are fundamentally
different in certain respects from those in the United States and Europe. The
Suzhou facility is managed by, among others, several key Taiwanese expatriate
employees of the Company. The loss of such employees, either voluntarily or
because of a deterioration in relations between China and Taiwan, may have a
material adverse effect on the Company's Suzhou manufacturing operations.
Risk of Margin Declines
The Company's gross margins are affected by a number of factors, including the
mix between retail and OEM sales, product mix, product obsolescence, price and
cost reductions. The Company believes that gross margins are likely to
fluctuate in the near-term, but over the long term are likely to decline due to
significant price pressures in the OEM market from PC manufacturers aggressively
targeting low cost PCs, changes in product mix in the retail market toward lower
margin products, and a decline in the rate of cost reductions in the Company's
manufacturing operations.
Risks Associated with International Operations; Currency Fluctuations
Logitech transacts a substantial portion of its business outside the United
States. There are certain risks inherent to doing business in international
markets, including tariffs, customs, duties and other trade barriers,
difficulties in staffing and managing foreign operations, problems in collecting
accounts receivable, longer accounts receivable payment cycles, political
instability, expropriation, nationalization and other political risks, foreign
exchange controls, technology export and import restrictions or prohibitions,
delays from customs brokers or government agencies, seasonal reductions in
business activity, subjection to multiple taxation regimes and potentially
adverse tax consequences, any of which could adversely impact the success of the
Company's international operations and, in turn, have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company publishes its consolidated financial statements in U.S. dollars,
however, a portion of the Company's revenues and expenses are denominated in
currencies other than the U.S. dollar. The functional currencies for the
Company's operations are primarily the U.S. dollar, and to a lesser extent, the
Dutch guilder, Swiss franc, Taiwanese dollar, Chinese yuan and Japanese yen.
Certain of the Company's operations record revenues in one currency while
incurring costs in different currencies. This currency imbalance has, and may
continue to, result in foreign currency transaction gains and losses. Further,
the Company is subject to risks of
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currency exchange to the extent of currency fluctuations between the U.S. dollar
and other currencies in which the Company transacts its business. Currently, the
Company does not actively hedge against exchange rate fluctuations, although it
may elect to do so in the future. Accordingly, changes in exchange rates may
have a material adverse effect on the Company's net sales, cost of goods sold,
gross margin and net income.
Intense Competition; Pricing Pressure
The Company's business is characterized by intense competition, a trend of
declining average selling prices and performance enhancements of competing
products. The Company expects that competition will continue to be intense and
may increase from current or future competitors. Logitech believes that the
principal competitive factors include the price, performance, user-centric
design, ease-of-use, quality and timeliness of products, as well as the
responsiveness, capacity, technical abilities, established customer
relationships, retail shelf space, advertising and promotion programs, and
brands of manufacturers.
In sales of control devices, the Company competes primarily with Alps,
Kensington/Advanced Gravis, KYE/Mouse Systems, Microsoft, Mitsumi, Primax and
Synaptics. In sales of imaging solutions, competitors include 3Com, Creative
Labs, Intel, Kodak, Panasonic, Philips, and Sharp.
Many of the Company's current and potential competitors have longer operating
histories and significantly greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and larger customer bases,
than the Company. In this regard, Microsoft is the Company's chief competitor
in the market for control devices. Microsoft is also a leading producer of
operating systems and applications with which the Company's control devices are
designed to operate. As a result of its position, Microsoft may be able to make
improvements in the functionality of its control devices to correspond with
ongoing modifications and enhancements to its operating systems and software
applications in advance of the Company. In certain instances, this ability may
provide Microsoft with significant lead time advantages for product development.
In addition, Microsoft may be able to offer pricing advantages on bundled
hardware and software products that the Company is not able to offer. Certain
of the Company's competitors may also have patents or intellectual property
rights, which provide them with an advantage. As a result, these competitors
may be able to respond more effectively to new or emerging technologies and
changes in customer requirements. Consequently, the Company expects to continue
to experience increased competition and significant price reductions, which
could result in decreased gross margin, loss of market share and lack of
acceptance of the Company's products. In the event of significant price
competition in the market for the Company's products, the Company would be
required to decrease costs at least proportionately to any price decreases in
order to maintain its existing margin levels and would be at a significant
disadvantage compared to competitors with substantially greater resources, which
could more readily withstand an extended period of downward pricing pressure.
There can be no assurance that the Company will be able to compete successfully
in the future or that competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Rapid Technological Change
The market for the Company's products is characterized by rapidly changing
technology and frequent new product introductions. The Company's success will
depend to a substantial degree on its ability to develop and introduce in a
timely manner new products and enhancements that meet changing customer
requirements and emerging industry standards. The development of new,
technologically advanced products and enhancements is a complex and uncertain
process requiring high levels of innovation as well as the anticipation of
technology and market trends. There can be no assurance that the Company will
be able to identify, develop, manufacture, market, sell, or support new products
and enhancements successfully, that new products or enhancements will achieve
market acceptance, or that the Company will be able to respond effectively to
technology changes, emerging industry standards or product announcements by
competitors. New product announcements by the Company could cause its customers
to defer purchases of existing products or cause distributors to request price
protection credits or stock rotations. Any of these events could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Dependence on Control Devices; New Product Lines
Approximately 95% of the Company's net sales for the nine months ended
December 31, 1998 were derived from the sale of mice, trackballs, entertainment
and other control devices. The Company is currently developing
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its PC video camera business. In connection with developing this business, in
September 1998, the Company completed the acquisition of the PC video camera
business unit of Connectix Corporation for approximately $26.2 million cash
(including closing and other costs). The Connectix business unit has been
combined with the Company's video division. Net sales and gross margins of the
Company's video products are less predictable and may be less favorable than its
experience with control devices. In addition, the Company has limited experience
in the design, development, manufacture, marketing, and support of these
products. These products are based on additional technologies and manufacturing
processes, and there can be no assurance that the Company will be successful in
this new market, which is still emerging. Many of the announced competitors for
one or more of the Company's products have stronger brand names, more extensive
retail channel coverage, deeper consumer knowledge and experience, and greater
resources.
Reliance on Suppliers
Certain key components used in the manufacture of the Company's products, as
well as certain products, are currently purchased by the Company from single or
limited sources that specialize in such components or products. At present,
single source components include certain of the Company's application specific
integrated circuits ("ASICs"), certain other integrated circuits and components,
and balls used in certain of the Company's trackballs. The Company generally
does not have long-term agreements with its single or limited sources of supply.
Lead times for materials and components ordered by the Company or its contract
manufacturers can vary significantly and depend on factors such as the specific
supplier, contract terms and demand for a component at a given time. From time
to time the Company has experienced supply shortages and fluctuation in
component prices. Shortages or interruptions in the supply of components or
subcontracted products, or the inability of the Company to procure these
components or products from alternate sources at acceptable prices in a timely
manner, could have a material adverse effect upon the Company's business,
financial condition and results of operations.
Dependence on Key Personnel
The Company's success depends to a significant degree on the continued
contributions of the Company's management and other key design, development,
manufacturing, marketing and sales personnel. The loss of any of such personnel
could have a material adverse effect on the Company's business, financial
condition and results of operations. In this regard, the Company's Chief
Financial Officer, Barry Zwarenstein, left the Company in November 1998, and the
Company's new Chief Financial Officer, Kristen Onken, joined the Company in
February 1999. Certain of the Company's other senior management and other key
personnel have recently joined the Company. The Company's success will depend
in part on successful assimilation of these and other new employees.
Assimilation and retention of personnel may be made more difficult by the fact
that the Company's management and other key personnel are dispersed throughout
various locations worldwide, thus requiring the coordination of organizations
separated by geography and time zone and the integration of personnel with
disparate business backgrounds, cultures and languages. In addition, the
Company believes that its future success will depend on its ability to attract
and retain highly skilled managerial, engineering, operations, marketing and
sales personnel, competition for which is intense. There can be no assurance
that the Company will be successful in attracting and retaining such personnel,
and the failure to attract and retain key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Distribution
The Company sells its products through a domestic and international network of
distributors, resellers and OEM customers, and the Company's success is
dependent on the continued viability and financial stability of its customer
base. The OEM, distribution and reseller industries have been historically
characterized by rapid change, including periods of widespread financial
difficulties and consolidations, and the emergence of alternative distribution
channels. The Company's distributor and reseller customers generally offer
products of several different companies, including products competitive with the
Company's products. Accordingly, there is a risk that these distributors and
resellers may give higher priority, including greater retail shelf space, to
products of other suppliers, and may reduce their efforts in selling the
Company's products. The loss of one or more of the Company's OEM customers,
distributors or major resellers could have a material adverse effect on the
Company's business, financial condition and results of operations.
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Due to its sales to large OEMs, distributors and high volume resellers, the
Company maintains individually significant receivable balances with large
customers. The Company seeks to control its credit risk through ongoing credit
evaluation of its customers' financial condition and by purchasing credit
insurance on European retail accounts receivable balances, but generally does
not require any collateral from its customers. If any of the Company's major
customers were to default in the payment of its receivables owed to the Company,
the Company's operating results could be materially adversely affected.
Product Return Risks
Like other manufacturers of consumer products, the Company is exposed to the
risk of product returns, either through the exercise by customers of contractual
return rights or as a result of the Company's assistance in balancing
inventories. In addition the Company offers price protection to its
distributors and retailers. A portion of the Company's net sales may result in
increased inventory at its distributors and resellers. As a result, historical
net sales may not be indicative of future net sales. Overstocking by Logitech's
distributors and retailers may lead to higher than normal returns. The short
product life cycles of certain of the Company's products and the difficulty in
predicting future sales increase the risk that new product introductions, price
reductions or other factors affecting the computer industry would result in
significant product returns. Although Logitech believes that it has provided
adequate allowances for projected returns, from time to time it has experienced
return levels in excess of its accruals and no assurance can be given that such
accruals will be sufficient for actual returns in future periods. In addition,
there can be no assurance that the accruals for price protection will be
sufficient, or that any future price changes will not have a material adverse
effect on the Company's results of operations.
Fluctuations in Effective Tax Rates; Potential Tax Increases
The Company operates in multiple jurisdictions and its profits are taxed
pursuant to the tax laws of such jurisdictions. The Company's effective tax
rate may be affected by changes in or interpretations of tax laws in any given
jurisdiction, utilization of net operating losses and tax credit carry forwards,
changes in transfer pricing that impact the recognition of net sales and
allocation of expenses in the Company's various subsidiaries, and changes in
management's assessment of matters such as the ability to realize deferred tax
assets. In the past, the Company has experienced substantial fluctuation in its
effective income tax rate. The Company's effective income tax rates reflect a
variety of factors that may not be present in the future. As a result, the
Company's effective income tax rate may increase in future periods.
Year 2000
The "Year 2000 Issue" is the result of computer programs being written using
two digits, rather than four digits, to define the applicable year. Software
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations.
The Company's Y2K project is divided into three phases: (1) inventorying Y2K
items, (2) assessing Y2K compliance of items determined to be material, and
(3) remediation and implementation. The Company has completed its inventory and
is currently assessing its systems, equipment, and processes to determine its
Y2K readiness, and has committed personnel and resources to resolve potential
Y2K issues. The Company has completed its assessment for significant systems.
Resulting testing and remediation is underway and planned for completion by the
middle of 1999. The Company continues to work with key suppliers and customers
to ensure their Y2K readiness. This includes identifying and prioritizing
critical suppliers and customers, and communicating with them about their plans
and problems in addressing the Y2K issue. This is scheduled for completion by
mid-1999. The Company's Y2K effort is being handled internally, and the costs
have not been nor are they expected to be significant.
The Company is currently engaged in a separate project to replace the computer
hardware and software it uses to operate, monitor and manage its business on a
daily basis. The suppliers have indicated that their products accurately
accommodate dates beyond the year 1999. The Company is testing such
capabilities as part of its implementation process. Under the current schedule,
this implementation will be complete by the third calendar quarter of 1999. As
a backup, the Company has upgraded the unimplemented sites to a new version of
the current software that is Y2K compliant. The Company could continue to use
the upgraded version of the current software if the implementation of the new
software is delayed.
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Despite the Company's efforts to address the Y2K impact on its internal
systems, the Company has not fully identified such impact or whether it can
resolve it without disruption of its business without incurring significant
expense. In addition, even if the internal systems of the Company are not
materially affected by the Y2K issue, the Company could be affected through
disruption in the operation of the enterprises with which the Company interacts.
As a result, an interruption of certain normal business activities could result,
which could materially and adversely affect the Company's operations, liquidity
and financial condition.
Outcome of Legal Proceedings
Logitech Inc., the Company's U.S. subsidiary, is a defendant in certain
lawsuits alleging that the plaintiffs suffer from symptoms generally known as
repetitive stress injury, allegedly incurred while using mice sold by Logitech
Inc. Logitech Inc. has denied these claims and intends to defend the suits
vigorously. These suits are similar to those filed against other major
suppliers of PCs and add-on devices. Ultimate resolution of the various suits
against Logitech Inc. may depend on results in other suits of this nature.
Should these claims be successful, the claims could have a material adverse
impact upon the financial position and results of operations of the Company.
In December 1997, Logitech Inc. filed suit against KYE Systems Corp., KYE
International Corp. and Mouse Systems Corp. in the United States Court, Eastern
District of Texas, Texarkana Division, seeking damages and equitable relief
based on allegations of patent infringement. In February 1998, Mouse Systems
Corporation filed suit against Logitech Inc. in the United States District Court
for the Northern District of California, seeking damages and equitable relief
also based on allegations of patent infringement. Logitech Inc. is also
involved in several other pending lawsuits with respect to patent and, to a less
extent, trade dress and trade secret infringement, involving its intellectual
property rights and the intellectual property rights of others. Logitech Inc.
believes that these lawsuits are without merit and intends to defend against
them vigorously. In addition, in late 1998, the Company's subsidiary in Suzhou,
China was sued in China for patent infringement involving certain of the
Company's mouse products. The plaintiff in that action has also instituted
further legal proceedings intended to cause disruptions or delays in the
Company's product shipment. The Company believes the lawsuit and further legal
actions are without merit and intends to defend against them vigorously.
However, there can be no assurances that the defense of any of these actions
will be successful, or that any judgment in any of these lawsuits would not have
a material adverse impact on the Company's business, financial condition and
result of operations.
The Company is involved from time to time in disputes with respect to its
intellectual property rights and the intellectual property rights of others.
Pending and future litigation involving the Company, whether as plaintiff or
defendant, regardless of outcome, may result in substantial costs and expenses
to the Company and significant diversion of effort by the Company's technical
and management personnel. In addition, there can be no assurance that
litigation, either instituted by or against the Company, will not be necessary
to resolve issues that may arise from time to time in the future. Furthermore,
there can be no assurance that the Company's efforts to protect its intellectual
property through litigation will prevent duplication of the Company's technology
or products. Any such litigation could have a material adverse effect upon the
Company's business, financial condition or results of operations.
There has been substantial litigation in the technology industry regarding
rights to intellectual property, and the Company is subject to the risk of
claims against it for alleged infringement of the intellectual property rights
of others. In addition, the existence of any such claim by a third party may
not become known to the Company until well after it has committed significant
resources to the development of a potentially infringing product. From time to
time, the Company has received claims that it has infringed third parties'
intellectual property rights, and there is no assurance that third parties will
not claim infringement by the Company in the future. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays, or require the Company to enter into royalty or
licensing agreements, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that such royalty or licensing agreements, if required, will be
available on terms acceptable to the Company, or at all.
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Other
For discussions identifying other factors that could cause actual results to
differ from those anticipated in the forward-looking statements, see
"Description of Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Form 20-F for the year
ended March 31, 1998. The Company cautions that the foregoing list of risk
factors is not exhaustive.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
Logitech International S.A.
By: _____________________________________
Guerrino De Luca
President and Chief Executive Officer
By: _____________________________________
Kristen M. Onken
Chief Finance Officer,
Chief Accounting Officer,
and U.S. Representative
February 16, 1999
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