UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report: May 2, 2018
 (Date of earliest event reported)
 
LOGITECH INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
 
Commission File Number: 0-29174

	
			
Canton of Vaud, Switzerland
(State or other jurisdiction
of incorporation or organization)	 	None
(I.R.S. Employer
Identification No.)	

	
	
Logitech International S.A.
Apples, 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)	
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company 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 standards provided pursuant to Section 13(a) of the Exchange Act . o

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On May 2, 2018 , Logitech International S.A. (“Logitech”) issued a press release regarding its financial results for the quarter and year ended March 31, 2018.   A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.
 
The information in Item 2.02 and Item 9.01 of this Current Report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

On May 2, 2018, L. Joseph Sullivan, the Company’s Senior Vice President, Worldwide Operations, announced his retirement and, effective immediately, resigned from the Company’s Group Management Team. The Company accepted this resignation. Mr. Sullivan’s retirement will be effective as of February 2, 2019, the end of his contractual notice period.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
 
d)                                Exhibits.
 
The following exhibit is furnished with this report on Form 8-K:
 
99.1                      Press release issued on May 2, 2018 including financial results for the quarter and year ended March 31, 2018.

 
 SIGNATURES
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized.

	
			
 	 	Logitech International S.A.	

 	 	/s/ Bracken Darrell	
 	 	 	
 	 	Bracken Darrell	
 	 	President and Chief Executive Officer	

 	 	/s/ Vincent Pilette	
 	 	 	
 	 	Vincent Pilette	
 	 	Chief Financial Officer	
May 2, 2018	 	 	

EXHIBIT INDEX
 
99.1                      Press release issued on May 2, 2018 including financial results for the quarter and year ended March 31, 2018.

Exhibit 99.1
Editorial Contacts:
Ben Lu, Vice President, Investor Relations - USA (510) 713-5568
Krista Todd, Vice President, External Communications - USA (510) 713-5834
Ben Starkie, Corporate Communications - Europe +41 (0) 79-292-3499

Logitech Grows to Highest Ever Fiscal Year Sales, Up 16%

Fifth Consecutive Year of Strong Financial Performance
Sales for Video Collaboration up 44% and Gaming up 57%
NEWARK, Calif. - May 2, 2018 and LAUSANNE, Switzerland, May 3, 2018 - Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the fourth quarter and full year of Fiscal Year 2018, ended March 31, 2018.
For Fiscal Year 2018:
		
•	Sales were the highest ever at $2.57 billion, up 16 percent in US dollars and 13 percent in constant currency, compared to the prior year.	
		
•	GAAP operating income grew 8 percent to $230 million, compared to $212 million a year ago. GAAP earnings per share (EPS) was $1.23, compared to $1.24 a year ago. Fiscal Year 2018 GAAP EPS was impacted by a $22 million ($0.13 per share) one-time net tax expense following the reduction in the U.S. federal income tax rate and other reforms.	
		
•	Non-GAAP operating income grew 14 percent to $287 million, compared to $252 million a year ago. Non-GAAP EPS grew 13 percent to $1.60, compared to $1.41 a year ago.	
		
•	Cash flow from operations grew 20 percent to $346 million - the highest in eight years.	
For Q4 Fiscal Year 2018:
		
•	Sales grew to $592 million, up 16 percent in US dollars and 9 percent in constant currency, compared to the prior year.	
		
•	GAAP operating income grew to $39 million, and non-GAAP operating income grew to a better-than-expected $55 million.	
		
•	Cash flow from operations reached $90 million.	
“Over the past five years we’ve built a business with sustainable growth. We have a resilient and expanding portfolio. We are building five scalable capabilities led by design and engineering,” said Bracken Darrell, Logitech president and chief executive officer. “Fiscal Year 2018 delivered broad-based, double-digit growth led by Gaming and Video Collaboration. Now, as we look to the next five years, we will go on the offense to accelerate the creation of an amazing company.”
Vincent Pilette, Logitech chief financial officer, said, “We’ve delivered a great fiscal year with record sales and better-than-expected profitability and cash flow from operations. We go into Fiscal Year 2019 with

strong momentum, our financial fundamentals in place, and an eye toward shaping the portfolio and reallocating resources to continuously transform.”
Outlook
Logitech confirmed its Fiscal Year 2019 outlook of high single-digit sales growth in constant currency and $310 to $320 million in non-GAAP operating income.
Management Update
On May 2, 2018, L. Joseph Sullivan, the Company’s senior vice president, worldwide operations, announced his retirement and, effective immediately, resigned from the Company’s Group Management Team. The Company accepted this resignation. Mr. Sullivan’s retirement from Logitech will be effective as of February 2, 2019, the end of his contractual notice period.
Prepared Remarks Available Online
Logitech has made its prepared written remarks for the financial results teleconference available online on the Logitech corporate website at http://ir.logitech.com .
Financial Results Teleconference and Webcast
Logitech will hold a financial results teleconference to discuss the results for Q4 and the full Fiscal Year 2018 on Thursday, May 3, 2018 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 and Constant Currency
To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of intangible assets, purchase accounting effect on inventory, acquisition-related costs, change in fair value of contingent consideration for business acquisition, restructuring charges (credits), gain (loss) on investments in privately held companies, investigation and related expenses, non-GAAP income tax adjustment, and other items detailed under “Supplemental Financial Information” after the tables below. Logitech also presents percentage sales growth in constant currency 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, used together with the GAAP financial 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 2019.

About Logitech
Logitech designs products that have an everyday place in people's lives, connecting them to the digital experiences they care about. More than 35 years ago, Logitech started connecting people through computers, and now it’s a multi-brand company designing products that bring people together through music, gaming, video and computing. Brands of Logitech include Logitech , Ultimate Ears , Jaybird , Logitech G and ASTRO Gaming . Founded in 1981, and headquartered in Lausanne, Switzerland, 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: our preliminary financial results for the three months and fiscal year ended March 31, 2018, ability to grow and sustain growth, product portfolio, capabilities and their scalability, transformation and creation of an amazing company and its timing, momentum, reallocation of resources, and outlook for Fiscal Year 2019 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; 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 or our growth opportunities are more limited 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 product categories, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2017 and our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, 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.

Logitech and other Logitech marks are trademarks or registered trademarks of Logitech Europe S.A and/or its affiliates in the U.S. and other countries. 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 .
 
(LOGIIR)

	
																	
LOGITECH INTERNATIONAL S.A.	 	 	 	 	 	 	 	 	
PRELIMINARY RESULTS	
(In thousands, except per share amounts) - unaudited	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Fiscal Years Ended	
 	 	March 31,	 	March 31,	
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	 	2018	 	2017	 	2018	 	2017	
 	 	 	 	 	 	 	 	 	
Net sales	 	$	592,426		 	$	510,552		 	$	2,566,863		 	$	2,221,427		
Cost of goods sold	 	377,617		 	311,303		 	1,648,744		 	1,395,211		
Amortization of intangible assets and purchase accounting effect on inventory	 	2,574		 	1,470		 	8,878		 	6,175		
Gross profit	 	212,235		 	197,779		 	909,241		 	820,041		
Operating expenses:	 	 	 	 	 	 	 	 	
Marketing and selling	 	109,572		 	99,941		 	435,489		 	379,641		
Research and development	 	37,616		 	33,658		 	143,760		 	130,525		
General and administrative	 	23,387		 	24,683		 	96,353		 	100,270		
Amortization of intangible assets and acquisition-related costs	 	2,553		 	1,279		 	8,930		 	5,814		
Change in fair value of contingent consideration for business acquisition	 	—		 	1,833		 	(4,908	)	 	(8,092	)	
Restructuring charges (credits), net	 	—		 	67		 	(116	)	 	23		
Total operating expenses	 	173,128		 	161,461		 	679,508		 	608,181		
Operating income	 	39,107		 	36,318		 	229,733		 	211,860		
Interest income	 	1,872		 	1,189		 	4,969		 	1,452		
Other income (expense), net	 	(1,543	)	 	734		 	(2,437	)	 	1,677		
Income before income taxes	 	39,436		 	38,241		 	232,265		 	214,989		
Provision for (benefit from) income taxes	 	5,032		 	(1,184	)	 	23,723		 	9,113		
Net income	 	$	34,404		 	$	39,425		 	$	208,542		 	$	205,876		
 	 	 	 	 	 	 	 	 	
Net income per share :	 	 		 	 		 	 		 	 		
Basic	 	$	0.21		 	$	0.24		 	$	1.27		 	$	1.27		
Diluted	 	$	0.20		 	$	0.24		 	$	1.23		 	$	1.24		
 	 	 	 	 	 	 	 	 	
Weighted average shares used to compute net income per share:	 	 		 	 		 	 		 	 		
Basic	 	164,374		 	162,023		 	164,038		 	162,058		
Diluted	 	169,387		 	166,526		 	168,971		 	165,540		
	 			 	 	 	 	 	 	
Cash dividend per share	 	$	—		 	$	—		 	$	0.63		 	$	0.57		

	
									
LOGITECH INTERNATIONAL S.A.	 	 	 	 	
PRELIMINARY RESULTS	
(In thousands) - unaudited	 	 	 	 	
 	 	 	 	 	
 	 	March 31,	 	March 31,	
CONDENSED CONSOLIDATED BALANCE SHEETS	 	2018	 	2017	
 	 	 	 	 	
Current assets:	 	 	 	 	
Cash and cash equivalents	 	$	641,947		 	$	547,533		
Accounts receivable, net	 	214,885		 	185,179		
Inventories	 	259,906		 	253,401		
Other current assets	 	56,362		 	41,732		
Total current assets	 	1,173,100		 	1,027,845		
Non-current assets:	 	 		 	 	
Property, plant and equipment, net	 	86,304		 	85,408		
Goodwill	 	275,451		 	249,741		
Other intangible assets, net	 	87,547		 	47,564		
Other assets	 	120,755		 	88,119		
Total assets	 	$	1,743,157		 	$	1,498,677		
 	 	 		 	 		
Current liabilities:	 	 		 	 		
Accounts payable	 	$	293,988		 	$	274,805		
Accrued and other current liabilities	 	281,732		 	232,273		
Total current liabilities	 	575,720		 	507,078		
Non-current liabilities:	 	 		 	 		
Income taxes payable	 	34,956		 	51,797		
Other non-current liabilities	 	81,924		 	83,691		
Total liabilities	 	692,600		 	642,566		
 	 	 	 	 	
Shareholders' equity:	 	 	 	 	
Registered shares, CHF 0.25 par value:	 	30,148		 	30,148		
Issued and authorized shares—173,106 at March 31, 2018 and 2017	 	 	 	 	
Conditionally authorized shares—50,000 at March 31, 2018 and 2017	 	 	 	 	
Additional paid-in capital	 	47,234		 	26,596		
Treasury shares, at cost—8,527 and 10,727 shares at March 31, 2018 and 2017, respectively	 	(165,686	)	 	(174,037	)	
Retained earnings	 	1,232,316		 	1,074,110		
Accumulated other comprehensive loss	 	(93,455	)	 	(100,706	)	
Total shareholders' equity	 	1,050,557		 	856,111		
Total liabilities and shareholders' equity	 	$	1,743,157		 	$	1,498,677		

	
																		
LOGITECH INTERNATIONAL S.A.	 	 	 	 	 	 	 	 	
PRELIMINARY RESULTS	
(In thousands) - unaudited	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Fiscal Years Ended	
 	 	March 31,	 	March 31,	
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	 	2018	 	2017	 	2018	 	2017	
 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 		 	 		 	 	 	 	
Net income	 	$	34,404		 	$	39,425		 	$	208,542		 	$	205,876		
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 		
Depreciation	 	11,077		 	8,642		 	41,295		 	41,121		
Amortization of intangible assets	 	4,954		 	2,749		 	15,607		 	9,367		
Share-based compensation expense	 	10,899		 	9,536		 	44,138		 	35,890		
Gain on investments in privately held companies	 	(119	)	 	(22	)	 	(669	)	 	(569	)	
Deferred income taxes	 	413		 	(1,924	)	 	7,141		 	(2,397	)	
Change in fair value of contingent consideration for business acquisition	 	—		 	1,833		 	(4,908	)	 	(8,092	)	
Other	 	(18	)	 	107		 	(11	)	 	107		
Changes in assets and liabilities, net of acquisitions:	 	 	 	 	 	 	 	 	
Accounts receivable, net	 	137,665		 	92,861		 	(26,363	)	 	(46,553	)	
Inventories	 	21,739		 	(234	)	 	16,047		 	(15,428	)	
Other assets	 	2,045		 	1,037		 	(16,908	)	 	(5,309	)	
Accounts payable	 	(134,016	)	 	(84,636	)	 	17,695		 	24,459		
Accrued and other liabilities	 	1,134		 	(21,632	)	 	44,655		 	49,917		
Net cash provided by operating activities	 	90,177		—		47,742		 	346,261		 	288,389		
Cash flows from investing activities:	 	 	 	 	 	 		 	 		
Purchases of property, plant and equipment	 	(12,155	)	 	(8,432	)	 	(39,748	)	 	(31,804	)	
Acquisitions, net of cash acquired	 	—		 	—		 	(88,323	)	 	(66,987	)	
Investment in privately held companies	 	(360	)	 	(320	)	 	(1,240	)	 	(960	)	
Proceeds from return of investment in privately held companies	 	—		 	—		 	237		 	—		
Changes in restricted cash	 	—		 	—		 	—		 	715		
Purchases of short-term investments	 	—		 	—		 	(6,789	)	 	—		
Sales of short-term investments	 	—		 	—		 	6,789		 	—		
Purchases of trading investments	 	(3,211	)	 	(1,184	)	 	(6,053	)	 	(7,052	)	
Proceeds from sales of trading investments	 	3,214		 	1,212		 	6,423		 	7,124		
Net cash used in investing activities	 	(12,512	)	—		(8,724	)	 	(128,704	)	 	(98,964	)	
Cash flows from financing activities:	 	 	 	 	 	 		 	 		
Payment of cash dividends	 	—		 	—		 	(104,248	)	 	(93,093	)	
Payment of contingent consideration for business acquisition	 	—		 	—		 	(5,000	)	 	—		
Purchases of registered shares	 	(10,314	)	 	(20,022	)	 	(30,722	)	 	(83,786	)	
Proceeds from exercise of stock options and purchase rights	 	10,963		 	19,219		 	41,910		 	39,574		
Tax withholdings related to net share settlements of restricted stock units	 	(4,308	)	 	(5,358	)	 	(29,813	)	 	(18,412	)	
Net cash used in financing activities	 	(3,659	)	 	(6,161	)	 	(127,873	)	 	(155,717	)	
Effect of exchange rate changes on cash and cash equivalents	 	3,053		 	1,098		 	4,730		 	(5,370	)	
Net increase in cash and cash equivalents	 	77,059		 	33,955		 	94,414		 	28,338		
Cash and cash equivalents at beginning of period	 	564,888		 	513,578		 	547,533		 	519,195		
Cash and cash equivalents at end of period	 	$	641,947		 	$	547,533		 	$	641,947		 	$	547,533		

	
																							
LOGITECH INTERNATIONAL S.A.	 	 	 	 	 	 	 	 	 	 	 	 	
PRELIMINARY RESULTS	 	 	 	 	
(In thousands) - unaudited	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
NET SALES	 	Three Months Ended	 	Fiscal Years Ended	
 	 	March 31,	 	March 31,	
SUPPLEMENTAL FINANCIAL INFORMATION	 	2018	 	2017	 	Change	 	2018	 	2017	 	Change	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales by product category:	 	 	 	 	 	 	 	 	 	 	 	 	
Pointing Devices	 	$	129,937		 	$	119,313		 	9	 %	 	$	516,637		 	$	501,562		 	3	 %	
Keyboards & Combos	 	136,787		 	120,488		 	14		 	498,472		 	480,312		 	4		
PC Webcams	 	31,776		 	27,015		 	18		 	112,147		 	107,087		 	5		
Tablet & Other Accessories	 	27,292		 	17,528		 	56		 	107,942		 	76,879		 	40		
Video Collaboration	 	54,709		 	38,711		 	41		 	182,717		 	127,009		 	44		
Mobile Speakers	 	13,974		 	39,975		 	(65	)	 	314,817		 	301,021		 	5		
Audio-PC & Wearables	 	55,248		 	60,332		 	(8	)	 	252,330		 	246,390		 	2		
Gaming	 	126,763		 	71,489		 	77		 	491,995		 	314,362		 	57		
Smart Home	 	15,892		 	15,594		 	2		 	89,373		 	65,510		 	36		
Other (1)	 	48		 	107		 	(55	)	 	433		 	1,295		 	(67	)	
Total net retail sales	 	$	592,426		 	$	510,552		 	16		 	$	2,566,863		 	$	2,221,427		 	16		
__________________	 	 	 	 	 	 	 	 	 	 	 	 	

(1) Other category includes products that we currently intend to transition out of, or have already transitioned out of, because they are no longer strategic to our business.

	
																	
LOGITECH INTERNATIONAL S.A.	 	 	 	 	 	 	 	 	
PRELIMINARY RESULTS	
(In thousands, except per share amounts) - Unaudited	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
GAAP TO NON GAAP RECONCILIATION (A)	 	Three Months Ended	 	Fiscal Years Ended	
 	 	March 31,	 	March 31,	
SUPPLEMENTAL FINANCIAL INFORMATION	 	2018	 	2017	 	2018	 	2017	
 	 	 	 	 	 	 	 	 	
Gross profit - GAAP	 	$	212,235		 	$	197,779		 	$	909,241		 	$	820,041		
Share-based compensation expense	 	971		 	733		 	3,733		 	2,663		
Amortization of intangible assets and purchase accounting effect on inventory	 	2,574		 	1,470		 	8,878		 	6,175		
Gross profit - Non-GAAP	 	$	215,780		 	$	199,982		 	$	921,852		 	$	828,879		
 	 	 	 	 	 	 	 	 	
Gross margin - GAAP	 	35.8	%	 	38.7	%	 	35.4	%	 	36.9	%	
Gross margin - Non-GAAP	 	36.4	%	 	39.2	%	 	35.9	%	 	37.3	%	
 	 	 	 	 	 	 	 	 	
Operating expenses - GAAP	 	$	173,128		 	$	161,461		 	$	679,508		 	$	608,181		
Less: Share-based compensation expense	 	9,928		 	8,803		 	40,405		 	33,227		
Less: Amortization of intangible assets and acquisition-related costs	 	2,553		 	1,279		 	8,930		 	5,814		
Less: Change in fair value of contingent consideration for business acquisition	 	—		 	1,833		 	(4,908	)	 	(8,092	)	
Less: Restructuring charges (credit), net	 	—		 	67		 	(116	)	 	23		
Less: Investigation and related expenses	 	—		 	—		 	—		 	612		
Operating expenses - Non-GAAP	 	$	160,647		 	$	149,479		 	$	635,197		 	$	576,597		
 	 	 	 	 	 	 	 	 	
% of net sales - GAAP	 	29.2	%	 	31.6	%	 	26.5	%	 	27.4	%	
% of net sales - Non - GAAP	 	27.1	%	 	29.3	%	 	24.7	%	 	26.0	%	
 	 	 	 	 	 	 	 	 	
Operating income - GAAP	 	$	39,107		 	$	36,318		 	$	229,733		 	$	211,860		
Share-based compensation expense	 	10,899		 	9,536		 	44,138		 	35,890		
Amortization of intangible assets	 	4,954		 	2,749		 	15,607		 	9,367		
Purchase accounting effect on inventory	 	173		 	—		 	789		 	1,160		
Acquisition-related costs	 	—		 	—		 	1,412		 	1,462		
Change in fair value of contingent consideration for business acquisition	 	—		 	1,833		 	(4,908	)	 	(8,092	)	
Restructuring charges (credit), net	 	—		 	67		 	(116	)	 	23		
Investigation and related expenses	 	—		 	—		 	—		 	612		
Operating income - Non - GAAP	 	$	55,133		 	$	50,503		 	$	286,655		 	$	252,282		
 	 	 	 	 	 	 	 	 	
% of net sales - GAAP	 	6.6	%	 	7.1	%	 	8.9	%	 	9.5	%	
% of net sales - Non - GAAP	 	9.3	%	 	9.9	%	 	11.2	%	 	11.4	%	
 	 	 	 	 	 	 	 	 	
Net income - GAAP	 	$	34,404		 	$	39,425		 	$	208,542		 	$	205,876		
Share-based compensation expense	 	10,899		 	9,536		 	44,138		 	35,890		
Amortization of intangible assets	 	4,954		 	2,749		 	15,607		 	9,367		
Purchase accounting effect on inventory	 	173		 	—		 	789		 	1,160		
Acquisition-related costs	 	—		 	—		 	1,412		 	1,462		
Change in fair value of contingent consideration for business acquisition	 	—		 	1,833		 	(4,908	)	 	(8,092	)	
Restructuring charges (credit), net	 	—		 	67		 	(116	)	 	23		
Investigation and related expenses	 	—		 	—		 	—		 	612		
Gain on i nvestments in privately held companies	 	(119	)	 	(22	)	 	(669	)	 	(569	)	
Non-GAAP income tax adjustment	 	4,249		 	(4,226	)	 	6,282		 	(12,875	)	
Net income - Non - GAAP	 	$	54,560		 	$	49,362		 	$	271,077		 	$	232,854		
 	 		 	 	 		 	 	
Net income per share:	 	 	 	 	 	 	 	 	
Diluted - GAAP	 	$	0.20		 	$	0.24		 	$	1.23		 	$	1.24		
Diluted - Non - GAAP	 	$	0.32		 	$	0.30		 	$	1.60		 	$	1.41		
 	 	 	 	 	 	 	 	 	
Shares used to compute net income per share:	 	 	 	 	 	 	 	 	
Diluted - GAAP and Non - GAAP	 	169,387		 	166,526		 	168,971		 	165,540		

	
																	
LOGITECH INTERNATIONAL S.A.	 	 	 	 	 	 	 	 	
PRELIMINARY RESULTS	
(In thousands) - unaudited	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
SHARE-BASED COMPENSATION EXPENSE	 	Three Months Ended	 	Fiscal Years Ended	
 	 	March 31,	 	March 31,	
SUPPLEMENTAL FINANCIAL INFORMATION	 	2018	 	2017	 	2018	 	2017	
 	 	 	 	 	 	 	 	 	
Share-based Compensation Expense	 	 	 	 	 	 	 	 	
Cost of goods sold	 	$	971		 	$	733		 	$	3,733		 	$	2,663		
Marketing and selling	 	4,417		 	4,036		 	17,765		 	14,723		
Research and development	 	1,584		 	1,193		 	6,381		 	4,200		
General and administrative	 	3,927		 	3,574		 	16,259		 	14,304		
Total share-based compensation expense	 	10,899		 	9,536		 	44,138		 	35,890		
Income tax benefit	 	(4,077	)	 	(2,444	)	 	(15,998	)	 	(8,536	)	
Total share-based compensation expense, net of income tax	 	$	6,822		 	$	7,092		 	$	28,140		 	$	27,354		

Note: These preliminary results for the three months and fiscal year ended March 31, 2018 are subject to adjustments, including subsequent events that may occur through the date of filing our Annual Report on Form 10-K.

(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 and year ended March 31, 2018, 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 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 gross profit, operating expenses and financial results from period to period.

Purchase accounting effect on inventory. Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment excludes the expected profit margin component that is recorded under business combination accounting principles associated with our business acquisitions. We believe the adjustment is useful to investors because such charges are not reflective of our ongoing operations. 

Acquisition-related costs and change in fair value of contingent consideration for business acquisition. We incurred expenses and credits in connection with our acquisitions which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related costs include all incremental expenses incurred to effect a business combination. Fair value of contingent consideration is associated with our estimates of the value of earn-outs in connection with certain acquisitions. We believe that providing the non-GAAP measures excluding these costs and credits, as well as the GAAP measures, assists our investors because such costs are not reflective of our ongoing operating results.

Restructuring charges (credits). These expenses are associated with re-aligning our business strategies based on current economic conditions. We have undertaken several restructuring plans 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 (credits) are not reflective of our ongoing operating results in the current period.

Gain (loss) on investments in privately held companies. We recognized gain (loss) related our investments in various privately-held companies, which varies depending on the operational and financial performance of the privately-held companies in which we invested. 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.

Investigation and related expenses.   These expenses are forensic accounting, audit, consulting and legal fees related to the Audit Committee’s investigation and the formal investigation by and settlement with the Securities and Exchange Commission (SEC), together with accruals based on settlement 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 not reflective of our ongoing operations.

Non-GAAP income tax adjustment.  Non-GAAP income tax adjustment primarily measures the income tax effect of non-GAAP adjustments excluded above and other events; the determination of which is based upon the nature of the underlying items, the mix of income and losses in jurisdictions and the relevant tax rates in which we operate. For example, we recognized more GAAP income tax expense in the third and fourth quarter of fiscal year 2018 as a result of the U.S. tax reform that we have excluded as a one-time charge on a non-GAAP basis. 

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.

Additional Supplemental Financial Information - Constant Currency

In addition, Logitech presents percentage sales growth in constant currency 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.