Logitech's EPS Beats, Revs Lag Y/Y

Logitech International SA ( LOGI - Analyst Report ) reported financial results for the second quarter of fiscal 2013, with earnings of 35 cents a share comprehensively beating the Zacks Consensus Estimate of 10 cents by 250%. Net income for the quarter soared 223% year over year to $55 million.

The increase in the net income was primarily attributable to a net tax benefit of $32 million in the quarter.

Revenues

Net sales in the second quarter of 2013 stood at $548 million, down 7% year over year. Excluding the adverse impact of currency translation, sales were down 4% year over year. The decline in revenues was primarily due to greater-than-expected weakening of the PC market. The general slowdown in the emerging markets also had a negative impact on the company’s top line.

Sales by Channel

During the quarter, Retail sales declined 5% year over year to $476.5 million. The reduction was due to lower sales from the EMEA region (down 3%), Americas (6%), Asia (7%), Lifesize (7%) and OEM (27%).

Sales by Product Division

Keyboards & Desktops was the best-performing retail product category in the reported quarter Q2, with sales increasing 20% year over year to $130.8 million. However, this increase was fully offset by a decline of 8% in pointing devices to $122.5 million, 13.5% decrease in auto devices revenue to $109.8 million and 17.3% drop in video revenue to $47.4 million. Moreover, gaming revenues and digital home revenues were down by 1% and 31.2%, respectively.

Income and Expenses

Gross margin for the quarter was 35.8% compared with 33.7% in the year-ago quarter. This increase in gross margin was driven by tight management of channel-pricing programs and a variety of efficiency improvements in the global supply chain.

Operating income for the quarter was $24 million, up 3% from $23 million in the same quarter last year. Operating expenses for the second quarter of 2013 were $171.9 million, down 2% year over year.

Balance Sheet & Cash Flow

As of March 31, 2012, cash and cash equivalents were $360 million and shareholder’s equity was $1.0 billion.

Net cash provided by operating activities was $16.0 million at the end of the quarter versus a negative of $2.1 million in the prior year period. During the quarter, the company paid a one-time dividend of $133 million. Capital expenditures incurred during the quarter were $10.9 million.

Logitech International, which faces stiff competition from Electronics for Imaging, Inc. ( EFII - Snapshot Report ) , retains a Zacks Rank of #5, implying a short-term Sell rating on the stock.