Logitech 2003 Annual Report Download - page 39

26
Interest Expense, Net
Interest expense for the year ended March 31, 2003 was $1.2 million, compared to $2.0 million in 2002. Interest
was higher last year because of short-term borrowings of $35 million in March 2001 and $55 million in April 2001 to
finance the Labtec acquisition and repay Labtec obligations and credit lines. This debt was repaid in June 2001
through the issuance of the convertible bonds bearing interest at an effective rate of 1.96%.
Other Income (Expense), Net
Other income was $.9 million for the year ended March 31, 2003, compared to other expense of $1.6 million last
year. Other income this year included $2.8 million of favorable fluctuations in exchange rates offset by a $1.7
million loss from investment write-downs and the sale of shares of investments. Other expense last year included the
$1.2 million write-off of an investment and $2.5 million of losses recorded for investments accounted for under the
equity method, partially offset by the $1.1 million gain on the sale of shares in Immersion and $.6 million of proceeds
from a property loss insurance claim.
Provision for Income Taxes
The provision for income taxes consists of income and withholding taxes. The provision for income taxes for the
year ended March 31, 2003 was $25 million compared to $19 million, representing a 20% effective tax rate in 2003
and 2002.
Year Ended March 31, 2002 Compared to Year Ended March 31, 2001
Net Sales
Net sales for the year ended March 31, 2002 increased $208 million or 28% to $944 million. This growth was
shared across all product categories, but primarily came from the Company’s pointing device products, the audio
products associated with the acquisition of Labtec and from the Company’s desktop products. The Euro’s loss in
value compared to the U.S. dollar restrained sales growth for fiscal year 2002. With approximately 52% of the
Company’s sales denominated in currencies other than the U.S. dollar, the Company estimated that the impact on net
sales of the weakening Euro along with the impact of exchange rate changes in the Japanese Yen and Taiwanese
Dollar relative to the U.S. dollar, was to decrease sales by $24 million; this calculation does not take into account the
impact these currency fluctuations have on our global pricing strategy which results in us lowering or raising selling
prices in one currency to avoid disparity with U.S. dollar prices.
Net sales reflect the impact of the Labtec acquisition beginning in fiscal 2002. If the Company had acquired
Labtec at the beginning of fiscal 2001 and Labtec sales were included in the results for fiscal year 2001, the sales
growth would have been $121 million or 15% for the year ended March 31, 2002.
Retail sales grew by 42% over the prior year. This growth was shared across all product categories. Retail sales
of the Company’s pointing devices, which include mice and trackballs, grew by 22% while unit volumes grew by
24%. Driven by the Company’s cordless optical wheel mouse, cordless mice were a significant source of this strong
growth, with 103% growth in sales and 73% growth in unit volumes. Even with this growth, mice represent 37% of
the Company’s total retail sales compared to 38% in the prior year, reflecting the Company’s expanded retail product
offerings. Sales of desktop products grew by 45% and unit volumes grew by 64%, with the majority of the growth
coming from cordless desktop products. In the PC video camera business, retail sales grew 17% and unit volumes
increased by 26% over fiscal 2001. This growth was driven primarily by our strong performance across all video
products. Sales of interactive entertainment products grew by 25% while unit volumes declined by 7%. This unit
volume decrease reflects volume decreases in sales of joysticks and gamepads which were offset by the strong sales
of the higher value GT Force Steering Wheel for PlayStation® 2. The Company’s audio products, which include a
full range of PC headsets, speakers and headphones, added eleven percentage points of absolute growth to retail sales
during fiscal year 2002.
OEM sales declined by 15% compared to the prior year, principally due to the significant sales of PC video
cameras in fiscal 2001 coupled with sluggish sales of new PCs in fiscal year 2002.
Gross Profit
Gross profit increased 35% to $316 million, due primarily to significantly higher sales volume. Gross margin
(gross profit as a percentage of net sales) increased from 31.7% to 33.4%. This improvement reflected a shift toward
higher margin retail products in the sales mix and improved product margins in several retail categories. In particular,
retail product margins for pointing devices, video and entertainment products improved primarily due to