Logitech 2014 Annual Report Download - page 11

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To Our Shareholders,
This Fiscal Year 2014 Annual Report comes to you late. We’ll begin our letter by addressing the
reasons for the delay. As we announced in May of this year, our Audit Committee, with the
assistance of independent advisors, found it necessary to conduct a thorough investigation into
certain accounting matters related to Logitech’s previously issued financial statements. We
needed the results of the investigation to validate or correct prior-year statements before we
could file our Annual Report on Form 10-K with the U.S. Securities and Exchange Commission
(SEC), because this report includes performance for prior years. And we needed the 10-K to be
finalized and filed before we could publish the Annual Report that we send to you.
The investigation did reveal the need to restate our financial reports for Fiscal Years 2011 and
2012 due to an accounting misstatement for inventory valuation reserves for our now-
discontinued Revue product. As a result, we recorded an adjustment to increase the cost of
goods sold during the fourth quarter of FY 2011 and to increase inventory reserves and supplier
liability for components. This resulted in a decrease in net income for FY 2011 and a
corresponding increase in net income for FY 2012. Because of the restatement, we made other
immaterial corrections to the financial statements included in the 10-K and the Annual Report.
Beyond the need for the restatement and the other corrections, the investigation identified that
certain practices of the accounting team were not following generally accepted accounting
principles (GAAP), and that our staff had some skills deficiencies. We are addressing both of
these issues with greater discipline in our practices and new staff members with the right skills.
While the delay was unfortunate, the outcome of the investigation – which was closed at the end
of October 2014 – allows us to move forward with a focus on our business goals, confident that
our prior-year financial statements are now accurate, our accounting practices are solid and our
financial staff has the right skills.
The U.S. regulatory authority (SEC) is also conducting its own investigation into some of these
same accounting matters. We continue to cooperate with the SEC and have shared the findings
of our independent investigation with them.
Business Update
Typically we write our annual letter to you shortly after our fiscal year ends. But the delay in
publishing our FY 2014 Annual Report has resulted in delivering this letter to you more than two
quarters into FY 2015. So we’ll focus on FY 2014 in this letter, but include a few updates on FY
2015 as appropriate.
FY 2014 was a strong year for Logitech. It was pivotal in the transformation of our company and
put us ahead of our turnaround plan:
• It was our first year of growth since FY 2011, with sales of $2.12 billion, up 1% over FY
2013.
• We exceeded our original profitability plan for FY 2014, with GAAP operating income of
$77 million, compared to an operating loss in FY 2013.
• Our GAAP earnings per share (EPS) for FY 2014 was $0.46, compared to a loss of
($1.42) per share a year ago.
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