File Number: 0-29174
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 June 30, 2001
LOGITECH INTERNATIONAL S.A.
(Exact name of Registrant as specified in its charter)
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Not Applicable
(Translation of Registrant's name into English)
Canton of Vaud, Switzerland
(Jurisdiction of incorporation or organization)
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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)
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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 the 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 the registrant in
connection with Rule 12g3-2(b).
Not applicable
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LOGITECH INTERNATIONAL S.A.
Form 6-K
Table of Contents
Page
Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets at June 30, 2001 and March 31, 2001...................................................3
Consolidated Statements of Income for the three months ended June 30, 2001 and 2000...............................4
Consolidated Statements of Cash Flows for the three months ended June 30, 2001 and 2000...........................5
Notes to Consolidated Financial Statements........................................................................6
Operating and Financial Review and Prospects..........................................................................10
Quantitative and Qualitative Disclosure About Market Risk.............................................................20
Signatures............................................................................................................21
Exhibit 99.1 Bond Purchase, Paying and Conversion Agency Agreement, dated as of June 1, 2001 by and among Logitech
(Jersey) Limited, Logitech International S.A., Credit Suisse First Boston and Banque Cantonale Vaudoise...........A-1
Exhibit 99.2 Deposit Agreement, dated as of June 1, 2001 by and among Logitech (Jersey) Limited, Logitech
International S.A. and Credit Suisse.............................................................................B-1
Exhibit 99.3 Guarantee, dated as of June 8, 2001 by Logitech International S.A......................................C-1
2
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, March 31,
2001 2001
-------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 70,023 $ 44,142
Accounts receivable........................................................ 120,137 144,781
Inventories................................................................ 106,537 111,612
Other current assets....................................................... 29,268 29,558
-------- --------
Total current assets.................................................. 325,965 330,093
Investments..................................................................... 16,656 16,649
Property, plant and equipment................................................... 38,899 38,160
Intangible assets:
Goodwill................................................................... 95,197 95,197
Other intangible assets.................................................... 17,750 18,726
Other assets.................................................................... 8,834 6,291
-------- --------
Total assets.......................................................... $503,301 $505,116
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt............................................................ 6,156 62,986
Accounts payable........................................................... 79,319 91,267
Accrued liabilities........................................................ 51,463 59,054
-------- --------
Total current liabilities............................................. 136,938 213,307
Long-term debt.................................................................. 97,337 26,908
Other liabilities............................................................... 6,560 8,847
-------- --------
Total liabilities..................................................... 240,835 249,062
-------- --------
Shareholders' equity:
Registered shares, par value CHF 1 - 53,673,930 authorized, 9,426,070
conditionally authorized, 47,641,050 issued and outstanding at June 30,
2001; 53,176,490 authorized, 9,923,510 conditionally authorized,
44,418,610 issued and outstanding at March 31, 2001..................... 33,215 31,396
Additional paid-in capital................................................. 121,381 118,740
Less registered shares in treasury, at cost, 2,849,047 at June 30, 2001 and
164,750 at March 31, 2001............................................... (2,114) (627)
Retained earnings.......................................................... 135,754 129,435
Accumulated other comprehensive loss....................................... (25,770) (22,890)
-------- --------
Total shareholders' equity............................................ 262,466 256,054
-------- --------
Total liabilities and shareholders' equity............................ $503,301 $505,116
======== ========
The accompanying notes are an integral part of these financial statements.
3
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
Three months ended June 30,
-------------------------------
2001 2000
-------------------------------
(unaudited)
Net sales....................................... $ 177,867 $ 141,416
Cost of goods sold ............................. 117,390 94,125
---------- ----------
Gross profit.................................... 60,477 47,291
Operating expenses:
Marketing and selling ....................... 33,570 26,449
Research and development .................... 10,469 8,509
General and administrative .................. 8,277 8,265
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Total operating expenses ....................... 52,316 43,223
---------- ----------
Operating income ............................... 8,161 4,068
Interest income (expense), net ................ (1,168) 196
Other income, net .............................. 896 1,967
---------- ----------
Income before income taxes...................... 7,889 6,231
Provision for income taxes ..................... 1,570 1,246
---------- ----------
Net ............................................ $ 6,319 $ 4,985
========== ==========
Net income per share and ADS:
Basic ........................................ $ .14 $ .12
Diluted ...................................... $ .13 $ .11
Shares used to compute net income per share:
Basic ........................................ 44,531,740 41,530,710
Diluted ...................................... 48,446,270 46,808,400
The accompanying notes are an integral part of these financial statements.
4
LOGITECH INTERNATIONAL S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended
June 30,
------------------------
2001 2000
-------- --------
(unaudited)
Cash flows from operating activities:
Net income......................................................... $ 6,319 $ 4,985
Non-cash items included in net income:
Depreciation..................................................... 6,232 3,359
Amortization of goodwill......................................... - 245
Amortization of other intangible assets.......................... 945 763
Gain on disposal of property, plant and equipment................ - (1,922)
Gain on sale of investments...................................... (541) (442)
Equity in net losses of affiliated companies..................... 580 388
Stock compensation expense....................................... 367 225
Accreted interest on convertible bond............................ 58 -
Other............................................................ 38 63
Changes in current assets and liabilities:
Accounts receivable.............................................. 22,980 15,554
Inventories...................................................... 3,709 (33,462)
Other current assets............................................. (404) 1,545
Accounts payable................................................. (11,152) 3,198
Accrued liabilities.............................................. (7,188) 40
-------- --------
Net cash provided by operating activities..................... 21,943 (5,461)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment......................... (7,463) (3,853)
Sales of investments............................................... 1,545 526
Sales of property, plant and equipment............................. - 3,637
Acquisitions and investments ...................................... (2,856) (476)
-------- --------
Net cash used in investing activities......................... (8,774) (166)
-------- --------
Cash flows from financing activities:
Net repayment of short-term debt................................... (54,050) -
Repayment of long term debt........................................ (27,078) (54)
Borrowing of long-term debt, net of issuance costs................. 92,363 -
Proceeds from sale of treasury shares.............................. 28 -
Purchase of treasury shares........................................ - (1,064)
Proceeds from issuance of registered shares........................ 2,779 2,131
-------- --------
Net cash provided by financing activities..................... 14,042 1,013
-------- --------
Effect of exchange rate changes on cash and cash equivalents.......... (1,330) (443)
-------- --------
Net increase (decrease) in cash and cash equivalents.................. 25,881 (5,057)
Cash and cash equivalents at beginning of period...................... 44,142 49,426
-------- --------
Cash and cash equivalents at end of period............................ $ 70,023 $ 44,369
======== ========
Supplemental cash flow information:
Interest paid...................................................... $ 1,210 $ 58
Income taxes paid.................................................. $ 576 $ 874
Non-cash investing and financing activities:
Acquisition of additional Labtec shares through issuance of
treasury shares................................................. $ 722 $ -
The accompanying notes are an integral part of these financial statements.
5
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- The Company:
Logitech International S.A. designs, manufactures and markets human
interface devices and supporting software that serve as the primary physical
interface between people and their personal computers and the internet. The
Company's products include corded and cordless mice, trackballs, and keyboards;
joysticks, gamepads and racing systems; internet video cameras; and PC speakers,
headsets and microphones. The Company sells its products to both original
equipment manufacturers ("OEMs") and to a network of retail distributors and
resellers.
Logitech was founded in Switzerland in 1981, and in 1988 listed its
registered shares in an initial public offering in Switzerland. In 1997, the
Company sold shares in a U.S. initial public offering in the form of American
Depository Shares ("ADSs") and listed the ADSs on the Nasdaq National Market
system. The Company's headquarters are in Fremont, California through its U.S.
subsidiary, with regional headquarters in Romanel, Switzerland and Hsinchu,
Taiwan through local subsidiaries. The Company has manufacturing operations in
China, and distribution facilities in the U.S., Europe and Asia.
Note 2 -- Interim Financial Data:
The accompanying consolidated financial statements should be read in
conjunction with the Company's 2001 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. Certain amounts reported in prior
quarters' financial statements have been reclassified to conform to the current
quarter's presentation.
Note 3 -- Stock Split:
In June 2001, the Company's shareholders approved a ten-for-one stock split
that was effected on August 2, 2001. The stock split related only to shares
traded on the Swiss Exchange. ADSs traded on Nasdaq were not affected. As a
result, the ratio of ten ADSs to one registered share changed to a new ratio of
one ADS to one registered share. All references to share and per-share data for
all periods presented have been adjusted to give effect to this ten-for-one
stock split.
Note 4 -- Net Income per Share:
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 are
registered shares issuable upon the exercise of stock options and stock purchase
plan agreements (using the treasury stock method), and upon the conversion of
convertible debt (using the if-converted method). At June 30, 2001, the
convertible debt was excluded from the registered share equivalents due to its
antidilutive effect.
Note 5 -- Acquisition of Labtec:
In March 2001, the Company purchased substantially all outstanding shares
of Labtec Inc. for $76.3 million, including transaction costs. The principal
business of Labtec has been combined with the Company's audio division to offer
a complete array of PC audio and telephony products. The acquisition was
accounted for using the purchase method of accounting. The results of operations
of the acquired business from the date of acquisition have been included in the
consolidated financial statements.
6
In connection with the acquisition, the Company recorded $91.9 million in
goodwill and $11.0 million in other intangible assets. During the three months
ended June 30, 2001, the Company purchased the remaining outstanding shares of
Labtec for $2.6 million in cash and stock.
Note 6 -- Investments:
In November 1999, Logitech announced the formation of a new company,
Spotlife Inc., whose business is to enhance video communications using the
internet infrastructure. Logitech has invested $7 million in Spotlife, and has
agreed to guarantee up to a maximum of $5.3 million of the company's capital
lease obligation. As of June 30, 2001, the outstanding balance of the lease
obligation, and therefore the Company's guarantee, was $2.9 million. As of June
30, 2001, Logitech owned approximately 34.2% of Spotlife's outstanding shares on
a fully diluted basis, with outside investors having the ability to exercise
significant influence over the management of the company. Logitech accounts for
its investment in this company using the equity method.
In June 1998, the Company acquired 49% of the outstanding shares of the
LogiCad 3D Group (formerly Space Control GmbH), the German-based provider of
Logitech's Magellan 3D Controller. The Company has an obligation to acquire the
remaining outstanding shares of LogiCad 3D, if certain conditions are met, and
an option to acquire the remaining shares if these conditions are not met. The
Company is using the equity method of accounting for this investment.
In April 1998, the Company acquired 10% of the then outstanding stock of
Immersion Corporation, a developer of force feedback technology for PC
peripherals and software applications. During the three months ended June 30,
2001, the Company sold a partial interest in Immersion and recognized a gain of
$.5 million in other income. The Company accounts for its investment in
Immersion as available-for-sale and, therefore, carries its investment at market
value and records changes in market value as a component of shareholders'
equity. As of June 30, 2001, Logitech owned approximately 4.4% of Immersion. The
cost of these securities was $3.5 million and the gross unrealized gain was $2.2
million.
The Company uses the cost method of accounting for all other investments,
all of which are less than 20% owned by Logitech.
Note 7 - Balance Sheet Components:
June 30, March 31,
2001 2001
-------- --------
(in thousands)
Accounts receivable:
Accounts receivable.......................... $138,695 $163,240
Allowance for doubtful accounts.............. (4,835) (7,502)
Allowance for returns and other.............. (13,723) (10,957)
-------- --------
$120,137 $144,781
======== ========
Inventories:
Raw materials................................ $ 22,453 $ 26,002
Work-in-process.............................. 209 225
Finished goods............................... 83,875 85,385
-------- --------
$106,537 $111,612
======== ========
Note 8 -- Goodwill and Other Intangible Assets -- Adoption of Statements 141 and
142:
Effective April 1, 2001, the Company adopted Statement of Financial
Accounting Standard No. 142, "Goodwill and Intangible Assets" and No. 141,
"Business Combinations", which were issued by the Financial Accounting Standards
Board in July 2001. Under these standards, the Company ceased amortizing
goodwill totaling $95.2 million (including $3.1 million of goodwill previously
classified as other intangible assets) as of
7
April 1, 2001. Adoption of the new standards resulted in not recognizing $1.5
million in amortization expense for the quarter ended June 30, 2001, that would
have been recognized had the old standards been in effect. The same quarter last
year included $.2 million in amortization expense under the old standards.
The following table presents the impact of the new standards on operating
income, net income and earnings per share, as if they had been in effect for the
quarter ended June 30, 2000.
Quarter ended June 30,
------------------------------------------------
2000
2001 -----------------------------
As Reported As Reported As Adjusted
----------- ----------- -----------
(in thousands, except per share amounts)
Operating income................. $8,161 $4,068 $4,313
Net income....................... $6,319 $4,985 $5,230
Basic earnings per share......... $ .14 $ .12 $ .13
Diluted earnings per share....... $ .13 $ .11 $ .11
Acquired other intangible assets subject to amortization were as follows:
June 30, 2001 March 31, 2001
-------------------------------- ---------------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
Amounts Amortization Amounts Amortization
-------------- ------------ -------------- ------------
(in thousands)
Trademark.......................... $14,883 $3,572 $14,975 $3,155
Existing technology............... 10,423 4,026 10,423 3,600
Other.............................. 500 458 500 417
------- ------ ------- ------
$25,806 $8,056 $25,898 $7,172
======= ====== ======= ======
For the three months ended June 30, 2001 and 2000, amortization expense for
other intangible assets was $.9 million and $.8 million. The estimated future
annual amortization expense for other intangible assets is $3.7 million, $3.6
million, $3.6 million, $3.6 million and $1.9 million for the years 2002, 2003,
2004, 2005, and 2006.
In accordance with these standards, the Company is required to complete a
transitional impairment test of all goodwill and intangible assets as of April
1, 2001 to be completed no later than the beginning of the third fiscal quarter.
While this transitional impairment test has not yet been completed, the Company
believes goodwill and intangible assets are not impaired.
Note 9 -- Long Term Convertible Debt:
On June 8, 2001, Logitech sold CHF 170,000,000 (US $95,625,000) aggregate
principal amount of its 1% Convertible Bonds 2001-2006 with maturity in five
years. The net proceeds of the convertible bond offering were used to refinance
debt associated with the acquisition of Labtec Inc., including repaying the $90
million short-term bridge loan. The Company registered the convertible bonds for
resale with the Swiss Stock Exchange. The convertible bonds were issued in
denominations of CHF 5,000 at par value, with interest at 1.00% payable
annually, and final redemption in June 2006 at 105%, representing a yield to
maturity of 1.96%. The convertible bonds are convertible at any time into shares
of Logitech registered shares at the conversion price of CHF 62.4 per share.
Early redemption is permitted at any time at the accreted redemption amount,
subject to certain requirements. As of June 30, 2001, the carrying amount of the
convertible bonds was $94,726,000 and the fair value based upon quoted market
value was $101,773,000.
8
Note 10 -- Comprehensive Income:
Comprehensive income is defined as the total change in shareholders' equity
during the period other than from transactions with shareholders. For the
Company, comprehensive income consists of net income, the net change in the
accumulated foreign currency translation adjustment account, and the net change
in unrealized gains on marketable equity securities. Comprehensive income is
presented as an element of shareholders' equity. For the three months ended June
30, 2001 and 2000, comprehensive income was $3.4 and $34.8 million.
Note 11 -- 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. In January 1999, the Company was advised that the VAT would
not be applied to goods manufactured during calendar 1999 and subsequent years.
With respect to prior years, the Company is in ongoing discussions with Chinese
officials and has been assured that, notwithstanding statements made by tax
authorities, the VAT for these prior periods would not be charged to the
Company. The Company believes the ultimate resolution of this matter will not
have a material adverse effect on the Company's financial position, cash flows
or results of operations.
The Company is involved in a number of lawsuits relating to patent
infringement and intellectual property rights. The Company believes the lawsuits
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.
9
LOGITECH INTERNATIONAL S.A.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview
Logitech designs, manufactures and markets human interface devices and
supporting software that serve as the primary physical interface between people
and their personal computers and the internet. The Company's products include
corded and cordless mice, trackballs and keyboards; joysticks, gamepads, and
racing systems; internet video cameras; and PC speakers, headsets and
microphones. The Company sells its products through two primary channels,
original equipment manufacturers ("OEMs") and a network of retail distributors
and resellers ("retail").
Recent Developments
Acquisition of Labtec:
In March 2001, the Company purchased substantially all outstanding shares
of Labtec Inc. for $76.3 million, including transaction costs. The principal
business of Labtec has been combined with the Company's audio division to offer
a complete array of PC audio and telephony products. The acquisition was
accounted for using the purchase method of accounting. The results of operations
of the acquired business from the date of acquisition have been included in the
consolidated financial statements. During the three months ended June 30, 2001,
the Company purchased the remaining outstanding shares of Labtec for $2.6
million in cash and stock.
Issuance of Convertible Bonds
In June 2001, the Company sold CHF 170,000,000 (US $95,625,000) aggregate
principal amount of its 1% Convertible Bonds 2001-2006 with maturity in five
years. The net proceeds of the convertible bond offering were used to refinance
debt associated with the acquisition of Labtec Inc., including repayment of the
$90 million short-term bridge loan. The convertible bonds are convertible at any
time into shares of Logitech registered shares at the conversion price of CHF
62.4 per share.
Goodwill and Other Intangible Assets -- Adoption of Statements 141 and 142:
Effective April 1, 2001, the Company adopted Statement of Financial
Accounting Standard No. 142, "Goodwill and Intangible Assets" and No. 141,
"Business Combinations", which were issued by the Financial Accounting Standards
Board in July 2001. Under these standards, the Company ceased amortizing
goodwill totaling $95.2 million (including $3.1 million of goodwill previously
classified as other intangible assets) as of April 1, 2001. Adoption of the new
standards resulted in not recognizing $1.5 million in amortization expense for
the quarter ended June 30, 2001, that would have been recognized had the old
standards been in effect. The same quarter last year included $.2 million in
amortization expense under the old standards.
10
Results of Operations
The following table sets forth certain consolidated financial statement
amounts as a percentage of net sales for the periods indicated:
Three months ended
June 30,
---------------------
2001 2000
----- -----
Net sales............................................. 100.0% 100.0%
Cost of goods sold.................................... 66.0 66.6
----- -----
Gross profit.......................................... 34.0 33.4
Operating expenses:
Marketing and selling.............................. 18.9 18.7
Research and development........................... 5.9 6.0
General and administrative......................... 4.7 5.8
----- -----
Total operating expenses.............................. 29.4 30.5
----- -----
Operating income...................................... 4.6 2.9
Interest (expense) income, net........................ (.7) .1
Other income, net..................................... .5 1.4
----- -----
Income before income taxes............................ 4.4 4.4
Provision for income taxes............................ .8 .9
----- -----
Net income............................................ 3.6% 3.5%
===== =====
Comparison of three months ended June 30, 2001 and 2000
Net Sales
Net sales for the three months ended June 30, 2001 increased $36.5 million
or 26% to $177.9 million, over the same quarter last year. This growth was
generally 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 to a lesser extent, from the Company's interactive
entertainment products. With approximately 50% of the Company's sales
denominated in currencies other than the US dollar, the dollar's strength
relative to the Euro, Japanese Yen and Taiwanese Dollar restrained sales growth
for the quarter by approximately $6 million.
Retail sales grew by 47% over the same quarter last year. This growth was
shared across all product categories. Retail sales of the Company's traditional
pointing devices, which include mice and trackballs, grew by 56% while unit
volumes grew 8%. Mice sales represented 41% of the Company's total retail
revenue for this quarter compared to 34% the same quarter last year. The
Company's new cordless optical wheel mouse was a significant source of this
strong growth. In the PC video camera business, retail sales grew 19% and unit
volumes increased by 28% over the same quarter last year. Sales of interactive
entertainment products grew by 109%, with the GT Force Steering Wheel for
PlayStation 2 accounting for the significant growth. The Company's newly
acquired audio products, including a full range of PC headsets, speakers and
headphones, added fifteen percentage points of absolute growth to retail sales
during the quarter. The Company anticipates continued strong growth in retail
sales in both the second quarter and full fiscal year.
OEM sales declined by 25% compared to the same quarter last year,
principally due to sluggish sales of new PCs. The Company believes that revenue
and unit volumes for OEM in total will decline on a year-over-year basis through
fiscal 2002.
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,
11
distribution costs and inventory write-offs. Gross profit increased 28% to $60.5
million, due primarily to significantly higher sales volume.
Gross margin (gross profit as a percentage of net sales) increased from
33.4% to 34.0%. This increase reflects continued operational efficiencies
achieved throughout the supply chain and a higher mix of higher margin retail
sales compared to OEM sales, partially offset by the decline in the value of the
Euro relative to the dollar. Over the full fiscal year, the Company continues to
expect gross margin to be within the long-term targeted range of 34% to 35%.
Operating Expenses
Total operating expenses increased 21%, from $43.2 million to $52.3
million. As a percentage of net sales, operating expenses decreased from 31% to
30%. The increase in sales and marketing expenses is directly related to the
Company's increased sales performance and marketing initiatives aimed at
strengthening the Company's retail presence. The Company continues to make
significant investments in advertising, channel marketing, and brand awareness.
The increase in research and development expenses related to new product
development and cost reductions on existing products. General and administrative
expenses remained flat at $8.3 million for the three months ended June 30, 2001
and 2000.
Interest Income (Expense), Net
Net interest expense was $1.2 million for the three months ended June 30,
2001 compared to interest income of $.2 million for the same period last year.
Interest expense increased substantially due to the short term borrowing and the
subsequent issuance of the five year convertible bonds to finance the Labtec
acquisition. The Company borrowed $35 million in March 2001 and $55 million in
April 2001 to finance the acquisition and repay Labtec obligations and credit
lines. This debt was repaid in June 2001 through the issuance of the convertible
bonds.
Other Income, Net
Other income was $.9 million for the three months ended June 30, 2001,
compared to $2.0 million for the same period last year. Other income this year
was primarily due to gains recognized from the sale of shares of Immersion
Corporation and proceeds from a property loss insurance claim, which were
partially offset by losses recorded for investments accounted for under the
equity method. Other income last year was primarily due to gains recognized from
the sale of a building and the sale of shares of Immersion.
Provision for Income Taxes
The provision for income taxes consists of income and withholding taxes and
is 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 and losses are generated, changes in local tax laws and
changes in valuation allowances based upon the likelihood of realizing deferred
tax assets. The provision for income taxes for the three months ended June 30,
2001 was $1.6 million, compared to $1.2 million for the comparable period in
2000. The effective tax rate remained at approximately 20% for both periods. The
Company's effective tax rate is dependent on achieving expected income levels in
a number of jurisdictions. If the Company is unable to achieve expected income
levels in those jurisdictions, the Company's effective tax rate could change
significantly.
Liquidity and Capital Resources
Cash Balances, Available Borrowings, and Capital Resources
At June 30, 2001, net working capital was $189.0 million, compared to
$116.8 million at March 31, 2001. Cash and cash equivalents totaled $70.0
million, an increase of $25.9 million from March 31, 2001. The increase in cash
was due to profitable operations and effective management of receivables and
inventory, as well as excess proceeds from net long-term borrowings over
acquisition needs. The Company has financed its operations and capital
requirements primarily through cash flow from operations and, to a lesser
extent, bank borrowings. The
12
Company's normal short-term liquidity and long-term 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.
The Company had credit lines with several European and Asian banks totaling
$57.8 million as of June 30, 2001. 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. As of June 30, 2001, $52.2 million was available
under these facilities.
Cash Flow from Operating Activities
The Company's operating activities provided net cash of $21.9 million for
the three months ended June 30, 2001, compared to $5.5 million used in the same
period last year. The effective management of inventories and receivables has
resulted in a reduction in accounts receivable and inventories of $23.0 million
and $3.7 million, respectively. The resulting increase in cash flows was
partially offset by reductions in accounts payable and accrued liabilities
totaling $18.3 million.
Cash Flow from Investing Activities
The Company's investing activities used cash of $8.8 million and $.2
million for the three months ended June 30, 2001 and 2000. During the quarter
ended June 30, 2001, cash of $2.9 million was used to acquire additional Labtec
shares and to acquire a non-marketable equity investment. Purchases of property
and equipment totaled $7.5 million, compared to $3.9 million in the same period
last year. These expenditures were partially offset by cash proceeds of $1.5
million from the sale of available-for-sale securities. Included in the first
quarter last year was $3.6 million for the sale of a building in Europe that was
no longer being used in the Company's operations.
Cash Flow from Financing Activities
The Company's financing activities provided net cash of $14.0 million and
$1.0 million for the three months ended June 30, 2001 and 2000. In April 2001,
the Company borrowed an additional bridge loan of $55 million to finance the
Labtec acquisition bringing the total bridge loan for the Labtec acquisition to
$90 million. During the quarter, the Company repaid short term Labtec borrowings
of $19 million and Labtec long term borrowings of $27 million. In June 2001, the
Company sold 1% convertible bonds in a registered offering. Net proceeds of
$92.4 million were used to repay the $90 million bridge loan that was borrowed
from banks for the acquisition of Labtec. Additionally, $2.8 million of proceeds
from the issuance of registered shares related to employee stock option and
stock purchase plans.
Capital Commitments
The Company believes that it will continue to make capital expenditures in
the future to support product development activities and ongoing and expanded
operations. Fixed commitments for capital expenditures, primarily for
manufacturing equipment, approximated $.6 million at June 30, 2001. In addition,
the Company has agreed to guarantee up to a maximum of $5.3 million of
Spotlife's capital lease obligation. As of June 30, 2001, the outstanding
balance of the lease obligation, and therefore the Company's guarantee, was $2.9
million. 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.
Risk Factors
Certain Factors Affecting Operating Results
This quarterly report on Form 6-K contains "forward-looking statements"
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
The words "anticipate," "believe," "estimate," "expect," "forecast," "intend,"
"may," "plan," "project," "predict," "should," and "will" and similar
expressions are intended
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to identify such forward-looking statements. All forward-looking statements are
subject to various risks and uncertainties that could cause actual results to
differ materially from those described in the statements. The factors that could
cause actual results to differ include those discussed more fully below. Undue
reliance should not be placed on these forward-looking statements, which speak
only as of the dates of their filings. We undertake no obligation to publicly
update or revise any forward-looking statements.
Our quarterly operating results are difficult to predict. This means that
our results could fall below investors' expectations, which could cause the
price of Logitech ADSs and registered shares to decline significantly.
Our 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:
o the volume and timing of orders received during the quarter;
o the maturation of product lines;
o the timing of new product introductions by us and our competitors and
their acceptance by the market;
o the impact of competition on our average selling prices and operating
expenses;
o our inventory levels or inventory levels in the distribution channels;
o changes in laws or regulations;
o fluctuations in exchange rates;
o changes in product or distribution channel mix;
o price protection charges;
o product returns from customers;
o deferrals of customer orders in anticipation of new products or
otherwise;
o changes in technologies and their acceptance by the market;
o the performance of our suppliers and third-party product manufacturers;
and
o the rate of economic growth in our principal geographic markets.
Many of these factors are beyond our control. In addition, due to the short
product life cycles inherent in our markets, our failure to introduce new,
competitive products consistently and in a timely manner would adversely affect
results of operations for one or more product cycles.
In addition, the volume and timing of orders received during a quarter are
difficult to forecast. Customers generally order on an as-needed basis.
Accordingly, we have 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, we 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 our products are manufactured in Asia, and we
rely 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 our 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. The foregoing means that our
operating results could fall below investors' expectations, which could cause
the price of Logitech ADSs and registered shares to decline significantly.
Our success depends on the continued viability and financial stability of
our distributors, resellers and OEM customers, as well as continued demand
by these customers for our products.
14
We sell our products through a domestic and international network of
distributors, resellers and OEM customers, and our success depends on the
continued viability and financial stability of these customers, as well as
continued demand by these customers for our products. 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. Our distributor and reseller
customers generally offer products of several different companies, including
products competitive with our 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, which would reduce demand for, and
sales of, our products.
Product returns and effects of price protection that exceed our accruals
may significantly impact our financial results.
As a manufacturer of consumer products, we are exposed to the risk of
product returns, either through the exercise by customers of contractual return
rights or as a result of our assistance in balancing inventories of retailers
and distributors. In addition, we offer price protection to our distributors and
retailers. A portion of our net sales has in the past resulted and may in the
future result in increased inventory at our distributors and resellers, which
has led and could lead to reduced orders by these customers in future periods.
As a result, historical net sales may not be indicative of future net sales.
Overstocking by our distributors and retailers has in the past led and may in
the future lead to higher than normal returns. The short product life cycles of
certain of our 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. In
addition, we continuously introduce product upgrades, enhancements and improved
packaging, and thus may experience higher rates of return on our older products.
We recognize revenue upon transfer of title and risk of loss, which is
generally when products are shipped. Because we are exposed to the risk of
product returns and price protection, we provide allowances for these risks upon
recognition of revenue. Amounts provided for returns and price protection are
estimated based upon historical and anticipated experience and our assessment of
inventory in the channels. We review and adjust the amounts provided
periodically, based upon changes in historical and anticipated experience and
channel inventory. Although we believe that we have provided adequate amounts
for projected returns, from time to time we have experienced return levels in
excess of amounts provided and our amounts provided may not be sufficient for
actual returns in future periods. In addition, our accruals for price protection
may not be sufficient in future periods, and any future price changes may have a
significant adverse effect on our results of operations.
To continue to be successful, we will need to effectively respond to future
changes in technology and customer demands.
The market for our products is characterized by rapidly changing technology
and frequent new product introductions. Our success will depend to a substantial
degree on our 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. We may
not be able to identify, develop, manufacture, market, sell, or support new
products and enhancements successfully, new products or enhancements may not
achieve market acceptance, or we may not be able to respond effectively to
technology changes, emerging industry standards or product announcements by
competitors. In addition, some of our competitors may have patents or
intellectual property rights that prevent us from being able to respond
effectively to new or emerging technologies and changes in customer
requirements. New product announcements by us could cause our customers to defer
purchases of existing products or cause distributors to request price protection
credits or stock rotations. Any of these events could materially harm our
business, financial condition and results of operations.
A significant amount of our manufacturing operations are located in China,
which exposes us to risks associated with doing significant business in
that country.
A significant amount of our manufacturing operations are located in China.
These operations could be severely impacted by economic or political instability
in China, including instability which may occur in
15
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 continue to
evolve and we expect differences in interpretation and enforcement to continue
in the foreseeable future. In addition, our Chinese employees in our Suzhou,
China facilities are subject to a number of government regulations regarding
employment practices and customs that are fundamentally different in many
respects from those in the United States and Europe. The Suzhou facilities are
managed by several of our key Taiwanese expatriate employees. The loss of these
employees, either voluntarily or because of a deterioration in relations between
China and Taiwan, may diminish the productivity and effectiveness of our Suzhou
manufacturing operations.
The effect of business, legal and political risks associated with foreign
countries and markets may negatively affect us.
We transact a substantial portion of our business outside the United
States. There are risks inherent in doing business in international markets,
including:
o tariffs, customs, duties and other trade barriers;
o difficulties in staffing and managing foreign operations;
o environmental and other related regulations;
o political instability, expropriation, nationalization and other political
risks;
o foreign exchange controls; and
o delays from customs brokers or government agencies.
Any of these risks could adversely impact the success of our international
operations and, in turn, have a material adverse effect on our business,
financial condition and results of operations.
Competition
Our business is characterized by intense competition, a trend of declining
average selling prices in OEM and performance enhancements and new features of
competing retail products. We expect that competition will continue to be
intense and may increase from current or future competitors.
We compete primarily with Creative Labs, Ezonics Corporation, Guillemot
Corporation, Intel, Interact Multimedia, Kensington/Advanced Gravis, KYE/Mouse
Systems, Microsoft, Mitsumi, Philips, Primax, Saitek Industries Ltd., Xirlink
Inc., Altec Lansing, Plantronics and Telex Communications. Many of our 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 us.
Our main competitor in the market for pointing devices, gaming devices and
keyboards is Microsoft. In late, 1999, Microsoft began shipping two new mouse
products that were based on an optical sensing technology. We responded to
Microsoft with optical offerings in the summer of 2000. In addition, we
continued to focus on the advantages of our cordless offerings to the end user.
Microsoft entered into the cordless mouse category in the second quarter of
fiscal 2001, and we expect Microsoft to add a cordless keyboard to their line in
the near future. We are also starting to see increased competition for cordless
desktops from less established brands, at the lower price segments.
Microsoft is also a leading producer of operating systems and applications
with which our pointing and gaming devices are designed to operate. As a result
of our position, Microsoft may be able to make improvements in the functionality
of its pointing and gaming devices to correspond with ongoing modifications and
enhancements to its operating systems and software applications before we are
able to make such improvements. This ability could 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 we are not able to offer.
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Our main competitor in the market for PC video cameras is Intel. Intel has
also begun offering a family of wireless products for use with a PC, including a
mouse, a keyboard and a gamepad. These products are offered separately and in
various combinations. These products are based on a wireless systems approach
that requires the use of a base station that can connect multiple wireless
devices. It remains to be seen how consumers will respond to this Intel
offering.
Competitors in the market for audio devices vary by product line. In the PC
speaker business, competitors include Altec Lansing and Creative Labs. In the
headset, microphone, and telephony markets, competitors include Plantronics and
Telex Communications. For the personal audio market, the primary competitor is
Sony. This market is intensely competitive and market leadership changes
frequently as a result of new products, designs and pricing.
We expect to continue to experience increased competition, significant
price reductions in OEM and performance enhancements of competing products in
retail. This could result in decreased revenue, decreased gross margin, loss of
market share and lack of acceptance of our products. In the event of significant
price competition in the market for our products, we would be required to
decrease costs at least proportionately to any price decreases in order to
maintain our 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. We may not be
able to compete successfully in the future, and competition may significantly
harm our business, financial condition and results of operations.
Our effective tax rates may increase in the future, which would adversely
affect our results.
We operate in multiple jurisdictions and our profits are taxed pursuant to
the tax laws of these jurisdictions. If our effective tax rate increases in a
future period, our operating results in general will be adversely impacted, and
specifically our net income and earnings per ADS and per registered share, will
decrease. Our 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 geographical
allocation of income and expense, and changes in our management's assessment of
matters such as the realizability of deferred tax assets. In the past, we have
experienced substantial fluctuation in our effective income tax rate. Our
effective income tax rates in a given fiscal year reflect a variety of factors
that may not be present in the succeeding fiscal year or years. As a result, our
effective income tax rate may increase in future periods.
We may be unable to protect our proprietary rights. Unauthorized use of our
technology may result in development of products that compete with our
products.
Our future success depends in part on our proprietary technology, technical
know-how and other intellectual property. We rely on a combination of patent,
trade secret, copyright, trademark and other intellectual property laws, and
confidentiality procedures and contractual provisions such as nondisclosure
agreements and licenses, to protect our intellectual property.
We hold various United States patents, together with corresponding patents
from other countries, relating to some of the same inventions. We also have
various United States patent applications pending, together with corresponding
applications from other countries relating to some of the same inventions.
Despite these patents and patent applications, it is possible that any patent
owned by us will be invalidated, deemed unenforceable, circumvented or
challenged, that the rights granted thereunder will not provide competitive
advantages to us, or that any of our pending or future patent applications will
not be issued with claims of the scope sought by us. In addition, other
intellectual property laws, or our confidentiality procedures and contractual
provisions, may not adequately protect our intellectual property. Also, our
competitors may independently develop similar technology, duplicate our
products, or design around our patents or other intellectual property rights. In
addition, unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. Any of these events
could significantly damage our business, financial condition and results of
operations.
We also rely on certain technologies that we license or acquire from
others. We may find it necessary or desirable in the future to obtain licenses
or other rights relating to one or more of our products or to current or future
technologies. These licenses or other rights may not be available on
commercially reasonable terms, or at all.
17
Pending lawsuits could adversely impact us.
There has been substantial litigation in the technology industry regarding
rights to intellectual property, and we are subject to the risk of claims
against us for alleged infringement of the intellectual property rights of
others. Through our U.S. subsidiary, we are currently involved in several
pending lawsuits with respect to patent infringement claims by third parties. We
believe that all of these pending lawsuits are without merit and intend to
defend against them vigorously. However, the defense of any of these actions may
not be successful. Any judgment in or settlement of any of these lawsuits may
have a material adverse impact on our business, financial condition and results
of operations.
Pending and future litigation involving us, whether as plaintiff or
defendant, regardless of outcome, may result in significant diversion of effort
by our technical and management personnel, result in costly litigation, cause
product shipment delays or require us to enter into royalty or licensing
agreements, any of which could have a material adverse effect on our business,
financial condition and results of operations. Royalty or licensing agreements,
if required, may not be available on terms acceptable to us, or at all. In
addition, our efforts to protect our intellectual property through litigation
may not prevent duplication of our technology or products.
We depend on original design manufacturers and independent assembly
contractors which may not have adequate capacity to fulfill our needs and
which may not meet our quality and delivery objectives.
We rely on original design manufacturers to supply a portion of our
keyboard and gamepad product lines, and a portion of our mice and entertainment
products are sourced from independent contractors. Our reliance on original
design manufacturers and independent assembly contractors involves significant
risks, including reduced control over quality and delivery schedules, the
potential lack of adequate capacity and discontinuance or phase-out of the
contractors' assembly processes. These manufacturers and contractors may also
choose to discontinue building our products for a variety of reasons. Since the
majority of these manufacturers and contractors are located in Asia, we are
subject to risks generally associated with foreign suppliers, including
political and economic uncertainty, currency exchange fluctuations, trade
restrictions and changes in tariff rates. Consequently, we may experience delay
in the timeliness, quality and adequacy in product deliveries, any of which may
have an adverse impact on our results of operations.
Certain key components used in the manufacture of our products, as well as
certain products, are currently purchased from single or limited sources that
specialize in such components or products. At present, single-sourced components
include certain of our ASICs, sensors, certain other integrated circuits and
components, and balls used in certain of our trackballs. We generally do not
have long-term agreements with our single or limited sources of supply. Lead
times for materials and components ordered by us or our 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 we
have experienced supply shortages and fluctuation in component prices. Shortages
or interruptions in the supply of components or subcontracted products, or our
inability to procure these components or products from alternate sources at
acceptable prices in a timely manner, could delay shipment of our products or
increase our production costs, which could decrease our revenue or gross margin.
Delays could also have a material adverse effect upon our business, financial
condition and results of operations.
We may not be successful in integrating the business and operations of the
Labtec acquisition.
We acquired the business, products and technologies of Labtec with a view
to combine them with our existing business and customer base to achieve
synergistic benefits. The Labtec acquisition offers us the platform to enter new
markets in personal audio and telephony products and it strengthens our existing
offering in the computer speaker product line. To realize the benefits of this
acquisition we must successfully integrate the products offering, research and
development efforts, sourcing and supply chain as well as sales and marketing
activities. The difficulties of such integration may be complicated by our
separate organizational structures, operation models, geographical locations and
corporate cultures. The success of the acquisition may also depend on factors
not entirely within our control, such as market acceptance of the combined
product line. The inability to successfully integrate our acquisition of Labtec
may harm our business and impair investor confidence in our company.
18
We may be required to recognize additional non-cash charges against
earnings if our management were to determine in the future that the amount
of goodwill arising from the Labtec acquisition was impaired.
If our management were to determine in the future that the amount of
goodwill was impaired, we would be required to recognize non-cash charges that
would reduce our earnings.
We depend on a few key personnel to manage and operate us.
Our success depends to a significant degree on the continued contributions
of our senior management and other key design, development, manufacturing,
marketing and sales personnel. The loss of any of these personnel could harm our
business. Assimilation and retention of personnel may be made more difficult by
the fact that our 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, we believe
that our future success will depend on our ability to attract and retain highly
skilled managerial, engineering, operations, marketing and sales personnel, for
whom competition is intense. We may not be successful in attracting and
retaining these personnel, and the failure to attract and retain key personnel
could harm our business.
19
LOGITECH INTERNATIONAL S.A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market Risk
Market risk represents the potential for loss due to adverse changes in the
fair value of financial instruments. As a global concern, the Company faces
exposure to adverse movements in foreign currency exchange rates and interest
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on the Company's financial results.
Foreign Currency Exchange Rates
Currently, the Company's primary exposures relate to non-U.S. dollar
denominated sales in Europe and Asia and non-dollar denominated operating
expenses, inventory costs and long term debt in Europe and Asia. The principal
currencies creating foreign exchange rate risk for the Company are the Euro,
Taiwan Dollar, Swiss Franc and Japanese Yen.
For the three months ended June 30, 2001 and 2000, 50% and 47%,
respectively, of the Company's sales were denominated in non-U.S. currencies.
With the exception of its manufacturing subsidiaries in Ireland and China, which
use the U.S. dollar as their functional currency, the Company primarily uses the
local currencies of its foreign subsidiaries as the functional currency.
Accordingly, unrealized foreign currency gains or losses resulting from the
translation of net assets denominated in foreign currencies to the U.S. dollar
are accumulated in the cumulative translation adjustment component of other
comprehensive income in shareholders' equity.
On June 8, 2001 the Company sold CHF 170 million (US $95.6 million) Swiss
Franc denominated 1% Convertible Bonds which mature in five years. Although the
Company is exposed to foreign exchange risks on this long-term obligation, the
Swiss Franc liability serves to partially offset the effect of exchange rate
fluctuations on assets held in European currencies. Unrealized gains or losses
resulting from translation of the bonds to the U.S. dollar are accumulated in
the cumulative translation adjustment component of other comprehensive loss in
shareholders' equity.
From time to time, certain subsidiaries enter into forward exchange
contracts to hedge inventory purchase exposures denominated in U.S. dollars.
These forward exchange contracts are denominated in the same currency as the
underlying transactions. Logitech does not use derivative financial instruments
for trading or speculative purposes. At June 30, 2001, there were no derivative
instruments or forward exchange contracts outstanding.
The Company estimates that if the U.S. dollar had appreciated by an
additional 10% as compared to the functional currencies used by its foreign
subsidiaries, net income would have been adversely impacted by approximately
$2.8 for the three months ended June 30, 2001 and 2000.
Interest Rates
In order to limit the effect of interest rate changes on earnings and cash
flows, the Company's long term debt portfolio is composed of fixed rate debt. A
change in interest rates, therefore, has no impact on interest expense or cash
flows.
Changes in interest rates could impact the Company's anticipated interest
income on its cash equivalents and interest expense on variable rate short-term
debt. The Company prepared sensitivity analyses of its interest rate exposures
to assess the impact of hypothetical changes in interest rates. Based on the
results of these analyses, a 100 basis point decrease or increase in interest
rates from March 31, 2001 and the June 30, 2001 quarter end rates would not have
a material effect on the Company's results of operations or cash flows.
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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: /s/ Guerrino De Luca
-----------------------------------------
Guerrino De Luca
President and Chief Executive Officer
By: /s/ Kristen M. Onken
-----------------------------------------
Kristen M. Onken
Chief Finance Officer,
Chief Accounting Officer,
and U.S. Representative
August 14, 2001
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