UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2013
Or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 0-29174
LOGITECH INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
Canton of Vaud, Switzerland |
|
None |
(State or other jurisdiction |
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(I.R.S. Employer |
of incorporation or organization) |
|
Identification No.) |
Logitech International S.A.
Apples, Switzerland
c/o Logitech Inc.
7600 Gateway Boulevard
Newark, California 94560
(Address of principal executive offices and zip code)
(510) 795-8500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
As of January 24, 2014, there were 161,587,245 shares of the Registrants share capital outstanding.
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Page |
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3 | ||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
30 | |
51 | ||
53 | ||
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55 | ||
55 | ||
65 | ||
65 | ||
65 | ||
65 | ||
66 | ||
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67 | |
Exhibits |
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In this document, unless otherwise indicated, references to the Company or Logitech are to Logitech International S.A., its consolidated subsidiaries and predecessor entities. Unless otherwise specified, all references to U.S. dollar, dollar or $ are to the United States dollar, the legal currency of the United States of America. All references to CHF are to the Swiss franc, the legal currency of Switzerland.
Logitech, the Logitech logo, and the Logitech products referred to herein are either the trademarks or the registered trademarks of Logitech. All other trademarks are the property of their respective owners.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
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Financial Statement Description |
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Page |
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· |
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4 | |
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· |
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5 | |
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· |
Condensed Consolidated Balance Sheets as of December 31, 2013 and March 31, 2013 |
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6 |
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· |
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7 | |
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· |
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8 | |
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Notes to Condensed Consolidated Financial Statements (revised) |
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9 |
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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December 31, |
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December 31, |
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2013 |
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2012 |
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2013 |
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2012 |
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(revised) |
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(revised) |
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Net sales |
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$ |
627,890 |
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$ |
614,500 |
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$ |
1,637,786 |
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$ |
1,630,797 |
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Cost of goods sold |
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414,528 |
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404,695 |
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1,072,656 |
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1,079,872 |
| ||||
Gross profit |
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213,362 |
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209,805 |
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565,130 |
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550,925 |
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Operating expenses: |
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Marketing and selling |
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93,624 |
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112,698 |
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287,969 |
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324,117 |
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Research and development |
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34,103 |
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40,488 |
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107,927 |
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117,625 |
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General and administrative |
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31,560 |
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26,382 |
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90,103 |
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84,842 |
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Goodwill impairment |
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211,000 |
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211,000 |
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Restructuring charges (reversals), net |
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822 |
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(358 |
) |
8,621 |
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28,198 |
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Total operating expenses |
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160,109 |
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390,210 |
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494,620 |
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765,782 |
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Operating income (loss) |
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53,253 |
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(180,405 |
) |
70,510 |
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(214,857 |
) | ||||
Interest income (expense), net |
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(1,022 |
) |
114 |
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(862 |
) |
651 |
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Other income (expense), net |
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1,082 |
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(3,670 |
) |
1,361 |
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(4,338 |
) | ||||
Income (loss) before income taxes |
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53,313 |
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(183,961 |
) |
71,009 |
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(218,544 |
) | ||||
Provision for (benefit from) income taxes |
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4,810 |
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11,370 |
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7,065 |
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(26,616 |
) | ||||
Net income (loss) |
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$ |
48,503 |
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$ |
(195,331 |
) |
$ |
63,944 |
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$ |
(191,928 |
) |
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Net income (loss) per share: |
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Basic |
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$ |
0.30 |
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$ |
(1.24 |
) |
$ |
0.40 |
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$ |
(1.21 |
) |
Diluted |
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$ |
0.30 |
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$ |
(1.24 |
) |
$ |
0.40 |
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$ |
(1.21 |
) |
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Shares used to compute net income (loss) per share : |
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Basic |
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160,871 |
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157,706 |
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160,051 |
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158,383 |
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Diluted |
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163,388 |
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157,706 |
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161,509 |
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158,383 |
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Cash dividends per share |
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$ |
|
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$ |
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$ |
0.22 |
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$ |
0.85 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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December 31, |
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December 31, |
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2013 |
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2012 |
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2013 |
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2012 |
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(revised) |
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(revised) |
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Net income (loss) |
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$ |
48,503 |
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$ |
(195,331 |
) |
$ |
63,944 |
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$ |
(191,928 |
) |
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Other comprehensive income: |
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Foreign currency translation gain (loss) |
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682 |
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583 |
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3,511 |
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(3,837 |
) | ||||
Defined benefit pension plans: |
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Net gain (loss) and prior service costs |
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(384 |
) |
(389 |
) |
(1,384 |
) |
7,531 |
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Less amortization included in operating expenses |
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318 |
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311 |
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933 |
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1,067 |
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Hedging gain (loss): |
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Unrealized hedging loss |
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(1,198 |
) |
(915 |
) |
(3,484 |
) |
(2,022 |
) | ||||
Reclass of hedging loss (gain) included in cost of goods sold |
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1,342 |
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1,137 |
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1,526 |
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(440 |
) | ||||
Reclassification adjustment for gain included in other income (expense), net |
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(343 |
) | ||||
Other comprehensive income: |
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760 |
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727 |
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1,102 |
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1,956 |
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Total comprehensive income (loss) |
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$ |
49,263 |
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$ |
(194,604 |
) |
$ |
65,046 |
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$ |
(189,972 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
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December 31, |
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March 31, |
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2013 |
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2013 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
379,865 |
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$ |
333,824 |
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Accounts receivable, net |
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312,947 |
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179,565 |
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Inventories |
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257,998 |
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261,083 |
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Other current assets |
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60,979 |
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58,103 |
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Assets held for sale |
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10,960 |
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Total current assets |
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1,011,789 |
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843,535 |
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Non-current assets: |
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Property, plant and equipment, net |
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87,494 |
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87,649 |
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Goodwill |
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345,036 |
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341,357 |
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Other intangible assets |
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13,319 |
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26,024 |
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Other assets |
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71,322 |
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75,098 |
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Total assets |
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$ |
1,528,960 |
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$ |
1,373,663 |
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Liabilities and Shareholders Equity |
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Current liabilities: |
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Accounts payable |
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$ |
328,757 |
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$ |
265,995 |
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Accrued and other current liabilities |
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234,297 |
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192,774 |
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Liabilities held for sale |
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3,202 |
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Total current liabilities |
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563,054 |
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461,971 |
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Non-current liabilities: |
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200,797 |
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195,882 |
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Total liabilities |
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763,851 |
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657,853 |
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Commitments and contingencies (note 11) |
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Shareholders equity: |
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Registered shares, CHF 0.25 par value: |
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30,148 |
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30,148 |
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Issued and authorized shares 173,106 at December 31, 2013 and March 31, 2013 |
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Conditionally authorized shares 50,000 at December 31, 2013 and March 31, 2013 |
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Additional paid-in capital |
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Less shares in treasury, at cost 11,711 at December 31, 2013 and 13,855 at March 31, 2013 |
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(143,525 |
) |
(177,847 |
) | ||
Retained earnings |
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970,377 |
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956,502 |
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Accumulated other comprehensive loss |
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(91,891 |
) |
(92,993 |
) | ||
Total shareholders equity |
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765,109 |
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715,810 |
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Total liabilities and shareholders equity |
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$ |
1,528,960 |
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$ |
1,373,663 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Nine Months Ended |
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December 31, |
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2013 |
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2012 |
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(revised) |
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Operating activities: |
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Net income (loss) |
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$ |
63,944 |
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$ |
(191,928 |
) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
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Depreciation |
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28,756 |
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33,861 |
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Amortization of other intangible assets |
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14,990 |
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18,412 |
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Share-based compensation expense |
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17,412 |
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18,659 |
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Goodwill impairment |
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211,000 |
| ||
Impairment of strategic investments |
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568 |
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3,600 |
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Loss on disposal of property, plant and equipment |
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3,878 |
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Gain on sale of securities |
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(831 |
) | ||
Excess tax benefits from share-based compensation |
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(572 |
) |
(26 |
) | ||
Deferred income taxes and other |
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(3,559 |
) |
9,398 |
| ||
Changes in operating assets and liabilities, net of acquisitions: |
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Accounts receivable, net |
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(130,265 |
) |
(41,571 |
) | ||
Inventories |
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14,652 |
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352 |
| ||
Other assets |
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(2,968 |
) |
(2,432 |
) | ||
Accounts payable |
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62,931 |
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41,893 |
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Accrued and other liabilities |
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38,118 |
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3,961 |
| ||
Net cash provided by operating activities |
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107,885 |
|
104,348 |
| ||
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Investing activities: |
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Purchases of property, plant and equipment |
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(32,096 |
) |
(42,032 |
) | ||
Purchase of strategic investments |
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|
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(3,970 |
) | ||
Acquisitions, net of cash acquired |
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(650 |
) |
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Proceeds from sales of available-for-sale securities |
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|
|
917 |
| ||
Proceeds from return of investment in privately held companies |
|
261 |
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|
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Purchases of trading investments for deferred compensation plan |
|
(7,831 |
) |
(2,294 |
) | ||
Proceeds from sales of trading investments for deferred compensation plan |
|
8,311 |
|
2,309 |
| ||
Net cash used in investing activities |
|
(32,005 |
) |
(45,070 |
) | ||
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|
|
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|
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Financing activities: |
|
|
|
|
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Payment of cash dividends |
|
(36,123 |
) |
(133,462 |
) | ||
Purchases of treasury shares |
|
|
|
(87,812 |
) | ||
Proceeds from sales of shares upon exercise of options and purchase rights |
|
8,465 |
|
8,843 |
| ||
Tax withholdings related to net share settlements of restricted stock units |
|
(2,937 |
) |
(1,995 |
) | ||
Excess tax benefits from share-based compensation |
|
572 |
|
26 |
| ||
Net cash used in financing activities |
|
(30,023 |
) |
(214,400 |
) | ||
|
|
|
|
|
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Effect of exchange rate changes on cash and cash equivalents |
|
184 |
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(1,249 |
) | ||
Net increase (decrease) in cash and cash equivalents |
|
46,041 |
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(156,371 |
) | ||
Cash and cash equivalents, beginning of the period |
|
333,824 |
|
478,370 |
| ||
Cash and cash equivalents, end of the period |
|
$ |
379,865 |
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$ |
321,999 |
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|
|
|
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|
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Non-cash investing activities: |
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|
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Property, plant and equipment purchased during the period and included in period end accounts payable |
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$ |
4,134 |
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$ |
1,535 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(in thousands)
(unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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Registered Shares |
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Paid-in |
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Treasury Shares |
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Retained |
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Comprehensive |
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Shareholders |
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Shares |
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Amount |
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Capital |
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Shares |
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Amount |
|
Earnings |
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Loss |
|
Equity |
| ||||||
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|
|
|
|
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|
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|
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(revised) |
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(revised) |
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(revised) |
|
|
| ||||||
March 31, 2012 |
|
191,606 |
|
$ |
33,370 |
|
$ |
|
|
27,173 |
|
$ |
(343,829 |
) |
$ |
1,528,620 |
|
$ |
(95,929 |
) |
$ |
1,122,232 |
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
(191,928 |
) |
1,956 |
|
(189,972 |
) | ||||||
Purchase of treasury shares |
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|
|
|
|
|
|
8,600 |
|
(87,812 |
) |
|
|
|
|
(87,812 |
) | ||||||
Tax benefit from exercise of stock options |
|
|
|
|
|
3,336 |
|
|
|
|
|
|
|
|
|
3,336 |
| ||||||
Tax effects from share-based awards |
|
|
|
|
|
(4,272 |
) |
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|
|
|
|
|
|
|
(4,272 |
) | ||||||
Sales of shares upon exercise of options and purchase rights |
|
|
|
|
|
3,508 |
|
(1,377 |
) |
41,646 |
|
(39,754 |
) |
|
|
5,400 |
| ||||||
Issuance of shares upon vesting of restricted stock units |
|
|
|
|
|
(20,709 |
) |
(783 |
) |
18,767 |
|
|
|
|
|
(1,942 |
) | ||||||
Share-based compensation expense |
|
|
|
|
|
18,137 |
|
|
|
|
|
|
|
|
|
18,137 |
| ||||||
Cash dividends |
|
|
|
|
|
|
|
|
|
|
|
(133,462 |
) |
|
|
(133,462 |
) | ||||||
Cancellation of treasury shares |
|
(18,500 |
) |
(3,222 |
) |
|
|
(18,500 |
) |
172,857 |
|
(169,635 |
) |
|
|
|
| ||||||
December 31, 2012 |
|
173,106 |
|
$ |
30,148 |
|
$ |
|
|
15,113 |
|
$ |
(198,371 |
) |
$ |
993,841 |
|
$ |
(93,973 |
) |
$ |
731,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
March 31, 2013 |
|
173,106 |
|
$ |
30,148 |
|
$ |
|
|
13,855 |
|
$ |
(177,847 |
) |
$ |
956,502 |
|
$ |
(92,993 |
) |
$ |
715,810 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
63,944 |
|
1,102 |
|
65,046 |
| ||||||
Tax effects from share-based awards |
|
|
|
|
|
(2,715 |
) |
|
|
|
|
|
|
|
|
(2,715 |
) | ||||||
Sales of shares upon exercise of options and purchase rights |
|
|
|
|
|
2,038 |
|
(1,327 |
) |
20,358 |
|
(13,946 |
) |
|
|
8,450 |
| ||||||
Issuance of shares upon vesting of restricted stock units |
|
|
|
|
|
(16,886 |
) |
(817 |
) |
13,964 |
|
|
|
|
|
(2,922 |
) | ||||||
Share-based compensation expense |
|
|
|
|
|
17,563 |
|
|
|
|
|
|
|
|
|
17,563 |
| ||||||
Cash dividends |
|
|
|
|
|
|
|
|
|
|
|
(36,123 |
) |
|
|
(36,123 |
) | ||||||
December 31, 2013 |
|
173,106 |
|
$ |
30,148 |
|
$ |
|
|
11,711 |
|
$ |
(143,525 |
) |
$ |
970,377 |
|
$ |
(91,891 |
) |
$ |
765,109 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
LOGITECH INTERNATIONAL S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 The Company
Logitech International S.A, together with its consolidated subsidiaries, (Logitech or the Company) develops and markets innovative hardware and software products that enable or enhance digital navigation, music and video entertainment, gaming, social networking, and audio and video communication over the Internet.
The Company has two operating segments, peripherals and video conferencing. Logitechs peripherals segment encompasses the design, manufacturing and marketing of peripherals for personal computers (PCs), tablets and other digital platforms. The Companys video conferencing segment offers scalable high-definition (HD) video communications endpoints, HD video conferencing systems with integrated monitors, video bridges and other infrastructure software and hardware to support large-scale video deployments, and services to support these products.
The Company sells its peripheral products to a network of distributors, retailers and original equipment manufacturers (OEMs). The Company sells its video conferencing products and services to distributors, value-added resellers, OEMs and, occasionally, direct enterprise customers. The large majority of its sales have historically been derived from peripheral products for use by consumers.
Logitech was founded in Switzerland in 1981 and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Apples, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East, Africa (EMEA) and Asia Pacific. Shares of Logitech International S.A. are listed on both the Nasdaq Global Select Market under the trading symbol LOGI and the SIX Swiss Exchange under the trading symbol LOGN.
Note 2 Revision of Previously Issued Financial Statements
In the quarter ended June 30, 2013, the Company identified errors related to the accounting for its product warranty liability and amortization expense of certain intangible assets. The errors impacted prior reporting periods, starting prior to fiscal year 2009. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the cumulative errors, net of tax, which amounted to $19.1 million, in the quarter ended June 30, 2013 would be material to that periods condensed consolidated financial statements and to the expected results of operations for the fiscal year ending March 31, 2014.
The Company evaluated the cumulative impact of the errors on prior periods under the guidance in Accounting Standards Codification (ASC) 250-10, Accounting Changes and Error Corrections, relating to Securities Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 99, Materiality. The Company also evaluated the impact of correcting the errors through an adjustment to its financial statements under the guidance in ASC 250-10 relating to SAB No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and concluded to revise its previously issued financial statements to reflect the impact of the correction of these errors when it files subsequent reports on Form 10-Q. In addition, as a result of the decision to revise its previously issued condensed consolidated financial statements for the three and nine months ended December 31, 2012, the Company also corrected other immaterial errors that were previously uncorrected. Accordingly, the Company filed a Form 10-K/A to revise its consolidated financial statements for the three fiscal years ended March 31, 2013 on August 7, 2013. As a result, the Company has also revised the condensed consolidated financial statements for the three and nine months ended December 31, 2012 from what were previously reported.
The revised financial statements corrected the following errors, which are included in the tables below, with associated footnotes:
(1) Warranty accrual The Company determined that its prior warranty model did not accurately estimate warranty costs and liabilities at each reporting period. The inherent flaws in the prior model involved use of generic assumptions, incomplete warranty cost data and inter-regional methodological differences. This error impacted prior reporting periods, starting prior to fiscal year 2009, and impacted deferred tax asset classification between current and non-current assets.
(2) Amortization of intangibles The Company determined that $4.2 million in intangible assets originating from a November 2009 acquisition were never amortized. The impact of this adjustment was $2.0 million in amortization expense not properly recorded during the periods from the quarter ended December 31, 2009 through the end of fiscal year 2013.
(3) Other adjustments The Company also corrected a number of other immaterial errors, including the cumulative translation adjustment related to the purchase of treasury shares and an adjustment affecting the amount of property, plant and equipment purchased during the quarter ended June 30, 2012.
Condensed Consolidated Statements of Operations
The following table presents the impact of the accounting errors on the Companys previously reported Condensed Consolidated Statement of Operations for the three and nine months ended December 31, 2012 (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||||
|
|
December 31, 2012 |
|
December 31, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
Net sales |
|
$ |
614,500 |
|
$ |
|
|
$ |
614,500 |
|
$ |
1,630,797 |
|
$ |
|
|
$ |
1,630,797 |
|
Cost of goods sold |
|
404,402 |
|
222 |
(1) |
404,695 |
|
1,080,452 |
|
(793 |
)(1) |
1,079,872 |
| ||||||
|
|
|
|
71 |
(2) |
|
|
|
|
213 |
(2) |
|
| ||||||
Gross profit |
|
210,098 |
|
(293 |
) |
209,805 |
|
550,345 |
|
580 |
|
550,925 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Marketing and selling |
|
112,698 |
|
|
|
112,698 |
|
324,117 |
|
|
|
324,117 |
| ||||||
Research and development |
|
40,393 |
|
95 |
(2) |
40,488 |
|
117,340 |
|
285 |
(2) |
117,625 |
| ||||||
General and administrative |
|
26,382 |
|
|
|
26,382 |
|
84,842 |
|
|
|
84,842 |
| ||||||
Goodwill impairment |
|
211,000 |
|
|
|
211,000 |
|
211,000 |
|
|
|
211,000 |
| ||||||
Restructuring charges (reversals), net |
|
(358 |
) |
|
|
(358 |
) |
28,198 |
|
|
|
28,198 |
| ||||||
Total operating expenses |
|
390,115 |
|
95 |
|
390,210 |
|
765,497 |
|
285 |
|
765,782 |
| ||||||
Operating income (loss) |
|
(180,017 |
) |
(388 |
) |
(180,405 |
) |
(215,152 |
) |
295 |
|
(214,857 |
) | ||||||
Interest income, net |
|
114 |
|
|
|
114 |
|
651 |
|
|
|
651 |
| ||||||
Other expense, net |
|
(3,670 |
) |
|
|
(3,670 |
) |
(4,338 |
) |
|
|
(4,338 |
) | ||||||
Loss before income taxes |
|
(183,573 |
) |
(388 |
) |
(183,961 |
) |
(218,839 |
) |
295 |
|
(218,544 |
) | ||||||
Provision for (benefit from) income taxes |
|
11,370 |
|
|
|
11,370 |
|
(26,616 |
) |
|
|
(26,616 |
) | ||||||
Net loss |
|
$ |
(194,943 |
) |
$ |
(388 |
) |
$ |
(195,331 |
) |
$ |
(192,223 |
) |
$ |
295 |
|
$ |
(191,928 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic and diluted net loss per share |
|
$ |
(1.24 |
) |
|
|
$ |
(1.24 |
) |
$ |
(1.21 |
) |
|
|
$ |
(1.21 |
) | ||
Shares used to compute net loss per share |
|
157,706 |
|
|
|
157,706 |
|
158,383 |
|
|
|
158,383 |
|
Condensed Consolidated Statements of Comprehensive Income
The Companys following table presents the impact of the accounting errors on the Companys previously reported Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2012 (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||||
|
|
December 31, 2012 |
|
December 31, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
|
$ |
(194,943 |
) |
$ |
(222 |
)(1) |
$ |
(195,331 |
) |
$ |
(192,223 |
) |
$ |
793 |
(1) |
$ |
(191,928 |
) |
|
|
|
|
(166 |
)(2) |
|
|
|
|
(498 |
)(2) |
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign currency translation gain (loss) |
|
(321 |
) |
904 |
(3) |
583 |
|
(1,616 |
) |
(2,221 |
)(3) |
(3,837 |
) | ||||||
Defined benefit pension plans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net gain (loss) and prior service costs |
|
(389 |
) |
|
|
(389 |
) |
7,531 |
|
|
|
7,531 |
| ||||||
Less amortization included in operating expenses |
|
311 |
|
|
|
311 |
|
1,067 |
|
|
|
1,067 |
| ||||||
Hedging gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized hedging loss |
|
(915 |
) |
|
|
(915 |
) |
(2,022 |
) |
|
|
(2,022 |
) | ||||||
Reclass of hedging loss (gain) included in cost of goods sold |
|
1,137 |
|
|
|
1,137 |
|
(440 |
) |
|
|
(440 |
) | ||||||
Reclassification adjustment for gain included in other income (expense), net |
|
|
|
|
|
|
|
(343 |
) |
|
|
(343 |
) | ||||||
Other comprehensive income (loss): |
|
(177 |
) |
904 |
|
727 |
|
4,177 |
|
(2,221 |
) |
1,956 |
| ||||||
Total comprehensive loss |
|
$ |
(195,120 |
) |
$ |
682 |
|
$ |
(194,604 |
) |
$ |
(188,046 |
) |
$ |
(1,428 |
) |
$ |
(189,972 |
) |
Condensed Consolidated Statements of Cash Flows
The following table presents the impact of the accounting errors on the Companys previously reported Condensed Consolidated Statement of Cash Flows for the nine months ended December 31, 2012 (in thousands):
|
|
Nine Months Ended |
| |||||||
|
|
December 31, 2012 |
| |||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
| |||
Operating activities: |
|
|
|
|
|
|
| |||
Net loss |
|
$ |
(192,223 |
) |
$ |
793 |
(1) |
$ |
(191,928 |
) |
|
|
|
|
(498 |
)(2) |
|
| |||
Adjustments to reconcile net loss to cash provided by operating activities: |
|
|
|
|
|
|
| |||
Depreciation |
|
33,861 |
|
|
|
33,861 |
| |||
Amortization of other intangible assets |
|
17,914 |
|
498 |
(2) |
18,412 |
| |||
Share-based compensation expense |
|
18,659 |
|
|
|
18,659 |
| |||
Goodwill impairment |
|
211,000 |
|
|
|
211,000 |
| |||
Impairment of strategic investment |
|
3,600 |
|
|
|
3,600 |
| |||
Gain on sale of securities |
|
(831 |
) |
|
|
(831 |
) | |||
Excess tax benefits from share-based compensation |
|
(26 |
) |
|
|
(26 |
) | |||
Deferred income taxes and other |
|
9,398 |
|
|
|
9,398 |
| |||
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
| |||
Accounts receivable, net |
|
(41,310 |
) |
(261 |
)(3) |
(41,571 |
) | |||
Inventories |
|
1,444 |
|
(1,092 |
)(3) |
352 |
| |||
Other assets |
|
(2,201 |
) |
(231 |
)(3) |
(2,432 |
) | |||
Accounts payable |
|
39,673 |
|
2,220 |
(3) |
41,893 |
| |||
Accrued and other liabilities |
|
5,238 |
|
(793 |
)(1) |
3,961 |
| |||
|
|
|
|
(484 |
)(3) |
|
| |||
Net cash provided by operating activities |
|
104,196 |
|
152 |
|
104,348 |
| |||
|
|
|
|
|
|
|
| |||
Investing activities: |
|
|
|
|
|
|
| |||
Purchases of property, plant and equipment |
|
(39,737 |
) |
(2,295 |
)(3) |
(42,032 |
) | |||
Purchase of strategic investment |
|
(3,970 |
) |
|
|
(3,970 |
) | |||
Proceeds from sales of available-for-sale securities |
|
917 |
|
|
|
917 |
| |||
Purchases of trading investments for deferred compensation plan |
|
(2,294 |
) |
|
|
(2,294 |
) | |||
Proceeds from sales of trading investments for deferred compensation plan |
|
2,309 |
|
|
|
2,309 |
| |||
Net cash used in investing activities |
|
(42,775 |
) |
(2,295 |
) |
(45,070 |
) | |||
|
|
|
|
|
|
|
| |||
Financing activities: |
|
|
|
|
|
|
| |||
Payment of cash dividends |
|
(133,462 |
) |
|
|
(133,462 |
) | |||
Purchases of treasury shares |
|
(89,955 |
) |
2,143 |
(3) |
(87,812 |
) | |||
Proceeds from sales of shares upon exercise of options and purchase rights |
|
8,843 |
|
|
|
8,843 |
| |||
Tax withholdings related to net share settlements of restricted stock units |
|
(1,995 |
) |
|
|
(1,995 |
) | |||
Excess tax benefits from share-based compensation |
|
26 |
|
|
|
26 |
| |||
Net cash used in financing activities |
|
(216,543 |
) |
2,143 |
|
(214,400 |
) | |||
|
|
|
|
|
|
|
| |||
Effect of exchange rate changes on cash and cash equivalents |
|
(1,249 |
) |
|
|
(1,249 |
) | |||
Net decrease in cash and cash equivalents |
|
(156,371 |
) |
|
|
(156,371 |
) | |||
Cash and cash equivalents, beginning of the year |
|
478,370 |
|
|
|
478,370 |
| |||
Cash and cash equivalents, end of the period |
|
$ |
321,999 |
|
$ |
|
|
$ |
321,999 |
|
Other Revisions
During fiscal year 2013, the Company also determined that geographic net sales (Note 13), previously reported in its Form 10-Q for the three and nine months ended December 31, 2012, were not properly stated. These revisions had no impact on the previously reported Condensed Consolidated Statements of Operations.
Note 3 Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated interim financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and therefore do
not include all the information required by GAAP for complete financial statements. They should be read in conjunction with the Companys audited consolidated financial statements for the fiscal year ended March 31, 2013, included in its Annual Report on Form 10-K/A filed with the SEC on August 7, 2013. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Operating results for the three and nine months ended December 31, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014, or any future periods.
Certain prior period financial statement amounts have been reclassified to conform to the current period presentation with no impact on previously reported net income.
Fiscal Years
The Companys fiscal years end on March 31. Interim quarters are thirteen-week periods, each ending on a Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the calendar month end.
Changes in Significant Accounting Policies
There have been no substantial changes in the Companys significant accounting policies during the three and nine months ended December 31, 2013, compared with the significant accounting policies described in its Annual Report on Form 10-K/A for the fiscal year ended March 31, 2013 filed with the SEC on August 7, 2013.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and expenses and the disclosure of contingent assets and liabilities. Examples of significant estimates and assumptions made by management involve the fair value of goodwill, accruals for customer programs, inventory valuation, valuation allowances for deferred tax assets and warranty accruals. Although these estimates are based on managements best knowledge of current events and actions that may impact the Company in the future, actual results could differ from those estimates.
Recent Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
Note 4 Net Income (Loss) Per Share
The computations of basic and diluted net income (loss) per share for the Company were as follows (in thousands, except per share amounts):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
(revised) |
|
|
|
(revised) |
| ||||
Net income (loss) |
|
$ |
48,503 |
|
$ |
(195,331 |
) |
$ |
63,944 |
|
$ |
(191,928 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Shares used in net income (loss) per share computation: |
|
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding - basic |
|
160,871 |
|
157,706 |
|
160,051 |
|
158,383 |
| ||||
Effect of potentially dilutive equivalent shares |
|
2,517 |
|
|
|
1,458 |
|
|
| ||||
Weighted average shares outstanding - diluted |
|
163,388 |
|
157,706 |
|
161,509 |
|
158,383 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.30 |
|
$ |
(1.24 |
) |
$ |
0.40 |
|
$ |
(1.21 |
) |
Diluted |
|
$ |
0.30 |
|
$ |
(1.24 |
) |
$ |
0.40 |
|
$ |
(1.21 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Anti-dilutive equivalent shares excluded |
|
11,080 |
|
15,951 |
|
15,874 |
|
17,505 |
|
Note 5 Employee Benefit Plans
Employee Share Purchase Plans and Stock Incentive Plans
As of September 30, 2013, the Company offers the 2006 Employee Share Purchase Plan-Non-U.S. (2006 ESPP), the 1996 Employee Share Purchase Plan-U.S. (1996 ESPP), the 2006 Stock Incentive Plan (2006 Plan) and the 2012 Stock Inducement Equity Plan (2012 Plan). On September 4, 2013, at the 2013 Annual General Meeting of Shareholders, the Companys shareholders approved amendments to, and restatement of, the 1996 ESPP and the 2006 ESPP, which included the increase of 8.0 million additional shares to be issued under these ESPP plans. Shares issued as a result of purchases or exercises under these plans are generally issued from shares held in treasury.
The following table summarizes the share-based compensation expense and related tax benefit recognized for the three and nine months ended December 31, 2013 and 2012 (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Cost of goods sold |
|
$ |
672 |
|
$ |
704 |
|
$ |
1,843 |
|
$ |
2,101 |
|
Research and development |
|
1,906 |
|
2,430 |
|
3,840 |
|
6,018 |
| ||||
Marketing and selling |
|
3,057 |
|
953 |
|
5,980 |
|
5,377 |
| ||||
General and administrative |
|
3,278 |
|
1,135 |
|
5,749 |
|
5,163 |
| ||||
Total share-based compensation expense |
|
8,913 |
|
5,222 |
|
17,412 |
|
18,659 |
| ||||
Income tax benefit |
|
(168 |
) |
(1,043 |
) |
(2,343 |
) |
(4,090 |
) | ||||
Total share-based compensation expense, net of income tax |
|
$ |
8,745 |
|
$ |
4,179 |
|
$ |
15,069 |
|
$ |
14,569 |
|
As of December 31 and March 31, 2013, $0.5 million and $0.4 million of share-based compensation expense were capitalized in inventory.
Defined Contribution Plans
Certain of the Companys subsidiaries have defined contribution employee benefit plans covering all or a portion of their employees. Contributions to these plans are discretionary for certain plans and are based on specified or were statutory requirements for others. The charges to expense for these plans for the three and nine months ended December 31, 2013 were $1.4 million and $4.7 million, respectively, compared to $2.0 million and $6.6 million for the three and nine months ended December 31, 2012.
Defined Benefit Plans
Certain of the Companys subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees years of service and earnings, or in accordance with applicable employee benefit regulations. The Companys practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations.
During the nine months ended December 31, 2012, the Companys Swiss defined benefit pension plan was subject to re-measurement due to the number of plan participants affected by the April 2012 restructuring described in Note 14. The re-measurement resulted in the realization of $2.2 million in previously unrecognized losses residing within accumulated other comprehensive loss that the Company recognized during the nine months ended December 31, 2012.
The net periodic benefit cost for defined benefit pension plans and non-retirement post-employment benefit obligations for the three and nine months ended December 31, 2013 and 2012 were as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Service costs |
|
$ |
2,024 |
|
$ |
1,770 |
|
$ |
5,953 |
|
$ |
5,371 |
|
Interest costs |
|
442 |
|
440 |
|
1,299 |
|
1,352 |
| ||||
Expected return on plan assets |
|
(405 |
) |
(378 |
) |
(1,395 |
) |
(996 |
) | ||||
Amortization of net transition obligation |
|
1 |
|
1 |
|
3 |
|
3 |
| ||||
Amortization of net period service costs |
|
53 |
|
39 |
|
157 |
|
115 |
| ||||
Recognized net actuarial loss |
|
263 |
|
271 |
|
772 |
|
949 |
| ||||
Settlement costs |
|
|
|
|
|
|
|
2,254 |
| ||||
|
|
$ |
2,378 |
|
$ |
2,143 |
|
$ |
6,789 |
|
$ |
9,048 |
|
Note 6 Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Companys income before taxes and the provision for income taxes are generated outside of Switzerland.
The income tax provision for the three months ended December 31, 2013 was $4.8 million based on an effective income tax rate of 9.0% of pre-tax income, compared to $11.4 million based on an effective income tax rate of 6.2% of pre-tax loss for the three months ended December 31, 2012. For the nine months ended December 31, 2013, the income tax provision was $7.1 million based on an effective income tax rate of 9.9% of pre-tax income, compared to an income tax benefit of $26.6 million based on an effective income tax rate of 12.2% of pre-tax loss for the nine months ended December 31, 2012. The change in the effective income tax rate for the three and nine months ended December 31, 2013, compared to the three and nine months ended December 31, 2012, was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates and the treatment of restructuring expenses and goodwill impairment as discrete events in determining the annual effective tax rate in fiscal year 2013. In addition, there was a discrete tax benefit of $35.6 million during the nine months ended December 31, 2012, related to the reversal of uncertain tax positions resulting from the closure of federal income tax examinations in the United States. In the three months ended December 31, 2013, there was a discrete tax benefit of $10.0 million from the reversal of uncertain tax positions resulting from expiration of the statutes of limitations.
During the three and nine months ended December 31, 2013, the Company incurred restructuring-related termination benefits and lease exit costs in the amount of $0.8 million and $8.6 million, respectively. In determining the Companys estimated effective annual tax rate for fiscal year 2014, the restructuring activities were not treated as a discrete event as the charges were not significantly unusual and infrequent in nature, unlike the $43.7 million incurred in fiscal year 2013, of which $28.2 million was incurred through December 31, 2012. The tax benefit associated with the restructuring during the nine months ended December 31, 2013 was not material.
The Company recorded a non-cash goodwill impairment charge of $214.5 million related to the video conferencing reporting unit in fiscal year 2013, of which $211.0 million was recorded in December 2012. The impairment was treated as a discrete event in fiscal year 2013 in determining the effective annual tax rate as it was significantly unusual and infrequent in nature. There was no tax benefit associated with goodwill impairment as the goodwill is not tax-deductible.
The U.S. federal research tax credit, which was extended retroactively by the American Taxpayer Relief Act of 2012 for two years from January 1, 2012, has expired as of December 31, 2013. The income tax expense for the nine months ended December 31, 2013 reflected a $0.8 million tax benefit for research tax credits.
As of December 31 and March 31, 2013, the total amount of unrecognized tax benefits and related accrued interest and penalties due to uncertain tax positions was $100.4 million and $102.0 million, respectively, of which $88.6 million and $90.3 million would affect the effective income tax rate if recognized, respectively. The Company classified the unrecognized tax benefits as non-current income taxes payable.
The Company continues to recognize interest and penalties related to unrecognized tax positions in income tax expense. As of December 31 and March 31, 2013, the Company had $5.6 million and $6.6 million of accrued interest and penalties related to uncertain tax positions, respectively.
The Company files Swiss and foreign tax returns. For all these tax returns, the Company is generally not subject to tax examinations for years prior to fiscal year 2001. The Company is under examination and has received assessment notices in foreign tax jurisdictions. At this time, the Company is not able to estimate the potential impact that these examinations may have on income tax expense. If the examinations are resolved unfavorably, there is a possibility they may have a material negative impact on the Companys results of operations.
Although the Company believes it has adequately provided for uncertain tax positions, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. It is not possible at this time to reasonably estimate changes in the unrecognized tax benefits within the next twelve months.
Note 7 Balance Sheet Components
The following table presents the components of certain balance sheet asset amounts as of December 31 and March 31, 2013 (in thousands):
|
|
December 31, |
|
March 31, |
| ||
|
|
2013 |
|
2013 |
| ||
Accounts receivable: |
|
|
|
|
| ||
Accounts receivable |
|
$ |
503,270 |
|
$ |
325,870 |
|
Allowance for doubtful accounts |
|
(1,018 |
) |
(2,153 |
) | ||
Allowance for returns |
|
(19,415 |
) |
(21,883 |
) | ||
Allowance for cooperative marketing arrangements |
|
(30,847 |
) |
(24,160 |
) | ||
Allowance for customer incentive programs |
|
(61,553 |
) |
(42,857 |
) | ||
Allowance for pricing programs |
|
(77,490 |
) |
(55,252 |
) | ||
|
|
$ |
312,947 |
|
$ |
179,565 |
|
|
|
|
|
|
| ||
Inventories: |
|
|
|
|
| ||
Raw materials |
|
$ |
29,541 |
|
$ |
37,504 |
|
Work-in-process |
|
98 |
|
41 |
| ||
Finished goods |
|
228,359 |
|
223,538 |
| ||
|
|
$ |
257,998 |
|
$ |
261,083 |
|
|
|
|
|
|
| ||
Other current assets: |
|
|
|
|
| ||
Income tax and value-added tax receivables |
|
$ |
19,358 |
|
$ |
17,403 |
|
Deferred tax asset |
|
28,109 |
|
25,400 |
| ||
Prepaid expenses and other assets |
|
13,512 |
|
15,300 |
| ||
|
|
$ |
60,979 |
|
$ |
58,103 |
|
|
|
|
|
|
| ||
Property, plant and equipment, net: |
|
|
|
|
| ||
Plant, buildings and improvements |
|
$ |
69,072 |
|
$ |
70,009 |
|
Equipment |
|
134,106 |
|
129,868 |
| ||
Computer equipment |
|
32,901 |
|
42,437 |
| ||
Software |
|
80,677 |
|
80,930 |
| ||
|
|
316,756 |
|
323,244 |
| ||
Less accumulated depreciation and amortization |
|
(243,458 |
) |
(247,469 |
) | ||
|
|
73,298 |
|
75,775 |
| ||
Construction-in-process |
|
11,377 |
|
9,047 |
| ||
Land |
|
2,819 |
|
2,827 |
| ||
|
|
$ |
87,494 |
|
$ |
87,649 |
|
|
|
|
|
|
| ||
Other assets: |
|
|
|
|
| ||
Deferred tax asset |
|
$ |
50,075 |
|
$ |
53,035 |
|
Trading investments |
|
16,439 |
|
15,599 |
| ||
Other assets |
|
4,808 |
|
6,464 |
| ||
|
|
$ |
71,322 |
|
$ |
75,098 |
|
The following table presents the components of certain balance sheet liability amounts as of December 31 and March 31, 2013 (in thousands):
|
|
December 31, |
|
March 31, |
| ||
|
|
2013 |
|
2013 |
| ||
Accrued and other current liabilities: |
|
|
|
|
| ||
Accrued personal expenses |
|
$ |
62,221 |
|
$ |
40,502 |
|
Accrued marketing expenses |
|
12,859 |
|
11,005 |
| ||
Indirect customer incentive programs |
|
40,775 |
|
29,464 |
| ||
Accrued restructuring |
|
3,265 |
|
13,458 |
| ||
Deferred revenue |
|
22,078 |
|
22,698 |
| ||
Accrued freight and duty |
|
9,912 |
|
5,882 |
| ||
Value-added taxes payable |
|
7,870 |
|
8,544 |
| ||
Accrued royalties |
|
4,597 |
|
3,358 |
| ||
Warranty accrual |
|
12,971 |
|
11,878 |
| ||
Employee benefit plan obligation |
|
1,762 |
|
4,351 |
| ||
Income taxes payable |
|
9,165 |
|
2,463 |
| ||
Other liabilities |
|
46,822 |
|
39,171 |
| ||
|
|
$ |
234,297 |
|
$ |
192,774 |
|
|
|
|
|
|
| ||
Non-current liabilities: |
|
|
|
|
| ||
Income taxes payable |
|
$ |
97,236 |
|
$ |
98,827 |
|
Warranty accrual |
|
9,689 |
|
8,660 |
| ||
Obligation for deferred compensation |
|
16,440 |
|
15,631 |
| ||
Employee benefit plan obligation |
|
41,133 |
|
35,963 |
| ||
Deferred rent |
|
23,316 |
|
24,136 |
| ||
Deferred tax liability |
|
1,769 |
|
1,989 |
| ||
Other liabilities |
|
11,214 |
|
10,676 |
| ||
|
|
$ |
200,797 |
|
$ |
195,882 |
|
The following table presents the changes in the allowance for doubtful accounts during the three and nine months ended December 31, 2013 and 2012 (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Beginning of the period |
|
$ |
1,071 |
|
$ |
2,239 |
|
$ |
2,153 |
|
$ |
2,472 |
|
Expense (reversal), net |
|
280 |
|
141 |
|
(79 |
) |
(48 |
) | ||||
Write-offs, net of recoveries |
|
(333 |
) |
(12 |
) |
(1,056 |
) |
(56 |
) | ||||
End of the period |
|
$ |
1,018 |
|
$ |
2,368 |
|
$ |
1,018 |
|
$ |
2,368 |
|
Note 8 Financial Instruments
Fair Value Measurements
The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:
· Level 1 Quoted prices in active markets for identical assets or liabilities.
· Level 2 Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
· Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company did not have level 3 assets and liabilities as of December 31 and March 31, 2013. The following table presents the Companys financial assets and liabilities, that were accounted for at fair value, excluding assets related to the Companys defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands):
|
|
December 31, 2013 |
|
March 31, 2013 |
| ||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 1 |
|
Level 2 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents: |
|
$ |
156,932 |
|
$ |
|
|
$ |
119,073 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Trading investments for deferred compensation plan: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
$ |
3,257 |
|
$ |
|
|
$ |
4,220 |
|
$ |
|
|
Mutual funds |
|
13,182 |
|
|
|
11,379 |
|
|
| ||||
|
|
$ |
16,439 |
|
$ |
|
|
$ |
15,599 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange derivative assets |
|
$ |
|
|
$ |
719 |
|
$ |
|
|
$ |
1,197 |
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange derivative liabilities |
|
$ |
|
|
$ |
(1,099 |
) |
$ |
|
|
$ |
(707 |
) |
The following table presents the changes in the Companys Level 3 available-for-sale securities during the three and nine months ended December 31, 2013 and 2012 (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
429 |
|
Sale of securities |
|
|
|
|
|
|
|
(917 |
) | ||||
Gain on sale of securities |
|
|
|
|
|
|
|
831 |
| ||||
Reversal of unrealized gain |
|
|
|
|
|
|
|
(343 |
) | ||||
End of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Cash Equivalents
Cash equivalents consist of bank demand deposits and time deposits. The time deposits have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.
Investment Securities
The Companys investment securities portfolio consists of marketable securities (money market and mutual funds) related to a deferred compensation plan. The marketable securities are classified as non-current other assets since the final sale of the investments or realization of proceeds by the plan participants are not expected within the Companys normal operating cycle of one year. The Company has designated these marketable securities as trading investments because the participants in the deferred compensation plan may select the mutual funds in which their compensation deferrals are invested within the confines of the Rabbi Trust which holds the marketable securities. The Company has no intent to actively buy and sell securities with the objective to generate profits on short-term difference in market prices.
The marketable securities are recorded at a fair value of $16.4 million and $15.6 million as of December 31 and March 31, 2013, based on quoted market prices. Earnings related to realized and unrealized gains and losses on trading investments are included in other income (expense), net. Unrealized trading gains and losses was a gain of $0.4 million and $0.2 million for the three and nine months ended December 31, 2013, respectively, compared to unrealized trading loss of $0.1 million and trading gain of $0.1 million for the three and nine months ended December 31, 2012.
Derivative Financial Instruments
The following table presents the fair values of the Companys derivative asset and liability instruments included in other assets and other liabilities, respectively, as of December 31 and March 31, 2013 (in thousands):
|
|
Derivatives |
| ||||||||||
|
|
Asset |
|
Liability |
| ||||||||
|
|
December 31, |
|
March 31, |
|
December 31, |
|
March 31, |
| ||||
|
|
2013 |
|
2013 |
|
2013 |
|
2013 |
| ||||
Designed as hedging instruments: |
|
|
|
|
|
|
|
|
| ||||
Cash flow hedges |
|
$ |
5 |
|
$ |
1,165 |
|
$ |
894 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Not designed as hedging instruments: |
|
|
|
|
|
|
|
|
| ||||
Foreign exchange forward contract |
|
|
|
|
|
184 |
|
270 |
| ||||
Foreign exchange swap contract |
|
714 |
|
32 |
|
21 |
|
437 |
| ||||
|
|
714 |
|
32 |
|
205 |
|
707 |
| ||||
|
|
$ |
719 |
|
$ |
1,197 |
|
$ |
1,099 |
|
$ |
707 |
|
The following table presents the amounts of gains and losses on the Companys derivative instruments for the three and nine months ended December 31, 2013 and 2012 (in thousands):
|
|
Three Months Ended December 31, |
< |