Logitech 2001 Annual Report Download - page 31

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LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and cash equivalents and accounts receivable,
accounts payable and accrued liabilities, short-term debt and current maturities of long-term debt, carrying value
approximates fair value due to their short maturities. The estimated fair value of publicly traded financial equity
instruments is determined by using quoted market prices. The carrying values of long-term debt do not materially differ
from their estimated fair values based upon quoted market prices for the same or similar instruments
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 included in the Company’s diluted
earnings per share computations are registered shares issuable upon the exercise of stock option or stock purchase plan
agreements (using the treasury stock method).
Stock Split
In July 2000, Logitech completed a two-for-one stock split. All references to share and per-share amounts for all
periods presented have been adjusted to give effect to the stock split.
Stock-Based Compensation Plans
The Company has adopted the pro forma disclosure-only requirements of SFAS 123, "Accounting for Stock-Based
Compensation," which requires companies to measure employee stock compensation based on the fair value method of
accounting. As permitted by SFAS 123, the Company follows the accounting provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees.” Accordingly, compensation expense is not recognized
unless the exercise price of an option is less than the market value of the underlying stock on the grant date.
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 or losses on
marketable equity securities. Comprehensive income is presented as an element of shareholder’s equity.
Reclassifications
Certain amounts reported in prior years’ financial statements have been reclassified to conform with the current year
presentation.
Note 3 — Acquisition of Labtec:
On March 27, 2001, the Company acquired Labtec, Inc. a publicly-traded Vancouver, Washington-based provider of
PC speakers, headsets and microphones, personal audio products for MP3 players and other portable audio devices, 3D
input devices, and other peripherals and accessories for computing, communications and entertainment. Under terms of
the merger agreement, Logitech purchased substantially all outstanding shares of Labtec for $73 million in cash and stock,
plus $3.3 million of transaction costs. Consideration for the purchase was obtained through: i) short-term borrowings of
$35 million under a term loan credit facility, ii) the issuance of 1,142,998 Logitech ADSs based upon an working capital
funds. The ADSs issued in the acquistion were valued using the 5-day weighted average market value of Logitech ADSs
encompassing the offer expiration date of March 20, 2001.
The acquisition was accounted for using the purchase method of accounting. Therefore, the assets acquired and
liabilities assumed were recorded at their estimated fair values as determined by the Company’s management based upon
information currently available and on current assumptions as to future operations. The Company obtained an
independent appraisal of the fair values of the acquired identifiable intangible assets. A summary of the purchase
consideration is as follows (in thousands):