Logitech 2003 Annual Report Download

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    LO G I T E C H ฀ ฀2 0 0 3 ฀ F I N A NC I A L ฀ R E V I E W

  • Page 13
    LOGITEC H฀INTERNATIONAL฀S.A.฀2003฀FINANCIAL฀REVIEW TA B L E ฀ O F ฀ C O N T E N T S ITEM฀ Form฀20-F฀ Our฀Corporate฀Governance฀ Logitech฀International฀S.A.฀Apples฀Financial฀Statements฀ P A G E฀ 1 CG-1 LISA-1

  • Page 14
    ... of incorporation or organization) 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) Securities registered or to be registered pursuant to Section 12(b) of...

  • Page 15
    ......4 Key Information...5 Information On The Company ...11 Operating And Financial Review And Prospects...22 Directors, Senior Management And Employees ...30 Major Shareholders And Related Party Transactions ...31 Financial Information...31 The Offer And Listing...32 Item 10. Additional Information...

  • Page 16
    ... statements include statements related to the business strategy for new areas of growth; our belief that we are positioned to take full advantage of opportunities in the market for personal interface products; our belief that our console gaming products will attract a larger number of gamers; the...

  • Page 17
    Part I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. 4

  • Page 18
    ... Corporation's PC video camera business in 1999, the Company recorded charges of $3.3 million and $6.2 million for purchased in-process research and development. 2) In fiscal 1998, the Company sold its scanner product line to Storm Technology, Inc. In 1999, the Company wrote off $5.8 million related...

  • Page 19
    ...results. Our revenues and profitability depend in part on the mix of our retail and OEM sales, because our prices and gross margins are generally lower for sales to OEM customers compared to our sales to retail customers. • • • Fluctuations in currency exchange rates impact our revenues and...

  • Page 20
    ..., including our ability to anticipate technology and market trends; timely develop innovative new products and enhancements; distinguish our products from those of our competitors; manufacture and deliver products in sufficient volumes; and price our products competitively. If we do not do these...

  • Page 21
    ... competition and price pressures in the OEM business and performance enhancements of competing products in retail as well as pricing pressure from less established brands. In addition, consolidation in the personal computer and retail industries has increased the purchasing power of our customers...

  • Page 22
    ...new products since engineers from the United States or Switzerland typically travel to Suzhou or Taiwan to deal with product launch related issues. If our employees outside Asia cannot meet with the production personnel, the launch of our products could be delayed or we may encounter product quality...

  • Page 23
    ... to us, it may be difficult for us to accurately predict revenues, manufacturing costs, customer support costs and product returns. Our ongoing investments in the development and marketing new lines of products could produce higher costs without a proportional increase in revenues. We may be unable...

  • Page 24
    ..., the Company sold 4,000,000 registered shares from treasury in a U.S. initial public offering in the form of 4,000,000 American Depositary Shares and listed the ADSs on the Nasdaq National Market. Logitech maintains its corporate headquarters through its U.S. subsidiary located at 6505 Kaiser Drive...

  • Page 25
    ... work, play and communicate, allowing them to personalize and enrich their digital experience. Over the past 20 years, Logitech has established itself as a leading designer, manufacturer and marketer of computer control devices (mice and trackballs). Building on this leadership position, the Company...

  • Page 26
    ... Choice, Product of the Year, Best of What's New, and more, in a variety of publications such as Popular Science, PC World, Computer Gaming World, Maximum PC, and many additional media worldwide. Retail Brand and Distribution. The Company believes the Logitech brand name and industrial designs are...

  • Page 27
    ... of products including driving wheels, cordless game pads, audio headsets, keyboards, mice and cameras. With many of its products, Logitech can efficiently leverage its investments from one platform -- desktop PC's -- into new platforms -- game consoles. The Mobile Environment As digital information...

  • Page 28
    ... joysticks, gamepads and steering wheels; multimedia speakers; and internet video cameras. The Company's product families are summarized below. • Mice. Logitech offers many varieties of mice, sold through OEM, system builder and retail channels. Most cordless pointing devices from Logitech use our...

  • Page 29
    ... awards, which affirm Logitech's brand in the speaker space. PC and Game Console Headsets and Microphones: Logitech offers a complete line of voice access headsets and microphones. This line is designed to provide the best performance from many PC and game console applications, including voice-over...

  • Page 30
    ... applications, software and video technologies. In addition, this location in the midst of the world's leading technology market enables the Company to compile market intelligence to define and position products and develop key strategic alliances. Logitech's Swiss engineering center provides...

  • Page 31
    ... and steering wheels, is consumers. The primary end-users for Logitech's audio products are consumers, SoHo, and OEM customers. The Company's end user markets for its PC video cameras are SoHo users, corporate buyers and consumers. Logitech's primary end user markets are in North America, Europe and...

  • Page 32
    ... prices in the OEM market, performance enhancements and new features of competing retail products, and increased price competition from less established brands. Microsoft is our main competitor in retail pointing devices, keyboards and PC gaming devices. Microsoft's offerings include a complete line...

  • Page 33
    ... in audio devices vary by product line. In the PC speaker business, competitors include Altec Lansing and Creative Labs. In headset, microphone, and telephony products, competitors include Altec Lansing, Plantronics, and GN Netcom. These markets are intensely competitive and market leadership...

  • Page 34
    ... to Memphis, Tennessee. Logitech's Europe headquarters are in Romanel-sur-Morges, Switzerland. This Company-owned facility comprises 33,300 square feet and includes research and development, product marketing, sales management, technical support, administration and certain Logitech group activities...

  • Page 35
    ...; internet video cameras; speakers, headsets and microphones; and 3D controllers. The Company sells its products through two primary channels, original equipment manufacturers ("OEMs") and a network of retail distributors and resellers ("retail"). Products sold to OEMs, principally pointing devices...

  • Page 36
    ... customer programs and incentive offerings including special pricing agreements, price protection, promotions and other volume-based incentives. Significant management judgments and estimates must be used in connection with establishing these allowances in any accounting period. If market conditions...

  • Page 37
    ... process issues at our third-party logistics provider and reduced our ability to ship product to our North American retail customers in the months of May and June 2002. The retail sales growth was mainly from keyboards, desktops, corded mice, audio, and video products. Our sales of pointing devices...

  • Page 38
    ...steering wheels. Sales of our audio products grew by 13% with unit volumes decreasing by 28%. The sales increase was due to the continued success of the Logitech branded Z series PC speaker family, which was partially offset by lower demand for the Company's value-priced Labtec branded product lines...

  • Page 39
    ... reflects volume decreases in sales of joysticks and gamepads which were offset by the strong sales of the higher value GT Force Steering Wheel for PlayStation® 2. The Company's audio products, which include a full range of PC headsets, speakers and headphones, added eleven percentage points of...

  • Page 40
    ... in new product areas, particularly internet video cameras and audio products. With the acquisition of Labtec at the end of fiscal year 2001, the Company incurred product marketing, product and packaging design and advertising costs relating to the audio products. As a percentage of sales, marketing...

  • Page 41
    ...in open market transactions under a short-term stock buyback program. In July 2002, the Company announced a program to buy back up to CHF 75 million (approximately $52 million based on exchange rates at the date of announcement) of Logitech shares in a twelve-month period. In March 2003, the Company...

  • Page 42
    ... the sale of registered shares and treasury shares to fulfill employee stock option and stock purchase plan requirements. In August through October 2001, under a previously announced registered share buyback program, the Company repurchased 628,704 Logitech shares for $15.0 million in open market...

  • Page 43
    ... Company's board practices appears on pages CG-3 to CG-6 in Exhibit 12.6 to the Form 20-F and is incorporated herein by reference. D. Employees We employed the following numbers of employees: Category Research and development Manufacturing and distribution Marketing, sales and support Administration...

  • Page 44
    ... community property laws where applicable. Registered shares subject to options that are currently exercisable or exercisable within 60 days after March 31, 2003 are deemed to be issued and beneficially owned by the person holding such options for the purpose of computing the percentage ownership of...

  • Page 45
    ... Company sold an additional 600,000 registered shares, represented by 600,000 ADSs, pursuant to an option granted to the underwriters in the offering to cover overallotments. Each ADS represented one-tenth of one registered share. In July 2000, Logitech completed a two-for-one stock split. The stock...

  • Page 46
    ......December 2002...January 2003...February 2003...March 2003...12.00 62.50 62.40 79.70 83.25 Price per Registered Share Low High CHF ...Shares. The ADSs are traded on the Nasdaq National Market. The table below presents, for ADSs on the Nasdaq National Market (i) the annual high and low market prices...

  • Page 47
    ... trading phase orders are matched. The Swiss Exchange interrupts, for limited periods, trading in a security that is subject to significant price fluctuation. Logitech American Depositary Shares The Logitech ADSs, each representing one registered share, have since March 27, 1997 been listed...

  • Page 48
    ... course of business. D. Exchange Controls As a Swiss corporation, Logitech is subject to requirements not generally applicable to United States corporations. Among other things, Logitech's issuances of capital stock generally must be submitted for approval at a general meeting of shareholders...

  • Page 49
    ... States holders of registered shares. Swiss Taxation Gain on Sale Under current Swiss law, a holder of registered shares or ADSs who (i) is a non-resident of Switzerland, (ii) during the taxable year has not engaged in a trade or business through a permanent establishment within Switzerland and (iii...

  • Page 50
    ... costs and long term debt in Europe and Asia. The principal currencies creating foreign exchange rate risk for Logitech are the Euro, Taiwan Dollar, Swiss Franc and Japanese Yen. For the year ended March 31, 2003, approximately 49% of the Company's sales were denominated in non-U.S. currencies. With...

  • Page 51
    ... purchases. 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 March 31, 2003, the notional amount of forward foreign exchange contracts outstanding...

  • Page 52
    ... of record. Each ADS represents one-tenth of a registered share. In August 2001, the Company completed a ten-for-one stock split for 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...

  • Page 53
    ..., or the Chief Accounting Officer. Our code of ethics is available on our website, and for no charge, a copy of the Company's code of ethics can be requested via the following address or phone number: Logitech Inc. Investor Relations Corporate Headquarters: 6505 Kaiser Drive Fremont, CA 94555 USA...

  • Page 54
    ... International S.A.'s Report on form F-4/A filed on March 13, 2001). List of Subsidiaries of Logitech International S.A. Business Ethics and Conflict of Interest Policy of Logitech International S.A., dated May 16, 2003. Consent of PricewaterhouseCoopers SA, Independent Accountants. Bond Purchase...

  • Page 55
    ... for filing on Form 20-F and has duly caused this annual report to be signed on its behalf. Logitech International S.A. By: Guerrino De Luca President and Chief Executive Officer By: Kristen M. Onken Chief Financial Officer, Chief Accounting Officer, and U.S. Representative May 21, 2003 42

  • Page 56
    ...certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which...

  • Page 57
    ...certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which...

  • Page 58
    ... of the Group Auditors to the General Meeting of Logitech International S.A. Apples, Switzerland ...Consolidated balance sheets at March 31, 2003 and 2002...Consolidated statements of income for the years ended March 31, 2003, 2002 and 2001...Consolidated statements of cash flows for the years ended...

  • Page 59
    ... AUDITORS TO THE GENERAL MEETING OF LOGITECH INTERNATIONAL S.A. APPLES, SWITZERLAND As group auditors, we have audited the consolidated financial statements of Logitech International S.A. and its subsidiaries, consisting of the consolidated balance sheets at March 31, 2003 and 2002, the consolidated...

  • Page 60
    ..., 17,890,465 conditionally authorized, 47,901,655 issued and outstanding at March 31, 2003; 53,934,535 authorized, 11,890,465 conditionally authorized, 47,901,655 issued and outstanding at March 31, 2002...Additional paid-in capital...Less registered shares in treasury, at cost, 2,454,857 at March...

  • Page 61
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) 2003 Net sales...Cost of goods sold...Gross profit...Operating expenses: Marketing and selling...Research and development...General and administrative...Purchased in-process research and ...

  • Page 62
    ...in-process research and development...Write-off of investments...Gain on sale of investments...Equity in net losses of affiliated companies...Gain on disposal of property, plant and equipment...Deferred income taxes and other...Changes in current assets and liabilities, net of acquisitions: Accounts...

  • Page 63
    ......Total comprehensive income...Issuance of registered shares for acquisition of Labtec...Issuance of registered shares at par value...Purchase of treasury shares...Sale of shares upon exercise of options and purchase rights...Tax benefit from exercise of stock options...March 31, 2001...Net income...

  • Page 64
    ... video cameras; PC speakers, headsets and microphones; and 3D controllers. 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...

  • Page 65
    ... Company capitalizes the cost of software developed for internal use in connection with major projects. Costs incurred during the feasibility stage are expensed, whereas costs incurred during the application development stage are capitalized. Depreciation is provided using the straight-line method...

  • Page 66
    ...value of publicly traded financial equity instruments are determined by using quoted market prices. Net Income Per Share and ADS Basic earnings per share are computed by dividing net income by the weighted average number of outstanding registered shares. Diluted earnings per share are computed using...

  • Page 67
    ... Stock Split In August 2001, the Company completed a ten-for-one stock split for 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. In July 2000, Logitech...

  • Page 68
    ...: As reported...$ Add back: Stock-based employee compensation expense included in reported net income...Deduct: total stock-based compensation expense determined under the fair value based method, net of related tax...Pro forma net income...$ Basic earnings per share and ADS: As reported...$ Pro...

  • Page 69
    ...of PC speakers, headsets and microphones, personal audio products for MP3 players and other portable audio devices, 3D input devices, and other accessories for computing, communications and entertainment. Under terms of the merger agreement, Logitech purchased substantially all outstanding shares of...

  • Page 70
    ... material to the Company's financial position, sales, results of operations, cash flows or earnings per share. On April 5, 2002, the Company exercised its option to purchase the remaining outstanding shares for $7.4 million, payable in July 2003. A summary of the purchase consideration is as follows...

  • Page 71
    ... 10% of the then outstanding stock of Immersion Corporation, a developer of force feedback technology for PC peripherals and software applications. In November 1999, Immersion registered shares on the U.S. Nasdaq Stock Market in an initial public offering. In June 2002, the Company reviewed the fair...

  • Page 72
    ...: Raw materials...Work-in-process...Finished goods...Other current assets: Tax and VAT refund receivables...Deferred taxes...Prepaid expenses...Other current...Property, plant and equipment: Land...Plant and buildings...Equipment...Computer equipment and software...Less accumulated depreciation...

  • Page 73
    ... the acquisition of Labtec. 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...

  • Page 74
    ... on exchange rates at the date of the announcement) of Logitech shares in a twelvemonth period. In March 2003, the Company completed its buy back program with the repurchase of 1,509,000 shares for $52.4 million in open market transactions under this program. In February 2003, the Board of Directors...

  • Page 75
    LOGITECH INTERNATIONAL S.A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Under the 1996 Employee Stock Plan, the Company may grant to employees options for registered shares or ADRs, restricted shares, stock appreciation rights, and stock units, which are bookkeeping entries representing the ...

  • Page 76
    ... are provided based on employees' years of service and earnings. The Company's practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. Net pension costs for the years ended March 31, 2003, 2002 and 2001 were $427,000, $321...

  • Page 77
    ...March 31, 2003 pertain to certain tax credits and net operating loss carry forwards resulting from the exercise of employee stock options. When recognized, through generating sufficient taxable income to utilize the NOL deductions, the tax benefit of these credits and losses will be accounted for as...

  • Page 78
    ... indemnification provisions at March 31, 2003. 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...

  • Page 79
    ...628 $ $ Note 15 - Geographic Information: The Company operates in one business segment, which is the design, development, production, marketing and support of computer interface devices. Geographic net sales information in the table below is based on the location of the selling entity. Long-lived...

  • Page 80
    ... and in fiscal year 2002, another customer represented 11% of net sales. In fiscal year 2001, no one customer accounted for more than 10% of our net sales. Long-lived assets by geographic region were as follows: March 31, 2003 2002 (In thousands) Europe...North America...Asia Pacific...Total long...

  • Page 81
    LOGITECH INTERNATIONAL S.A. QUARTERLY FINANCIAL DATA (Unaudited) Three months ended, Mar. 31, 2003 Net sales...Gross profit...Operating expenses: Marketing and selling ...Research and development...General and administrative...Total...Operating income...Net income...Shares used to compute net income...

  • Page 82
    ... incorporation by reference in the Registration Statement on Form S-8 (No. 333100854) of Logitech International S.A. of our report dated April 22, 2003 relating to the financial statements, which appears in this Form 20-F. PricewaterhouseCoopers SA M. Foley M. Perry Lausanne, Switzerland May 21...

  • Page 83
    ... Report fairly presents, in all material respects, the financial condition and result of operations of the Company. By: Senior Vice President Finance Chief Financial Officer May 21, 2003 In connection with the Form 20-F of Logitech International S.A. (the "Company") as furnished to the Securities...

  • Page 84
    Exhibit 12.6 LOGITECH INTERNATIONAL S.A. OUR CORPORATE GOVERNANCE

  • Page 85
    ... new ratio of one ADS to one registered share. In June 2002, the Company repurchased 88,000 shares for $3.8 million in open market transactions under a stock buyback program. In July 2002, the Company announced a program to buy back up to CHF 75 million (approximately $52 million) of Logitech shares...

  • Page 86
    ... of the Board Logitech's Board of Directors is responsible for supervising the management of the business and affairs of the Company. In particular, the primary functions of the Board are setting strategic direction of the Company; overseeing the Company's financial accounting, controls, planning...

  • Page 87
    ...the Company's internal controls; reviews the independence, fee arrangements, audit scope, and performance of the Company's independent auditors, and recommends the appointment or replacement of independent auditors to the Board of Directors; reviews and approves all non-audit work to be performed by...

  • Page 88
    ..., Switzerland. Guerrino De Luca joined the Company as President and Chief Executive Officer in February 1998, and became a member of the Board of Directors in June 1998. Prior to that time, Mr. De Luca served as Executive Vice President of Worldwide Marketing for Apple Computer, Inc., a personal...

  • Page 89
    ...Moone was Group Vice President and General Manager of the Consumer Line of Business at Cisco Systems, Inc. From March 1999, Mr. Moone served as President, Chief Executive Officer and a member of the Board of Directors of V-Bits Inc., until its acquisition by Cisco Systems in December 1999. From June...

  • Page 90
    ... was named Senior Vice President, Video Division in April 2001. Prior to joining Logitech, he was Vice President of Engineering from 1995 at Winnov LP, a company engaged in the development and marketing of multimedia products. For over 10 years he held several engineering and management positions at...

  • Page 91
    ... of Management The following table presents information as of March 31, 2003 regarding the share and option ownership of our registered shares, including shares represented by American Depositary Receipts, by our non-employee directors and executive officers as a group: Shares Owned % of Outstanding...

  • Page 92
    ... or senior management other than as noted above. In addition, none of them had any outstanding loans at March 31, 2003. Conflicts of Interest The Company believes that no director or officer benefits from any contract between Logitech and a third party. Shareholders' Rights Each registered share...

  • Page 93
    ... is required to make an offer to acquire all listed securities of the company that are listed for trading on the Swiss Exchange. Logitech has not waived or otherwise changed these rules. Our executive officers generally have Change of Control Severance Agreements with Logitech. Under the terms of...

  • Page 94
    ...and annual SEC files as well as press releases are available to download from our website at www.logitech.com. For no charge, a copy of the Company's filings can be requested via the following address or phone number: Logitech Inc. Investor Relations Corporate Headquarters: 6505 Kaiser Drive Fremont...

  • Page 95
    LOGITECH INTERNATIONAL S.A., APPLES FINANCIAL STATEMENTS

  • Page 96
    LOGITECH INTERNATIONAL S.A., APPLES TABLE OF CONTENTS Page Swiss Statutory Balance Sheet ...2 Swiss Statutory Statements of Income ...3 Notes to Swiss Statutory Financial Statements ...4 Report of the Statutory Auditors ...5 LISA - 1

  • Page 97
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY BALANCE SHEET (unconsolidated) (In thousands of Swiss francs) March 31, 2003 ASSETS Current assets: Cash...Short-term bank deposits...Dividends receivable...Accrued interest and other receivables...Advances to group companies...Total current ...

  • Page 98
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY STATEMENTS OF INCOME (unconsolidated) (In thousands of Swiss francs) Year ended M arch 31, 2003 2002 Dividend income...Royalty fees...Interest income from third parties...Interest income from subsidiaries...Realized exchange gains, net of exchange...

  • Page 99
    ... consolidated financial position of the Holding Company and its subsidiaries. Note 2 - Contingent Liabilities: Logitech International SA issued guarantees to a bank for CHF 20,000,000 for lines of credit available to its subsidiaries. At March 31, 2003 the aforementioned credit line facilities were...

  • Page 100
    ... remaining number of conditional registered shares at March 31, 2003 was 15,165,465, which are available for issuance upon the exercise of employee stock options and purchase rights related to the employee share purchase plans. During the fiscal year 2003 and 2002, zero and 758,065, were issued from...

  • Page 101
    ... and notes) of Logitech International S.A. for the year ended March 31, 2003. These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements...

  • Page 102
    ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ...

  • Page 103
    ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ © 2003 Logitech. All rights reserved. Logitech, the Logitech logo, and other Logitech marks are owned by Logitech and may be registered. All other trademarks are the property of their respective owners. ฀

  • Page 104
    LO G I T E C H ฀ ฀2 0 0 3 ฀ F I N A NC I A L ฀ R E V I E W

  • Page 105
    LOGITEC H฀INTERNATIONAL฀S.A.฀2003฀FINANCIAL฀REVIEW TA B L E ฀ O F ฀ C O N T E N T S ITEM฀ Form฀20-F฀ Our฀Corporate฀Governance฀ Logitech฀International฀S.A.฀Apples฀Financial฀Statements฀ P A G E฀ 1 CG-1 LISA-1

  • Page 106
    ... of incorporation or organization) 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) Securities registered or to be registered pursuant to Section 12(b) of...

  • Page 107
    ......4 Key Information...5 Information On The Company ...11 Operating And Financial Review And Prospects...22 Directors, Senior Management And Employees ...30 Major Shareholders And Related Party Transactions ...31 Financial Information...31 The Offer And Listing...32 Item 10. Additional Information...

  • Page 108
    ... statements include statements related to the business strategy for new areas of growth; our belief that we are positioned to take full advantage of opportunities in the market for personal interface products; our belief that our console gaming products will attract a larger number of gamers; the...

  • Page 109
    Part I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. 4

  • Page 110
    ... Corporation's PC video camera business in 1999, the Company recorded charges of $3.3 million and $6.2 million for purchased in-process research and development. 2) In fiscal 1998, the Company sold its scanner product line to Storm Technology, Inc. In 1999, the Company wrote off $5.8 million related...

  • Page 111
    ...results. Our revenues and profitability depend in part on the mix of our retail and OEM sales, because our prices and gross margins are generally lower for sales to OEM customers compared to our sales to retail customers. • • • Fluctuations in currency exchange rates impact our revenues and...

  • Page 112
    ..., including our ability to anticipate technology and market trends; timely develop innovative new products and enhancements; distinguish our products from those of our competitors; manufacture and deliver products in sufficient volumes; and price our products competitively. If we do not do these...

  • Page 113
    ... competition and price pressures in the OEM business and performance enhancements of competing products in retail as well as pricing pressure from less established brands. In addition, consolidation in the personal computer and retail industries has increased the purchasing power of our customers...

  • Page 114
    ...new products since engineers from the United States or Switzerland typically travel to Suzhou or Taiwan to deal with product launch related issues. If our employees outside Asia cannot meet with the production personnel, the launch of our products could be delayed or we may encounter product quality...

  • Page 115
    ... to us, it may be difficult for us to accurately predict revenues, manufacturing costs, customer support costs and product returns. Our ongoing investments in the development and marketing new lines of products could produce higher costs without a proportional increase in revenues. We may be unable...

  • Page 116
    ..., the Company sold 4,000,000 registered shares from treasury in a U.S. initial public offering in the form of 4,000,000 American Depositary Shares and listed the ADSs on the Nasdaq National Market. Logitech maintains its corporate headquarters through its U.S. subsidiary located at 6505 Kaiser Drive...

  • Page 117
    ... work, play and communicate, allowing them to personalize and enrich their digital experience. Over the past 20 years, Logitech has established itself as a leading designer, manufacturer and marketer of computer control devices (mice and trackballs). Building on this leadership position, the Company...

  • Page 118
    ... Choice, Product of the Year, Best of What's New, and more, in a variety of publications such as Popular Science, PC World, Computer Gaming World, Maximum PC, and many additional media worldwide. Retail Brand and Distribution. The Company believes the Logitech brand name and industrial designs are...

  • Page 119
    ... of products including driving wheels, cordless game pads, audio headsets, keyboards, mice and cameras. With many of its products, Logitech can efficiently leverage its investments from one platform -- desktop PC's -- into new platforms -- game consoles. The Mobile Environment As digital information...

  • Page 120
    ... joysticks, gamepads and steering wheels; multimedia speakers; and internet video cameras. The Company's product families are summarized below. • Mice. Logitech offers many varieties of mice, sold through OEM, system builder and retail channels. Most cordless pointing devices from Logitech use our...

  • Page 121
    ... awards, which affirm Logitech's brand in the speaker space. PC and Game Console Headsets and Microphones: Logitech offers a complete line of voice access headsets and microphones. This line is designed to provide the best performance from many PC and game console applications, including voice-over...

  • Page 122
    ... applications, software and video technologies. In addition, this location in the midst of the world's leading technology market enables the Company to compile market intelligence to define and position products and develop key strategic alliances. Logitech's Swiss engineering center provides...

  • Page 123
    ... and steering wheels, is consumers. The primary end-users for Logitech's audio products are consumers, SoHo, and OEM customers. The Company's end user markets for its PC video cameras are SoHo users, corporate buyers and consumers. Logitech's primary end user markets are in North America, Europe and...

  • Page 124
    ... prices in the OEM market, performance enhancements and new features of competing retail products, and increased price competition from less established brands. Microsoft is our main competitor in retail pointing devices, keyboards and PC gaming devices. Microsoft's offerings include a complete line...

  • Page 125
    ... in audio devices vary by product line. In the PC speaker business, competitors include Altec Lansing and Creative Labs. In headset, microphone, and telephony products, competitors include Altec Lansing, Plantronics, and GN Netcom. These markets are intensely competitive and market leadership...

  • Page 126
    ... to Memphis, Tennessee. Logitech's Europe headquarters are in Romanel-sur-Morges, Switzerland. This Company-owned facility comprises 33,300 square feet and includes research and development, product marketing, sales management, technical support, administration and certain Logitech group activities...

  • Page 127
    ...; internet video cameras; speakers, headsets and microphones; and 3D controllers. The Company sells its products through two primary channels, original equipment manufacturers ("OEMs") and a network of retail distributors and resellers ("retail"). Products sold to OEMs, principally pointing devices...

  • Page 128
    ... customer programs and incentive offerings including special pricing agreements, price protection, promotions and other volume-based incentives. Significant management judgments and estimates must be used in connection with establishing these allowances in any accounting period. If market conditions...

  • Page 129
    ... process issues at our third-party logistics provider and reduced our ability to ship product to our North American retail customers in the months of May and June 2002. The retail sales growth was mainly from keyboards, desktops, corded mice, audio, and video products. Our sales of pointing devices...

  • Page 130
    ...steering wheels. Sales of our audio products grew by 13% with unit volumes decreasing by 28%. The sales increase was due to the continued success of the Logitech branded Z series PC speaker family, which was partially offset by lower demand for the Company's value-priced Labtec branded product lines...

  • Page 131
    ... reflects volume decreases in sales of joysticks and gamepads which were offset by the strong sales of the higher value GT Force Steering Wheel for PlayStation® 2. The Company's audio products, which include a full range of PC headsets, speakers and headphones, added eleven percentage points of...

  • Page 132
    ... in new product areas, particularly internet video cameras and audio products. With the acquisition of Labtec at the end of fiscal year 2001, the Company incurred product marketing, product and packaging design and advertising costs relating to the audio products. As a percentage of sales, marketing...

  • Page 133
    ...in open market transactions under a short-term stock buyback program. In July 2002, the Company announced a program to buy back up to CHF 75 million (approximately $52 million based on exchange rates at the date of announcement) of Logitech shares in a twelve-month period. In March 2003, the Company...

  • Page 134
    ... the sale of registered shares and treasury shares to fulfill employee stock option and stock purchase plan requirements. In August through October 2001, under a previously announced registered share buyback program, the Company repurchased 628,704 Logitech shares for $15.0 million in open market...

  • Page 135
    ... Company's board practices appears on pages CG-3 to CG-6 in Exhibit 12.6 to the Form 20-F and is incorporated herein by reference. D. Employees We employed the following numbers of employees: Category Research and development Manufacturing and distribution Marketing, sales and support Administration...

  • Page 136
    ... community property laws where applicable. Registered shares subject to options that are currently exercisable or exercisable within 60 days after March 31, 2003 are deemed to be issued and beneficially owned by the person holding such options for the purpose of computing the percentage ownership of...

  • Page 137
    ... Company sold an additional 600,000 registered shares, represented by 600,000 ADSs, pursuant to an option granted to the underwriters in the offering to cover overallotments. Each ADS represented one-tenth of one registered share. In July 2000, Logitech completed a two-for-one stock split. The stock...

  • Page 138
    ......December 2002...January 2003...February 2003...March 2003...12.00 62.50 62.40 79.70 83.25 Price per Registered Share Low High CHF ...Shares. The ADSs are traded on the Nasdaq National Market. The table below presents, for ADSs on the Nasdaq National Market (i) the annual high and low market prices...

  • Page 139
    ... trading phase orders are matched. The Swiss Exchange interrupts, for limited periods, trading in a security that is subject to significant price fluctuation. Logitech American Depositary Shares The Logitech ADSs, each representing one registered share, have since March 27, 1997 been listed...

  • Page 140
    ... course of business. D. Exchange Controls As a Swiss corporation, Logitech is subject to requirements not generally applicable to United States corporations. Among other things, Logitech's issuances of capital stock generally must be submitted for approval at a general meeting of shareholders...

  • Page 141
    ... States holders of registered shares. Swiss Taxation Gain on Sale Under current Swiss law, a holder of registered shares or ADSs who (i) is a non-resident of Switzerland, (ii) during the taxable year has not engaged in a trade or business through a permanent establishment within Switzerland and (iii...

  • Page 142
    ... costs and long term debt in Europe and Asia. The principal currencies creating foreign exchange rate risk for Logitech are the Euro, Taiwan Dollar, Swiss Franc and Japanese Yen. For the year ended March 31, 2003, approximately 49% of the Company's sales were denominated in non-U.S. currencies. With...

  • Page 143
    ... purchases. 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 March 31, 2003, the notional amount of forward foreign exchange contracts outstanding...

  • Page 144
    ... of record. Each ADS represents one-tenth of a registered share. In August 2001, the Company completed a ten-for-one stock split for 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...

  • Page 145
    ..., or the Chief Accounting Officer. Our code of ethics is available on our website, and for no charge, a copy of the Company's code of ethics can be requested via the following address or phone number: Logitech Inc. Investor Relations Corporate Headquarters: 6505 Kaiser Drive Fremont, CA 94555 USA...

  • Page 146
    ... International S.A.'s Report on form F-4/A filed on March 13, 2001). List of Subsidiaries of Logitech International S.A. Business Ethics and Conflict of Interest Policy of Logitech International S.A., dated May 16, 2003. Consent of PricewaterhouseCoopers SA, Independent Accountants. Bond Purchase...

  • Page 147
    ... for filing on Form 20-F and has duly caused this annual report to be signed on its behalf. Logitech International S.A. By: Guerrino De Luca President and Chief Executive Officer By: Kristen M. Onken Chief Financial Officer, Chief Accounting Officer, and U.S. Representative May 21, 2003 42

  • Page 148
    ...certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which...

  • Page 149
    ...certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. All significant deficiencies in the design or operation of internal controls which...

  • Page 150
    ... of the Group Auditors to the General Meeting of Logitech International S.A. Apples, Switzerland ...Consolidated balance sheets at March 31, 2003 and 2002...Consolidated statements of income for the years ended March 31, 2003, 2002 and 2001...Consolidated statements of cash flows for the years ended...

  • Page 151
    ... AUDITORS TO THE GENERAL MEETING OF LOGITECH INTERNATIONAL S.A. APPLES, SWITZERLAND As group auditors, we have audited the consolidated financial statements of Logitech International S.A. and its subsidiaries, consisting of the consolidated balance sheets at March 31, 2003 and 2002, the consolidated...

  • Page 152
    ..., 17,890,465 conditionally authorized, 47,901,655 issued and outstanding at March 31, 2003; 53,934,535 authorized, 11,890,465 conditionally authorized, 47,901,655 issued and outstanding at March 31, 2002...Additional paid-in capital...Less registered shares in treasury, at cost, 2,454,857 at March...

  • Page 153
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) 2003 Net sales...Cost of goods sold...Gross profit...Operating expenses: Marketing and selling...Research and development...General and administrative...Purchased in-process research and ...

  • Page 154
    ...in-process research and development...Write-off of investments...Gain on sale of investments...Equity in net losses of affiliated companies...Gain on disposal of property, plant and equipment...Deferred income taxes and other...Changes in current assets and liabilities, net of acquisitions: Accounts...

  • Page 155
    ......Total comprehensive income...Issuance of registered shares for acquisition of Labtec...Issuance of registered shares at par value...Purchase of treasury shares...Sale of shares upon exercise of options and purchase rights...Tax benefit from exercise of stock options...March 31, 2001...Net income...

  • Page 156
    ... video cameras; PC speakers, headsets and microphones; and 3D controllers. 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...

  • Page 157
    ... Company capitalizes the cost of software developed for internal use in connection with major projects. Costs incurred during the feasibility stage are expensed, whereas costs incurred during the application development stage are capitalized. Depreciation is provided using the straight-line method...

  • Page 158
    ...value of publicly traded financial equity instruments are determined by using quoted market prices. Net Income Per Share and ADS Basic earnings per share are computed by dividing net income by the weighted average number of outstanding registered shares. Diluted earnings per share are computed using...

  • Page 159
    ... Stock Split In August 2001, the Company completed a ten-for-one stock split for 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. In July 2000, Logitech...

  • Page 160
    ...: As reported...$ Add back: Stock-based employee compensation expense included in reported net income...Deduct: total stock-based compensation expense determined under the fair value based method, net of related tax...Pro forma net income...$ Basic earnings per share and ADS: As reported...$ Pro...

  • Page 161
    ...of PC speakers, headsets and microphones, personal audio products for MP3 players and other portable audio devices, 3D input devices, and other accessories for computing, communications and entertainment. Under terms of the merger agreement, Logitech purchased substantially all outstanding shares of...

  • Page 162
    ... material to the Company's financial position, sales, results of operations, cash flows or earnings per share. On April 5, 2002, the Company exercised its option to purchase the remaining outstanding shares for $7.4 million, payable in July 2003. A summary of the purchase consideration is as follows...

  • Page 163
    ... 10% of the then outstanding stock of Immersion Corporation, a developer of force feedback technology for PC peripherals and software applications. In November 1999, Immersion registered shares on the U.S. Nasdaq Stock Market in an initial public offering. In June 2002, the Company reviewed the fair...

  • Page 164
    ...: Raw materials...Work-in-process...Finished goods...Other current assets: Tax and VAT refund receivables...Deferred taxes...Prepaid expenses...Other current...Property, plant and equipment: Land...Plant and buildings...Equipment...Computer equipment and software...Less accumulated depreciation...

  • Page 165
    ... the acquisition of Labtec. 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...

  • Page 166
    ... on exchange rates at the date of the announcement) of Logitech shares in a twelvemonth period. In March 2003, the Company completed its buy back program with the repurchase of 1,509,000 shares for $52.4 million in open market transactions under this program. In February 2003, the Board of Directors...

  • Page 167
    LOGITECH INTERNATIONAL S.A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Under the 1996 Employee Stock Plan, the Company may grant to employees options for registered shares or ADRs, restricted shares, stock appreciation rights, and stock units, which are bookkeeping entries representing the ...

  • Page 168
    ... are provided based on employees' years of service and earnings. The Company's practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. Net pension costs for the years ended March 31, 2003, 2002 and 2001 were $427,000, $321...

  • Page 169
    ...March 31, 2003 pertain to certain tax credits and net operating loss carry forwards resulting from the exercise of employee stock options. When recognized, through generating sufficient taxable income to utilize the NOL deductions, the tax benefit of these credits and losses will be accounted for as...

  • Page 170
    ... indemnification provisions at March 31, 2003. 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...

  • Page 171
    ...$ Note 15 - Geographic Information: The Company operates in one business segment, which is the design, development, production, marketing and support of computer interface devices. Geographic net sales information in the table below is based on the location of the selling entity. Long-lived assets...

  • Page 172
    ... and in fiscal year 2002, another customer represented 11% of net sales. In fiscal year 2001, no one customer accounted for more than 10% of our net sales. Long-lived assets by geographic region were as follows: March 31, 2003 2002 (In thousands) Europe...North America...Asia Pacific...Total long...

  • Page 173
    LOGITECH INTERNATIONAL S.A. QUARTERLY FINANCIAL DATA (Unaudited) Three months ended, Mar. 31, 2003 Net sales...Gross profit...Operating expenses: Marketing and selling ...Research and development...General and administrative...Total...Operating income...Net income...Shares used to compute net income...

  • Page 174
    ... incorporation by reference in the Registration Statement on Form S-8 (No. 333100854) of Logitech International S.A. of our report dated April 22, 2003 relating to the financial statements, which appears in this Form 20-F. PricewaterhouseCoopers SA M. Foley M. Perry Lausanne, Switzerland May 21...

  • Page 175
    ... Report fairly presents, in all material respects, the financial condition and result of operations of the Company. By: Senior Vice President Finance Chief Financial Officer May 21, 2003 In connection with the Form 20-F of Logitech International S.A. (the "Company") as furnished to the Securities...

  • Page 176
    Exhibit 12.6 LOGITECH INTERNATIONAL S.A. OUR CORPORATE GOVERNANCE

  • Page 177
    ... new ratio of one ADS to one registered share. In June 2002, the Company repurchased 88,000 shares for $3.8 million in open market transactions under a stock buyback program. In July 2002, the Company announced a program to buy back up to CHF 75 million (approximately $52 million) of Logitech shares...

  • Page 178
    ... of the Board Logitech's Board of Directors is responsible for supervising the management of the business and affairs of the Company. In particular, the primary functions of the Board are setting strategic direction of the Company; overseeing the Company's financial accounting, controls, planning...

  • Page 179
    ...the Company's internal controls; reviews the independence, fee arrangements, audit scope, and performance of the Company's independent auditors, and recommends the appointment or replacement of independent auditors to the Board of Directors; reviews and approves all non-audit work to be performed by...

  • Page 180
    ..., Switzerland. Guerrino De Luca joined the Company as President and Chief Executive Officer in February 1998, and became a member of the Board of Directors in June 1998. Prior to that time, Mr. De Luca served as Executive Vice President of Worldwide Marketing for Apple Computer, Inc., a personal...

  • Page 181
    ...Moone was Group Vice President and General Manager of the Consumer Line of Business at Cisco Systems, Inc. From March 1999, Mr. Moone served as President, Chief Executive Officer and a member of the Board of Directors of V-Bits Inc., until its acquisition by Cisco Systems in December 1999. From June...

  • Page 182
    ... was named Senior Vice President, Video Division in April 2001. Prior to joining Logitech, he was Vice President of Engineering from 1995 at Winnov LP, a company engaged in the development and marketing of multimedia products. For over 10 years he held several engineering and management positions at...

  • Page 183
    ... of Management The following table presents information as of March 31, 2003 regarding the share and option ownership of our registered shares, including shares represented by American Depositary Receipts, by our non-employee directors and executive officers as a group: Shares Owned % of Outstanding...

  • Page 184
    ... or senior management other than as noted above. In addition, none of them had any outstanding loans at March 31, 2003. Conflicts of Interest The Company believes that no director or officer benefits from any contract between Logitech and a third party. Shareholders' Rights Each registered share...

  • Page 185
    ... is required to make an offer to acquire all listed securities of the company that are listed for trading on the Swiss Exchange. Logitech has not waived or otherwise changed these rules. Our executive officers generally have Change of Control Severance Agreements with Logitech. Under the terms of...

  • Page 186
    ...and annual SEC files as well as press releases are available to download from our website at www.logitech.com. For no charge, a copy of the Company's filings can be requested via the following address or phone number: Logitech Inc. Investor Relations Corporate Headquarters: 6505 Kaiser Drive Fremont...

  • Page 187
    LOGITECH INTERNATIONAL S.A., APPLES FINANCIAL STATEMENTS

  • Page 188
    LOGITECH INTERNATIONAL S.A., APPLES TABLE OF CONTENTS Page Swiss Statutory Balance Sheet ...2 Swiss Statutory Statements of Income ...3 Notes to Swiss Statutory Financial Statements ...4 Report of the Statutory Auditors ...5 LISA - 1

  • Page 189
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY BALANCE SHEET (unconsolidated) (In thousands of Swiss francs) March 31, 2003 ASSETS Current assets: Cash...Short-term bank deposits...Dividends receivable...Accrued interest and other receivables...Advances to group companies...Total current ...

  • Page 190
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY STATEMENTS OF INCOME (unconsolidated) (In thousands of Swiss francs) Year ended M arch 31, 2003 2002 Dividend income...Royalty fees...Interest income from third parties...Interest income from subsidiaries...Realized exchange gains, net of exchange...

  • Page 191
    ... consolidated financial position of the Holding Company and its subsidiaries. Note 2 - Contingent Liabilities: Logitech International SA issued guarantees to a bank for CHF 20,000,000 for lines of credit available to its subsidiaries. At March 31, 2003 the aforementioned credit line facilities were...

  • Page 192
    ... remaining number of conditional registered shares at March 31, 2003 was 15,165,465, which are available for issuance upon the exercise of employee stock options and purchase rights related to the employee share purchase plans. During the fiscal year 2003 and 2002, zero and 758,065, were issued from...

  • Page 193
    ... and notes) of Logitech International S.A. for the year ended March 31, 2003. These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements...

  • Page 194
    ® Visit฀www.logitech.com฀for฀ a฀complete฀list฀of฀Logitech฀locations Holding฀Company฀ Logitech฀International฀S.A. CH-1143฀Apples Switzerland Americas,฀Worldwide฀Headquarters Logitech฀Inc. 6505฀Kaiser฀Drive Fremont,฀CA฀94555 United฀States Asia฀Pacific฀...