Logitech 2003 Annual Report Download - page 143

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Functional Currency
Transaction
Currency
Net Exposed
Long (Short)
Currency
Position
FX Gain (Loss)
From 10%
Appreciation of
Functional
Currency
FX Gain (Loss)
From 10%
Depreciation of
Functional
Currency
(in thousands)
U.S. dollar Swiss Franc 544$ (49)$ 60$
U.S. dollar Japanese Yen 2,623 (238) 291
U.S. dollar Euro 1,243 (113) 138
U.S. dollar British pound sterling 7,295 (663) 811
U.S. dollar Taiwan dollar 12,193 (1,108) 1,355
U.S. dollar Singapore dollar 4,706 (428) 523
Euro British pound sterling 8,150 (741) 906
Euro Swiss Franc 3,292 (299) 366
Euro Swedish Kroner 2,165 (197) 241
Taiwan dollar Singapore dollar (1,832) 167 (204)
U.S. dollar Chinese Yen 1,885 (171) 209
42,264$ (3,842)$ 4,696$
Long currency positions represent net assets being held in the transaction currency while short currency positions
represent net liabilities being held in the transaction currency.
On June 8, 2001 the Company sold CHF 170 million (US $95.6 million) Swiss Franc denominated 1%
Convertible Bonds which mature in 2006. Although the Company is exposed to foreign exchange risks on this long-
term obligation, the Swiss Franc liability serves to partially offset the effect of exchange rate fluctuations on assets
held in European currencies. Unrealized gains or losses resulting from translation of the bonds to the U.S. dollar are
accumulated in the cumulative translation adjustment component of other comprehensive loss in shareholders' equity.
At March 31, 2003, the carrying amount of the convertible bonds was US $127.7 million, which reflects appreciation
of the Swiss Franc against the U.S. dollar since June 8, 2001 with an impact on the carrying amount of $24.5 million
and the accretion of the redemption premium over the life of the debt. If the U.S. dollar strengthened by 10% in
comparison to the Swiss Franc, the increase in the cumulative translation adjustment component of shareholders’
equity would be $11.4 million. If the U.S. dollar weakened by 10% in comparison to the Swiss Franc, a decrease of
approximately $13.9 million would occur in the cumulative translation adjustment component of shareholders’
equity.
From time to time, certain subsidiaries enter into forward exchange contracts to hedge inventory purchase
exposures denominated in U.S. dollars. The amount of the forward exchange contracts is based on forecasts of
inventory 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 was $13.0 million. These forward
contracts generally mature within three months. At March 31, 2003, there was no unrealized gain or loss on the fair
value of the outstanding foreign exchange hedging contracts. If the U.S. dollar had depreciated by 10% as compared
to the hedged foreign currency, an approximate $1.5 million unrealized loss in our forward foreign exchange contract
portfolio would have occurred. If the U.S. dollar had appreciated by 10% as compared to the hedged foreign
currency, an unrealized gain of approximately $1.2 million in our forward foreign exchange contract portfolio would
have occurred.
Interest Rates
The interest rate on the Company’s long-term debt is fixed. A change in interest rates, therefore, has no impact
on interest expense or cash flows.
Changes in interest rates could impact the Company's anticipated interest income on its cash equivalents and
interest expense on variable rate short-term debt. The Company prepared sensitivity analyses of its interest rate
exposures to assess the impact of hypothetical changes in interest rates. Based on the results of these analyses, a 100
basis point decrease or increase in interest rates from the fiscal 2003 and 2002 year end rates would not have a
material effect on the Company's results of operations or cash flows.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.