Logitech 2004 Annual Report Download

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LOGITECH ANNUAL REPORT 2004

Table of contents

  • Page 1
    LOGITECH ANNUAL REPORT 2004

  • Page 2
    ...DIGITAL WORLD MORE PERSONAL AND INTUITIVE. RENDRE L'UNIVERS DIGITAL PLUS PERSONNEL ET PLUS CONVIVIAL. DIE DIGITALE WELT PERSÃ-NLICHER UND UNMITTELBARER GESTALTEN. REVENUE (in millions of dollars) INCOME (in millions of dollars) SHARE PERFORMANCE (based on an initial investment of 100 Swiss francs...

  • Page 3
    ... the Logitech brand. We surpassed the milestone of 500 million mice shipped. And, we saw remarkable growth in most key segments of our business, while making significant progress in positioning other parts of our business for future success. The company posted revenues of $1.27 billion, representing...

  • Page 4
    QuickCam® Pro 4000 Logitech® Cordless Optical Mouse for Notebooks Logitech® io™ Personal Digital Pen work. Logitech® Z-3 WORK ON YOUR OWN TERMS, COMFORTABLY AND PRODUCTIVELY. TRAVAILLEZ SANS CONTRAINTE, CONFORTABLEMENT ET EFFICACEMENT. INDIVIDUELLES UND PRODUKTIVES ARBEITEN IN EINEM ...

  • Page 5
    ... Media Desktopâ„¢ , a cordless optical mouse for notebooks, affordable cordless controllers for gaming, and new entry-level cordless mice and keyboards that are designed to accelerate broad market adoption of this key technology. In addition to offering innovative products that customers want to buy...

  • Page 6
    ... 1998 and 2001, to successfully enter the video and audio businesses, in May 2004 we acquired Intrigue Technologies, a Canadian company whose Harmony system brings an innovative and user-friendly approach to remote controls, to broaden our presence in the connected, digital home. souris et claviers...

  • Page 7
    GET COMPLETELY IMMERSED IN THE GAME. LAISSEZ-VOUS PRENDRE AU JEU. SICH VOLL UND GANZ INS SPIEL VERTIEFEN. Logitech® Cordless Action™ Controller for PlayStation®2 play. Logitech® USB Headset for PlayStation®2 Logitech® Z-680

  • Page 8
    QuickCam® Orbit™ Logitech® Premium Stereo USB Headset 300 Logitech® diNovo Media Desktop™ communicate. ENGAGE WITH FRIENDS AND FAMILY IN ALL PARTS OF THE WORLD. DIALOGUEZ AVEC VOS AMIS ET VOS PROCHES, DANS LE MONDE ENTIER. MIT FREUNDEN UND FAMILIE IN ALLER WELT VERBUNDEN SEIN.

  • Page 9
    Corporate governance continues to be a high priority for Logitech. For many years we have worked to ensure the highest levels of corporate accountability, sound judgment and transparency to shareholders. This year, our Board of Directors appointed technology industry veteran Frank Gill as Lead ...

  • Page 10
    Guerrino De Luca President and Chief Executive Officer Daniel Borel Chairman of the Board succeed. It is with special pride and gratitude that we acknowledge our employees, for their spirit and for their commitment to win in a highly competitive business environment. Logitech's employees are our ...

  • Page 11
    ...the Board Guerrino De Luca President and Chief Executive Officer Erh-Hsun Chang Senior Vice President, Worldwide Operations and General Manager, Far East Wolfgang Hausen President and Chief Executive Officer, 3Dconnexion David Henry Senior Vice President, Control Devices Junien Labrousse Senior Vice...

  • Page 12
    ...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 Headquarters Logitech Hong Kong Ltd. 1003A Far East Finance Centre 16 Harcourt Road Hong Kong Europe...

  • Page 13
    LOGITECH FINANCIAL REVIEW 2004

  • Page 14
    ... CG-1 Report on Corporate Governance Logitech's Report on Corporate Governance provides information on the Company's structure, its Board members and executive officers, and its corporate governance practices. This Report includes information required by the directives of the SWX Swiss Exchange for...

  • Page 15
    LOGITECH INTERNATIONAL S.A. REPORT ON CORPORATE GOVERNANCE

  • Page 16
    .... Logitech's personal interface products include input and pointing devices such as corded and cordless mice, trackballs, and keyboards; interactive gaming devices for entertainment such as joysticks, gamepads and steering wheels; multimedia speakers; Internet video cameras; 3D motion controllers...

  • Page 17
    ... into the Swiss commercial register. This aggregate number was 47,901,655 voting rights as of March 31, 2004. (4) For the Company, Directors and Executive Officers, the relevant date is the last day of the fiscal year. 1.3 Cross-shareholdings Logitech has no shareholdings in companies that to...

  • Page 18
    ... registered shares with a par value of CHF 1 each, to be fully paid-in. This authorization expires on June 27, 2004, and the Company is seeking approval from its shareholders at its June 2004 Annual General Meeting to renew this authorization for an additional two years. The Board of Directors may...

  • Page 19
    ... - - - - 629 15,043 (1) Represents the approved buyback amount in U.S. dollars, calculated based on exchange rates on the repurchase dates. On April 15, 2004, the Company announced a new buyback program of up to CHF 250 million (approximately $200 million based on exchange rates at the date of...

  • Page 20
    ... of CHF 62.4 ($48.9 based on exchange rates at March 31, 2004) per share. The Company may redeem the bonds on notice if the closing price of its registered shares is at least 150% of the conversion price on 20 consecutive trading days or if 95% of the bonds have been converted. Logitech shareholders...

  • Page 21
    Warrants. Logitech has not issued warrants on its shares. Employee Stock Options and Stock Purchase Plans. Logitech believes equity compensation is an important part of attracting and retaining high-caliber employees and of aligning the interests of management and the directors of the Company with...

  • Page 22
    ... in Europe. Mr. De Luca holds a BS degree in Electronic Engineering from the University of Rome, Italy. Frank Gill, U.S. national, has been a non-executive Director of the Company since June 1999. Mr. Gill served in a variety of positions in sales and marketing, product development and manufacturing...

  • Page 23
    ... a Director-elect and is being presented to the shareholders for election to the Board at the Company's Annual General Meeting on June 24, 2004. Since September 2003, Mr. Okamoto has served as a research and development consultant. Prior to that, he served in executive and management positions with...

  • Page 24
    ... and serves on the Boards of two privately held U.S. companies, Unicru, Inc. and Kryptic, Inc. Kee-Lock Chua serves as a Director of Digiland International, Ltd., a Singapore based wholesale distributor of information technology products to resellers in the Asia Pacific region. He also serves...

  • Page 25
    ...or more shareholders who together represent shares having an aggregate par value of one million Swiss francs may demand that the election of directors be placed on the agenda of a meeting and propose candidates. Such requests must be made in writing and be received by the Board of Directors at least...

  • Page 26
    ... the budget, which must be approved by the Board of Directors; reviewing and certifying the Company's annual report; appointing, dismissing and promoting any employees of Logitech other than Executive Officers and the head of the internal audit function; taking immediate measures to protect the...

  • Page 27
    ... "Operating and Financial Review and Prospects" contained in the Company's Annual Report on Form 20-F, and recommends that the Board of Directors submit these items to the shareholders' meeting for approval. In fiscal 2004, the Audit Committee was composed of Frank Gill, Chairman, Gary Bengier...

  • Page 28
    ... Board of Directors, the nominees are presented to the full Board. 3.6 Allocation of Powers and Responsibilities between the Board of Directors and Senior Management The Board of Directors has delegated the management of the Company to the Chief Executive Officer and the Executive Officers, except...

  • Page 29
    ... U.S. Chairman of the Board President and Chief Executive Officer, Director Sr. Vice President, Worldwide Operations and General Manager, Far East President and Chief Executive Officer, 3Dconnexion Sr. Vice President, Control Devices Sr. Vice President, Video Sr. Vice President, Finance, and Chief...

  • Page 30
    ... that, Mr. Hausen had been Senior Vice President and General Manager, Control Devices Business Unit of Logitech since 1997. Prior to that time, Mr. Hausen served as President and Chief Executive Officer of Cardinal Technologies, Inc., a U.S. PC multimedia and modem company from May 1994. From March...

  • Page 31
    ... options are granted at the fair market value at the date of grant and become exercisable over 3 years in equal annual increments. In addition, non-executive Directors are paid an annual retainer of $25,000, or CHF 35,000 and receive $2,000, or CHF 2,500 for each board or committee meeting attended...

  • Page 32
    ... per share) for non-executive Directors and $15.14 per share (approximately CHF 21.86 per share) for all Executive Officers, based on the Black-Scholes option-pricing model. These numbers are not necessarily indicative of the Company's future stock performance. If the price of Logitech's shares does...

  • Page 33
    ... Directors and Executive Officers. Refer to section 2.7 for a description of Logitech's employee equity compensation plans. Options held by non-executive Directors (in thousands except share and per share amounts): Grant Year Options Held Vested Options Exercise Price Expiration Year Option Value...

  • Page 34
    ... 2004, he received 100,000 options in April 2004 in recognition of his service and the Company's performance during fiscal year 2004. These options were granted at an exercise price of $47.67 per share, which was the fair market value of the Company's registered shares on the date of grant. Based...

  • Page 35
    ... value of one million Swiss francs (approximately 2.1% of the Company's share capital) may demand that an item be placed on the agenda of a meeting. A request to place an item on the General Meeting agenda must be requested in writing, describe the proposal and be received by the Board of Directors...

  • Page 36
    ...change in control of Logitech, the executive would receive his or her base salary, annual and quarterly bonuses, and payment of health benefits for up to a year following the termination, as well as 100% vesting of all unvested stock options. In the case of a demotion, the Executive Officer would be...

  • Page 37
    ... and annual SEC filings as well as press releases are available for download from the Logitech Web site 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 Investor Relations Corporate Headquarters 6505 Kaiser Drive...

  • Page 38
    ......Logitech Italia SRL ...Logitech Nordic AB ...Logitech Northern Europe B.V...Logitech S.A...AMERICAS 3Dconnexion, Inc...Labtec Inc...Logitech Australia Computer Peripherals Pty, Ltd...Logitech Canada, Inc...Logitech, Inc...ASIA-PACIFIC LogiCool Co. Ltd...Logitech Far East, Ltd...Logitech Hong Kong...

  • Page 39
    ...) Canton of Vaud, Switzerland (Jurisdiction 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...

  • Page 40
    ... on the Company ...Operating and Financial Review and Prospects ...Directors, Senior Management and Employees ...Major Shareholders and Related Party Transactions ...Financial Information ...The Offer and Listing ...Additional Information ...Quantitative And Qualitative Disclosures about Market Risk...

  • Page 41
    ... INFORMATION This Annual Report on Form 20-F contains forward-looking statements based on beliefs of our management as of the filing date of this Form 20-F. These forward-looking statements include statements related to our business strategy for new areas of growth and for building on the Company...

  • Page 42
    PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. 4

  • Page 43
    ...in the future. 2004 Year ended March 31, 2003 2002 2001 (In thousands, except per share amounts) 2000 Consolidated statements of income and cash flow data: Net sales ...$1,268,470 Gross profit ...408,922 Operating expenses: Marketing and selling ...156,793 Research and development ...61,289 General...

  • Page 44
    ... based on the noon buying rate as reported by The Bank of New York, expressed in Swiss francs per U.S. dollars. The noon buying rate is the rate in New York City for cable transfers in selected currencies as certified for customs purposes by the Federal Reserve Bank of New York. Average(1) High Low...

  • Page 45
    ... and market trends; timely develop innovative new products and enhancements; distinguish our products from those of our competitors; manufacture and deliver high-quality products in sufficient volumes; and price our products competitively. If we do not execute these successfully, our business...

  • Page 46
    ... less established brands. Microsoft is our main competitor in retail pointing devices and keyboards. Microsoft's offerings include a complete line of mice, trackballs and keyboards including cordless mice and desktops. Microsoft has significantly greater financial, technical, sales, marketing and...

  • Page 47
    ...audio devices vary by product line. In the PC speaker business, competitors include Altec Lansing and Creative Labs. In the PC and console headset, telephony and microphone business, competitors include Altec Lansing and Plantronics. In addition, with our entry into the mobile phone headset business...

  • Page 48
    ... time we have experienced supply shortages and fluctuations in component prices. In the second half of fiscal year 2004, we experienced increased lead times on semiconductors and base metals used in our pointing device, keyboard and video products. While we are trying to manage our component levels...

  • Page 49
    ... places pressure on our supply chain and could adversely impact our revenues and profitability if we are unable to successfully fulfill all our orders from our customers in the quarter. We conduct operations in a number of countries and the effect of business, legal and political risks associated...

  • Page 50
    ... develop, sell and market these new products. With limited experience in these product lines and because these products may be based on technologies that are new to us, it may be difficult for us to accurately anticipate and forecast revenues, manufacturing costs, customer support costs and product...

  • Page 51
    ... the normal operations of our business; potential loss of key employees and customers of the acquired company; insufficient future revenues and profitability of the acquired company that could negatively impact our consolidated results; exposure to potential product quality issues; and exposure to...

  • Page 52
    ... digital imaging and the growth of the market for PC video cameras. With the success of its line of PC video cameras, the Company has emerged as a market leader in this product category. In March 2001, Logitech acquired Labtec Inc., a publicly traded provider of PC speakers, headsets and microphones...

  • Page 53
    ...Logitech is a leader in the design, manufacture and marketing of personal interface products for personal computers and other digital platforms. The Company's product family includes webcams, mice, trackballs, and keyboards for the PC; interactive gaming controllers, multimedia speakers and headsets...

  • Page 54
    ..., the Company's line of steering wheels support popular driving games, including Gran Turismo™ and Formula One™. Logitech also manufactures webcams and headsets for gaming consoles, including the EyeToy™ camera and the USB Headset for the PlayStation®2. For mobile phones, Logitech offers...

  • Page 55
    ... designed to work seamlessly together. Logitech aggressively pursues several important aspects of today's desktop, including the freedom and flexibility of cordless solutions, easy Internet-based visual communication, integration of personal digital assistants, or PDAs, and mobile phones with the PC...

  • Page 56
    ... installed base of personal computers. The market penetration of PCs and other information access devices, already high in developed countries, is likely to increase worldwide. In addition, continuing growth in processing power and communications bandwidth, the increased accessibility of digital...

  • Page 57
    ... devices that people touch and use every day. The Living Room Environment Logitech offers a broad spectrum of products for gaming consoles and PCs, including driving wheels, cordless gamepads, audio headsets, keyboards, mice and cameras. With its expertise in force and vibration feedback, cordless...

  • Page 58
    ... common sales channels or common company infrastructure requirements. Logitech's personal interface products include input and pointing devices such as corded and cordless mice, trackballs, and keyboards; interactive gaming devices such as joysticks, gamepads and steering wheels; multimedia speakers...

  • Page 59
    ...Forceâ„¢ wheel and Logitech Cordless Controllers, and OEM hardware including the USB headset and the Sony EyeToyâ„¢ camera. To enable this hardware and ensure high-quality support within games, Logitech also provides state-of-the-art software drivers and tools to game developers. Multimedia Speakers...

  • Page 60
    ... its optical mouse products. Signal Processing Algorithms. Logitech engineers employ sophisticated signal processing algorithms across many product lines to compute spatial displacements, enhance color image quality and compress or format data for transmission. For example, in the Company's Internet...

  • Page 61
    ...PC-based technologies support speaker transducer design. For headsets, in-house engineering and testing technology ensure high-resolution voice recognition microphones. Computer aided design and in-house rapid prototyping technology speed the overall process and help ensure that products meet design...

  • Page 62
    ...-user markets for Logitech mice, trackballs and keyboards have traditionally been consumers, small office and home office, or SoHo users and, through its OEM customers, corporate buyers. The primary end user market for Logitech entertainment devices, such as joysticks, gamepads and steering wheels...

  • Page 63
    ... sales offices or sales representatives in more than 30 countries and throughout the United States. Principal Markets The Company operates as one business segment, which is the design, development, production, marketing and support of personal interface devices. Net sales to unaffiliated customers...

  • Page 64
    ... established brands. Microsoft is the Company's main competitor in retail pointing devices and keyboards. Microsoft's offerings include a complete line of mice, trackballs and keyboards including cordless mice and desktops. Microsoft has significantly greater financial, technical, sales, marketing...

  • Page 65
    ... Rights Intellectual property rights that apply to Logitech's products and services include patents, trademarks, copyrights and trade secrets. The Company holds a number of patents and pending applications from the U.S. and Europe, as well as from other countries. While Logitech believes that...

  • Page 66
    ... North American distribution to a third party facility in 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...

  • Page 67
    ...The Company offers a broad range of products including input and pointing devices such as corded and cordless mice, trackballs, and keyboards; interactive gaming devices for entertainment such as joysticks, gamepads, and racing systems; web cameras; speakers, headsets and microphones; 3D controllers...

  • Page 68
    ...growth in its core audio business and new market opportunities with its line of mobile phone headsets. The Company remained focused on providing high quality products to its customers and continued investment in research and development, while committed to maintaining its low-cost structure. Also in...

  • Page 69
    ... its mobile headsets and digital pen offerings. Further, Logitech expects its recent acquisition of Intrigue Technologies to broaden its presence in the digital living room. In addition, the Company will continue to focus on its supply chain management in order to increase efficiency and effectively...

  • Page 70
    ... and retail customers allowing customers to receive a credit equal to a set percentage of their purchases of the Company's products for various marketing programs. The objective of these programs is to encourage advertising and promotional events to increase sales of the Company's products. Accruals...

  • Page 71
    ... its products and build inventory in advance of customer orders. Further, the Company's industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand. The Company records inventories at the lower of cost or market value and records write-downs...

  • Page 72
    ... future remote control revenue targets. The acquisition is part of the Company's growth strategy to position Logitech at the convergence of consumer electronics and personal computing in the living room. With its knowledge and experience in control devices for the PC and game consoles, combined...

  • Page 73
    ... selling prices in a currency in order to avoid disparity with U.S. dollar prices and to respond to currency-driven competitive pricing actions. Strong sales of PC webcams and gaming products as well as Bluetooth cordless desktop products drove higher sales in Europe in fiscal year 2004. Similar...

  • Page 74
    ... of personnel and related overhead costs, corporate and product marketing, promotions, advertising, trade shows, customer and technical support and facilities costs. The increase in marketing and selling expense correlated with the Company's higher revenues in fiscal year 2004 compared to fiscal...

  • Page 75
    ... fiscal year 2004 compared to fiscal year 2003 was mainly due to increased personnel to support ongoing investment in product development. Specifically, the Company increased research and development spending for its control device and audio product programs. Also, the stronger Swiss franc relative...

  • Page 76
    ... Company's third-party logistics provider and impeded Logitech's ability to ship product to its 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. Sales of pointing devices increased...

  • Page 77
    ...related to the cordless controllers, which have a lower average selling price compared to the GT Forceâ„¢ Steering Wheel console products sold in 2002. Despite the popularity of gaming console devices, the market demand for PC gaming products declined in fiscal year 2003, and as a result the Company...

  • Page 78
    ...primarily due to increased information technology costs to support the engineering, operations and human resource functions. In addition, the increase also related to increased personnel to support the growth of the Company's business and the strengthening of the Euro and Swiss franc relative to the...

  • Page 79
    ... facilities. Cash Flow from Operating Activities The following table presents selected financial information and statistics for fiscal years 2004, 2003 and 2002 (dollars in thousands): 2004 2003 2002 Accounts receivable, net ...Inventories ...Working capital ...Days sales in accounts receivable...

  • Page 80
    ... Flow from Investing Activities The following table sets forth information on the Company's cash flows from investing activities during fiscal years 2004, 2003 and 2002 (in thousands): 2004 2003 2002 Purchases of property, plant and equipment ...Acquisitions and investments, net of cash acquired...

  • Page 81
    ... 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 transactions. Cash Outlook The Company's working capital...

  • Page 82
    ...the normal course of business and are to original design manufacturers, contract manufacturers and other suppliers. Commitments for capital expenditures are primarily for computer hardware and software, warehouse facilities and tooling. Off-Balance Sheet Arrangements The Company has not entered into...

  • Page 83
    ... Board of Directors" in Exhibit 14.1 to the Form 20-F and is incorporated herein by reference. D. Employees The number of people employed worldwide by the Company was as follows: Category 2004 As of March 31, 2003 2002 Research and development ...Manufacturing and distribution ...Marketing, sales...

  • Page 84
    ...9C "Markets on which our Shares Trade" for information regarding the number of ADSs held in the United States. B. Related Party Transactions In connection with the Company's investment in the Anoto Group AB, a Logitech executive was elected to the Anoto board of directors. Anoto is a publicly traded...

  • Page 85
    ... earnings for use in the operation and expansion of the business. B. Significant Changes None. ITEM 9. THE OFFER AND LISTING Stock Price Information Registered Shares. Logitech's registered shares are listed and traded on the Swiss Exchange, where the share price is denominated in Swiss francs. 47

  • Page 86
    ... share price information, for the Company's registered shares. The information presented is based on (i) the high and low closing sales prices quoted in Swiss francs for the registered shares on the Swiss Exchange, and (ii) the U.S. dollar equivalent based on the noon buying rate on the trading day...

  • Page 87
    American Depositary Shares. Logitech's ADSs are traded on the Nasdaq National Market. The following table sets forth certain historical market price information for the Company's ADSs. Price per ADS on Nasdaq High Low Annual Highs and Lows: Fiscal 2000 ...Fiscal 2001 ...Fiscal 2002 ...Fiscal 2003 ...

  • Page 88
    ... Swiss law and the Company's Articles of Incorporation and Organizational Regulations (bylaws). Logitech incorporates by reference the Company's Articles of Incorporation, as amended and set forth in Exhibit 1.1 of the Company's Annual Report on Form 20-F, File No. 0-29174 filed with the SEC...

  • Page 89
    ...Annual Report on Form 20-F. 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 90
    ...SEC-0330 for further information about the public reference room. Such material may also be obtained at the Internet site the SEC maintains at www.sec.gov. I. Subsidiary Information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Market risk represents...

  • Page 91
    ...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 ($95.6 million based on exchange rates at the time of issue) Swiss franc denominated 1% Convertible Bonds which mature in 2006...

  • Page 92
    ...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 March 31, 2004 and 2003 year-end rates would not have a material effect on the Company's results of operations or cash flows. ITEM 12...

  • Page 93
    ..., "Business Ethics and Conflict of Interest Policy of Logitech International S.A.," covers members of the Company's board of directors and its executive officers (including the principal executive officer, principal financial officer and controller) as well as all other employees. The code of...

  • Page 94
    ... Company's code of ethics can be requested via the following address or phone number: Logitech Investor Relations Corporate Headquarters 6505 Kaiser Drive Fremont, CA 94555 USA Main +1 510-795-8500 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information concerning accountant fees and services...

  • Page 95
    ... in fiscal year 2004 were part of two publicly announced programs: • In February 2003, Logitech announced its intention to purchase registered shares amounting to CHF 75 million (approximately $52 million based on exchange rates at the date of announcement). This program expired in September...

  • Page 96
    ... Sarbanes-Oxley Act of 2002. Certification by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* Report on Corporate Governance prepared under the rules of the SWX Swiss Exchange. S-8 333-100854 05/27/03 4.1 2.2 6-K 0-29174 08/14...

  • Page 97
    ... that it meets all of the requirements 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...

  • Page 98
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of the Group Auditors to the General Meeting of Logitech International S.A. Apples, Switzerland ...Consolidated Balance Sheets - March 31, 2004 and 2003 ...Consolidated Statements of Income - Year Ended March 31, 2004, 2003 and 2002 ...Consolidated...

  • Page 99
    ... statements are the responsibility of the Board of Directors of Logitech International S.A. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the Swiss legal requirements concerning professional qualification and...

  • Page 100
    ..., except share and per share amounts) March 31, 2004 2003 ASSETS Current assets: Cash and cash equivalents ...$ 294,753 Accounts receivable ...206,187 Inventories ...135,561 Other current assets ...45,304 Total current assets ...Investments ...Property, plant and equipment ...Goodwill ...Other...

  • Page 101
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) 2004 Year ended March 31, 2003 2002 Net sales ...Cost of goods sold ...Gross profit ...Operating expenses: Marketing and selling ...Research and development...145,669 13,516 $1,100,288 735,784 364,...

  • Page 102
    ...356) (3,139) Accounts payable ...9,812 27,807 (878) Accrued liabilities ...15,231 21,106 10,585 Net cash provided by operating activities ...Cash flows from investing activities: Purchases of property, plant and equipment ...Acquisitions and investments, net of cash acquired ...Sales of investments...

  • Page 103
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) Registered shares Shares March 31, 2001 ... income ...Tax benefit from exercise of stock options ...Purchase of treasury shares ...Sale of shares upon exercise of options and purchase rights...

  • Page 104
    ...Company's products include corded and cordless mice, trackballs, and keyboards; joysticks, gamepads and racing systems; Internet video cameras; PC speakers, headsets and microphones; 3D controllers; and with its recent acquisition of Intrigue Technologies, advanced remote controls. The Company sells...

  • Page 105
    ...71.6 million in fiscal years 2004, 2003 and 2002. Advertising costs are recorded as either a marketing and selling expense or a deduction from revenue. Advertising costs reimbursed by the Company to a customer must have an identifiable benefit and an estimable fair value in order to be classified as...

  • Page 106
    ... in value deemed to be other than temporary in nature. Property, Plant and Equipment Property, plant and equipment are stated at cost. Additions and improvements are capitalized, and maintenance and repairs are expensed as incurred. The Company capitalizes the cost of software developed for internal...

  • Page 107
    ..., "Accounting for Stock Issued to Employees" which measures compensation expense for employee stock-based compensation plans using the intrinsic value method. Under the intrinsic value method, compensation expense is not recognized unless the exercise price of an option is less than the market value...

  • Page 108
    ... related deferred tax asset was reserved in the valuation allowance in those years. The fair value of the employee stock options granted and shares purchased under the Company's purchase plans was estimated using the Black-Scholes valuation model applying the following assumptions and values: Year...

  • Page 109
    ... estimated useful lives of five years. The 3Dconnexion business has been combined with the 3D input device business acquired with the Company's Labtec acquisition in March 2001, to offer a complete line of 3D input devices utilizing the market strengths, engineering resources and global presence of...

  • Page 110
    ... then outstanding stock of Immersion Corporation, a developer of force feedback technology for PC peripherals and software applications. In November 1999, Immersion registered its shares on the Nasdaq National Market in an initial public offering. In June 2002, the Company reviewed the fair value of...

  • Page 111
    ... balance sheet components (in thousands): March 31, 2004 2003 Accounts receivable: Accounts receivable ...Allowance for doubtful accounts ...Allowance for customer programs and returns ...Inventories: Raw materials ...Work-in-process ...Finished goods ...Other current assets: Tax and VAT refund...

  • Page 112
    ... level. Based on impairment tests performed, there has been no impairment of the Company's goodwill to date. Note 7 - Financing Arrangements: Short-term Credit Facilities The Company had several uncommitted, unsecured bank lines of credit aggregating $71.7 million at March 31, 2004. Borrowings...

  • Page 113
    ...value, with interest at 1.00% payable annually, and final redemption in June 2006 at 105%, representing a yield to maturity of 1.96%. The convertible bonds are convertible at any time into Logitech registered shares at the conversion price of CHF 62.4 ($48.9 based on exchange rates at March 31, 2004...

  • Page 114
    ... share capital. The program expires at the date of the Company's 2006 Annual General Meeting. Note 9 - Employee Benefit Plans: Employee Share Purchase Plans Under the 1996 Employee Share Purchase Plans, eligible employees may purchase registered shares at the lower of 85% of the fair market value...

  • Page 115
    ... employees. Retirement benefits 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, 2004, 2003...

  • Page 116
    ... but operates in various countries with differing tax laws and rates. Further, a portion of the Company's income before taxes and the provision for income taxes are generated outside of Switzerland. The portion of the Company's income before taxes for fiscal year 2004, 2003 and 2002 that is...

  • Page 117
    ... currencies, also designated as cash flow hedges. The foreign exchange contracts are entered into on a monthly basis and generally mature between one to two months, corresponding with the expected payment terms on the Company's sales. Gains and losses in the fair value of the effective portion of...

  • Page 118
    ... it to pay property taxes, insurance and maintenance costs. Operating leases for facilities are generally renewable at the Company's option and usually include escalation clauses linked to inflation. Future minimum annual rentals at March 31, 2004 are as follows (in thousands): Year ending March...

  • Page 119
    ... Information: The Company operates in one operating segment, which is the design, manufacturing and marketing of personal interface products for personal computers and other digital platforms. Geographic net sales information in the table below is based on the location of the selling entity...

  • Page 120
    ... consist of the acquired company's database of product information and infrared codes, technology and brand name. Also, the agreement provides for possible performance-based payments to the former shareholders of Intrigue tied to the achievement of certain future remote control revenue targets. F-23

  • Page 121
    ... Third Fourth Net sales ...100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Gross profit ...27.8 31.5 34.3 33.2 34.0 34.1 33.3 31.6 Operating expenses: Marketing and selling ...12.8 13.4 11.6 12.0 15.5 14.3 11.7 11.1 Research and development ...6.7 5.0 3.8 4.8 6.6 5.4 4.0 5.1 General and...

  • Page 122
    ... incorporation by reference in the Registration Statement on Form S-8 (No. 333100854) of Logitech International S.A. of our report dated May 17, 2004 relating to the financial statements, which appear in this Form 20-F. PricewaterhouseCoopers SA M. Foley Lausanne, Switzerland May 17, 2004 M. Perry

  • Page 123
    ...the Company's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. b. May 19, 2004 Chief Executive Officer

  • Page 124
    ...the Company's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. b. May 19, 2004 Chief Financial Officer

  • Page 125
    ...(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 19, 2004 Chief Executive Officer Chief...

  • Page 126
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY FINANCIAL STATEMENTS

  • Page 127
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY FINANCIAL STATEMENTS TABLE OF CONTENTS Page Swiss Statutory Balance Sheets (unconsolidated) ...Swiss Statutory Statements of Income (unconsolidated) ...Notes to Swiss Statutory Financial Statements ...Proposal of the Board of Directors for ...

  • Page 128
    ... BALANCE SHEETS (unconsolidated) (In thousands of Swiss francs) March 31, 2004 2003 ASSETS Current assets: Cash ...CHF 565 Short-term bank deposits ...169,356 Accrued interest and other receivables ...843 Advances to and amounts receivable from group companies ...19,122 Total current assets ...Long...

  • Page 129
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY STATEMENTS OF INCOME (unconsolidated) (In thousands of Swiss francs) Year ended March 31, 2004 2003 Dividend income ...CHF 153,392 Royalty fees ...32,146 Interest income from third parties ...1,668 Interest income from subsidiaries ...10,183 ...

  • Page 130
    ... subsidiaries include the following: Logitech Europe S.A., Logitech Far East Ltd., Logitech Inc., and Suzhou Logitech Electronic Co. Ltd. All subsidiaries are directly or indirectly 100% owned by the Holding Company. Note 4 - Treasury Shares: During fiscal years 2003 and 2004, repurchases of and...

  • Page 131
    ..., 2004, the Company announced a new buyback program of up to CHF 250,000,000. Purchases under the program will be conducted so that the Company's total holdings of its own shares do not exceed 10% of its share capital. The program expires at the Company's 2006 Annual General Meeting. Treasury shares...

  • Page 132
    ... on retained earnings were as follows (in thousands): Year ended March 31, 2004 2003 Retained earnings at the beginning of the year ...CHF 141,036 Net income for the year ...115,928 Retained earnings at the disposal of the Annual General Meeting CHF 256,964 CHF 140,688 348 CHF 141,036 LISA-6

  • Page 133
    ... Proposal of the Board of Directors for appropriation of retained earnings were as follows during fiscal years 2003 and 2004 (in thousands): Year ended March 31, 2004 2003 Proposal of the Board of Directors To be carried forward ...CHF 256,964 Resolution of the General Meeting CHF 141,036 LISA...

  • Page 134
    ... and notes) of Logitech International S.A. for the year ended March 31, 2004. 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 135
    ...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 Headquarters Logitech Hong Kong Ltd. 1003A Far East Finance Centre 16 Harcourt Road Hong Kong Europe...