Logitech 2005 Annual Report Download

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LOGITECH 2005 ANNUAL REPORT
A PORTFOLIO OF PRODUCTS
FOR THE DIGITAL LIFESTYLE

Table of contents

  • Page 1
    L O G I T E C H 2 0 0 5 A N N U A L R E P O R T A P O R T F O L I O T H E O F P R O D U C T S L I F E S T Y L E F O R D I G I T A L

  • Page 2
    LOGITECH OFFICERS BOARD OF DIRECTORS Daniel Borel Chairman of the Board Guerrino De Luca President and Chief Executive Officer Erh-Hsun Chang Senior Vice President, Worldwide Operations and General Manager, Far East David Henry Senior Vice President, Control Devices Junien Labrousse Senior Vice ...

  • Page 3
    ... 700, which features integrated software and special media-control buttons for easy enjoyment of music, videos and photos. La qualité est la composante clé de chaque pièce de l'ensemble desktop LX 700, qui est doté d'un logiciel intégré et de boutons de commande multimedia, pour profiter ais...

  • Page 4
    ...I G H T S REVENUE (in millions of U.S. dollars) INCOME (in millions of U.S. dollars) SHARE PERFORMANCE (based on an initial investment of 100 Swiss francs) 171.7 857 782 1,483 1,268 1,100 944 97.2 736 592 448 41.0 30.0 54.7...INCOME LOGITECH SWISS PERFORMANCE INDEX MARCH 31, 1999 - MARCH 31, 2005

  • Page 5
    ...V AT I O N L O G I T E C H® M X™ 1 0 0 0 L A S E R C O R D L E S S M O U S E The world's first mouse to use laser illumination and tracking, setting a new standard for responsiveness and accuracy. La première souris au monde à utiliser la technologie laser pour le suivi et l'illumination...

  • Page 6
    ... Harmony remote control business in May 2004, Logitech successfully integrated the business into the Company. Harmony sales in North America steadily increased, with the Harmony remote now the U.S. market leader in its category. Most recently, we expanded our line of personal peripherals to mobile...

  • Page 7
    ... L R E M O T E The first Harmony remote to leverage Logitech's renowned design expertise, features a large color screen and comfortable sculpted buttons. La première télécommande Harmony qui allie l'expertise de Logitech en matière de design, un grand écran couleur et des boutons ergonomiques...

  • Page 8
    ...pour les consoles PlayStation 2 et Xbox® . Logitech a su intégrer avec succès la ligne de produit de commandes à distance Harmony, acquise en mai 2004. Le chiffre d'affaires d'Harmony n'a cessé d'augmenter en Amérique du Nord et la marque est aujourd'hui leader de sa catégorie aux États-Unis...

  • Page 9
    ... N I N G Z-5 5 0 0 D I G I T A L By delivering premium performance at any volume, this powerful THX® certified 5.1 surround-sound system has collected top awards throughout Europe and the U.S. Avec des performances optimales quel que soit le volume, ce puissant système son surround THX® certi...

  • Page 10
    ..., wurde das F&E-Personal aufgestockt, unter anderem durch fast 200 neue Ingenieure...mobile Entertainment-System PSP™ , den iPod® von Apple und weitere MP3Player. Wir nutzen unser Fachwissen im Bereich Audio und Design...zur Marke Logitech ist unser Ziel. Ebenso wichtig sind unsere Partner. Wir konnten...

  • Page 11
    L O G I T E C H 2 0 0 5 ฀ F I N A N C I A L ฀ R E V I E W

  • Page 12
    ... CONTENTS 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...

  • Page 13
    CG LOGITECH INTERNATIONAL S.A. REPORT ON CORPORATE GOVERNANCE 20-F LISA

  • Page 14
    ... design manufacturers located in Asia. The Company's other operations support the business units and marketing and sales organizations through management of distribution centers and the product supply chain, and the provision of technical support, customer relations and other services. Logitech...

  • Page 15
    ... none of Logitech International S.A.'s subsidiaries has securities listed on a stock exchange. 1.2 Significant Shareholders CG To the knowledge of the Company, the beneficial owners holding more than 5% of the voting rights of the Company as of March 31, 2005 were as follows: Name Number of Shares...

  • Page 16
    ... if the shares are placed on international markets or issued in connection with an acquisition or merger. The unexercised preferential subscription rights revert to the Company and their use may be directed by the Board of Directors. The Board sets the price at which the shares will be issued, the...

  • Page 17
    ... the Company's shareholders. Refer to section 1.1 and "Logitech ADRs" below for information on Logitech's ADR program. Each registered share entitles its owner to dividends declared, even if the owner is not registered in the share register of the Company. Under Swiss law, the Company pays dividends...

  • Page 18
    ... shares of Logitech International S.A. at the conversion price of CHF 62.40 ($52.24 based on exchange rates at March 31, 2005) per share. The Company's shareholders were not given the preferential right to subscribe to the convertible bonds. The convertible bonds are listed on the SWX Swiss Exchange...

  • Page 19
    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 the interests of the shareholders. Accordingly, Logitech ...

  • Page 20
    ... video processing technology company. Prior to this time, Mr. Moone held various executive management positions at HealthRider, a U.S. fitness equipment company, Mercantec, a U.S. provider of products and services enabling Internet commerce, Atari, a U.S. based developer of interactive gaming, and...

  • Page 21
    ..., Mr. Bengier was Vice President and Chief Financial Officer of Vxtreme, Inc., a U.S. developer of Internet video streaming products. Prior to that time, Mr. Bengier was Corporate Controller at Compass Design Automation, a U.S. publisher of electronic circuit design software, from February 1993 to...

  • Page 22
    ... publicly listed companies. Mr. Chua serves as a Director of Pacific Internet Limited, a publicly listed company. 3.4 Elections and Terms of Office Directors are elected at the Annual General Meeting of Shareholders, upon proposal of the Board of Directors. The proposals of the Board of Directors...

  • Page 23
    ...-executive Directors and serving as the presiding Director in performing such other functions as the Board may direct. The Chairman sets the agenda for Board meetings. Any member of the Board of Directors may request that a meeting of the Board be convened. The Directors receive materials in advance...

  • Page 24
    ... executive sessions where non-management Directors meet without management present. During fiscal year 2005 executive sessions of the independent Directors were held 5 times. Board Committees The Board has standing Audit, Compensation, Board Compensation and Nominating Committees to assist the Board...

  • Page 25
    ...and recommends to the Board for approval the compensation of Executive Officers and Logitech's compensation policies and programs, including share option programs and other incentive-based compensation. Within the guidelines established by the Board and the limits set out in the 1996 Stock Plan, the...

  • Page 26
    ... of the sale or acquisition, including related borrowings of the Company's real estate. Refer to section 3.5 above for an outline of the powers and responsibilities of Logitech's Chief Executive Officer. 3.7 Supervision and Control Instruments The Board of Directors monitors the responsibility...

  • Page 27
    ...the Board President and Chief Executive Officer, Director Sr. Vice President, Worldwide Operations and General Manager, Far East Sr. Vice President, Control Devices Sr. Vice President, Video Sr. Vice President, Finance, and Chief Financial Officer Sr. Vice President, Worldwide Sales and Marketing Sr...

  • Page 28
    ... of home improvement and building products, in various management positions including Vice President of Finance and Logistics. Mr. Wick holds a BS degree in Accounting from the University of Arizona and was a Certified Public Accountant. 4.2 Involvements Outside Logitech of the Executive Officers...

  • Page 29
    ... has designed its compensation programs to attract, develop, retain and motivate the high caliber of executives, managers and staff that is critical to the long-term success of its business. Logitech's compensation package is composed of a base salary that is competitive to comparable companies in...

  • Page 30
    ... Incentives Logitech provides for stock option grants as part of its executive compensation package. It does so because it believes that a portion of executive compensation should be linked to increasing shareholder value. Stock options have value for an employee only if the Company's share price...

  • Page 31
    ....75 to $21.74 per share (approximately CHF 25.30 to CHF 28.05 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 not increase above the...

  • Page 32
    ... present information as of March 31, 2005 regarding the option ownership for shares (including shares represented by ADRs) of Logitech International S.A. by Logitech's non-executive Directors and Executive Officers. Refer to section 2.7 for a description of Logitech's employee equity compensation...

  • Page 33
    ... fair market value of the Company's registered shares on the date of grant. Based on the Black-Scholes option-pricing model, these options have an estimated value of $2.7 million or $26.66 per share. Mr. De Luca did not receive any compensation for his service rendered as a Director. 6. Shareholders...

  • Page 34
    ...be requested in writing, describe the proposal and be received by the Board of Directors at least 60 days prior to the date of the General Meeting. Such requests should be addressed to: Secretary to the Board of Directors, Logitech International S.A., CH 1143 Apples, Switzerland, or c/o Logitech Inc...

  • Page 35
    ...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 36
    ...In addition, the Company informs its shareholders by means of an annual report and informs the public by the means of press releases upon occurrence of significant events within Logitech. The Company has reporting requirements under Swiss law and the regulations of the SWX Swiss Exchange, and to the...

  • Page 37
    ... 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 6505 Kaiser Drive Fremont, CA 94555 USA Main...

  • Page 38
    ......Logitech Australia Computer Peripherals Pty, Ltd...Logitech de Mexico S.A. de C.V...Logitech Canada, Inc...Logitech, Inc...ASIA-PACIFIC LogiCool Co. Ltd...Logitech Electronic (India) Private Limited ...Logitech Far East, Ltd...Logitech Hong Kong, Ltd...Logitech Korea, Ltd...Logitech Service Asia...

  • Page 39
    ... FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2005 Commission File Number: 0-29174 CG LOGITECH INTERNATIONAL S.A. (Exact name of Registrant as specified in its charter) Not Applicable (Translation of Registrant...

  • Page 40
    ...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 ...Description of Securities...

  • 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
    ... the acquisition of Labtec in fiscal year 2001, the Company recorded a charge of $3.3 million for purchased in-process research and development. Exchange Rates Our registered shares traded on the SWX Swiss Exchange are denominated in Swiss francs while our ADSs traded on the Nasdaq National Market...

  • Page 44
    ... the periods indicated, information concerning exchange rates between the U.S. dollar and the Swiss franc 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...

  • Page 45
    ... innovative new products and enhancements in a timely manner; distinguish our products from those of our competitors; manufacture and deliver high-quality products in sufficient volumes; and price our products competitively. CG 20-F If we do not execute on these factors successfully, our business...

  • Page 46
    ... adversely affected by consumer trends toward notebook computers. Our OEM mice are sold with name-brand desktop PCs. Consequently our OEM business is highly dependent on market trends for desktop PCs. In recent periods, a shift by consumers towards notebook products has resulted in slower growth for...

  • Page 47
    ... offer. Video. Our main competitor in the U.S. for PC web cameras is Creative Labs, offering a complete line of PC web cameras. In Europe, our main competitors are Creative Labs and Philips. We continue to encounter aggressive pricing practices, promotions and channel marketing on a worldwide basis...

  • Page 48
    ... acquisition of Intrigue Technologies in May 2004, we have expanded our product portfolio to include a new line of personal peripheral devices for home entertainment systems. The market for advanced remote controls is highly competitive with many companies offering universal remote controls at price...

  • Page 49
    ... needs or may not meet our quality and delivery objectives. Original design manufacturers and contract manufacturers produce key portions of our product lines for us. Our reliance on them involves significant risks, including reduced control over quality and logistics management, the potential lack...

  • Page 50
    ...Europe distribution center located in Hungary. If we do not successfully establish our expanded Western Europe distribution center, and if we do not otherwise successfully coordinate the timely manufacture and distribution of our products, we may have insufficient supply of products to meet customer...

  • Page 51
    ... diversion of our technical and management resources, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements, any of which could adversely affect our business, financial condition and operating results. Our effective tax rates may...

  • Page 52
    ... furthered its strategy to move the Company beyond the PC platform and into markets such as mobile telephony. The Company integrated the Labtec business, and has expanded the Labtec brand to encompass additional product categories such as mice and web cameras. Intrigue - Advanced Remote Controls. In...

  • Page 53
    ...pay a license fee based on the number licensed software. B. Business Overview Company Overview Logitech is a leader in the design, manufacture and marketing of personal peripherals for PCs and other digital platforms. The Company's products include webcams, mice, trackballs, and keyboards for the PC...

  • Page 54
    ...-based cordless input devices, offering a comprehensive selection of cordless keyboards, mice and gaming controllers. The Company also has become a leader in the PC video camera market. In addition, Logitech has emerged as a leading provider of multimedia speaker systems and PC voice access products...

  • Page 55
    ...incorporating force feedback or optical sensing, and it has resulted in digital writing technologies. Product Definition, Technology and Industrial Design Excellence Logitech understands the balance between features and complexity, functionality and style, price and performance. The Company believes...

  • Page 56
    ... applications have created a very large installed base of personal computers. Logitech believes that 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...

  • Page 57
    ... base of PCs by offering innovative personal peripherals to address the needs of the desktop. While PCs are being used more and more as the digital hub to access information and communicate, other platforms such as game consoles, mobile phones, mobile entertainment devices and home entertainment...

  • Page 58
    ... leading brand for video imaging products, keyboards, PC audio products and control devices for 3D CAD/CAM users. The Company has the ability to introduce an even greater number of essential personal peripherals that people touch and use every day. The Living Room Environment Logitech offers a broad...

  • Page 59
    .... Logitech's personal peripheral 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; headsets; web cameras; and advanced remote controls. The Company...

  • Page 60
    ...™ Cordless Mouse that functions both as a remote and a mouse. All of Logitech's premium retail mice are bundled with Logitech® SetPoint® software, enabling users to program mouse buttons for specific tasks. New models introduced this year feature the Company's tilt wheel plus zoom capability...

  • Page 61
    ... line of voice access headsets and microphones. This line is designed to provide high-quality performance from many PC and game console applications, including voice-over-Internet communication, speech recognition, and video game voice command. Logitech is one of the world's largest producers of USB...

  • Page 62
    ... wheel and Logitech Cordless Controllers. To enable this hardware and promote high-quality support within games, Logitech also provides advanced software drivers and tools to game developers. Other Advanced Remote Controls Logitech has expanded its presence in the digital living room with a new line...

  • Page 63
    ... computing applications with a very long battery life and mass market price points; it was first used in the Logitech MXâ„¢ series of mice. 2.4 GHz technology, designed by Logitech especially for game controllers, satisfies gamers who value high-speed performance. Logitech's cordless gaming devices...

  • Page 64
    ... for force feedback joysticks and wheels, mice, keyboards, cameras and headsets. The SDKs are used in many of the top-selling console games and make it easy for users to leverage the latest features of Logitech's gaming peripherals. The Company's line of advanced universal remote controls is powered...

  • Page 65
    ... and advanced remote controls, is consumers. The primary users for Logitech's audio products are consumers, SoHo, and OEM customers. The Company's user markets for its PC web cameras are SoHo users, corporate buyers and consumers. Logitech's primary user markets are in North America, Europe and Asia...

  • Page 66
    ...Company operates as one business segment, which is the design, development, production, marketing and support of personal peripherals. Net sales to unaffiliated customers by geographic region were as follows (in thousands): 2005 Year ended March 31, 2004 2003 Europe ...North America ...Asia Pacific...

  • Page 67
    ...devices and audio products, are manufactured by third-party suppliers to the Company's specifications. Retail product localization with local language manuals, packaging, software CDs and power plugs is performed at distribution centers in North America, Europe and Asia Pacific. Competition Logitech...

  • Page 68
    ... in May 2004, Logitech has expanded its product portfolio to include a new line of personal peripheral devices for home entertainment systems. The market for advanced remote controls is highly competitive with many companies offering universal remote controls at price points similar to or...

  • Page 69
    ... The following lists the Company's significant subsidiaries: Name Country of Incorporation Ownership Interest CG 20-F LISA Logitech Inc...Logitech Hong Kong, Ltd...Logitech Far East Ltd...Suzhou Logitech Electronics Co. Ltd...Logitech Europe S.A... U.S. Hong Kong Taiwan China Switzerland 100...

  • Page 70
    ... facilities are occupied by Logitech's Americas headquarters, including research and development, product marketing, sales management, technical support and administration. The Company's Fremont lease expires in March 2013. The audio business unit is located in 25,000 square feet of leased office...

  • Page 71
    ..., and keyboards; interactive gaming devices for entertainment such as joysticks, gamepads, and racing systems; web cameras; speakers, headsets and microphones; 3D controllers and advanced remote controls. The Company sells its products through two primary channels, original equipment manufacturers...

  • Page 72
    ... programs in any accounting period. The Company grants limited rights of return for certain products. Estimates of expected future product returns are based on analyses of historical returns, inventories owned by and located at distributors and retailers, and current customer demand. Return rates...

  • Page 73
    ... 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 74
    ... tax assets. Logitech has recorded a valuation allowance at March 31, 2005 due to uncertainties related to its ability to utilize some of the deferred tax assets before they expire. The valuation allowance is based on estimates of taxable income by jurisdiction in which the Company operates and the...

  • Page 75
    ... value share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. In addition, the adoption of SFAS 123R will require additional accounting related to tax benefits on employee stock options and for shares issued under the Company...

  • Page 76
    Logitech's cordless and corded product families include the Company's mice, trackballs, keyboards and desktops for the PC. Video is comprised of PC webcams; audio includes multimedia speakers, headsets and headphones for the PC and for gaming consoles, headsets for mobile phones, and headsets, ...

  • Page 77
    ... Strong demand for cordless, video, audio and console gaming products contributed to the increased sales, partially offset by reductions in sales of corded and PC gaming products. Contribution from the remote control line also benefited sales in the region. In Europe, retail sales also showed growth...

  • Page 78
    ... Selling Marketing and selling expense consists of personnel and related overhead costs, corporate and product marketing, promotions, advertising, trade shows, customer and technical support and facilities costs. Higher marketing and selling expense in absolute dollars and as a percentage of sales...

  • Page 79
    ..., investments to upgrade business applications and information technology systems, and legal costs related to patent infringement claims inherited with the Company's acquisition of Intrigue contributed to higher general and administrative spending. The impact of exchange rate changes on translation...

  • Page 80
    ... in PC web camera products. Retail - Audio. Sales of the Company's audio products increased 43% and unit shipments increased 22%. While the growth was primarily a result of the success of the Logitech branded speakers, the Company also benefited from sales of its mobile headsets and USB headsets for...

  • Page 81
    ... the audio segment for Logitech branded speakers and increased sales of PC webcams in the video segment. In Europe, retail sales grew 18% over the prior year. Europe retail sales benefited from the strengthening Euro, reporting growth in all product categories, including its corded and cordless mice...

  • Page 82
    ... expense in fiscal year 2004 was mainly due to increased personnel to support ongoing investment in product development. Specifically, the Company increased research and development spending for its cordless and audio product programs. The impact of exchange rate changes on translation to the...

  • Page 83
    ... and borrowings, as needed, under its credit facilities. The Company had credit lines with several European and Asian banks totaling $73.3 million as of March 31, 2005. As is common for businesses in European and Asian countries, these credit lines are uncommitted and unsecured. Despite the lack of...

  • Page 84
    ... decision to carry more finished goods inventory to ensure sufficient supply on hand to meet demand for key retail accounts in Europe and North America. Raw material inventory was also higher compared to a year ago, largely due to carrying buffer stock to manage potential shortages or interruptions...

  • Page 85
    ... company from which Logitech licenses digital pen technology. During the year ended March 31, 2003, the Company invested $28.7 million for normal capital expenditures to acquire computer hardware and software, tooling costs, capital improvements, and machinery and equipment. The Company received...

  • Page 86
    ... 2006 into registered shares of Logitech at the conversion price of CHF 62.40 ($52.24 based on exchange rates at March 31, 2005) per share. The Company's stock price on the SWX Swiss Exchange at March 31, 2005 was CHF 72.75. Based on the current stock price, the Company anticipates bondholders will...

  • Page 87
    ... of business and are to original design manufacturers, contract manufacturers and other suppliers. Commitments for capital and other expenditures primarily related to commitments for manufacturing equipment, software, and also for commitments related to the construction of the Company's new factory...

  • Page 88
    ... AND EMPLOYEES A. Directors and Senior Management Information concerning Directors and Senior Management of Logitech appears in Section 3 "The Board of Directors" and Section 4 "Senior Management" in Exhibit 15.1 to the Form 20-F and is incorporated herein by reference. B. Compensation of Executive...

  • Page 89
    ... of Directors and Executive Officers" in Exhibit 15.1 to the Form 20-F and is incorporated herein by reference. Information concerning the Company's employee stock-based compensation arrangements including stock option plans and stock purchase plans is disclosed in Note 9 "Employee Benefit Plans...

  • Page 90
    ...earnings to repurchase its shares. B. Significant Changes None. ITEM 9. THE OFFER AND LISTING A. Offer and Listing Details Stock Price Information Registered Shares Logitech's registered shares are listed and traded on the SWX Swiss Exchange, where the share price is denominated in Swiss francs. 52

  • Page 91
    ... 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 SWX Swiss Exchange, and (ii) the U.S. dollar equivalent based on the noon buying rate on the trading day...

  • Page 92
    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 2001 ...Fiscal 2002 ...Fiscal 2003 ...Fiscal ...

  • Page 93
    ...the Issue Not applicable. ITEM 10. ADDITIONAL INFORMATION A. Share Capital Not applicable. B. Memorandum and Articles of Incorporation Set forth below is certain information and references to information concerning Logitech's share capital, material provisions of applicable Swiss law and the Company...

  • Page 94
    ...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 95
    ... States holders of registered shares. Swiss Taxation Gain on Sale Under 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) is not...

  • Page 96
    ...currency exchange rate risk as it transacts business in multiple foreign currencies, including exposure related to anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. dollar. Logitech transacts business in over 30 currencies worldwide, of...

  • Page 97
    ... pegged to the U.S. dollar, accordingly the Company's exposure to exchange rate changes for net assets held in RMB is limited. On June 8, 2001 the Company sold CHF 170.0 million ($95.6 million based on exchange rates at the time of issue) Swiss franc denominated 1% Convertible Bonds which mature in...

  • Page 98
    ... Swiss Exchange. ADSs traded on the Nasdaq National Market 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. The Company is seeking approval from its shareholders at its June 2005 Annual General Meeting to effect...

  • Page 99
    ... on the Company's Web site at www.logitech.com, and for no charge, a copy of the Company's code of ethics can be requested via the following address or phone number: Logitech Investor Relations 6505 Kaiser Drive Fremont, CA 94555 USA Main 510-795-8500 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES...

  • Page 100
    ..., authorizing the purchase of up to CHF 250 million of shares (approximately $200 million based on exchange rates at the date of announcement). The program expires at the Company's 2006 Annual General Meeting at the latest. PART III ITEM 17. FINANCIAL STATEMENTS The Company has responded to Item 18...

  • Page 101
    ... Credit Suisse. List of subsidiaries of Logitech International S.A. Consent of Independent Registered Public Accounting Firm Report on Corporate Governance prepared under the rules of the SWX Swiss Exchange. Charter for the Audit Committee of the Board of Directors of Logitech International S.A. (as...

  • Page 102
    ... Act of 2002. Certification by Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.* X 32.1 X * This exhibit is furnished herewith, but not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or...

  • Page 103
    ...it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. Logitech International S.A. Guerrino De Luca President and Chief Executive Officer CG Kristen M. Onken Chief Financial Officer, Chief Accounting Officer, and U.S. Representative May 18, 2005 20-F LISA 65

  • Page 104
    ... 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, 2005 and 2004 ...Consolidated Statements of Income - Year Ended March 31, 2005, 2004 and 2003 ...Consolidated...

  • Page 105
    ... 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 audits. We confirm that we meet the Swiss legal requirements concerning professional qualification and...

  • Page 106
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) March 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents ...Accounts receivable ...Inventories ...Other current assets ...Total current assets ...Investments ...Property, plant and...

  • Page 107
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) 2005 Year ended March 31, 2004 2003 Net sales ...Cost of goods sold ...Gross profit ...Operating expenses: Marketing and selling ...Research and development ...General and administrative ...Total ...

  • Page 108
    ... from sale of shares upon exercise of options and rights ...Net cash used in financing activities ...Effect of exchange rate changes on cash and cash equivalents ...Net increase in cash and cash equivalents ...Cash and cash equivalents at beginning of period ...Cash and cash equivalents at end of...

  • Page 109
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands) Registered shares Shares... income ...Tax benefit from exercise of stock options ...Purchase of treasury shares ...Sale of shares upon exercise of options and purchase rights ...March 31, 2005 ...- - -...

  • Page 110
    ... for the PC and for gaming consoles; headsets for mobile phones; headsets, headphones and speakers for mobile entertainment platforms; advanced remote controls; digital writing solutions; and 3D control devices. The Company sells its products to both original equipment manufacturers ("OEMs") and...

  • Page 111
    ... of the product is fixed or determinable; and collectibility of the receivable is reasonably assured. Revenues from sales to distributors and authorized resellers are subject to terms allowing price protection, certain rights of return and allowances for customer marketing programs. Reserves for...

  • Page 112
    ...in excess of anticipated demand or market value based on a consideration of product lifecycle stage, technology trends, product development plans, component cost trends and assumptions about future demand and market conditions. Investments Investments in companies in which Logitech owns less than 20...

  • Page 113
    ... of these options were greater than the average market price of the Company's registered shares, and therefore their inclusion would have been anti-dilutive. Stock-Based Compensation Plans The Company currently measures compensation expense for its employee stock-based compensation plans using the...

  • Page 114
    ...% $15.00 LISA In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, "Share-Based Payment," which requires companies to expense the fair value of employee stock options and other forms of share-based compensation. Accordingly, SFAS 123R eliminates the use of the intrinsic...

  • Page 115
    ... held provider of advanced remote controls, based in Mississauga, Canada. The acquisition is part of the Company's strategy to pursue new opportunities in the living room environment, positioning Logitech at the convergence of consumer electronics and personal computing in the digital living room...

  • Page 116
    ... and infrared database, which support infrared-controlled devices made by manufacturers. The acquired technology relates to developed software used in Intrigue's line of advanced remote controls. Trademark/trade name relates to the Harmony brand name which the remote controls are sold under and...

  • Page 117
    ... 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 both entities...

  • Page 118
    ... with the investment, a Logitech executive was appointed to the A4Vision board of directors. A4Vision is a privately held company from which Logitech licenses face tracking software. The license agreement requires Logitech to pay a license fee based on the number of its products sold with A4Vision...

  • Page 119
    ... balance sheet components (in thousands): March 31, 2005 2004 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 120
    ...by $.3 million for purchase price adjustments related to the Intrigue acquisition. Also, during fiscal year 2005, the Company recorded additions to goodwill of $2.8 million for foreign currency translation adjustments. The Company performs its annual goodwill impairment test during its fiscal fourth...

  • Page 121
    ... in connection with the issue of the Company's convertible bonds. The conditional share capital increase does not have an expiration date. Pursuant to Swiss corporate law, Logitech International S.A. may only pay dividends in Swiss francs. The payment of dividends is limited to certain amounts of...

  • Page 122
    ... executed at the end of each offering period. Stock Option Plans Under the 1996 Stock Plan, the Company may grant to employees options for registered shares or ADSs, restricted shares, stock appreciation rights, and stock units, which are bookkeeping entries representing the equivalent of shares...

  • Page 123
    ... 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, 2005, 2004...

  • Page 124
    ... This would result in an increase in the Company's effective tax rate. Deferred tax assets of $35.4 million at March 31, 2005 pertain to net operating loss ("NOL") and tax credit carry forwards resulting from the exercise of employee stock options. Management believes that it is more likely than not...

  • Page 125
    ... of goods sold during fiscal years 2005, 2004 and 2003 were $1.0 million, $3.5 million and $1.1 million. The Company also enters into foreign exchange forward contracts to hedge against foreign currency exposures inherent in forecasted sales denominated in non-functional currencies, also designated...

  • Page 126
    ... approximated $14.6 million and primarily related to commitments for manufacturing equipment, software, and also for commitments related to the construction of the Company's new factory in Suzhou, China. The Company also had commitments of $.2 million related to its participation in an investment...

  • Page 127
    ... intangibles, and investments are reported below based on the location of the asset. Retail and OEM net sales to unaffiliated customers by geographic region were as follows (in thousands): 2005 Year ended March 31, 2004 2003 Europe ...$ 733,667 North America ...532,611 Asia Pacific ...216,348 Total...

  • Page 128
    ...14% and another customer represented 10% of net sales. In fiscal years 2004 and 2003 one customer represented 10% and 12% of net sales. Long-lived assets by geographic region were as follows (in thousands): March 31, 2005 2004 Europe ...$ 53,363 North America ...141,125 Asia Pacific ...27,523 Total...

  • Page 129
    ...following table sets forth certain quarterly financial information as a percentage of net sales: First Year ended March 31, 2005 Second Third Fourth First Year ended March 31, 2004 Second Third Fourth Net sales ...Gross profit ...Operating expenses: Marketing and selling ...Research and development...

  • Page 130
    Exhibit 12.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333100854) of Logitech International SA of our reports dated May 18, 2005 relating to the financial statements and financial ...

  • Page 131
    ...disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent function): a. All significant deficiencies and material weaknesses in the design or...

  • Page 132
    ...disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent function): a. All significant deficiencies and material weaknesses in the design or...

  • Page 133
    ... 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 18, 2005 Guerrino De Luca Chief Executive Officer Kristen M. Onken Chief Financial...

  • Page 134
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY FINANCIAL STATEMENTS CG 20-F LISA

  • Page 135
    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 136
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY BALANCE SHEETS (unconsolidated) (In thousands of Swiss francs) March 31, 2005 2004 ASSETS Current assets: Cash ...CHF 1,183 Short-term bank deposits ...118,408 Accrued interest and other receivables ...1,178 Advances to and amounts receivable from...

  • Page 137
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY STATEMENTS OF INCOME (unconsolidated) (In thousands of Swiss francs) Year ended March 31, 2005 2004 Dividend income ...CHF 112,565 Royalty fees ...34,904 Interest income from third parties ...1,597 Interest income from subsidiaries ...7,236 ...

  • Page 138
    ... Liabilities: Logitech International S.A. issued guarantees to various banks for CHF 26,195,000 for lines of credit available to its subsidiaries. At March 31, 2005 the aforementioned credit line facilities were not drawn down. Logitech International S.A. purchases foreign exchange contracts for...

  • Page 139
    LOGITECH INTERNATIONAL S.A., APPLES NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS-(Continued) In October 2003, the Board of Directors authorized the repurchase of up to CHF 40,000,000 of the Holding Company's registered shares/ADSs. This program expired in March 2004 upon completion of the purchase ...

  • Page 140
    ... (in thousands): Year ended March 31, 2005 2004 Retained earnings at the beginning of the year ...CHF 256,964 Attribution to reserve for treasury shares ...(24,544) Net income for the year ...95,472 Retained earnings at the disposal of the Annual General Meeting CHF 327,892 CHF 141,036 - 115...

  • Page 141
    ... Proposal of the Board of Directors for appropriation of retained earnings were as follows during fiscal years 2004 and 2005 (in thousands): Year ended March 31, 2005 2004 Proposal of the Board of Directors To be carried forward ...CHF 327,892 Resolution of the General Meeting CHF 256,964 LISA...

  • Page 142
    ... and notes) of Logitech International S.A. for the year ended March 31, 2005. 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 143
    ....com฀for฀a฀complete฀list฀ of฀Logitech฀locations Holding฀Company Logitech฀International฀S.A. CH-1143฀Apples Switzerland Americas฀Headquarters฀ Logitech฀Inc. 6505฀Kaiser฀Drive Fremont,฀CA฀94555 United฀States Asia฀Pacific฀Headquarters฀ Logitech฀Hong฀Kong...