Logitech 2005 Annual Report Download - page 115

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LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
options and for shares issued under the Company’s employee stock purchase plan. The Company is required to
adopt SFAS 123R in the first quarter of fiscal year 2007. The Company is evaluating the requirements of SFAS
123R and expects its impact on the Company’s results of operations will not be materially different from the
amounts currently disclosed pursuant to the pro forma provisions of SFAS 123.
Comprehensive Income
Comprehensive income is defined as the total change in shareholders’ equity during the period other than
from transactions with shareholders. Comprehensive income consists of net income and other comprehensive
income, a component of shareholders’ equity. Other comprehensive income is comprised of foreign currency
translation adjustments from those entities not using the U.S. dollar as their functional currency, unrealized gains
and losses on marketable equity securities and net deferred gains and losses on hedging activity.
Note 3 — Acquisitions:
Intrigue
In May 2004, the Company acquired Intrigue Technologies, a privately 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.
Under the terms of the purchase agreement, the Company acquired all the outstanding shares of Intrigue
Technologies for $29.0 million in cash. An additional $1.6 million was incurred for transaction costs. The
agreement provides for possible performance-based payments to the former shareholders of Intrigue tied to the
achievement of remote control revenue targets. The revenue measurement period for purposes of determining the
performance payments will be the four-quarter consecutive period with the highest revenue beginning in April
2006 through September 2007. In the event remote control revenues during the measurement period reach the
maximum level, as defined in the agreement, the amount of performance payments would total approximately
27% of remote control revenues during that period, although the percentage could be higher at lower revenue
target levels. The aggregate amount of performance payments, if any, will not be known until the end of the
revenue measurement period, which may be as late as fiscal year 2008, and will be recorded as an adjustment to
goodwill. No performance payments will be required for revenue levels less than $55.0 million during the
revenue measurement period.
The acquisition has been accounted for using the purchase method of accounting. Therefore, the assets
acquired and liabilities assumed were recorded at their estimated fair values as determined by Company
management based on information available at the date of acquisition. The Company obtained an independent
appraisal to assist management in its determination of the fair values of the acquired identifiable intangible assets.
The results of operations of the acquired company were included in Logitech’s consolidated statement of income
from the acquisition date forward. Pro forma results of operations are not presented, as the results of operations of
Intrigue at the time of acquisition was not material to the Company’s consolidated financial statements.
F-12