Logitech 2006 Annual Report Download - page 104

balances, resulting from significantly higher sales in fiscal year 2006 and an increase in DSO. Although partially
offset by higher collections, accounts receivable increased to $289.8 million at March 31, 2006, compared with
$229.2 million last year. In addition, the Company increased its inventory levels and purchases to respond to the
sales increases in fiscal year 2006. At March 31, 2006, inventory was $196.9 million compared with $176.0
million at March 31, 2005. The increase was predominantly in finished goods, intended to ensure sufficient
supply on hand to meet demand. Increased operating expenses also affected cash flow from operating activities
in fiscal year 2006. The Company invested in additional personnel, marketing and product initiatives, and
infrastructure improvements to support the expanding sales base.
The Company’s operating activities generated net cash of $213.7 million during fiscal year 2005 compared
with $166.5 million in the prior year. The increase in cash flow generated from operations was due to higher
sales and better management of outstanding receivables. Also contributing to improved cash from operations
were refunds for value-added taxes from the Chinese government related to certain calendar year 2003 claims.
Partially offsetting the increase in cash flow from operations was increased spending for inventory purchases and
for operating expenses. The increase in inventory in fiscal year 2005 reflected the Company’s anticipation of
product demand by key retail accounts and raw material buffer stock required to manage shortages or
interruptions in component supplies. Also, cash flows from operations were impacted by increased operating
expenses, which included higher personnel costs, spending for marketing and product development initiatives
and investments in infrastructure improvements.
Cash Flow from Investing Activities
Cash flows from investing activities during fiscal years 2006, 2005 and 2004 were as follows (in thousands):
2006 2005 2004
Purchases of property, plant and equipment ......... $(54,102) $(40,541) $(24,718)
Acquisitions and investments, net of cash acquired .... 860 (30,494) (15,490)
Premium paid on cash surrender value of life insurance
policies .................................... (1,464) — —
Net cash used in investing activities ........... $(54,706) $(71,035) $(40,208)
During fiscal year 2006, the Company’s purchases of property, plant and equipment were primarily for
construction of the new factory in Suzhou, China, information system upgrades, and normal expenditures for
tooling. The Company also invested participant deferrals of $1.5 million from its management deferred
compensation plan in life insurance contracts. In addition, the Company received proceeds from the sale of an
investment.
The Company’s purchases of property, plant and equipment in fiscal year 2005 were primarily normal
expenditures for tooling costs, machinery and equipment, and computer equipment and software. Capital
expenditures also included the cost of information system upgrades and construction of a new factory in Suzhou,
China. In connection with the acquisition of Intrigue Technologies in May 2004, the Company paid net cash of
$29.8 million, acquiring all of Intrigue’s outstanding shares. Also, the Company made other equity investments
of $.6 million, primarily for funding in A4Vision, Inc., a privately held company from which Logitech licenses
face tracking software used in its PC webcams.
During the year ended March 31, 2004, the Company used cash of $24.7 million to acquire property, plant
and equipment, primarily for tooling and computer equipment purchases. Also, the Company used cash of
$15.5 million to invest in two technology companies, $15.1 million of which was invested in the Anoto Group
AB, a Swedish high technology company from which Logitech licenses digital pen technology.
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