Logitech 2006 Annual Report Download - page 107

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Operating and Capital Leases
The remaining terms on the Company’s non-cancelable operating leases expire in various years through
2015. The Company had minimal commitments on capital leases as of March 31, 2006.
Purchase Commitments – Inventory
The Company has fixed purchase commitments for inventory of $128.6 million as of March 31, 2006.
Inventory purchase commitments are made in the normal course of business and are to contract manufacturers
and other suppliers. Although open purchase commitments are considered enforceable and legally binding, the
terms generally allow the Company the option to reschedule and adjust its requirements based on the business
needs prior to the delivery of the purchases. The purchase commitments for inventory are expected to be fulfilled
within one year.
Purchase Obligations
Purchase obligations represent an estimate of all open purchase orders and contractual obligations for capital
and other expenditures, for which the goods or services are not received. These purchase obligations are
primarily related to commitments for manufacturing equipment and software, as well as consulting, marketing
and advertising arrangements. Although open purchase orders are considered enforceable and legally binding, the
terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on the
business needs prior to the delivery of goods or performance of services.
Off-Balance Sheet Arrangements
The Company has not entered into any transactions with unconsolidated entities whereby the Company has
financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that
expose it to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company.
Guarantees
The Company has guaranteed the purchase obligations of some of its contract manufacturers to certain
component suppliers. These guarantees have a term of one year and are automatically extended for one or more
years as long as a liability exists. The amount of the purchase obligations of these manufacturers varies over
time, and, therefore, the amounts subject to the Company’s guarantees similarly vary. At March 31, 2006, the
amount of these outstanding guaranteed purchase obligations was approximately $1.3 million. Logitech does not
believe, based on historical experience and information currently available, that it is probable that any amounts
will be required to be paid under these guarantee arrangements.
Indemnifications
The Company indemnifies certain of its suppliers and customers for losses arising from matters such as
intellectual property rights and safety defects, subject to certain restrictions. The scope of these indemnities
varies and may include indemnification for damages and expenses, including reasonable attorneys’ fees. No
amounts have been accrued for indemnification provisions as of March 31, 2006. The Company does not believe,
based on historical experience and information currently available, that it is probable that any amounts will be
required to be paid under its indemnification arrangements.
Research and Development
For a discussion of the Company’s research and development activities, patents and licenses, please refer to
Item 4B “Business Overview.”
49
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