Logitech 2006 Annual Report Download - page 117

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appreciation of the CNY, the Company has transferred a portion of its cash investments to CNY accounts. At
March 31, 2006, net assets held in CNY totaled $100.2 million. While the revaluation continues to limit the CNY
to float within a narrow percentage band each day, the Company believes that the change to a more flexible
system based on a basket of foreign currencies could lead to a further, gradual rise in the CNY’s value.
From time to time, the Company enters into foreign exchange forward contracts to hedge against exposure
to changes in foreign currency exchange rates related to forecasted inventory purchases by subsidiaries. These
forward contracts are denominated in the same currency as the underlying transactions. The Company does not
use derivative financial instruments for trading or speculative purposes. As of March 31, 2006, the notional
amounts of foreign exchange forward contracts outstanding for forecasted inventory purchases were
$13.6 million. These forward contracts generally mature within three months. Deferred realized gains totaled
$.2 million at March 31, 2006 and are expected to be reclassified to cost of goods sold when the related inventory
is sold. If the U.S. dollar had appreciated by 10% as compared with the hedged foreign currency, an unrealized
gain of $1.3 million in the foreign exchange forward contract portfolio would have occurred. If the U.S. dollar
had depreciated by 10% as compared with the hedged foreign currency, a $1.4 million unrealized loss in the
foreign exchange forward contract portfolio would have occurred.
Interest Rates
Changes in interest rates could impact the Company’s anticipated interest income on its cash equivalents
and interest expense on variable rate short-term debt. The Company analyzed its interest rate exposures to 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, 2006 and March 31, 2005 period end rates would not
have a material effect on the Company’s results of operations or cash flows.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
59
CG
LISA