Logitech 2006 Annual Report Download - page 145

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At March 31, 2006, the Company had approximately $128.6 million in fixed purchase commitments with
suppliers for inventory. Fixed commitments for capital and other expenditures approximated $8.7 million and
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 reschedule and adjust its requirements based on the business
needs prior to the delivery of goods or performance of services.
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
additional 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 Logitech’s guarantees similarly varies. At March 31, 2006, the
amount of these outstanding guaranteed purchase obligations was approximately $1.3 million. 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 these guarantee arrangements.
Logitech indemnifies some of its suppliers and customers for losses arising from matters such as intellectual
property rights and product safety defects, subject to certain restrictions. The scope of these indemnities varies,
but in some instances, includes indemnification for damages and expenses, including reasonable attorneys’ fees.
No amounts have been accrued for indemnification provisions at 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.
All of the Company’s products are subject to the European Union’s (“EU”) Waste Electrical and Electronic
Equipment Directive (“WEEE”), which require producers of electrical goods be financially responsible for
specified collection, recycling, treatment and disposal of covered products. The original implementation date
proposed by the WEEE Directive for enactment of national legislation by EU member states was August 2004.
Producers are to be financially responsible under the WEEE legislation beginning in August 2005. Producer
obligations also include specified collection, recycling, treatment and disposal of equipment that had been placed
in the EU marketplace prior to August 2005, and has reached its end of life. To date, specific legal requirements
have not been finalized by all member states, with certain member states delaying implementation until late
2006. In those countries which have enacted legislation, the Company expects to incur costs for managing and
recycling historical waste equipment and make provisions for costs related to future waste. These costs are
expected to be based on the Company’s estimated market share of the total cost, which will depend on a number
of factors, including administration, recycling and treatment costs as well as the commercial cost of recycling.
The Company is involved in a number of lawsuits and claims relating to commercial matters that arise in the
normal course of business. The Company believes these lawsuits and claims are without merit and intends to
vigorously defend against them. However, there can be no assurances that its defenses will be successful, or that
any judgment or settlement in any of these lawsuits would not have a material adverse impact on the Company’s
business, financial condition and results of operations.
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