Logitech 2007 Annual Report Download

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2007 ANNUAL REPORT

Table of contents

  • Page 1
    2007 ANNUAL REPORT

  • Page 2
    ...stock options and employee stock purchases, and the related income tax effect, as recognized in accordance with SFAS 123R. Because we implemented SFAS 123R effective April 1, 2006, our financial results prior to this time do not include the effect of share-based compensation expense. Our management...

  • Page 3
    ... 02 03 04 05 06 07 FY 00 01 02 03 04 05 06 07 FY 00 01 02 03 04 05 06 07 NET SALES (in millions of us dollars) INCOME (in millions of us dollars) Operating Income Net Income SHARE PERFORMANCE (based on an initial investment of 100) Logitech Swiss Performance Index Nasdaq 100

  • Page 4
    LETTER TO OUR SHAREHOLDERS

  • Page 5
    ... in PC navigation, notebook peripherals, Internet communications, gaming and digital music. We are pursuing opportunities in the digital home by offering our Harmony remote controls to tame the complexities of home-entertainment systems. And, with our October 2006 acquisition of Slim Devices, we...

  • Page 6
    ... la nouvelle électronique grand public, notamment celle destinée à la « maison numérique ». Dans notre métier de base, nous sommes à la pointe de l'innovation dans la navigation sur PC, les périphériques pour ordinateurs portables, les communications sur Internet, les périphériques de...

  • Page 7
    .... Zudem wurde Logitech in den Nasdaq...im Management und...PC-Navigation, Peripheriegeräte für Notebooks, Internet...Slim Devices im Oktober 2006 den Konsumenten überall in ihrer Wohnung den Zugriff auf Internet..., Service- und Supportleistungen. Logitech wei... 2007 war ein herausragendes Jahr für Logitech,...

  • Page 8
    34.3% GROSS MARGIN REFLECTS THE VALUE OF INNOVATION HARMONY® 1000 Z-10 INTERACTIVE 2.0 SPEAKER SYSTEM

  • Page 9
    ... for end-to-end solutions for digital music in the home by offering speakers for listening to music on the PC and an expanded portfolio of iPod speakers and headphones. Most recently we strengthened our position in the emerging wireless music category with our acquisition of Slim Devices. * FY 2007...

  • Page 10
    ...portfolio. The speaker phone in this product demonstrates our VoIP audio know-how while the software automates the VoIP experience on the PC. Our Cordless Desktop offerings are well positioned to take advantage of the new navigation features in Windows Vistaâ„¢ such as Flip3D and Zoom. The highlight...

  • Page 11
    34 CONSECUTIVE QUARTERS OF DOUBLE DIGIT REVENUE GROWTH DINOVO EDGE â„¢ V450 LASER CORDLESS MOUSE FOR NOTEBOOKS

  • Page 12
    8 YEARS OF DOUBLE DIGIT EPS GROWTH QUICKCAM® FUSION ™ MM50 PORTABLE SPEAKERS FOR IPOD®

  • Page 13
    ... Speaker System. The Z-10 speakers feature a high-style design as well as a touchpad to control digital music on the PC, including iTunes® . This was the first PC speaker with embedded software, an innovation that we view as an opportunity for strong differentiation and higher price points...

  • Page 14
    ... to reaching future revenue targets. Slim Devices has developed a solution that enables people to enjoy high-quality digital music, in multiple rooms of the home, regardless of whether the music is streaming directly from the Internet, or from a PC, Mac® , or storage device on the network. We're...

  • Page 15
    $306M CASH-FLOW FROM OPERATIONS DOUBLED OVER PREVIOUS YEAR CHILLSTREAM ™ CONTROLLER HARMONY® 890

  • Page 16
    27% INCREASE IN NET PROFIT DRIVEN BY HIGHER GROSS MARGIN MX â„¢ REVOLUTION MICROGEAR â„¢ PRECISION SCROLL WHEEL

  • Page 17
    ...the internal workings of the new mouse. Reinventing the wheel wouldn't be easy: it had to be small enough to fit into the space specified by the designers alongside new optics and electronics and also robust enough to be manufactured in the millions. Our engineering team had generated a number of...

  • Page 18
    ... products they replaced. The focus of our product development teams on optimizing product cost paid off handsomely in a number of categories, particularly in cordless mice and desktops, PC speakers and PC gaming. Another contributor to our gross margin improvement was the cost-effective performance...

  • Page 19
    ... the sales mix among our lower- and higher-margin products and our geographic sales mix; as well as those additional factors set forth in our periodic filings with the Securities and Exchange Commission, including our annual report on Form 20-F for the Fiscal Year ended March 31, 2007. Logitech does...

  • Page 20
    ... INFORMATION (in thousands, except per share amounts) Reconciliation of GAAP to non-GAAP Financial Measures Twelve Months Ended March 31, 2007 GAAP gross margin ...Adjustments: Effect of share-based compensation ...Non-GAAP gross margin GAAP research and development ...Adjustments: Effect of share...

  • Page 21
    ...-based Compensation Expense for Employee Stock Options and Employee Stock Purchases Twelve Months Ended March 31, 2007 Cost of goods sold ...Marketing and selling ...Research and development ...General and administrative ...Income tax benefit ...Total share-based compensation expense after income...

  • Page 22
    ... on Corporate Governance Logitech's Report on Corporate Governance provides information on the Company's structure, its Board members and executive officers, and its corporate governance practices. This Report includes information required by the directives of the SWX Swiss Exchange for SWX-listed...

  • Page 23
    LOGITECH INTERNATIONAL S.A. REPORT ON CORPORATE GOVERNANCE 20-F LISA

  • Page 24
    ... developing and marketing innovative products in PC navigation, Internet communications, digital music, home-entertainment control, interactive gaming and wireless devices. Our products include mice, keyboards, trackballs, 3D control devices, webcams, multimedia speakers, wireless and Internet music...

  • Page 25
    ... the Swiss commercial register. This aggregate number was 191,606,620 voting rights as of March 31, 2007. SESTA requires shareholders who own voting rights exceeding certain percentage thresholds of a company incorporated in Switzerland whose shares are listed on a stock exchange in Switzerland to...

  • Page 26
    ... at the Company's Annual General Meeting in 2008. The Board of Directors may restrict the shareholders' right to subscribe to the newly issued shares by preference, in particular if the shares are placed on international markets or issued in connection with an acquisition or merger. The unexercised...

  • Page 27
    ... CHF 15,165 CHF 2,725 CHF 10,000 CHF 15,165 CHF 2,725 For information on Logitech's shareholders' equity as of March 31, 2007 and 2006, refer to the Swiss Statutory Balance Sheets on page LISA-3. During fiscal years 2007, 2006 and 2005, the Board of Directors authorized the following share buyback...

  • Page 28
    ... not issued warrants on its shares. Employee Stock Incentive and Stock Purchase Plans. Logitech believes equity compensation is an important part of attracting and retaining high-caliber employees and of aligning the interests of management and the directors of the Company with the interests of the...

  • Page 29
    ... Note 4 to the Consolidated Financial Statements for more information on the Company's outstanding stock options. Employee Share Purchase Plans. Logitech maintains two employee share purchase plans, one for employees in the United States and one for employees outside the United States. The plan for...

  • Page 30
    ...Business School. Daniel Borel, Swiss national, Chairman of the Board and executive board member, is a founder of the Company. Mr. Borel assumes a leading role in mid- and long-term strategic planning and the selection of top-level management, and he supports major transaction initiatives of Logitech...

  • Page 31
    ...who are employees of Logitech. The Board has determined that they are independent Directors under the rules of the Nasdaq Stock Market and under the Swiss Code of Best Practice for Corporate Governance. Mr. Chang is a former executive of the Company. Although he is a non-executive Board member he is...

  • Page 32
    ... premium drinks company. Reporting to the Chief Executive Officer and a Member of the Diageo Executive committee, Mr. Malcolm has worldwide responsibility for the marketing, sales and innovation functions for Diageo and direct responsibility for strategy, equity management, innovation and global...

  • Page 33
    ... is listed on the SWX Swiss Exchange. Mr. Borel also served on the Board of Directors of Julius Baer Holding A.G. until April 2007. Kris Onken, a former Chief Financial Officer of the Company, is a member of the Board of Directors of Biosensors International Group, Ltd., of which Director Kee-Lock...

  • Page 34
    ... Chief Executive Officer recommend Executive Officers or other members of senior management who, at the invitation of the Board, attend portions of each quarterly Board meeting to report on areas of the business within their responsibility, thereby ensuring that the Board has sufficient information...

  • Page 35
    ..., and Ms. Ribar. The Board of Directors has determined that each member of the Audit Committee meets the independence requirements of the Nasdaq Stock Market listing standards and the applicable rules and regulations of the United States Securities and Exchange Commission ("SEC"). In addition, the...

  • Page 36
    ... set forth in the Company's employee equity plans, the Compensation Committee also has the authority to grant options to employees other than the Chief Executive Officer without further Board approval. The Committee is composed of only non-executive, independent Board members. In fiscal year 2007...

  • Page 37
    ...budget, which must be approved by the Board of Directors; reviewing and certifying the Company's annual report; appointing, dismissing and promoting any employees of Logitech other than Executive Officers and the head of the internal audit function; taking immediate measures to protect the interests...

  • Page 38
    ... management meetings at which business developments are raised and discussed. At each regular Board meeting the Chief Executive Officer reports to the Board on developments and important issues. The Chief Executive Officer also provides regular updates to the other Board members regarding Logitech...

  • Page 39
    ... was named Senior Vice President, Customer Experience and Chief Marketing Officer in March 2007. From January 2000 to June 2001, Mr. Henry served as Vice President of Business Development and Product Management of Xigo Inc., a U.S. on-line intelligence software company. From November 1997 to January...

  • Page 40
    ... has designed its compensation programs to attract, develop, retain and motivate the high caliber of executives, managers and staff that is critical to the long-term success of its business. Logitech's compensation package is composed of a base salary that is competitive with comparable companies in...

  • Page 41
    ... Board of Directors may authorize a special cash bonus payment separate from the bonus plans based on outstanding individual performance. Long-Term Incentives Stock Options. At present, our long-term compensation to Executive Officers consists solely of stock options. Logitech provides stock option...

  • Page 42
    ...the closing trading price of our shares on the SWX Swiss Exchange or the Nasdaq Global Select Market on the date of grant. Employee Share Purchase Plans. Executive Officers are also eligible to participate in the Company's Employee Share Purchase Plans, under which employees may purchase shares with...

  • Page 43
    ...the underlying shares or of the Company's future share price performance. Total options granted to non-executive Directors and Executive Officers represent 25.6% of the options granted by Logitech in fiscal year 2007. The remainder of the options were granted to 463 of Logitech's other employees. Mr...

  • Page 44
    ...-FBC, the shareholding percentage is calculated based on the aggregate number of voting rights entered into the Swiss commercial register, which was 191,606,620 as of March 31, 2007. The Board of Directors adopted share ownership guidelines for members of the Board of Directors effective June 2006...

  • Page 45
    ...sale of the underlying shares or of the Company's future share price performance. (2) Includes 3,163,576 options held by Mr. De Luca as of March 31, 2007. (3) Mr. De Luca and Mr. Hawkins have each adopted trading plans in compliance with Swiss rules and Rule 10b5-1 under the U.S. Securities Exchange...

  • Page 46
    ... of the options and the sale of the underlying shares or of the Company's future share price performance. Mr. De Luca did not receive any compensation for his service rendered as a Director. 6. Shareholders' Participation Rights 6.1 Exercise and Limitations to Shareholders' Voting Rights Each share...

  • Page 47
    ...Meeting. Such requests should be addressed to: Secretary to the Board of Directors, Logitech International S.A., CH 1143 Apples, Switzerland, or c/o Logitech Inc., 6505 Kaiser Drive, Fremont, CA 94555, USA. 6.5 Registration in the Company's Share Register LISA Registration into the Company's share...

  • Page 48
    ...the 2007 Annual General Meeting the Board of Directors is seeking approval from the shareholders of the Company to delete the provision of the Company's Articles of Incorporation which mandates the closing of the share register on the day such notice is sent. 7. Mandatory Offer and Change of Control...

  • Page 49
    ... closed sessions of Committee meetings. On a quarterly basis, PwC reports on the findings of its audit and/or review work including, beginning in fiscal year 2007, their audit of Logitech's internal controls over financial reporting. These reports include the Independent Registered Public Accounting...

  • Page 50
    ... on corporate governance, and other information regarding the Company. The website is available at http://ir.logitech.com. For no charge, a copy of the Company's annual reports and filings made with the U.S. Securities and Exchange Commission can be requested by contacting our Investor Relations...

  • Page 51
    ... FZ-LLC ...Logitech (Streaming Media) SA ...AMERICAS 3Dconnexion Inc...Logitech (Intrigue) Inc...Labtec Inc...Logitech de Mexico S.A. de C.V...Logitech Canada Inc...Logitech Inc...Logitech (Streaming Media) Inc ...Logitech (Slim Devices) Inc... France Federal Republic of Germany Switzerland Poland...

  • Page 52
    ... Pacific Pte. Ltd...Logitech Singapore Pte. Ltd...Logitech Technology (Suzhou) Co., Ltd...Logitech Trading (Shanghai) Co. Ltd...Suzhou Logitech Computing Equipment Co., Ltd...Suzhou Logitech Electronic Co. Ltd...Logitech Asia Logistics Limited ...Logitech Asia Pacific Limited ...Logitech Australia...

  • Page 53
    ...20549 FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2007 Commission File Number: 0-29174 LOGITECH INTERNATIONAL S.A. (Exact name of Registrant as specified in its charter) Not Applicable (Translation of Registrant...

  • Page 54
    ......Key Information ...Information on the Company ...Unresolved Staff Comments ...Operating and Financial Review and Prospects ...Directors, Senior Management and Employees ...Major Shareholders and Related Party Transactions ...Financial Information ...The Offer and Listing ...Additional Information...

  • Page 55
    ...-LOOKING INFORMATION This Annual Report on Form 20-F contains forward-looking statements based on beliefs of our management as of the filing date of this Form 20-F. These forward-looking statements include statements related to our business strategy for fiscal year 2008 and beyond for new areas...

  • Page 56
    PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. 4

  • Page 57
    ...to be expected in the future. 2007 Year ended March 31, 2006 2005 2004 (In thousands, except per share amounts) 2003 Consolidated statements of income and cash flow data: Net sales ...Gross profit ...Operating expenses: Marketing and selling ...Research and development ...General and administrative...

  • Page 58
    ... in Swiss francs per U.S. dollars. The noon buying rate is the rate in New York City for cable transfers in selected currencies as certified for customs purposes by the Federal Reserve Bank of New York. Average (1) High Low Period End Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007...

  • Page 59
    ... on the timing of our product introductions, market reaction to our products, product mix, geographic sales mix, customers and other factors. Our gross margins can vary due to consumer demand, competition, product life cycle, new product introductions, unit volumes, commodity and supply chain costs...

  • Page 60
    ... headset, telephony and microphone business, our main competitors include Plantronics and its Altec Lansing subsidiary. With the acquisition of Slim Devices in October 2006, we expanded our audio product portfolio to include network-based audio systems for digital music. This is an emerging market...

  • Page 61
    ... resources and production levels of our products. Although we receive forecasts from our customers, many are not obligated to purchase the forecasted demand. Also, actual sales volumes for individual products in our retail distribution channel can be volatile due to changes in consumer preferences...

  • Page 62
    ... in the foreseeable future. Our Suzhou facilities are managed by several of our key Taiwanese expatriate employees. The loss of these employees, either voluntarily or as a consequence of deterioration in relations between China and Taiwan, could diminish the productivity and effectiveness of our...

  • Page 63
    ... in establishing sales and distribution channels in unfamiliar markets, with their own market characteristics and competition, particularly in Latin America, Eastern Europe and Asia; changes in VAT or VAT reimbursement; imposition of currency exchange controls; and delays from customs brokers or...

  • Page 64
    ..., the Company's growth strategy, through innovation, product line expansion and the acquisition of complementary businesses, requires periodic changes and enhancements to our operational, financial, and management controls, and to our reporting systems and procedures. Our compliance with the annual...

  • Page 65
    ...SWX Swiss Exchange and the Nasdaq Global Select Market. Our registered office is CH-1143 Apples, Switzerland; and the telephone number is 41-(0)21-800-53-54. We have manufacturing facilities in Asia and offices in major cities in North America, Europe and Asia Pacific. Important Events Share for ADS...

  • Page 66
    ... Overview Company Overview Logitech is a world leader in personal peripherals for personal computers and other digital platforms, developing and marketing innovative products in PC navigation, Internet communications, digital music, homeentertainment control, interactive gaming and wireless devices...

  • Page 67
    .... Logitech's personal peripheral products include PC navigation devices such as corded and cordless mice, trackballs and keyboards, and 3D control devices; Internet communication devices such as webcams and headsets; digital music devices such as speakers, headphones and wireless music systems...

  • Page 68
    .... All of Logitech's premium retail mice are bundled with Logitech SetPoint® software, enabling users to program mouse buttons for specific tasks. We also sell both corded and cordless mice designed specifically for OEM customers. Trackballs We offer several trackballs for the retail channel. All...

  • Page 69
    ...Communications Web Cameras Logitech's industry-leading QuickCam® webcams make it easy for friends and family to keep in touch by seeing and talking to each other using their computers. We work closely with leading application developers to help deliver the video communications services and software...

  • Page 70
    ... requiring a wireless network. The long-range Wireless DJ remote, with its display and scroll wheel, can navigate a music collection from anywhere in the home. Gaming PC Game Controllers Logitech offers a full range of dedicated game controllers for PC gamers. The products address key game genres...

  • Page 71
    ... promote high-quality support within games, we also provide advanced software drivers and tools to game developers. In fiscal year 2007, we introduced a line of products for the newly launched PlayStation 3 computer entertainment system that includes the new Logitech Cordless Precisionâ„¢ controller...

  • Page 72
    ... a new benchmark for scrolling efficiency. Logitech engineers have developed several radio transmission technologies for cordless operations, developed new applications for webcams, enabled the integration of new controllers in console gaming, and developed innovative database and Web-based systems...

  • Page 73
    ... affordable prices and wider availability of business, consumer, education, and communication applications have created a very large installed base of desktop and notebook personal computers. We believe that market penetration of PCs and other information access devices, already high in developed...

  • Page 74
    ... Revolution cordless laser mouse's MicroGearTM Precision Scroll Wheel, the Z-10 Interactive Speaker System's innovative interactive display, the diNovo EdgeTM keyboard's sleek, rechargeable design, and the Harmony® 1000 remote's color touch screen. Logitech is committed to meeting customer needs...

  • Page 75
    ...- Digital Music Systems, Home-Entertainment Systems, Game Consoles The Mobile Environment - Notebook Computers, Digital Music Players, Mobile Phones CG The Office Environment Logitech has successfully broadened our desktop presence by introducing new, more innovative, highperformance PC navigation...

  • Page 76
    ... range of applications. Fast RF cordless technology is designed to provide excellent performance for everyday computing applications with a very long battery life and mass market price points. 2.4 GHz technology, designed by Logitech especially for game controllers, satisfies gamers who value high...

  • Page 77
    ...for force feedback joysticks and wheels, mice, keyboards, cameras and headsets. The SDKs are used in many of the top-selling console and PC games and make it easy for users to leverage the latest features of Logitech's gaming peripherals. Logitech's line of Harmony advanced universal remote controls...

  • Page 78
    ... support speaker transducer design. For headsets, in-house engineering and testing technology ensure high-resolution voice recognition microphones. Computer-aided design and in-house rapid prototyping technology speed the overall process and help ensure that products meet design and performance...

  • Page 79
    ..., including online retailers. We support these retail channels with third-party distribution centers located in North America, Europe and Asia Pacific. These centers perform final configuration of products and product localization with local language manuals, packaging, software CDs and power plugs...

  • Page 80
    ... customer service and technical support operations in the United States, Canada, Europe, Asia and Australia. Customer service and technical personnel provide support services to retail purchasers of products through telephone, email, facsimile and the Logitech Web site. This site is designed...

  • Page 81
    ... headset, telephony and microphone business, our main competitors include Plantronics and its Altec Lansing subsidiary. With the acquisition of Slim Devices in October 2006, we expanded our audio product portfolio to include network-based audio systems for digital music. This is an emerging market...

  • Page 82
    ... on Logitech's estimated market share of the total cost, which depends on a number of factors, including administration and treatment costs as well as the commercial cost of recycling. On March 1, 2007, China's Management Methods on the Control of Pollution Caused by Electronic Information Products...

  • Page 83
    ... 172,000 square feet. These facilities are occupied by Logitech's Americas headquarters, including research and development, product marketing, sales management, technical support and administration. The Fremont lease expires in March 2013. The audio business unit is located in 36,000 square feet of...

  • Page 84
    ... include mice, keyboards, trackballs, 3D control devices, webcams, multimedia speakers, wireless and Internet music solutions for the home, headsets, headphones, gaming controllers, gaming accessories and advanced remote controls for home entertainment systems. We sell our products to a network of...

  • Page 85
    ... phones, home entertainment systems and mobile entertainment and digital music systems. Logitech's markets are extremely competitive and are characterized by short product life cycles, rapidly changing technology, evolving customer demands, and aggressive promotional and pricing practices. In order...

  • Page 86
    ... product information, such as stage of product life-cycle. Return trends are influenced by the timing of the sale, the type of customer, operational policies and procedures, product sell-through, product quality issues, sales levels, market acceptance of products, competitive pressures, new product...

  • Page 87
    ... for product returns, cooperative marketing arrangements, customer incentive programs and price protection. Future market conditions and product transitions may require the Company to take action to increase such programs. In addition, when the variables used to estimate these costs change, or...

  • Page 88
    ... for further discussion of share-based compensation. Our estimates of share-based compensation expense require a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns, future forfeitures, dividend yield, related tax effects and the selection of...

  • Page 89
    ...projected future operating results; significant changes in the manner of use of the assets or the strategy for the Company's overall business; significant negative industry or economic trends; significant decline in the Company's stock price for a sustained period; and market capitalization relative...

  • Page 90
    ...Year Ended March 31, 2006 Net Sales Net sales by channel and product family for fiscal years 2007 and 2006 were as follows (in thousands): 2007 2006 Change % Net sales by channel: Retail ...OEM ...Total net sales ...Net sales by product family: Retail - Cordless ...Retail - Corded ...Retail - Video...

  • Page 91
    ... year 2007. Other retail includes sales of 3D control devices and Slim Devices wireless music systems. Retail Regional Performance. Retail sales in the Americas region increased 18%, with strong performance in the cordless product line and in Harmony remote controls. European retail sales increased...

  • Page 92
    ..., corporate and product marketing, promotions, advertising, trade shows, customer and technical support and facilities costs. Marketing and selling expense in fiscal year 2007 was higher than fiscal year 2006 primarily due to increased advertising and customer marketing programs to stimulate sales...

  • Page 93
    ... and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existing products. Headcount increases in product research and development related to the audio, video and remote control product lines were the primary...

  • Page 94
    ... Company's retail and OEM products. Retail sales growth was largely attributable to strong demand for the audio product line and increased demand for video and remote control products. OEM sales also returned to growth due to increased demand for mice. Approximately 50% of the Company's sales were...

  • Page 95
    ... mouse, generated higher sales and units sold, increasing cordless mice sales by 8% and units by 21%. Cordless desktop sales declined 9% while units increased 5%, due to lower sales in the mid-range and high-end segments of the product line, offset by strong growth in the mass-market segment. Retail...

  • Page 96
    ...development initiatives, higher personnel costs and higher outside commission expenses to support higher retail sales levels and expanded territorial coverage. The Company increased its market penetration in developing markets, such as Latin America, Eastern Europe and China, by securing new channel...

  • Page 97
    ... in cash. We used $138.1 million to repurchase shares under the share buyback program and $47.2 million for capital expenditures, including investments for information system upgrades, manufacturing equipment and tooling costs. We also had net purchases of short-term investments of $214.6 million...

  • Page 98
    ...with the 15% increase in net sales. Combined with higher collections of accounts receivable, DSO improved by 2 days as of March 31, 2007 compared with 2006. The higher levels of accounts payable and accrued liabilities reflected more effective working capital management. During fiscal year 2006, our...

  • Page 99
    ... 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...

  • Page 100
    ... were realized from the sales of shares pursuant to the Company's employee option and share purchase plans. Cash Outlook Our working capital requirements and capital expenditures may increase to support future expansion of Logitech operations. Future acquisitions or expansion of our operations...

  • Page 101
    ...and working capital needs for the foreseeable future. Contractual Obligations and Commitments As of March 31, 2007, the Company's outstanding contractual obligations and commitments included: (i) amounts drawn on our credit lines, (ii) equipment financed under capital leases, (iii) facilities leased...

  • Page 102
    ...We had purchase obligations for manufacturing equipment, tooling and leasehold improvements of $21.4 million as of March 31, 2007. We also had other commitments of $28.3 million for consulting, information technology services, marketing arrangements and advertising. Although open purchase orders are...

  • Page 103
    ... The following table sets forth certain beneficial ownership information as of March 31, 2007 of each shareholder known by Logitech to beneficially own 5% or more of the Company's shares. Logitech does not believe it is directly or indirectly owned or controlled by any corporation or by any...

  • Page 104
    ..., 2007, we held approximately 5.2% of total shares issued. B. Related Party Transactions In connection with our investment in the Anoto Group AB, a Logitech executive was elected to the Anoto board of directors. Anoto is a publicly traded Swedish high technology company from which Logitech licenses...

  • Page 105
    ... of the business and, in more recent years, to repurchase its shares. B. Significant Changes None. ITEM 9. THE OFFER AND LISTING A. Offer and Listing Details Stock Price Information Shares Logitech's shares are listed and traded on both the SWX Swiss Exchange, where the share price is denominated...

  • Page 106
    ... historical share price information for the Company's shares traded on the SWX Swiss Exchange. The information presented is based on (i) the high and low closing sales prices quoted in Swiss francs for the shares on the SWX Swiss Exchange, and (ii) the U.S. dollar equivalent based on the noon buying...

  • Page 107
    ... the same Logitech shares trade on the Nasdaq Global Select Market as on the SWX Swiss Exchange. The information presented below is based on the high and low closing sales prices quoted in U.S. dollars for Logitech shares or ADSs on the Nasdaq Global Select Market. Share prices have been adjusted...

  • Page 108
    ...the General Meeting of Shareholders" in Exhibit 15.1 to this Form 20-F and is incorporated herein by reference. Change of Control Provisions Information concerning the provisions relating to a change of control of the Company appears in Section 7 "Mandatory Offer and Change of Control Provisions" in...

  • Page 109
    ... of business during the previous two years immediately preceding filing of this Annual Report on Form 20-F. D. Exchange Controls CG As a Swiss corporation, Logitech is subject to requirements not generally applicable to United States corporations. Among other things, Logitech's issuances of capital...

  • Page 110
    ... call the SEC at 1-800-SEC-0330 for further information about the public reference room. Such material may also be obtained at the Internet site the SEC maintains at www.sec.gov. I. Subsidiary Information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market...

  • Page 111
    ... at March 31, 2007 and are expected to be reclassified to cost of goods sold when the related inventory is sold. The Company also enters into foreign exchange forward contracts to reduce the short-term effects of foreign currency fluctuations on certain foreign currency receivables or payables. The...

  • Page 112
    ... in our forward foreign exchange contract portfolio would have ...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, 2007 and March 31, 2006 period end rates would not have a material effect on the Company...

  • Page 113
    ... the Registered Public Accounting Firm Our management's assessment of the effectiveness of our internal control over financial reporting as of March 31, 2007 has been audited by PricewaterhouseCoopers SA, Switzerland, an independent registered public accounting firm, as stated in their report, which...

  • Page 114
    ...for any Director or Executive Officer. Logitech's code of ethics is available on the Company's Web site at www.logitech.com, and for no charge, a copy of the Company's code of ethics can be requested via the following address or phone number: Logitech Investor Relations 6505 Kaiser Drive Fremont, CA...

  • Page 115
    ... PURCHASERS The following table sets forth certain information related to purchases made by Logitech of its equity securities (in thousands, except share and per share amounts): Total Number of Shares Purchased as Part of Publicly Announced Programs CG Period Average Price Paid Per Share in CHF...

  • Page 116
    .... Index to Consolidated Financial Statements ...Report of the Independent Registered Public Accounting Firm to the General Meeting of Logitech International S.A., Apples, Switzerland ...Consolidated Statements of Income - Years Ended March 31, 2007, 2006 and 2005 ...Consolidated Balance Sheets...

  • Page 117
    ...of Independent Registered Public Accounting Firm Report on Corporate Governance prepared under the rules of the SWX Swiss Exchange. Charter for the Audit Committee of the Board of Directors of Logitech International S.A. (as amended October 12, 2004) Certification by Chief Financial Officer pursuant...

  • Page 118
    ... that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. Logitech International S.A. Guerrino De Luca President and Chief Executive Officer Mark J. Hawkins Chief Financial Officer, and...

  • Page 119
    ...S.A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of the Independent Registered Public Accounting Firm to the General Meeting of Logitech International S.A., Apples, Switzerland ...Consolidated Statements of Income - Years Ended March 31, 2007, 2006 and 2005 ...Consolidated Balance Sheets...

  • Page 120
    ..., effective internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company's management, with the oversight of the Board of Directors, is responsible for maintaining effective internal control...

  • Page 121
    ... in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An...

  • Page 122
    LOGITECH INTERNATIONAL S.A. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Year ended March 31, 2007 2006 2005 Net sales ...Cost of goods sold ...Gross profit ...Operating expenses: Marketing and selling ...Research and development ...General and administrative ...Total ...

  • Page 123
    ... ...Long-term debt ...Other liabilities ...Total liabilities ...Commitments and contingencies Shareholders' equity: Shares, par value CHF 0.25 - 231,606,620 authorized, 71,561,860 conditionally authorized, 191,606,620 issued at March 31, 2007 and 2006 ...Additional paid-in capital ...Less shares in...

  • Page 124
    ...Amortization of other intangible assets ...Share-based compensation expense related to options and purchase rights ...Write-off of investments ...Gain on sale of investment ...Gain on cash surrender value of life insurance policies ...In-process research and development ...Loss on disposal of fixed...

  • Page 125
    ... 158, net of tax of $859 . . Tax benefit from exercise of stock options ...Purchase of treasury shares ...Sale of shares upon exercise of options and purchase rights ...Share-based compensation expense related to employee stock options and stock purchase plan 14,668 - (62,396 15,714 10,157 - (17...

  • Page 126
    ... personal computers and other digital platforms, developing and marketing innovative products in PC navigation, Internet communications, digital music, home-entertainment control, interactive gaming and wireless devices. For the PC, the Company's products include mice, trackballs, keyboards, gaming...

  • Page 127
    ... in the channel. Customer incentive programs include volume and consumer rebates. Volume rebates are related to purchase volumes or sales of specific products by distributors to specified retailers. Consumer rebates are offered from time to time at the Company's discretion directly to end-users...

  • Page 128
    ... to recorded costs in the period of change. If, at any future time, the Company becomes unable to reasonably estimate these costs, recognition of revenue may be deferred until products are sold to end-users. Research and Development Costs Costs related to research, design and development of products...

  • Page 129
    ... cost or market. Cost is computed on a first-in, first-out basis. The Company records write-downs of inventories which are obsolete or in excess of anticipated demand or market value based on a consideration of product life cycle stage, technology trends, historical sales, product development plans...

  • Page 130
    ... for Stock Issued to Employees" ("APB 25"). In March 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 107 ("SAB 107") regarding the SEC's interpretation of SFAS 123R and the valuation of share-based payments for public companies. Logitech has applied...

  • Page 131
    ... Board Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans", on a straight-line basis over the service period for each separately vesting portion of the award (multiple-option approach). Share-based compensation expense for fiscal 2007...

  • Page 132
    ... share for the Company were as follows (in thousands except per share amounts): Year ended March 31, 2007 2006 2005 Net income - basic ...Convertible debt interest expense, net of income taxes ...Net income - diluted ...Weighted average shares - basic ...Effect of dilutive stock options ...Effect...

  • Page 133
    ... to repurchase shares. During the fiscal year ended March 31, 2007, the number of in-the-money employee stock options treated as potential shares in computing diluted earnings per share was approximately 18,035,229 shares or 9.9% of the basic weighted average shares outstanding based on the Company...

  • Page 134
    ... expenses: Marketing and selling ...Research and development ...General and administrative ...Share-based compensation expense included in operating expenses ...Total share-based compensation expense related to employee stock options and employee stock purchases ...Tax benefit ...Share-based...

  • Page 135
    ... of employee stock options granted and shares purchased under the Company's employee purchase plans was estimated using the Black-Scholes-Merton option-pricing valuation model applying the following assumptions and values: Year ended March 31, 2007 Purchase Plans 2006 2005 2007 Stock Option Plans...

  • Page 136
    ... volatility is based on historical volatility using daily prices over the term of past options or purchase offerings. The Company considers historical share price volatility as most representative of future stock option volatility. The risk-free interest rate assumptions are based upon the implied...

  • Page 137
    ... acquired Slim Devices, Inc. ("Slim Devices"), a privately held company specializing in network-based audio systems for digital music, based in Mountain View, California. The acquisition is part of the Company's strategy to expand its presence in the digital music and home-entertainment control...

  • Page 138
    LOGITECH INTERNATIONAL S.A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Trademark/trade name relates to the Slim Devices product brand names. The value of the trademark/ tradename was determined using the royalty savings approach, which estimates the value of the assets by capitalizing ...

  • Page 139
    ... in Anoto Group AB ("Anoto"), a publicly traded Swedish technology company from which Logitech licenses its digital pen technology. The investment represented approximately 9.5% of Anoto's outstanding shares as of March 31, 2006. During fiscal year 2007, the Company sold its Anoto investment and...

  • Page 140
    ... for one share. Since the exchange of the Nasdaq-listed ADSs for Logitech shares was a one-for-one exchange, there was no impact on financial statement or per share amounts. Stock Split In June 2006, the Company's shareholders approved a two-for-one split of Logitech's shares, which took effect on...

  • Page 141
    ... mergers and other transactions. This authorization expires at the Company's Annual General Meeting in 2008. In addition, the Company has conditionally authorized shares totaling 60,661,860 to cover option rights granted or other equity rights that may be granted to employees, officers and directors...

  • Page 142
    ...Note 13 - Employee Benefit Plans Employee Share Purchase Plans and Stock Option Plans See Note 4 to the consolidated financial statements for further discussion of the employee share purchase plans and stock option plans. Defined Contribution Plans Certain of the Company's subsidiaries have defined...

  • Page 143
    .... Retirement benefits are provided based on employees' years of service and earnings, or in accordance with applicable employee benefit regulations. The Company's practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. In...

  • Page 144
    ... ability to realize deferred tax assets recorded in the Company's entities based upon the weight of available evidence, including such factors as the recent earnings history and expected future taxable income. In the event future taxable income is below management's estimates or is generated in tax...

  • Page 145
    ... deferred tax assets. This would result in an increase in the Company's effective tax rate. Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect the exercises in fiscal year 2007. Some exercises resulted in tax deductions in excess of previously...

  • Page 146
    ...to be fulfilled within the fiscal quarter ending June 30, 2007. The Company also had other commitments totaling $28.3 million for consulting services, information technology services, marketing arrangements and advertising. Although open purchase orders are considered enforceable and legally binding...

  • Page 147
    ... its end of life. To date, specific legal requirements have not been finalized by all member states, with certain member states delaying implementation until 2007 or beyond. In those countries where legislation is not in effect, the Company has concluded that the costs of managing and recycling...

  • Page 148
    ... and marketing of personal peripherals for personal computers and other digital platforms. Geographic net sales information in the table below is based on the location of the selling entity. Long-lived assets, primarily fixed assets, are reported below based on the location of the asset. Retail and...

  • Page 149
    ...-(Continued) Net sales by product family for fiscal years 2007, 2006 and 2005 were as follows (in thousands): 2007 Year ended March 31, 2006 2005 Retail - Cordless ...Retail - Corded ...Retail - Video ...Retail - Audio ...Retail - Gaming ...Retail - Remote Controls ...Retail - Other ...OEM...

  • Page 150
    ... forth certain quarterly financial information as a percentage of net sales: Year ended March 31, 2007 Second Third Fourth Year ended March 31, 2006 Second Third Fourth First First Net sales ...Gross profit ...Operating expenses: Marketing and selling ...Research and development ...General and...

  • Page 151
    ... Marketing Arrangements ...Cooperative Marketing Arrangements ...Customer Incentive Programs ...Customer Incentive Programs ...Customer Incentive Programs ...Reserve for Sales Returns ...Reserve for Sales Returns ...Reserve for Sales Returns ...Price Protection ...Price Protection ...Price...

  • Page 152
    ...) of Logitech International S.A. of our report dated May 24, 2007 relating to the financial statements, financial statement schedules, management assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which...

  • Page 153
    ... to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. b. May 25, 2007 Guerrino De Luca Chief Executive Officer

  • Page 154
    ... to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. b. May 25, 2007 Mark J. Hawkins Chief Financial Officer

  • Page 155
    ... of Section 13(a) or 15(d) of the Exchange Act; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May 25, 2007 Guerrino De Luca Chief Executive Officer Mark J. Hawkins Chief Financial Officer

  • Page 156
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY FINANCIAL STATEMENTS CG 20-F

  • Page 157
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY FINANCIAL STATEMENTS TABLE OF CONTENTS Page Swiss Statutory Balance Sheets (unconsolidated) ...Swiss Statutory Statements of Income (unconsolidated) ...Notes to Swiss Statutory Financial Statements ...Proposal of the Board of Directors for ...

  • Page 158
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY BALANCE SHEETS (unconsolidated) (In thousands of Swiss francs) March 31, 2007 2006 ASSETS Current assets: Cash ...Short-term bank deposits ...Accrued interest and other receivables ...Advances to and amounts receivable from group companies ......

  • Page 159
    LOGITECH INTERNATIONAL S.A., APPLES SWISS STATUTORY STATEMENTS OF INCOME (unconsolidated) (In thousands of Swiss francs) Year ended March 31, 2007 2006 Dividend income ...Royalty fees ...Interest income from third parties ...Interest income from subsidiaries ...Realized exchange gains, net of ...

  • Page 160
    ... Company Country % of possession Currency Share capital Purpose CG Logitech Europe S.A...Switzerland 100 CHF Logitech Inc... USA 100 USD Logitech (Intrigue) Inc... Canada 100 100 CAD USD Logitech Technology (Suzhou) Co., Ltd. China ROC 100,000 Administration, research, development, sales...

  • Page 161
    ...Meeting. At March 31, 2007, the Company had repurchased 2,725,700 registered shares for approximately USD 76,610,000. Treasury shares are recorded as a long-term asset at the lower of cost or market value. The disposal of treasury shares during the period was to the Company's directors and employees...

  • Page 162
    LOGITECH INTERNATIONAL S.A., APPLES NOTES TO SWISS STATUTORY FINANCIAL STATEMENTS-(Continued) Note 6 - Significant Shareholders: The Holding Company's share capital consists of registered shares. To the knowledge of the Holding Company, the only beneficial owner holding more than 5% of the voting ...

  • Page 163
    ... Proposal of the Board of Directors for appropriation of retained earnings were as follows during fiscal years 2006 and 2007 (in thousands): Year ended March 31, 2007 2006 Proposal of the Board of Directors To be carried forward ...CHF 378,300 Resolution of the General Assembly CHF 352,032 LISA...

  • Page 164
    ... Report of the Statutory Auditors to the General Meeting of Logitech International S.A., Apples As statutory auditors, we have audited the accounting records and the financial statements (balance sheet, statement of income and notes) of Logitech International S.A. for the year ended March 31, 2007...

  • Page 165
    ... Marketing, Sales and Innovation, Diageo PLC (To be presented to the shareholders at the Annual General Meeting in June 2007) Shin'ichi Okamoto Research and Development Consultant, Former Chief Technology Officer, Sony Computer Entertainment Inc. (Retiring from the Board of Directors in June 2007...

  • Page 166
    Visit www.logitech.com for a complete list of Logitech locations Holding Company Logitech International S.A. CH-1143 Apples Switzerland Americas Headquarters Logitech Inc. 6505 Kaiser Drive Fremont, CA 94555 United States Asia Pacific Headquarters Logitech Asia Pacific Ltd. Room 1408-10, China ...