Logitech 2007 Annual Report Download - page 147

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2007. 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.
In May 2004, the Company acquired Intrigue Technologies, Inc., a privately held provider of advanced
remote controls. The purchase agreement provides for deferred payments to Intrigue’s former shareholders based
on the highest net sales from products incorporating Intrigue’s technology during the revenue measurement
period, defined as any consecutive four-quarter period beginning in April 2006 through September 2007. The
total deferred payment amount will vary with net sales in the revenue measurement period. The payment amount
would approximate 27% of such net sales at the highest net sales level, although the percentage could be higher
at lower net sales levels. Based on the net sales of remote controls for fiscal year 2007, the Company will be
obligated to make a deferred payment of at least $33.7 million. The total deferred payment amount could be
higher, and will not be known until the end of the revenue measurement period. The total deferred payment will
be paid by December 31, 2007. As of March 31, 2007, a deferred payment of $33.7 million has been recorded as
an adjustment to goodwill.
All of the Company’s products are subject to the European Union’s (“EU”) Waste Electrical and Electronic
Equipment Directive (“WEEE”), which came into effect in August 2004 and requires producers of electrical
goods to be financially responsible for specified collection, recycling, treatment and disposal of covered
products. 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 2007 or beyond. In those countries where legislation is not in effect, the Company has
concluded that the costs of managing and recycling historical and future waste equipment are not reasonably
estimable, and no liability has been recognized. In those countries which have enacted legislation, the Company
has provided for the costs of managing and recycling historical and future waste equipment. These costs, which
are not material, are based on the Company’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.
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.
F-29
CG