Logitech 2008 Annual Report Download - page 104

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F-34
LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Rent expense was $13.8 million, $9.9 million and $8.7 million for the years ended March 31, 2008,
2007 and 2006. The Company’s asset retirement obligations for its leased facilities as of March 31, 2008
were not material.
At March 31, 2008, fixed purchase commitments for capital expenditures amounted to $13.6 million,
and primarily related to commitments for manufacturing equipment, tooling, computer software and
computer hardware. Also, the Company has commitments for inventory purchases made in the normal
course of business to original design manufacturers, contract manufacturers and other suppliers. At March
31, 2008, fixed purchase commitments for inventory amounted to $144.1 million, which are expected to
be fulfilled by December 31, 2008. The Company also had other commitments totaling $33.6 million for
consulting services, marketing arrangements, advertising and other services. 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 delivery of goods or performance
of services.
The Company has guaranteed the purchase obligations of some of its contract manufacturers and
original design manufacturers to certain component suppliers. These guarantees generally 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
Logitech’s guarantees similarly vary. At March 31, 2008, the amount of outstanding guaranteed purchase
obligations was approximately $1.8 million. The maximum potential future payments under one of the two
guarantee arrangements is limited to $2.8 million. The other guarantee is limited to purchases of specified
components from the named supplier. 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 International S.A., the parent holding company, has guaranteed certain contingent liabilities
of various subsidiaries related to specific transactions occurring in the normal course of business. The
maximum amount of the guarantees was $2.3 million as of March 31, 2008. As of March 31, 2008, no
amounts were outstanding under these guarantees.
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,
2008. 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 December 2006, the Company acquired Slim Devices, Inc., a privately held company specializing
in network-based audio systems for digital music. The purchase agreement provides for a possible
performance-based payment, payable in the first calendar quarter of 2010. The performance-based payment
is based on net revenues from the sale of products and services in calendar year 2009 derived from Slim
Devices’ technology. The maximum performance-based payment is $89.5 million, and no payment is due if
the applicable net revenues total $40 million or less. The total performance-based payment, if any, will be
recorded in goodwill and will not be known until the end of calendar year 2009.
In November 2007, the Company acquired WiLife, Inc., a privately held company that manufactures
PC-based video cameras for self-monitoring a home or a small business. The purchase agreement provides
for a possible performance-based payment, payable in the first calendar quarter of 2011. The performance-