Logitech 2008 Annual Report Download - page 39

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17
Liquidity and Capital Resources
Cash Balances, Available Borrowings, and Capital Resources
At March 31, 2008, net working capital was $723.2 million, compared with $549.1 million at
March 31, 2007. The increase in working capital from March 31, 2007 was primarily due to an increase in
cash flow from operations, accounts receivable and inventory balances. The reclassification of $89.7 million
of unrecognized tax benefits from current income taxes payable to non-current income taxes payable as a
result of the implementation of FIN 48 during the first quarter of fiscal year 2008 also contributed to the
increase in working capital.
During fiscal year 2008, operating activities generated cash of $393.1 million. Proceeds from the sale
of the balance of our investment in Anoto Group A.B. provided $11.3 million, and the exercise of stock
options provided $50.6 million. We used $219.7 million during fiscal year 2008 to repurchase shares under
our share buyback programs, $22.0 million for the acquisition of WiLife, $37.7 million for the deferred
payment related to our May 2004 acquisition of Intrigue Technologies, Inc., $11.7 million to reduce short-
term debt, and $57.9 million for capital expenditures, including investments for manufacturing equipment,
leasehold improvements, tooling costs and computer hardware and software purchases.
Cash and cash equivalents increased $286.2 million at March 31, 2008 compared with March 31, 2007,
due to increased cash flow from operations and the sale of our short-term investments. We sold a portion of
our short-term investments and reinvested $130.9 million into short-term bank deposits, which are classified
as cash equivalents in the Company’s balance sheet.
Short-term investments totaled $3.9 million at March 31, 2008, a decrease of $210.7 million from
March 31, 2007. Short-term investments decreased $130.9 million due to transfers to short-term bank deposits
and $79.8 million due to the other-than-temporary declines in the estimated fair value recorded during
fiscal year 2008. The auction rate securities in the Company’s short-term investment portfolio, which are
collateralized by commercial and residential real estate mortgage loans, declined significantly in fair value as
a result of the U.S. credit market disruptions which began during the quarter ended September 30, 2007.
Management believes the other-than-temporary decline in fair value of our short-term investments
does not have a material impact on the Company’s liquidity. During the third quarter of fiscal year
2008, we received $84.3 million for the sale at par of 50% of each of the auction rate securities held at
September 30, 2007, pursuant to a confidential settlement agreement. The par value sale price was not
necessarily indicative of current fair market value at the date of sale for the securities. In addition, the
Company sold all of its remaining short-term investments collateralized by corporate debt and received
$28.3 million during the quarter ended December 31, 2007.
The Company has credit lines with several European and Asian banks totaling $131.9 million as
of March 31, 2008. As is common for businesses in European and Asian countries, these credit lines are
uncommitted and unsecured. Despite the lack of formal commitments from the banks, we believe that these
lines of credit will continue to be made available because of our long-standing relationships with these
banks. At March 31, 2008, the Company had no outstanding borrowings under these lines of credit. There
are no financial covenants under these facilities.
The Company has financed its operating and capital requirements primarily through cash flow from
operations and, to a lesser extent, from capital markets and bank borrowings. The Company’s normal short-term
liquidity and long-term capital resource requirements are provided from three sources: cash flow generated from
operations, cash and cash equivalents on hand, and borrowings, as needed, under its credit facilities.
Based upon our available cash balances and credit lines, and the trend of our historical cash flow
generation, we believe we have sufficient liquidity and are not dependent upon selling the remaining short-
term investments in order to fund operations for the foreseeable future.