Logitech 2011 Annual Report Download - page 233

ANNUAl REPORT
221
Purchase Commitments
At March 31, 2011, the Company had the following outstanding purchase commitments:
March 31, 2011
Inventory purchases ..................................... $165,286
Operating expenses ..................................... 49,839
Capital expenditures ..................................... 10,724
Total purchase commitments ........................ $225,849
Commitments for inventory purchases are made in the normal course of business to original design
manufacturers, contract manufacturers and other suppliers and are expected to be fulfilled by September 2011.
Operating expense commitments are for consulting services, marketing arrangements, advertising, outsourced
customer services and other services. Fixed purchase commitments for capital expenditures primarily related to
commitments for manufacturing equipment and tooling. 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.
Guarantees
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, 2011, there were no outstanding guaranteed purchase obligations. The maximum potential future
payments under two of the three guarantee arrangements is limited to $30.0 million. The third guarantee is limited
to purchases of specified components from the named suppliers. 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 $54.7 million as of March 31, 2011. As of March 31, 2011, $10.3 million was
outstanding under these guarantees. The parent holding company has also guaranteed the purchases of one
of its subsidiaries under three guarantee agreements. Two of these guarantees do not specify a maximum
amount. The third guarantee is limited to $7.0 million. As of March 31, 2011, $4.9 million was outstanding under
these guarantees.
Indemnifications
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, 2011. 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.
Letters of Credit
Logitech provides various third parties with irrevocable letters of credit in the normal course of business to
secure its obligations to pay or perform pursuant to the requirements of an underlying agreement or the provision
of goods and services. These standby letters of credit are cancelable only at the option of the beneficiary who is
authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance
with its terms. At March 31, 2011, the Company had $0.7 million of letters of credit in place, of which $0.1 million
was outstanding. These letters of credit relate primarily to equipment purchases by a subsidiary in China, and
expire between April and December 2011.