Logitech 2012 Annual Report Download - page 257

LOGITECH INTERNATIONAL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
cycle of one year. The marketable securities are recorded at a fair value of $14.3 million and $13.1 million as of
March 31, 2012 and 2011, based on quoted market prices. Quoted market prices are observable inputs that are
classified as Level 1 within the fair value hierarchy. Earnings, gains and losses on trading investments are included
in other income (expense), net. Unrealized trading gains of $0.1 million are included in other income (expense), net
for the fiscal year ended March 31, 2012 and relate to trading securities held at March 31, 2012.
The auction rate securities are classified as non-current available-for-sale securities. These securities are
collateralized by residential and commercial mortgages, and are second-priority senior secured floating rate notes
with maturity dates in excess of 10 years. Interest rates on these notes were intended to reset through an auction
every 28 days, however auctions for these securities have failed since August 2007. During the fiscal year ended
March 31, 2012, the Company sold two of the auction rate securities with a total carrying value of $0.5 million
and a total par value of $10.0 million for $6.6 million. The gain of $6.1 million was recognized in other income
(expense), net. During the three months ended March 31, 2012, two securities with a total carrying value of $0.4
million and a total par value of $22.2 million were liquidated. The Company did not receive any proceeds from the
liquidation. The loss of $0.4 million was recorded in accumulated other comprehensive loss, offsetting a previously
recorded temporary increase in fair value. The par value and original cost of the auction rate securities held as of
March 31, 2012 and 2011 were $15.2 million and $47.5 million. These securities are recorded at an estimated fair
value of $0.4 million and $1.7 million at March 31, 2012 and 2011. The estimated fair value was determined by
estimating future cash flows through time according to each security’s terms, including periodic consideration
of overcollateralization and interest coverage tests, and incorporating estimates of default rate, loss severity,
prepayment, and delinquency assumptions when available, for the underlying assets in the securities based on
representative indices and various research reports. The estimated coupon and principal payments were discounted
at the rate of return required by investors, based on the characteristics of each security as calculated from the
indices. Such valuation methods fall within Level 3 of the fair value hierarchy.
Derivative Financial Instruments
The following table presents the fair values of the Company’s derivative instruments and their locations on
the Balance Sheet as of March 31, 2012 and 2011 (in thousands):
Asset Derivatives Liability Derivatives
Fair Value Fair Value
March 31, March 31,
Location 2012 2011 Location 2012 2011
Derivatives designated as hedging
instruments:
Cash Flow Hedges .................. Other assets $250 $ — Other liabilities $ — $1,763
250 — — 1,763
Derivatives not designated as hedging
instruments:
Foreign Exchange Forward Contracts ... Other assets 341 486 Other liabilities 148 —
Foreign Exchange Swap Contracts ..... Other assets 67 80 Other liabilities 97 118
408 566 245 118
$658 $566 $245 $1,881
Note 8 — Financial Instruments (Continued)
ANNUAL REPORT
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