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Note 1 — The Company
Logitech International S.A, together with its consolidated subsidiaries, (“Logitech” or the “Company”) develops and markets innovative hardware and software products that enable or enhance digital navigation, music and video entertainment, gaming, social networking, and audio and video communication over the Internet.
Logitech has two operating segments, peripherals and video conferencing. Logitech’s peripherals segment encompasses the design, manufacturing and marketing of peripherals for PCs (personal computers), tablets and other digital platforms. Logitech’s video conferencing segment offers scalable HD (high-definition) video communications endpoints, HD video conferencing systems with integrated monitors, video bridges and other infrastructure software and hardware to support large-scale video deployments, and services to support these products.
Logitech sells its peripheral products to a network of distributors, retailers and OEMs (original equipment manufacturers). Logitech sells its video conferencing products and services to distributors, value-added resellers, OEMs, and, occasionally, direct enterprise customers. The large majority of its sales have historically been derived from peripheral products for use by consumers.
Logitech was founded in Switzerland in 1981, and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Apples, Switzerland, which conducts its business through subsidiaries in the Americas, EMEA (Europe, Middle East, Africa) and Asia Pacific. Shares of Logitech International S.A. are listed on both the Nasdaq Global Select Market, under the trading symbol LOGI, and the SIX Swiss Exchange, under the trading symbol LOGN.
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Note 2 — Revision of Previously-Issued Financial Statements
In the first quarter of fiscal year 2014, the Company identified errors related to the accounting for its product warranty liability and amortization expense of certain intangible assets. The errors impacted prior reporting periods, starting prior to fiscal year 2009. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the cumulative errors and related tax effects, which amounted to $19.1 million, in the first quarter of fiscal year 2014 would be material to the consolidated financial statements for the three months ended June 30, 2013 and to the expected results of operations for the fiscal year ending March 31, 2014.
The Company evaluated the cumulative impact of the errors on prior periods under the guidance in ASC 250-10 relating to SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality. The Company also evaluated the impact of correcting the errors through an adjustment to its financial statements and concluded, based on the guidance within ASC 250-10 relating to SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, to revise its previously issued financial statements to reflect the impact of the correction of these errors when it files subsequent reports on Form 10-Q and Form 10-K. Accordingly, the Company has revised its consolidated financial statements for the quarter ended June 30, 2012, to correct these errors. In addition, as a result of the decision to revise its previously issued consolidated financial statements to correct for the errors described above, the Company also corrected other immaterial errors that were previously uncorrected. On August 7, 2013, the Company filed a Form 10-K/A to revise its financial statements for the years ended March 31, 2011, 2012 and 2013 to correct for the same errors. As a result, the Company has also revised its financial statements for the three and six months ended September 30, 2012 from what it previously reported.
The revised financial statements correct the following errors, which are included in the tables below, with associated footnotes:
(1) - Warranty accrual — The Company determined that its prior warranty model did not accurately estimate warranty costs and liabilities at each reporting period. The inherent flaws in the prior model involved use of generic assumptions, incomplete warranty cost data and inter-regional methodological differences. This error impacted prior reporting periods, starting prior to fiscal year 2009, and impacted deferred tax asset classification between current and non-current assets.
(2) - Amortization of intangibles — The Company determined that $4.2 million in intangible assets originating from a November 2009 acquisition were never amortized. The impact of this adjustment was $2.0 million in amortization expense not properly recorded during the periods from the quarter ended December 31, 2009 through the end of fiscal year 2013.
(3) - Other adjustments — The Company also corrected a number of other immaterial errors, including the cumulative translation adjustment related to the purchase of treasury shares, and an adjustment affecting the amount of property, plant and equipment purchased during the first quarter of fiscal year 2013.
Consolidated Statements of Operations.
The following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statement of operations for the three and six months ended September 30, 2012 (in thousands):
|
|
Three Months ended September 30, 2012 |
|
Six Months ended September 30, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
|
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net sales |
|
$ |
547,693 |
|
150 |
(1) |
$ |
547,693 |
|
$ |
1,016,297 |
|
(1,015 |
)(1) |
$ |
1,016,297 |
| ||
Cost of goods sold |
|
351,698 |
|
71 |
(2) |
351,919 |
|
676,050 |
|
142 |
(2) |
675,177 |
| ||||||
Gross profit |
|
195,995 |
|
(221 |
) |
195,774 |
|
340,247 |
|
873 |
|
341,120 |
| ||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Marketing and selling |
|
110,522 |
|
— |
|
110,522 |
|
211,419 |
|
— |
|
211,419 |
| ||||||
Research and development |
|
38,019 |
|
95 |
(2) |
38,114 |
|
76,947 |
|
190 |
(2) |
77,137 |
| ||||||
General and administrative |
|
25,980 |
|
— |
|
25,980 |
|
58,460 |
|
— |
|
58,460 |
| ||||||
Restructuring charges (credits) |
|
(2,671 |
) |
— |
|
(2,671 |
) |
28,556 |
|
— |
|
28,556 |
| ||||||
Total operating expenses |
|
171,850 |
|
95 |
|
171,945 |
|
375,382 |
|
190 |
|
375,572 |
| ||||||
Operating income (loss) |
|
24,145 |
|
(316 |
) |
23,829 |
|
(35,135 |
) |
683 |
|
(34,452 |
) | ||||||
Interest income, net |
|
153 |
|
— |
|
153 |
|
537 |
|
— |
|
537 |
| ||||||
Other expense, net |
|
(509 |
) |
— |
|
(509 |
) |
(668 |
) |
— |
|
(668 |
) | ||||||
Income (loss) before income taxes |
|
23,789 |
|
(316 |
) |
23,473 |
|
(35,266 |
) |
683 |
|
(34,583 |
) | ||||||
Benefit from income taxes |
|
(31,076 |
) |
— |
|
(31,076 |
) |
(37,986 |
) |
— |
|
(37,986 |
) | ||||||
Net Income |
|
$ |
54,865 |
|
$ |
(316 |
) |
$ |
54,549 |
|
$ |
2,720 |
|
$ |
683 |
|
$ |
3,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income per share: |
|
$ |
0.35 |
|
|
|
$ |
0.35 |
|
$ |
0.02 |
|
|
|
$ |
0.02 |
| ||
Basic |
|
$ |
0.35 |
|
|
|
$ |
0.35 |
|
$ |
0.02 |
|
|
|
$ |
0.02 |
| ||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shares used to compute net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
156,736 |
|
|
|
156,736 |
|
158,723 |
|
|
|
158,723 |
| ||||||
Diluted |
|
157,932 |
|
|
|
157,932 |
|
159,853 |
|
|
|
159,853 |
| ||||||
Consolidated Statements of Comprehensive Income
The Company’s following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statements of comprehensive income for the three and six months ended September 30, 2012 (in thousands):
|
|
Three Months ended September 30, 2012 |
|
Six Months ended September 30, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
|
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Income |
|
$ |
54,865 |
|
$ |
(150 |
)(1) |
$ |
54,549 |
|
$ |
2,720 |
|
$ |
1,015 |
(1) |
$ |
3,403 |
|
|
|
|
|
$ |
(166 |
)(2) |
|
|
|
|
$ |
(332 |
)(2) |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign currency translation gain (loss) |
|
4,970 |
|
(2,529 |
)(3) |
2,441 |
|
(1,295 |
) |
(3,125 |
)(3) |
(4,420 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in net loss, and prior service cost related to defined benefit pension plans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss and prior service cost |
|
6,457 |
|
— |
|
6,457 |
|
7,920 |
|
|
|
7,920 |
| ||||||
Less amortization included in operating expenses |
|
301 |
|
— |
|
301 |
|
756 |
|
— |
|
756 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net change in hedging gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized hedging loss |
|
(5,466 |
) |
— |
|
(5,466 |
) |
(4,261 |
) |
— |
|
(4,261 |
) | ||||||
Less reclassification adjustment for gain included in cost of goods sold |
|
1,683 |
|
— |
|
1,683 |
|
1,577 |
|
— |
|
1,577 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net change in unrealized investment loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Reclassification adjustment for gain included in other income (expense) |
|
— |
|
— |
|
— |
|
(343 |
) |
— |
|
(343 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other comprehensive income |
|
7,945 |
|
(2,529 |
) |
5,416 |
|
4,354 |
|
(3,125 |
) |
1,229 |
| ||||||
Total comprehensive income |
|
$ |
62,810 |
|
$ |
(2,845 |
) |
$ |
59,965 |
|
$ |
7,074 |
|
$ |
(2,442 |
) |
$ |
4,632 |
|
Consolidated Statements of Cash Flows
The following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statement of cash flows for the six months ended September 30, 2012 (in thousands):
|
|
Six Months ended |
| |||||||
|
|
September 30, 2012 |
| |||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
| |||
|
|
|
|
(Unaudited) |
|
|
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
| |||
Net income |
|
$ |
2,720 |
|
$ |
1,015 |
(1) |
$ |
3,403 |
|
|
|
|
|
(332 |
)(2) |
|
| |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
| |||
Depreciation |
|
22,307 |
|
— |
|
22,307 |
| |||
Amortization of other intangible assets |
|
12,257 |
|
332 |
(2) |
12,589 |
| |||
Share-based compensation expense |
|
13,437 |
|
— |
|
13,437 |
| |||
Gain on sale of available-for-sale securities |
|
(831 |
) |
— |
|
(831 |
) | |||
Excess tax benefits from share-based compensation |
|
(22 |
) |
— |
|
(22 |
) | |||
Deferred income taxes and other |
|
(3,806 |
) |
— |
|
(3,806 |
) | |||
Changes in assets and liabilities, net of acquisition: |
|
|
|
|
|
— |
| |||
Accounts receivable |
|
(58,272 |
) |
(261 |
)(3) |
(58,533 |
) | |||
Inventories |
|
(30,733 |
) |
(1,092 |
)(3) |
(31,825 |
) | |||
Other assets |
|
(7,339 |
) |
(231 |
)(3) |
(7,570 |
) | |||
Accounts payable |
|
68,875 |
|
2,220 |
(3) |
71,095 |
| |||
Accrued and other liabilities |
|
(9,498 |
) |
(1,015 |
)(1) |
(10,997 |
) | |||
|
|
|
|
(484 |
)(3) |
|
| |||
Net cash provided by operating activities |
|
9,095 |
|
152 |
|
9,247 |
| |||
Cash flows from investing activities: |
|
|
|
|
|
— |
| |||
Purchases of property, plant and equipment |
|
(30,522 |
) |
(2,295 |
)(3) |
(32,817 |
) | |||
Investment in privately-held company |
|
(3,970 |
) |
— |
|
(3,970 |
) | |||
Proceeds from sale of available-for-sale securities |
|
917 |
|
— |
|
917 |
| |||
Purchases of trading investments for deferred compensation plan |
|
(1,648 |
) |
— |
|
(1,648 |
) | |||
Proceeds from sales of trading investments for deferred compensation plan |
|
1,638 |
|
— |
|
1,638 |
| |||
Net cash used in investing activities |
|
(33,585 |
) |
(2,295 |
) |
(35,880 |
) | |||
Cash flows from financing activities: |
|
|
|
|
|
— |
| |||
Payment of cash dividends |
|
(133,462 |
) |
— |
|
(133,462 |
) | |||
Purchases of treasury shares |
|
(89,955 |
) |
2,143 |
(3) |
(87,812 |
) | |||
Proceeds from sale of shares upon exercise of options and purchase rights |
|
9,008 |
|
— |
|
9,008 |
| |||
Tax withholdings related to net share settlements of restricted stock units |
|
(635 |
) |
— |
|
(635 |
) | |||
Excess tax benefits from share-based compensation |
|
22 |
|
— |
|
22 |
| |||
Net cash used in financing activities |
|
(215,022 |
) |
2,143 |
|
(212,879 |
) | |||
Effect of exchange rate changes on cash and cash equivalents |
|
(1,825 |
) |
— |
|
(1,825 |
) | |||
Net decrease in cash and cash equivalents |
|
(241,337 |
) |
— |
|
(241,337 |
) | |||
Cash and cash equivalents at beginning of period |
|
478,370 |
|
— |
|
478,370 |
| |||
Cash and cash equivalents at end of period |
|
$ |
237,033 |
|
$ |
— |
|
$ |
237,033 |
|
Other Revisions
During fiscal year 2013, the Company also determined that geographic net sales (Note 13), previously reported in its Form 10-Q for the three and six months ended September 30, 2012, were not property stated. These revisions had no impact on the previously reported consolidated statements of operations.
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Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The consolidated interim financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The consolidated financial statements are presented in accordance with U.S. GAAP (accounting principles generally accepted in the United States of America) for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. They should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2013, included in its Annual Report on Form 10-K/A. In the opinion of management, these consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Operating results for the three and six months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending March 31, 2014, or any future periods.
Certain prior period financial statement amounts have been reclassified to conform to the current period presentation with no impact on previously reported net income.
Fiscal Years
The Company’s fiscal years end on March 31. Interim quarters are thirteen-week periods, each ending on a Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the month end.
Changes in Significant Accounting Policies
There have been no substantial changes in the Company’s significant accounting policies during the three and six months ended September 30, 2013, compared with the significant accounting policies described in its Annual Report on Form 10-K/A for the fiscal year ended March 31, 2013.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and expenses, and the disclosure of contingent assets and liabilities. Examples of significant estimates and assumptions made by management involve the fair value of goodwill, accruals for customer programs, inventory valuation, valuation allowances for deferred tax assets and warranty accruals. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ from those estimates.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
|
Note 5 — Employee Benefit Plans
Employee Share Purchase Plans and Stock Incentive Plans
As of September 30, 2013, the Company offers the 2006 ESPP (2006 Employee Share Purchase Plan (Non-U.S.)), the 1996 ESPP (1996 Employee Share Purchase Plan (U.S.)), the 2006 Plan (2006 Stock Incentive Plan) and the 2012 Plan (2012 Stock Inducement Equity Plan). On September 4, 2013, at the fiscal year 2013 Annual General Meeting of Shareholders, Logitech shareholders approved amendments to and restatement of the1996 ESPP and the 2006 ESPP, which included the increase of 8.0 million additional shares to be issued under these plans. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury.
The following table summarizes the share-based compensation expense and related tax benefit recognized for the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended |
|
Six Months ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of goods sold |
|
$ |
594 |
|
$ |
608 |
|
$ |
1,171 |
|
$ |
1,397 |
|
Share-based compensation expense included in gross profit |
|
594 |
|
608 |
|
1,171 |
|
1,397 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Marketing and selling |
|
1,017 |
|
2,644 |
|
2,923 |
|
4,424 |
| ||||
Research and development |
|
840 |
|
1,763 |
|
1,934 |
|
3,588 |
| ||||
General and administrative |
|
1,658 |
|
2,251 |
|
2,471 |
|
4,028 |
| ||||
Share-based compensation expense included in operating expenses |
|
3,515 |
|
6,658 |
|
7,328 |
|
12,040 |
| ||||
Total share-based compensation expense |
|
4,109 |
|
7,266 |
|
8,499 |
|
13,437 |
| ||||
Income tax benefit |
|
(1,300 |
) |
(1,671 |
) |
(2,175 |
) |
(3,047 |
) | ||||
Share-based compensation expense, net of income tax |
|
$ |
2,809 |
|
$ |
5,595 |
|
$ |
6,324 |
|
$ |
10,390 |
|
As of September 30 and March 31, 2013, $0.4 million and $0.4 million of share-based compensation cost was capitalized to inventory.
Defined Contribution Plans
Certain of the Company’s subsidiaries have defined contribution employee benefit plans covering all or a portion of their employees. Contributions to these plans are discretionary for certain plans and are based on specified or statutory requirements for others. The charges to expense for these plans for the three months ended September 30, 2013 and 2012 were $1.6 million and $1.8 million, and for the six months ended September 30, 2013 and 2012 were $3.3 million and $4.6 million.
Defined Benefit Plans
Certain of the Company’s subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee benefit regulations. The Company’s practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations.
During the quarter ended September 30, 2012, the Company’s Swiss defined benefit pension plan was subject to re-measurement due to the number of plan participants affected by the April 2012 restructuring described in Note 14. The re-measurement resulted in the realization of $2.2 million in previously unrecognized losses residing within accumulated other comprehensive loss that the Company recognized during the three months ended September 30, 2012.
The net periodic benefit cost for defined benefit pension plans and non-retirement post-employment benefit obligations for the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Service cost |
|
$ |
1,972 |
|
$ |
1,726 |
|
$ |
3,929 |
|
$ |
3,601 |
|
Interest cost |
|
430 |
|
418 |
|
857 |
|
912 |
| ||||
Expected return on plan assets |
|
(490 |
) |
(525 |
) |
(990 |
) |
(618 |
) | ||||
Amortization of net transition obligation |
|
1 |
|
1 |
|
2 |
|
2 |
| ||||
Amortization of net prior service cost |
|
52 |
|
38 |
|
104 |
|
76 |
| ||||
Recognized net actuarial loss |
|
256 |
|
262 |
|
508 |
|
678 |
| ||||
Settlement cost |
|
— |
|
2,254 |
|
— |
|
2,254 |
| ||||
Net periodic benefit cost |
|
$ |
2,221 |
|
$ |
4,174 |
|
$ |
4,410 |
|
$ |
6,905 |
|
|
Note 6 — Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company’s income before taxes and the provision for income taxes are generated outside of Switzerland.
The income tax provision for the three months ended September 30, 2013 was $3.1 million based on an effective income tax rate of 17.5% of pre-tax income. The income tax benefit for the three months ended September 30, 2012 was $31.1 million based on an effective income tax rate of (132.4%) of pre-tax income. For the six months ended September 30, 2013, the income tax provision was $2.3 million based on an effective income tax rate of 12.7% of pre-tax income. For the six months ended September 30, 2012, the income tax benefit was $38.0 million based on an effective income rate of 109.8% of pre-tax loss. The change in the effective income tax rate for the three and six months ended September 30, 2013, compared with the same periods in fiscal year 2013, is primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates, and the treatment of restructuring expenses as a discrete event in determining the annual effective tax rate in fiscal year 2013. In addition, there was a discrete tax benefit of $32.1 million in the three months ended September 30, 2012 from the reversal of uncertain tax positions resulting from the closure of federal income tax examinations in the United States.
In fiscal year 2013, the Company incurred $43.7 million of restructuring charges and related expenses to simplify the organization and to align the organization to its strategic priorities, $28.6 million of such charges were incurred through the second quarter of fiscal year 2013 with the remaining balance primarily incurred in the fourth quarter of the fiscal year 2013. In the three and six months ended September 30, 2013, the Company incurred restructuring-related termination benefits and lease exit costs in the amount of $5.5 million and $7.8 million, respectively. In determining the estimated fiscal 2014 annual effective tax rate, the restructuring activities were not treated as a discrete event as the charges were not significantly unusual and infrequent in nature, unlike those that were incurred in fiscal year 2013. The tax benefit associated with the restructuring in the six months ended September 30, 2013 was not material.
As of September 30 and March 31, 2013, the total amount of unrecognized tax benefits and related accrued interest and penalties due to uncertain tax positions was $103.5 million and $102.0 million, of which $90.8 million and $90.3 million would affect the effective income tax rate if recognized. The Company classified the unrecognized tax benefits as non-current income taxes payable.
The Company continues to recognize interest and penalties related to unrecognized tax positions in income tax expense. As of September 30 and March 31, 2013, the Company had approximately $6.9 million and $6.6 million of accrued interest and penalties related to uncertain tax positions.
The Company files Swiss and foreign tax returns. For all these tax returns, the Company is generally not subject to tax examinations for years prior to fiscal year 2001. The Company is under examination and has received assessment notices in foreign tax jurisdictions. At this time, the Company is not able to estimate the potential impact that these examinations may have on income tax expense. If the examinations are resolved unfavorably, there is a possibility they may have a material negative impact on the Company’s results of operations.
Although the Company has adequately provided for uncertain tax positions, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. It is not possible at this time to reasonably estimate changes in the unrecognized tax benefits within the next twelve months.
|
Note 7 — Balance Sheet Components
The following table presents the components of certain balance sheet asset amounts as of September 30 and March 31, 2013 (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Accounts receivable: |
|
|
|
|
| ||
Accounts receivable |
|
$ |
413,696 |
|
$ |
325,870 |
|
Allowance for doubtful accounts |
|
(1,071 |
) |
(2,153 |
) | ||
Allowance for returns |
|
(19,230 |
) |
(21,883 |
) | ||
Allowances for cooperative marketing arrangements |
|
(26,010 |
) |
(24,160 |
) | ||
Allowances for customer incentive programs |
|
(44,788 |
) |
(42,857 |
) | ||
Allowances for pricing programs |
|
(63,739 |
) |
(55,252 |
) | ||
|
|
$ |
258,858 |
|
$ |
179,565 |
|
Inventories: |
|
|
|
|
| ||
Raw materials |
|
$ |
34,020 |
|
$ |
37,504 |
|
Work-in-process |
|
75 |
|
41 |
| ||
Finished goods |
|
258,682 |
|
223,538 |
| ||
|
|
$ |
292,777 |
|
$ |
261,083 |
|
Other current assets: |
|
|
|
|
| ||
Income tax and value-added tax refund receivables |
|
$ |
25,113 |
|
$ |
17,403 |
|
Deferred taxes |
|
29,109 |
|
25,400 |
| ||
Prepaid expenses and other |
|
11,586 |
|
15,300 |
| ||
|
|
$ |
65,808 |
|
$ |
58,103 |
|
Property, plant and equipment: |
|
|
|
|
| ||
Plant, buildings and improvements |
|
$ |
68,642 |
|
$ |
70,009 |
|
Equipment |
|
131,913 |
|
129,868 |
| ||
Computer equipment |
|
32,551 |
|
42,437 |
| ||
Computer software |
|
80,136 |
|
80,930 |
| ||
|
|
313,242 |
|
323,244 |
| ||
Less: accumulated depreciation |
|
(236,845 |
) |
(247,469 |
) | ||
|
|
76,397 |
|
75,775 |
| ||
Construction-in-progress |
|
7,890 |
|
9,047 |
| ||
Land |
|
2,846 |
|
2,827 |
| ||
|
|
$ |
87,133 |
|
$ |
87,649 |
|
Other assets: |
|
|
|
|
| ||
Deferred taxes |
|
$ |
51,121 |
|
$ |
53,035 |
|
Trading investments |
|
15,435 |
|
15,599 |
| ||
Other |
|
5,261 |
|
6,464 |
| ||
|
|
$ |
71,817 |
|
$ |
75,098 |
|
The following table presents the components of certain balance sheet liability amounts as of September 30 and March 31, 2013 (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Accrued and other current liabilities: |
|
|
|
|
| ||
Accrued personnel expenses |
|
$ |
56,906 |
|
$ |
40,502 |
|
Accrued marketing expenses |
|
13,039 |
|
11,005 |
| ||
Indirect customer incentive programs |
|
32,539 |
|
29,464 |
| ||
Accrued restructuring |
|
5,566 |
|
13,458 |
| ||
Deferred revenue |
|
21,562 |
|
22,698 |
| ||
Accrued freight and duty |
|
8,596 |
|
5,882 |
| ||
Value-added tax payable |
|
8,477 |
|
8,544 |
| ||
Accrued royalties |
|
4,012 |
|
3,358 |
| ||
Warranty accrual |
|
12,634 |
|
11,878 |
| ||
Employee benefit plan obligations |
|
1,571 |
|
4,351 |
| ||
Income taxes payable |
|
5,392 |
|
2,463 |
| ||
Other accrued liabilities |
|
49,352 |
|
39,171 |
| ||
|
|
$ |
219,646 |
|
$ |
192,774 |
|
Non-current liabilities: |
|
|
|
|
| ||
Income taxes payable |
|
$ |
100,310 |
|
$ |
98,827 |
|
Warranty accrual |
|
9,451 |
|
8,660 |
| ||
Obligation for deferred compensation |
|
15,435 |
|
15,631 |
| ||
Employee benefit plan obligations |
|
40,728 |
|
35,963 |
| ||
Deferred rent |
|
23,690 |
|
24,136 |
| ||
Deferred taxes |
|
1,872 |
|
1,989 |
| ||
Other liabilities |
|
11,070 |
|
10,676 |
| ||
|
|
$ |
202,556 |
|
$ |
195,882 |
|
The following table presents the changes in the allowance for doubtful accounts during the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
(2,189 |
) |
$ |
(2,321 |
) |
$ |
(2,153 |
) |
$ |
(2,472 |
) |
Bad debt expense reversal, net |
|
428 |
|
103 |
|
359 |
|
189 |
| ||||
Write-offs, net of recoveries |
|
690 |
|
(21 |
) |
723 |
|
44 |
| ||||
Ending balance |
|
$ |
(1,071 |
) |
$ |
(2,239 |
) |
$ |
(1,071 |
) |
$ |
(2,239 |
) |
|
Note 8 — Financial Instruments
Fair Value Measurements
The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:
· Level 1 — Quoted prices in active markets for identical assets or liabilities.
· Level 2 — Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
· Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company did not have level 3 assets and liabilities as of September 30 and March 31, 2013. The following table presents the Company’s financial assets and liabilities, that were accounted for at fair value, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 1 |
|
Level 2 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents (1) |
|
$ |
99,510 |
|
$ |
— |
|
$ |
119,073 |
|
$ |
— |
|
Trading investments for deferred compensation plan: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
3,311 |
|
— |
|
4,220 |
|
— |
| ||||
Mutual funds |
|
12,124 |
|
— |
|
11,379 |
|
— |
| ||||
Foreign exchange derivative assets |
|
— |
|
126 |
|
— |
|
1,197 |
| ||||
Total assets at fair value |
|
$ |
114,945 |
|
$ |
126 |
|
$ |
134,672 |
|
$ |
1,197 |
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange derivative liabilities |
|
$ |
— |
|
$ |
1,546 |
|
$ |
— |
|
$ |
707 |
|
Total liabilities at fair value |
|
$ |
— |
|
$ |
1,546 |
|
$ |
— |
|
$ |
707 |
|
(1) Excludes cash balances of $195.3 million as of September 30, 2013 and $214.7 million as of March 31, 2013.
The following table presents the changes in the Company’s Level 3 available-for-sale securities during the six months ended September 30, 2013 and 2012 (in thousands):
|
|
September 30, 2013 |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Beginning balance |
|
$ |
— |
|
$ |
429 |
|
Proceeds from sales of securities |
|
— |
|
(917 |
) | ||
Reversal of unrealized gains previously recognized in accumulated other comprehensive loss |
|
— |
|
831 |
| ||
Reversal of unrealized losses previously recognized in accumulated other comprehensive loss |
|
— |
|
(343 |
) | ||
Ending balance |
|
$ |
— |
|
$ |
— |
|
Cash and Cash Equivalents
Cash equivalents consist of bank demand deposits and time deposits. The time deposits have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.
Investment Securities
The Company’s investment securities portfolio consists of marketable securities (money market and mutual funds) related to a deferred compensation plan at September 30, 2013 and March 31, 2013.
The marketable securities related to the deferred compensation plan are classified as non-current other assets. Since participants in the deferred compensation plan may select the mutual funds in which their compensation deferrals are invested within the confines of the Rabbi Trust which holds the marketable securities, the Company has designated these marketable securities as trading investments, although there is no intent to actively buy and sell securities within the objective of generating profits on short-term difference in market prices. Management has classified the investments as non-current assets because final sale of the investments or realization of proceeds by plan participants is not expected within the Company’s normal operating cycle of one year. The marketable securities are recorded at a fair value of $15.4 million and $15.6 million as of September 30 and March 31, 2013, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Earnings, and realized and unrealized gains and losses on trading investments are included in other income (expense). Unrealized trading gains of $0.4 million and unrealized trading losses of $0.2 million are included in other income (expense) for the three and six months ended September 30, 2013, respectively and relate to the trading securities held at September 30, 2013. Unrealized trading gains of $0.5 million and $0.2 million are included in other income (expense) for the three and six months ended September 30, 2012 and relate to trading securities held at September 30, 2012.
Derivative Financial Instruments
The following table presents the fair values of the Company’s derivative instruments and their locations on its Consolidated Balance Sheets as of September 30 and March 31, 2013 (in thousands):
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||||||||
|
|
|
|
Fair Value |
|
|
|
Fair Value |
| ||||||||
|
|
|
|
September 30, |
|
March 31, |
|
|
|
September 30, |
|
March 31, |
| ||||
|
|
Location |
|
2013 |
|
2013 |
|
Location |
|
2013 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flow hedges |
|
Other assets |
|
$ |
8 |
|
$ |
1,165 |
|
Other liabilities |
|
$ |
754 |
|
$ |
— |
|
|
|
|
|
8 |
|
1,165 |
|
|
|
754 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange forward contracts |
|
Other assets |
|
118 |
|
— |
|
Other liabilities |
|
240 |
|
270 |
| ||||
Foreign exchange swap contracts |
|
Other assets |
|
— |
|
32 |
|
Other liabilities |
|
552 |
|
437 |
| ||||
|
|
|
|
118 |
|
32 |
|
|
|
792 |
|
707 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
$ |
126 |
|
$ |
1,197 |
|
|
|
$ |
1,546 |
|
$ |
707 |
|
The following table presents the amounts of gains and losses on the Company’s derivative instruments for the three and six months ended September 30, 2013 and 2012 and their locations on its consolidated statements of operations (in thousands):
|
|
Net Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
| ||||||||||||
|
|
2013 |
|
2012 |
|
Loss into Income |
|
2013 |
|
2012 |
|
Immediately |
|
2013 |
|
2012 |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flow hedges |
|
$ |
(1,467 |
) |
$ |
(3,783 |
) |
Cost of goods sold |
|
$ |
(94 |
) |
$ |
(1,683 |
) |
Other income/expense |
|
$ |
16 |
|
$ |
120 |
|
|
|
(1,467 |
) |
(3,783 |
) |
|
|
(94 |
) |
(1,683 |
) |
|
|
16 |
|
120 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange forward contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
(482 |
) |
(92 |
) | ||||||
Foreign exchange swap contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
5 |
|
(390 |
) | ||||||
|
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
(477 |
) |
(482 |
) | ||||||
|
|
$ |
(1,467 |
) |
$ |
(3,783 |
) |
|
|
$ |
(94 |
) |
$ |
(1,683 |
) |
|
|
$ |
(461 |
) |
$ |
(362 |
) |
|
|
Net Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
| ||||||||||||
|
|
2013 |
|
2012 |
|
Loss into Income |
|
2013 |
|
2012 |
|
Immediately |
|
2013 |
|
2012 |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flow hedges |
|
$ |
(2,102 |
) |
$ |
(2,684 |
) |
Cost of goods sold |
|
$ |
184 |
|
$ |
(1,577 |
) |
Other income/expense |
|
$ |
46 |
|
$ |
172 |
|
|
|
(2,102 |
) |
(2,684 |
) |
|
|
184 |
|
(1,577 |
) |
|
|
46 |
|
172 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange forward contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
165 |
|
(837 |
) | ||||||
Foreign exchange swap contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
743 |
|
435 |
| ||||||
|
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
908 |
|
(402 |
) | ||||||
|
|
$ |
(2,102 |
) |
$ |
(2,684 |
) |
|
|
$ |
184 |
|
$ |
(1,577 |
) |
|
|
$ |
954 |
|
$ |
(230 |
) |
Cash Flow Hedges
The Company enters into foreign exchange forward contracts to hedge against exposure to changes in foreign currency exchange rates related to its subsidiaries’ forecasted inventory purchases. The Company has one entity with a euro functional currency that purchases inventory in U.S. dollars. The primary risk managed by using derivative instruments is the foreign currency exchange rate risk. The Company has designated these derivatives as cash flow hedges. Logitech does not use derivative financial instruments for trading or speculative purposes. These hedging contracts mature within four months, and are denominated in the same currency as the underlying transactions. Gains and losses in the fair value of the effective portion of the hedges are deferred as a component of accumulated other comprehensive loss until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold. The Company assesses the effectiveness of the hedges by comparing changes in the spot rate of the currency underlying the forward contract with changes in the spot rate of the currency in which the forecasted transaction will be consummated. If the underlying transaction being hedged fails to occur or if a portion of the hedge does not generate offsetting changes in the foreign currency exposure of forecasted inventory purchases, the Company immediately recognizes the gain or loss on the associated financial instrument in other income (expense). Such gains and losses were immaterial during the three and six months ended September 30, 2013 and 2012. Cash flows from such hedges are classified as operating activities in the consolidated statements of cash flows. The notional amounts of foreign exchange forward contracts outstanding related to forecasted inventory purchases were $56.7 million (€41.9 million) and $38.5 million (€30.1 million) at September 30, 2013 and March 31, 2013, respectively. The notional amount represents the future cash flows under contracts to purchase foreign currencies.
Other Derivatives
The Company also enters into foreign exchange forward contracts to reduce the short-term effects of foreign currency fluctuations on certain foreign currency receivables or payables. These forward contracts generally mature within three months. The Company may also enter into foreign exchange swap contracts to economically extend the terms of its foreign exchange forward contracts. The primary risk managed by using forward and swap contracts is the foreign currency exchange rate risk. The gains or losses on foreign exchange forward contracts are recognized in other income (expense) based on the changes in fair value.
The notional amounts of foreign exchange forward contracts outstanding at September 30 and March 31, 2013 relating to foreign currency receivables or payables were $16.4 million and $14.2 million. Open forward contracts as of September 30, 2013 consisted of contracts in U.S. dollars to purchase Taiwanese dollars and contracts in euros to sell British pounds at future dates at pre-determined exchange rates. Open forward contracts as of March 31, 2013 consisted of contracts in U.S. dollars to purchase Taiwanese dollars and contracts in euros to sell British pounds at future dates at pre-determined exchange rates. The notional amounts of foreign exchange swap contracts outstanding at September 30 and March 31, 2013 were $31.7 million and $19.6 million. Swap contracts outstanding at September 30, 2013 consisted of contracts in Mexican Pesos, Japanese Yen and Australian Dollars. Swap contracts outstanding at March 31, 2013 consisted of contracts in Mexican Pesos, Japanese Yen and Australian Dollars.
The fair value of all foreign exchange forward contracts and foreign exchange swap contracts is determined based on observable market transactions of spot currency rates and forward rates. Cash flows from these contracts are classified as operating activities in the consolidated statements of cash flows.
|
Note 9 — Goodwill and Other Intangible Assets
Interim Goodwill Impairment Testing
During the second quarter of fiscal year 2014, the Company implemented a restructuring plan (“this plan”) associated with its video conferencing reporting unit to simplify its organization, to better align costs with its current business, and to free up resources to pursue growth opportunities. This plan resulted in restructuring charges of $5.4 million in termination benefits to affected employees and $0.6 million in lease exit costs. This plan also involved a $5.2 million write-off of video conferencing discontinued products. In addition, actual performance was significantly less than projected results for the periods since the most recent goodwill impairment assessment performed during the third quarter of fiscal 2013, due to a combination of a changing industry landscape caused by a shift to less expensive, cloud-based video conferencing solutions, an evolving LifeSize product line and challenges in execution. These factors resulted in the Company concluding that it is more likely than not that the fair value of its video conferencing reporting unit was less than its carrying amount. The Company, therefore, performed an interim Step 1 assessment of its video conferencing reporting unit during the second quarter of fiscal year 2014.
The Step 1 assessment involved measuring the recoverability of goodwill by comparing the video conferencing reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value was estimated using both an income approach employing a discounted cash flow (“DCF”) model and a market approach. The DCF model was based on projected cash flows from the Company’s most recent forecast, which was based on a number of key assumptions, including, but not limited to, discount rate, compounded annual growth rate (“CAGR”) during the forecast period, and terminal value. The terminal value was based on an exit price at the end of the assessment forecast using an earnings multiple applied to the final year of the assessment forecast. The discount rate was applied to the projected cash flows to reflect the risks inherent in the timing and amount of the projected cash flows, including the terminal value, and was derived from the weighted average cost of capital of market participants in similar businesses. The market approach model was based on applying certain revenue multiples of comparable companies to the respective revenue and earnings metrics of the reporting unit. The DCF and market approach models require the exercise of significant judgment, including assumptions about appropriate discount rates, long-term growth rates for purposes of determining a terminal value at the end of the discrete forecast period, economic expectations, timing of expected future cash flows, and expectations of returns on equity that will be achieved. Such assumptions are subject to change as a result of changing economic and competitive conditions.
Key assumptions used in the Step 1 income approach analysis included the appropriate discount rates, CAGR during the forecast period, and long-term growth rates for purposes of determining a terminal value at the end of the discrete forecast period. Sensitivity assessment of key assumptions for the video conferencing reporting unit Step 1 test is presented below.
· CAGR assumption was 7.0% through fiscal year 2021, with a forecast decline in the remainder of fiscal year 2014, higher growth rates from fiscal years 2015 through 2019, reducing to a growth rate of 4% in fiscal year 2021. The forecasted growth contrasts with the recent performance of the video conferencing reporting unit, when the Company experienced a decline in revenue (see Note 13 for further details). A hypothetical decrease to 2.1% in the CAGR rate, holding all other assumptions constant, would decrease the fair value of the video conferencing reporting unit below its carrying value and hence would result in the reporting unit failing Step 1 of the goodwill impairment test.
· Discount rate assumptions was 15%. A hypothetical increase to 18.7% in the discount rate, holding all other assumptions constant, would result in the reporting unit failing Step 1 of the goodwill impairment test.
· Terminal growth rate assumption was 4%. A hypothetical decrease to 0% in the terminal growth rate assumption, holding all other assumptions constant, would result in the reporting unit passing Step 1 of the goodwill impairment test.
The assumptions used also included a reduction in future operating expenses as a percentage of revenue, driven by increases in forecast revenue as described above, combined with reduced operating expenses related to the fourth Q4’13 and Q2’14 restructuring activities.
The Step 1 assessment resulted in the Company determining that the video conferencing reporting unit passed the Step 1 test because the estimated fair value exceeded its carrying value by approximately 23%, thus not requiring a Step 2 assessment of this reporting unit. This result presents a future video conferencing reporting unit goodwill impairment risk to the Company since the margin it cleared the current Step 1 assessment was not significant.
The Company continues to evaluate and monitor all key factors impacting the carrying value of its recorded goodwill, as well as other long-lived assets. There are a number of uncertainties associated with the key assumptions described above based primarily on the difficulty of predicting the Company’s revenues and profitability. The Company’s revenues and profitability are difficult to predict due to the nature of the markets in which it competes, fluctuating end-user demand, the uncertainty of current and future global economic conditions, and for many other reasons, including, but not limited to:
· The video conferencing industry is characterized by continual performance enhancements and large, well-financed competitors. There is increased participation in the video conferencing market by companies such as Cisco Systems, Inc. and Polycom, Inc., and as a result, the Company expects competition in the industry to further intensify.
· The Company’s revenues are impacted by end-user consumer demand and future global conditions, which could fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic distress, as well as from shifts in consumer buying patterns.
· The Company must incur a large portion of its costs in advance of sales orders, because it must plan research and production, order components, buy tooling equipment, and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from its customers. This makes it difficult for it to rapidly adjust its costs in response to a revenue shortfall.
· Fluctuations in currency exchange rates can impact the Company’s revenues, expenses and profitability because it reports its financial statements in U.S. dollars, whereas a significant portion of its revenues and expenses are in other currencies.
Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and operating margins, discount rates and future market conditions, among others. It is reasonably possible that changes in the judgments, assumptions and estimates that the Company used in assessing the fair value of the video conferencing reporting unit result in the goodwill to become impaired. A goodwill impairment charge would have the effect of decreasing the Company’s earnings or increasing its losses in such period. If the Company is required to take a substantial impairment charge, its operating results would be materially and adversely affected in such period.
Goodwill and Other Intangible Assets
During the first quarter of fiscal year 2014, the Company decided not to sell its Remotes product category, previously classified as assets held for sale as of March 31, 2013. This decision required the Company to assess whether the fair value of the goodwill and other intangibles related to its Remotes category were less than the carrying value of these assets. For other intangibles, carrying value was adjusted by amortization expense not taken during the period in which this category was classified as assets held for sale. The Company concluded that the carrying value of these assets was less than their fair value. Accordingly, the Company reclassified these assets from assets held for sale back to goodwill and other intangible assets at their respective carrying values, which amounted to $2.5 million for goodwill and $1.6 million for intangibles as of June 30, 2013.
The following table summarizes the activity in the Company’s goodwill during the six months ended September 30, 2013 (in thousands):
|
|
September 30, 2013 |
| |||||||
|
|
Peripherals |
|
Video |
|
Total |
| |||
Beginning balance |
|
$ |
216,744 |
|
$ |
124,613 |
|
$ |
341,357 |
|
Additions |
|
202 |
|
— |
|
202 |
| |||
Foreign currency movements |
|
— |
|
731 |
|
731 |
| |||
Reclassified from assets held for sale |
|
2,469 |
|
— |
|
2,469 |
| |||
Ending balance |
|
$ |
219,415 |
|
$ |
125,344 |
|
$ |
344,759 |
|
The Company’s acquired other intangible assets subject to amortization were as follows (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||||||||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
| ||||||
|
|
Amount |
|
Amortization |
|
Amount |
|
Amount |
|
Amortization |
|
Amount |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trademark/tradename |
|
$ |
32,085 |
|
$ |
(30,127 |
) |
$ |
1,958 |
|
$ |
29,842 |
|
$ |
(26,558 |
) |
$ |
3,284 |
|
Technology (1) |
|
92,007 |
|
(84,144 |
) |
7,863 |
|
73,249 |
|
(61,560 |
) |
11,689 |
| ||||||
Customer contracts |
|
40,345 |
|
(32,419 |
) |
7,926 |
|
39,068 |
|
(28,017 |
) |
11,051 |
| ||||||
|
|
$ |
164,437 |
|
$ |
(146,690 |
) |
$ |
17,747 |
|
$ |
142,159 |
|
$ |
(116,135 |
) |
$ |
26,024 |
|
(1) During the six months ended September 30, 2013, the Company changed its classification of its Retail - Remote product category and digital video security product line from assets held for sale to assets held and used. The increase in gross carrying amount and accumulated amortization between March 31, 2013 and September 30, 2013 was due to this change in classification.
Amortization expense for other intangible assets was $5.3 million and $6.2 million for the three months ended September 30, 2013 and 2012, and $10.5 million and $12.6 million for the six months ended September 30, 2013 and 2012. The Company expects that amortization expense for the remaining six months of fiscal year 2014 will be $7.3 million, and annual amortization expense for fiscal years 2015, 2016 and 2017 will be $8.4 million, $1.8 million and $0.1 million, respectively.
|
Note 10 — Financing Arrangements
In December 2011, the Company entered into a Senior Revolving Credit Facility Agreement with a group of primarily Swiss banks that provides for a revolving multicurrency unsecured credit facility in an amount of up to $250.0 million. The Company may, upon notice to the lenders and subject to certain requirements, arrange with existing or new lenders to provide up to an aggregate of $150.0 million in additional commitments, for a total of $400.0 million of unsecured revolving credit. The credit facility may be used for working capital, general corporate purposes, and acquisitions. There were no outstanding borrowings under the credit facility at September 30, 2013.
The credit facility matures on October 31, 2016. The Company may prepay the loans under the credit facility in whole or in part at any time without premium or penalty. Borrowings under the credit facility will accrue interest at a per annum rate based on LIBOR (London Interbank Offered Rate), or EURIBOR (Euro Interbank Offered Rate) in the case of loans denominated in euros, plus a variable margin determined quarterly based on the ratio of senior debt-to-earnings before interest, taxes, depreciation and amortization for the preceding four-quarter period, plus, if applicable, an additional rate per annum intended to compensate the lenders for the cost of compliance with regulatory reserve requirements and other banking regulations. The Company also pays a quarterly commitment fee of 40% of the applicable margin on the available commitment. In connection with entering into the credit facility, the Company incurred non-recurring fees totaling $1.5 million, which are amortized on a straight-line basis over the term of the credit facility.
The facility agreement contains representations, covenants, including threshold financial covenants, and events of default customary in Swiss credit markets. Affirmative covenants include covenants regarding reporting requirements, maintenance of insurance, maintenance of properties and compliance with applicable laws and regulations, and financial covenants that require the maintenance of net senior debt, interest cover and adjusted equity ratios determined in accordance with the terms of the facility. Negative covenants limit the ability of the Company and its subsidiaries, among other things, to grant liens, make investments, incur debt, make restricted payments, enter into a merger or acquisition, or sell, transfer or dispose of assets, in each case subject to certain exceptions. As of March 31, 2013, the Company was not in compliance with the interest coverage ratio of this credit facility. This situation resulted from the significant operating loss incurred during fiscal year 2013. On June 13, 2013, the Company amended this credit facility to amend the definitions of (a) EBITDA to exclude the effect of impairment of goodwill and other intangible assets and (b) interest coverage ratio calculation to utilize EBITDA rather than EBIT. As of September 30, 2013, the Company was not in compliance with the adjusted equity ratio of this facility. This facility continues to be available for the Company’s use based on a temporary waiver of the adjusted equity ratio covenant through the end of the third quarter of fiscal year 2014.
This credit facility stipulates that, upon an uncured event of default under the facility, the lenders may declare all or a portion of the outstanding obligations payable by the Company to be immediately due and payable, terminate their commitments and exercise other rights and remedies provided for under the facility. The events of default under the facility include, among other things, payment defaults, covenant defaults, inaccuracy of representations and warranties, cross defaults with certain other indebtedness, bankruptcy and insolvency events and events that have a material adverse effect (as defined in the facility). Upon a change of control of the Company, lenders whose commitments aggregate more than two-thirds of the total commitments under the facility may terminate the commitments and declare all outstanding obligations to be due and payable.
The Company had several uncommitted, unsecured bank lines of credit aggregating $62 million at September 30, 2013. There are no financial covenants under these lines of credit with which the Company must comply. At September 30, 2013, the Company had no outstanding borrowings under these lines of credit. The Company also had credit lines related to corporate credit cards totaling $17.4 million at September 30, 2013. The outstanding borrowings under these credit lines are recorded in other current liabilities. There are no financial covenants under these credit lines.
|
Note 11 — Commitments and Contingencies
Operating Leases
The Company leases facilities under operating leases, certain of which require it to pay property taxes, insurance and maintenance costs. Operating leases for facilities are generally renewable at the Company’s option and usually include escalation clauses linked to inflation. Future minimum annual rentals under non-cancelable operating leases at September 30, 2013 amounted to $84.7 million.
In connection with its leased facilities, the Company has recognized a liability for asset retirement obligations representing the present value of estimated remediation costs to be incurred at lease expiration.
The following table describes changes to the Company’s asset retirement obligation liability for the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
1,532 |
|
$ |
2,001 |
|
$ |
1,750 |
|
$ |
1,918 |
|
Liabilities incurred |
|
— |
|
— |
|
— |
|
— |
| ||||
Liabilities settled |
|
(375 |
) |
— |
|
(596 |
) |
— |
| ||||
Accretion expense |
|
9 |
|
4 |
|
11 |
|
16 |
| ||||
Foreign currency translation |
|
12 |
|
(135 |
) |
13 |
|
(64 |
) | ||||
Ending balance |
|
$ |
1,178 |
|
$ |
1,870 |
|
$ |
1,178 |
|
$ |
1,870 |
|
Product Warranties
All of the Company’s products are covered by warranty to be free from defects in material and workmanship for periods ranging from one year to five years. At the time of sale, the Company accrues a warranty liability for estimated costs to provide replacement products, parts or services to repair or replace products in satisfaction of the warranty obligation. The Company’s estimate of costs to fulfill its warranty obligations is based on historical experience and expectations of future requirements. When the Company experiences changes in warranty claim activity or costs associated with fulfilling those claims, the warranty liability is adjusted accordingly. Changes in the Company’s warranty liability for the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
As Revised |
|
|
|
As Revised |
| ||||
Beginning balance |
|
$ |
22,655 |
|
$ |
23,966 |
|
$ |
20,538 |
|
$ |
25,494 |
|
Provision during the period |
|
3,356 |
|
3,444 |
|
6,645 |
|
5,981 |
| ||||
Settlements made during the year, net of adjustments |
|
(3,926 |
) |
(3,873 |
) |
(7,425 |
) |
(7,938 |
) | ||||
Amount classified as liabilities held for sale (1) |
|
— |
|
— |
|
2,327 |
|
— |
| ||||
Ending balance |
|
$ |
22,085 |
|
$ |
23,537 |
|
$ |
22,085 |
|
$ |
23,537 |
|
(1) Represents warranty liability previously allocated to the Company’s Retail — Remotes product category which was classified as an asset held for sale as of March 31, 2013.
Deferred Services Revenue
The Company’s video conferencing reporting unit offers maintenance contracts for sale of the majority of its products which allow for customers to receive service and support in addition to the expiration of the product warranty contractual term. The Company also provides installation services to its customer under contractual arrangements. The Company recognizes these contracts over the life of the service period. Change in the Company’s deferred services revenue during the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
29,080 |
|
$ |
26,340 |
|
$ |
29,328 |
|
$ |
24,568 |
|
Additions for extended warranties issued during the period |
|
7,914 |
|
8,112 |
|
15,830 |
|
16,394 |
| ||||
Amortization of deferred revenue for the period |
|
(7,926 |
) |
(7,333 |
) |
(16,090 |
) |
(13,843 |
) | ||||
Ending balance |
|
$ |
29,068 |
|
$ |
27,119 |
|
$ |
29,068 |
|
$ |
27,119 |
|
The cost of providing these services for the three months ended September 30, 2013 and 2012 was $2.1 million and $2.3 million, respectively, and for the six months ended September 30, 2013 and 2012 was $4.2 million and $4.3 million, respectively.
Purchase Commitments
At September 30, 2013, the Company had the following outstanding purchase commitments:
|
|
September 30, 2013 |
| |
|
|
|
| |
Inventory purchases |
|
$ |
132,782 |
|
Operating expenses |
|
63,426 |
| |
Capital expenditures |
|
18,372 |
| |
|
|
$ |
214,580 |
|
Commitments for inventory purchases are made in the normal course of business to original design manufacturers, the majority of the contract manufacturers and other suppliers and are expected to be fulfilled by December 2013. Operating expense commitments are for consulting services, marketing arrangements, advertising, outsourced customer services, information technology maintenance and support services, and other services. Fixed purchase commitments for capital expenditures primarily related to commitments for computer hardware and leasehold improvements. 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
Logitech International S.A., the parent holding company, has guaranteed payment of the purchase obligations of various subsidiaries from certain component suppliers. These guarantees generally have an unlimited term. The maximum potential future payment under the guarantee arrangements is limited to $30.0 million. At September 30, 2013, there were no purchase obligations outstanding for which the parent holding company was required to guarantee payment.
Logitech Europe S.A., a subsidiary of the parent holding company, has guaranteed the purchase obligations of another Logitech subsidiary under two guarantee agreements. One of these guarantees does not specify a maximum amount. The remaining guarantee has a total limit of $7.0 million. As of September 30, 2013, there was an immaterial amount of guaranteed purchase obligations that were outstanding under these guarantees. Logitech Europe S.A. has also guaranteed payment of the purchase obligations of a third-party contract manufacturer under one guarantee agreement. The maximum amount of this guarantee was $3.5 million as of September 30, 2013. As of September 30, 2013, $2.8 million of guaranteed purchase obligations were outstanding under this agreement.
Logitech International S.A. and Logitech Europe S.A. have guaranteed certain contingent liabilities of various subsidiaries related to transactions occurring in the normal course of business. The maximum amount of the guarantees was $35.0 million as of September 30, 2013 and $5.6 million of guaranteed obligations were outstanding under these agreements.
Indemnifications
Logitech indemnifies certain of its suppliers and customers for losses arising from matters such as intellectual property disputes 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 September 30, 2013. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under its indemnification arrangements.
Logitech also indemnifies its current and former directors and certain of its current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. Logitech is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable.
Legal Proceedings
From time to time the Company is involved in claims and legal proceedings which arise in the ordinary course of its business. The Company is currently subject to several such claims and a small number of legal proceedings. The Company believes that these matters lack merit and intends to vigorously defend against them. Based on currently available information, the Company does not believe that resolution of pending matters will have a material adverse effect on its financial condition, cash flows or results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that the Company’s defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on the Company’s business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against us, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect the Company’s business.
|
Note 13 — Segment Information
Net sales by product family, excluding intercompany transactions, were as follows (in thousands):
|
|
Three Months ended |
|
Six Months ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012(1) |
|
2013 |
|
2012(1) |
| ||||
Peripherals |
|
|
|
|
|
|
|
|
| ||||
Retail - Pointing Devices |
|
$ |
130,656 |
|
$ |
122,524 |
|
$ |
245,307 |
|
$ |
238,353 |
|
Retail - PC Keyboards & Desktops |
|
105,236 |
|
97,069 |
|
203,186 |
|
191,628 |
| ||||
Retail - Tablet Accessories |
|
34,711 |
|
33,737 |
|
73,270 |
|
49,623 |
| ||||
Retail - Audio PC |
|
67,199 |
|
77,267 |
|
119,164 |
|
138,792 |
| ||||
Retail - Audio - Wearables & Wireless |
|
25,648 |
|
19,108 |
|
44,723 |
|
33,707 |
| ||||
Retail - Video |
|
41,061 |
|
49,453 |
|
76,319 |
|
86,612 |
| ||||
Retail - PC Gaming |
|
41,493 |
|
46,673 |
|
81,110 |
|
73,456 |
| ||||
Retail - Remotes |
|
13,327 |
|
16,434 |
|
27,901 |
|
30,166 |
| ||||
Retail - Other |
|
5,522 |
|
14,214 |
|
7,109 |
|
29,243 |
| ||||
OEM |
|
37,526 |
|
36,718 |
|
72,039 |
|
73,393 |
| ||||
Total peripherals |
|
502,379 |
|
513,197 |
|
950,128 |
|
944,973 |
| ||||
Video conferencing |
|
29,593 |
|
34,496 |
|
59,768 |
|
71,324 |
| ||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
(1) Certain products within the retail product families as presented in the prior year have been reclassified to conform to the current year presentation, with no impact on previously reported total peripheral sales.
The Company has two reporting segments, peripherals and video conferencing, based on product markets and internal organizational structure. The peripherals segment encompasses the design, manufacturing and marketing of peripherals for PCs, tablets and other digital platforms. The video conferencing segment encompasses the design, manufacturing and marketing of LifeSize video conferencing products, infrastructure and services for the enterprise, public sector and other business markets. The Company’s reporting segments do not record revenue on sales between segments, as such sales are not material.
Operating performance measures for the peripherals segment and the video conferencing segment are reported separately to Logitech’s Chief Executive Officer, who is considered to be the Company’s chief operating decision maker. The Chief Executive Officer periodically reviews information such as net sales and operating income (loss) for each operating segment to make business decisions. These operating performance measures do not include share-based compensation expense, and amortization of intangible assets. Share-based compensation expense and amortization of intangible assets are presented in the following financial information by operating segment as “other charges.” Assets by operating segment are not presented since the Company does not present such data to the chief operating decision maker. Net sales and operating income (loss) for the Company’s reporting segments were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales by reporting segment: |
|
|
|
|
|
|
|
|
| ||||
Peripherals |
|
$ |
502,379 |
|
$ |
513,197 |
|
$ |
950,128 |
|
$ |
944,973 |
|
Video conferencing |
|
29,593 |
|
34,496 |
|
59,768 |
|
71,324 |
| ||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
|
|
|
|
|
|
|
|
|
| ||||
Operating income (loss) by segment: |
|
|
|
|
|
|
|
|
| ||||
Peripherals (1) |
|
$ |
39,281 |
|
$ |
39,097 |
|
$ |
52,151 |
|
$ |
(5,505 |
) |
Video conferencing (1) |
|
(12,708 |
) |
(1,811 |
) |
(15,877 |
) |
(2,921 |
) | ||||
Operating income (loss) before other charges |
|
26,573 |
|
37,286 |
|
36,274 |
|
(8,426 |
) | ||||
Other charges: |
|
|
|
|
|
|
|
|
| ||||
Share-based compensation |
|
(4,109 |
) |
(7,266 |
) |
(8,499 |
) |
(13,437 |
) | ||||
Amortization |
|
(5,254 |
) |
(6,191 |
) |
(10,518 |
) |
(12,589 |
) | ||||
Total operating income (loss) |
|
$ |
17,210 |
|
$ |
23,829 |
|
$ |
17,257 |
|
$ |
(34,452 |
) |
(1) The previously-reported operating income (loss) for the three and six months ended September 30, 2012 was impacted by the errors described in Note 2 as follows: (a) For the three and six months ended September 30, 2012, Peripherals operating income (loss) decreased by an immaterial amount and increased by $1.2 million, respectively, and (b) For the three and six months ended September 30, 2012, Video Conferencing operating loss decreased by less than $0.1 million and $0.2 million, respectively. These changes resulted from the warranty accrual and amortization of intangibles error correction.
Geographic net sales information in the table below is based on the customer location. Long-lived assets, primarily fixed assets, are reported below based on the location of the asset.
Net sales to unaffiliated customers by geographic region were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||||||||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||||||||||||
|
|
|
|
As Reported |
|
Adjustments (1) |
|
As Revised |
|
|
|
As Reported |
|
Adjustments (1) |
|
As Revised |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Americas |
|
$ |
202,381 |
|
$ |
216,596 |
|
$ |
(17,079 |
) |
$ |
199,517 |
|
$ |
402,834 |
|
$ |
420,522 |
|
$ |
(36,438 |
) |
$ |
384,084 |
|
EMEA |
|
203,353 |
|
212,050 |
|
10,939 |
|
222,989 |
|
358,576 |
|
362,056 |
|
24,306 |
|
386,362 |
| ||||||||
Asia Pacific |
|
126,238 |
|
119,047 |
|
6,140 |
|
125,187 |
|
248,486 |
|
233,719 |
|
12,132 |
|
245,851 |
| ||||||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
— |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
$ |
— |
|
$ |
1,016,297 |
|
(1) During fiscal year 2013, the Company determined that net sales to unaffiliated customers by geographic regions previously reported, including the three and six months ended September 30, 2012, were not properly stated since amounts related to its Video Conferencing segment and other businesses were improperly allocated solely to the Americas region.
Sales are attributed to countries on the basis of the customers’ locations. The United States represented 34% and 32% of the Company’s total consolidated net sales for the quarter ended September 30, 2013 and 2012. No other single country represented more than 10% of the Company’s total consolidated net sales during those periods. Revenues from sales to customers in Switzerland, the Company’s home domicile, represented 2% of the Company’s total consolidated net sales for the three and six months ended September 30, 2013 and 2012. One customer group of the Company’s peripheral operating segment represented 14% and 13% of sales for the quarters ended September 30, 2013 and 2012. The United States represented 35% and 33% of the Company’s total consolidated net sales for the six months ended September 30, 2013 and 2012. Revenues from sales to customers in Switzerland represented 1% and 2% of the Company’s total consolidated net sales for the six months ended September 30, 2013 and 2012. No other single country represented more than 10% of the Company’s total consolidated net sales during those periods. One customer group of the Company’s peripheral reporting segment represented 14% and 12% of net sales in each of the six month periods ended September 30, 2013 and 2012.
Long-lived assets by geographic region were as follows (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Americas |
|
$ |
43,386 |
|
$ |
43,357 |
|
EMEA |
|
5,875 |
|
8,315 |
| ||
Asia Pacific |
|
42,396 |
|
40,952 |
| ||
Total long-lived assets |
|
$ |
91,657 |
|
$ |
92,624 |
|
Long-lived assets in the United States and China were $43.2 million and $35.0 million at September 30, 2013 and $43.2 million and $33.1 million at March 31, 2013. No other countries represented more than 10% of the Company’s total consolidated long-lived assets at September 30 and March 31, 2013. Long-lived assets in Switzerland were $1.9 million and $4.2 million at September 30 and March 31, 2013.
|
Note 14 — Restructuring
During the first quarter of fiscal year 2013, Logitech implemented a restructuring plan to simplify the Company’s organization, to better align costs with its current business, and to free up resources to pursue growth opportunities. A majority of the restructuring activity was completed during the three months ended June 30, 2012. As part of this restructuring plan, the Company reduced its worldwide non-direct labor workforce. Charges and other costs related to the workforce reduction are presented as restructuring charges in the consolidated statements of operations. During the three months ended September 30, 2012, the Company incurred a $3.8 million credit in termination benefits to affected employees due to the further refinement of estimates previously accrued during the three months ended June 30, 2012. For the six months ended September 30, 2012, the Company incurred $24.8 million in termination benefits to affected employees under this plan. In addition, the Company incurred legal, consulting, and other costs of $1.1 million and $2.2 million as a result of the terminations during the three and six months ended September 30, 2012. The Company also incurred $1.5 million in lease exit costs primarily related to costs associated with the closure of existing facilities during the six months ended September 30, 2012. During the six months ended September 30, 2012, charges of approximately $3.0 million related to discontinuance of certain product development efforts are included in cost of goods sold in the consolidated statements of operations. During the quarter ended September 30, 2012, the Company also incurred $2.2 million from the re-measurement of its Swiss defined benefit pension plan caused by the number of plan participants affected by this restructuring that was not included in restructuring charge since it related to prior services.
During the fourth quarter of fiscal year 2013, Logitech implemented an additional restructuring plan to align the organization to its strategic priorities of increasing focus on mobility products, improving profitability in PC-related products and enhancing global operational efficiencies. As part of this restructuring plan, the Company reduced its worldwide non-direct labor workforce. Restructuring charges under this plan primarily consisted of severance and other one-time termination benefits. Charges and other costs related to the workforce reduction are presented as restructuring charges in the consolidated statements of operations. During the three months ended September 30, 2013, the Company incurred a $0.8 million credit in termination benefits to affected employees due to the further refinement of estimates which were previously accrued and a $0.3 million charge in lease exit costs. During the six months ended September 30, 2013, restructuring changes under this plan included $1.2 million in termination benefits to affected employees and $0.6 million in lease exit costs. The Company estimates to complete this restructuring plan by March 31, 2014.
During the second quarter of fiscal year 2014, Logitech implemented a restructuring plan associated with its video conferencing operating segment to simplify its organization, to better align costs with its current business, and to free up resources to pursue growth opportunities. A majority of the restructuring activity was completed during the three months ended September 30, 2013. As part of this restructuring plan, the Company reduced its non-direct labor workforce, which is presented as restructuring charges in the consolidated statements of operations. During the three months ended September 30, 2013, restructuring charges under this plan included $5.4 million in termination benefits to affected employees and $0.6 million in lease exit costs. During the three months ended September 30, 2013, the Company also incurred a $5.2 million write-off of discontinued products, resulting from the restructuring of our video conferencing reporting segment included in cost of goods sold in the consolidated statements of operations. The Company estimates to complete this restructuring plan by March 31, 2014.
Termination benefits were calculated based on regional benefit practices and local statutory requirements. Lease exit costs primarily relate to costs associated with the closure of existing facilities. Other charges primarily consist of legal, consulting and other costs related to employee terminations.
The following table summarizes restructuring related activities (in thousands):
|
|
Total |
|
Termination |
|
Lease Exit |
|
Other |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at March 31, 2012 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
31,227 |
|
28,655 |
|
1,472 |
|
1,100 |
| ||||
Cash payments |
|
(5,195 |
) |
(4,766 |
) |
— |
|
(429 |
) | ||||
Foreign exchange |
|
63 |
|
63 |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at June 30, 2012 |
|
26,095 |
|
23,952 |
|
1,472 |
|
671 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
(2,671 |
) |
(3,816 |
) |
48 |
|
1,097 |
| ||||
Cash payments |
|
(17,652 |
) |
(16,642 |
) |
(52 |
) |
(958 |
) | ||||
Foreign exchange |
|
14 |
|
— |
|
— |
|
14 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at September 30, 2012 |
|
$ |
5,786 |
|
$ |
3,494 |
|
$ |
1,468 |
|
$ |
824 |
|
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
(358 |
) |
(188 |
) |
(182 |
) |
12 |
| ||||
Cash payments |
|
(4,511 |
) |
(2,633 |
) |
(1,104 |
) |
(774 |
) | ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at December 30, 2012 |
|
917 |
|
673 |
|
182 |
|
62 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
15,507 |
|
16,437 |
|
(30 |
) |
(900 |
) | ||||
Cash payments |
|
(2,966 |
) |
(3,727 |
) |
(77 |
) |
838 |
| ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at March 31, 2013 |
|
13,458 |
|
13,383 |
|
75 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
2,334 |
|
2,004 |
|
330 |
|
— |
| ||||
Cash payments |
|
(8,422 |
) |
(8,422 |
) |
— |
|
— |
| ||||
Foreign exchange |
|
(170 |
) |
(170 |
) |
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at June 30, 2013 |
|
7,200 |
|
6,795 |
|
405 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
5,465 |
|
4,562 |
(1) |
903 |
(1) |
— |
| ||||
Cash payments |
|
(7,099 |
) |
(6,535 |
) |
(564 |
) |
— |
| ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at September 30, 2013 |
|
$ |
5,566 |
|
$ |
4,822 |
|
$ |
744 |
|
$ |
— |
|
(1) During the three months ended September 30, 2013, the Company incurred $4.6 million in termination benefits, $5.4 million charge related to the restructuring plan initiated during the second quarter of fiscal year 2014 offset by a $0.8 million credit related to the restructuring plan initiated during the fourth quarter of fiscal year 2013. During the same period, the Company also incurred $0.9 million in lease exit costs, $0.6 million related to the restructuring plan initiated during the second quarter of fiscal year 2014 and $0.3 million related to the restructuring plan initiated during the fourth quarter of fiscal year 2013.
|
Basis of Presentation
The consolidated interim financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The consolidated financial statements are presented in accordance with U.S. GAAP (accounting principles generally accepted in the United States of America) for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. They should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2013, included in its Annual Report on Form 10-K/A. In the opinion of management, these consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. Operating results for the three and six months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending March 31, 2014, or any future periods.
Certain prior period financial statement amounts have been reclassified to conform to the current period presentation with no impact on previously reported net income.
Fiscal Years
The Company’s fiscal years end on March 31. Interim quarters are thirteen-week periods, each ending on a Friday. For purposes of presentation, the Company has indicated its quarterly periods as ending on the month end.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect reported amounts of assets, liabilities, net sales and expenses, and the disclosure of contingent assets and liabilities. Examples of significant estimates and assumptions made by management involve the fair value of goodwill, accruals for customer programs, inventory valuation, valuation allowances for deferred tax assets and warranty accruals. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ from those estimates.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The ASU provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
|
The following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statement of operations for the three and six months ended September 30, 2012 (in thousands):
|
|
Three Months ended September 30, 2012 |
|
Six Months ended September 30, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
|
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net sales |
|
$ |
547,693 |
|
150 |
(1) |
$ |
547,693 |
|
$ |
1,016,297 |
|
(1,015 |
)(1) |
$ |
1,016,297 |
| ||
Cost of goods sold |
|
351,698 |
|
71 |
(2) |
351,919 |
|
676,050 |
|
142 |
(2) |
675,177 |
| ||||||
Gross profit |
|
195,995 |
|
(221 |
) |
195,774 |
|
340,247 |
|
873 |
|
341,120 |
| ||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Marketing and selling |
|
110,522 |
|
— |
|
110,522 |
|
211,419 |
|
— |
|
211,419 |
| ||||||
Research and development |
|
38,019 |
|
95 |
(2) |
38,114 |
|
76,947 |
|
190 |
(2) |
77,137 |
| ||||||
General and administrative |
|
25,980 |
|
— |
|
25,980 |
|
58,460 |
|
— |
|
58,460 |
| ||||||
Restructuring charges (credits) |
|
(2,671 |
) |
— |
|
(2,671 |
) |
28,556 |
|
— |
|
28,556 |
| ||||||
Total operating expenses |
|
171,850 |
|
95 |
|
171,945 |
|
375,382 |
|
190 |
|
375,572 |
| ||||||
Operating income (loss) |
|
24,145 |
|
(316 |
) |
23,829 |
|
(35,135 |
) |
683 |
|
(34,452 |
) | ||||||
Interest income, net |
|
153 |
|
— |
|
153 |
|
537 |
|
— |
|
537 |
| ||||||
Other expense, net |
|
(509 |
) |
— |
|
(509 |
) |
(668 |
) |
— |
|
(668 |
) | ||||||
Income (loss) before income taxes |
|
23,789 |
|
(316 |
) |
23,473 |
|
(35,266 |
) |
683 |
|
(34,583 |
) | ||||||
Benefit from income taxes |
|
(31,076 |
) |
— |
|
(31,076 |
) |
(37,986 |
) |
— |
|
(37,986 |
) | ||||||
Net Income |
|
$ |
54,865 |
|
$ |
(316 |
) |
$ |
54,549 |
|
$ |
2,720 |
|
$ |
683 |
|
$ |
3,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income per share: |
|
$ |
0.35 |
|
|
|
$ |
0.35 |
|
$ |
0.02 |
|
|
|
$ |
0.02 |
| ||
Basic |
|
$ |
0.35 |
|
|
|
$ |
0.35 |
|
$ |
0.02 |
|
|
|
$ |
0.02 |
| ||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Shares used to compute net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
156,736 |
|
|
|
156,736 |
|
158,723 |
|
|
|
158,723 |
| ||||||
Diluted |
|
157,932 |
|
|
|
157,932 |
|
159,853 |
|
|
|
159,853 |
| ||||||
The Company’s following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statements of comprehensive income for the three and six months ended September 30, 2012 (in thousands):
|
|
Three Months ended September 30, 2012 |
|
Six Months ended September 30, 2012 |
| ||||||||||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
|
As Reported |
|
Adjustments |
|
As Revised |
| ||||||
|
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Income |
|
$ |
54,865 |
|
$ |
(150 |
)(1) |
$ |
54,549 |
|
$ |
2,720 |
|
$ |
1,015 |
(1) |
$ |
3,403 |
|
|
|
|
|
$ |
(166 |
)(2) |
|
|
|
|
$ |
(332 |
)(2) |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign currency translation gain (loss) |
|
4,970 |
|
(2,529 |
)(3) |
2,441 |
|
(1,295 |
) |
(3,125 |
)(3) |
(4,420 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in net loss, and prior service cost related to defined benefit pension plans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss and prior service cost |
|
6,457 |
|
— |
|
6,457 |
|
7,920 |
|
|
|
7,920 |
| ||||||
Less amortization included in operating expenses |
|
301 |
|
— |
|
301 |
|
756 |
|
— |
|
756 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net change in hedging gain (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized hedging loss |
|
(5,466 |
) |
— |
|
(5,466 |
) |
(4,261 |
) |
— |
|
(4,261 |
) | ||||||
Less reclassification adjustment for gain included in cost of goods sold |
|
1,683 |
|
— |
|
1,683 |
|
1,577 |
|
— |
|
1,577 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net change in unrealized investment loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Reclassification adjustment for gain included in other income (expense) |
|
— |
|
— |
|
— |
|
(343 |
) |
— |
|
(343 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other comprehensive income |
|
7,945 |
|
(2,529 |
) |
5,416 |
|
4,354 |
|
(3,125 |
) |
1,229 |
| ||||||
Total comprehensive income |
|
$ |
62,810 |
|
$ |
(2,845 |
) |
$ |
59,965 |
|
$ |
7,074 |
|
$ |
(2,442 |
) |
$ |
4,632 |
|
The following table presents the impact of the accounting errors on the Company’s previously-reported consolidated statement of cash flows for the six months ended September 30, 2012 (in thousands):
|
|
Six Months ended |
| |||||||
|
|
September 30, 2012 |
| |||||||
|
|
As Reported |
|
Adjustments |
|
As Revised |
| |||
|
|
|
|
(Unaudited) |
|
|
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
| |||
Net income |
|
$ |
2,720 |
|
$ |
1,015 |
(1) |
$ |
3,403 |
|
|
|
|
|
(332 |
)(2) |
|
| |||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
| |||
Depreciation |
|
22,307 |
|
— |
|
22,307 |
| |||
Amortization of other intangible assets |
|
12,257 |
|
332 |
(2) |
12,589 |
| |||
Share-based compensation expense |
|
13,437 |
|
— |
|
13,437 |
| |||
Gain on sale of available-for-sale securities |
|
(831 |
) |
— |
|
(831 |
) | |||
Excess tax benefits from share-based compensation |
|
(22 |
) |
— |
|
(22 |
) | |||
Deferred income taxes and other |
|
(3,806 |
) |
— |
|
(3,806 |
) | |||
Changes in assets and liabilities, net of acquisition: |
|
|
|
|
|
— |
| |||
Accounts receivable |
|
(58,272 |
) |
(261 |
)(3) |
(58,533 |
) | |||
Inventories |
|
(30,733 |
) |
(1,092 |
)(3) |
(31,825 |
) | |||
Other assets |
|
(7,339 |
) |
(231 |
)(3) |
(7,570 |
) | |||
Accounts payable |
|
68,875 |
|
2,220 |
(3) |
71,095 |
| |||
Accrued and other liabilities |
|
(9,498 |
) |
(1,015 |
)(1) |
(10,997 |
) | |||
|
|
|
|
(484 |
)(3) |
|
| |||
Net cash provided by operating activities |
|
9,095 |
|
152 |
|
9,247 |
| |||
Cash flows from investing activities: |
|
|
|
|
|
— |
| |||
Purchases of property, plant and equipment |
|
(30,522 |
) |
(2,295 |
)(3) |
(32,817 |
) | |||
Investment in privately-held company |
|
(3,970 |
) |
— |
|
(3,970 |
) | |||
Proceeds from sale of available-for-sale securities |
|
917 |
|
— |
|
917 |
| |||
Purchases of trading investments for deferred compensation plan |
|
(1,648 |
) |
— |
|
(1,648 |
) | |||
Proceeds from sales of trading investments for deferred compensation plan |
|
1,638 |
|
— |
|
1,638 |
| |||
Net cash used in investing activities |
|
(33,585 |
) |
(2,295 |
) |
(35,880 |
) | |||
Cash flows from financing activities: |
|
|
|
|
|
— |
| |||
Payment of cash dividends |
|
(133,462 |
) |
— |
|
(133,462 |
) | |||
Purchases of treasury shares |
|
(89,955 |
) |
2,143 |
(3) |
(87,812 |
) | |||
Proceeds from sale of shares upon exercise of options and purchase rights |
|
9,008 |
|
— |
|
9,008 |
| |||
Tax withholdings related to net share settlements of restricted stock units |
|
(635 |
) |
— |
|
(635 |
) | |||
Excess tax benefits from share-based compensation |
|
22 |
|
— |
|
22 |
| |||
Net cash used in financing activities |
|
(215,022 |
) |
2,143 |
|
(212,879 |
) | |||
Effect of exchange rate changes on cash and cash equivalents |
|
(1,825 |
) |
— |
|
(1,825 |
) | |||
Net decrease in cash and cash equivalents |
|
(241,337 |
) |
— |
|
(241,337 |
) | |||
Cash and cash equivalents at beginning of period |
|
478,370 |
|
— |
|
478,370 |
| |||
Cash and cash equivalents at end of period |
|
$ |
237,033 |
|
$ |
— |
|
$ |
237,033 |
|
|
The following table summarizes the share-based compensation expense and related tax benefit recognized for the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended |
|
Six Months ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of goods sold |
|
$ |
594 |
|
$ |
608 |
|
$ |
1,171 |
|
$ |
1,397 |
|
Share-based compensation expense included in gross profit |
|
594 |
|
608 |
|
1,171 |
|
1,397 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Marketing and selling |
|
1,017 |
|
2,644 |
|
2,923 |
|
4,424 |
| ||||
Research and development |
|
840 |
|
1,763 |
|
1,934 |
|
3,588 |
| ||||
General and administrative |
|
1,658 |
|
2,251 |
|
2,471 |
|
4,028 |
| ||||
Share-based compensation expense included in operating expenses |
|
3,515 |
|
6,658 |
|
7,328 |
|
12,040 |
| ||||
Total share-based compensation expense |
|
4,109 |
|
7,266 |
|
8,499 |
|
13,437 |
| ||||
Income tax benefit |
|
(1,300 |
) |
(1,671 |
) |
(2,175 |
) |
(3,047 |
) | ||||
Share-based compensation expense, net of income tax |
|
$ |
2,809 |
|
$ |
5,595 |
|
$ |
6,324 |
|
$ |
10,390 |
The net periodic benefit cost for defined benefit pension plans and non-retirement post-employment benefit obligations for the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Service cost |
|
$ |
1,972 |
|
$ |
1,726 |
|
$ |
3,929 |
|
$ |
3,601 |
|
Interest cost |
|
430 |
|
418 |
|
857 |
|
912 |
| ||||
Expected return on plan assets |
|
(490 |
) |
(525 |
) |
(990 |
) |
(618 |
) | ||||
Amortization of net transition obligation |
|
1 |
|
1 |
|
2 |
|
2 |
| ||||
Amortization of net prior service cost |
|
52 |
|
38 |
|
104 |
|
76 |
| ||||
Recognized net actuarial loss |
|
256 |
|
262 |
|
508 |
|
678 |
| ||||
Settlement cost |
|
— |
|
2,254 |
|
— |
|
2,254 |
| ||||
Net periodic benefit cost |
|
$ |
2,221 |
|
$ |
4,174 |
|
$ |
4,410 |
|
$ |
6,905 |
|
The following table presents the components of certain balance sheet asset amounts as of September 30 and March 31, 2013 (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Accounts receivable: |
|
|
|
|
| ||
Accounts receivable |
|
$ |
413,696 |
|
$ |
325,870 |
|
Allowance for doubtful accounts |
|
(1,071 |
) |
(2,153 |
) | ||
Allowance for returns |
|
(19,230 |
) |
(21,883 |
) | ||
Allowances for cooperative marketing arrangements |
|
(26,010 |
) |
(24,160 |
) | ||
Allowances for customer incentive programs |
|
(44,788 |
) |
(42,857 |
) | ||
Allowances for pricing programs |
|
(63,739 |
) |
(55,252 |
) | ||
|
|
$ |
258,858 |
|
$ |
179,565 |
|
Inventories: |
|
|
|
|
| ||
Raw materials |
|
$ |
34,020 |
|
$ |
37,504 |
|
Work-in-process |
|
75 |
|
41 |
| ||
Finished goods |
|
258,682 |
|
223,538 |
| ||
|
|
$ |
292,777 |
|
$ |
261,083 |
|
Other current assets: |
|
|
|
|
| ||
Income tax and value-added tax refund receivables |
|
$ |
25,113 |
|
$ |
17,403 |
|
Deferred taxes |
|
29,109 |
|
25,400 |
| ||
Prepaid expenses and other |
|
11,586 |
|
15,300 |
| ||
|
|
$ |
65,808 |
|
$ |
58,103 |
|
Property, plant and equipment: |
|
|
|
|
| ||
Plant, buildings and improvements |
|
$ |
68,642 |
|
$ |
70,009 |
|
Equipment |
|
131,913 |
|
129,868 |
| ||
Computer equipment |
|
32,551 |
|
42,437 |
| ||
Computer software |
|
80,136 |
|
80,930 |
| ||
|
|
313,242 |
|
323,244 |
| ||
Less: accumulated depreciation |
|
(236,845 |
) |
(247,469 |
) | ||
|
|
76,397 |
|
75,775 |
| ||
Construction-in-progress |
|
7,890 |
|
9,047 |
| ||
Land |
|
2,846 |
|
2,827 |
| ||
|
|
$ |
87,133 |
|
$ |
87,649 |
|
Other assets: |
|
|
|
|
| ||
Deferred taxes |
|
$ |
51,121 |
|
$ |
53,035 |
|
Trading investments |
|
15,435 |
|
15,599 |
| ||
Other |
|
5,261 |
|
6,464 |
| ||
|
|
$ |
71,817 |
|
$ |
75,098 |
|
The following table presents the components of certain balance sheet liability amounts as of September 30 and March 31, 2013 (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Accrued and other current liabilities: |
|
|
|
|
| ||
Accrued personnel expenses |
|
$ |
56,906 |
|
$ |
40,502 |
|
Accrued marketing expenses |
|
13,039 |
|
11,005 |
| ||
Indirect customer incentive programs |
|
32,539 |
|
29,464 |
| ||
Accrued restructuring |
|
5,566 |
|
13,458 |
| ||
Deferred revenue |
|
21,562 |
|
22,698 |
| ||
Accrued freight and duty |
|
8,596 |
|
5,882 |
| ||
Value-added tax payable |
|
8,477 |
|
8,544 |
| ||
Accrued royalties |
|
4,012 |
|
3,358 |
| ||
Warranty accrual |
|
12,634 |
|
11,878 |
| ||
Employee benefit plan obligations |
|
1,571 |
|
4,351 |
| ||
Income taxes payable |
|
5,392 |
|
2,463 |
| ||
Other accrued liabilities |
|
49,352 |
|
39,171 |
| ||
|
|
$ |
219,646 |
|
$ |
192,774 |
|
Non-current liabilities: |
|
|
|
|
| ||
Income taxes payable |
|
$ |
100,310 |
|
$ |
98,827 |
|
Warranty accrual |
|
9,451 |
|
8,660 |
| ||
Obligation for deferred compensation |
|
15,435 |
|
15,631 |
| ||
Employee benefit plan obligations |
|
40,728 |
|
35,963 |
| ||
Deferred rent |
|
23,690 |
|
24,136 |
| ||
Deferred taxes |
|
1,872 |
|
1,989 |
| ||
Other liabilities |
|
11,070 |
|
10,676 |
| ||
|
|
$ |
202,556 |
|
$ |
195,882 |
|
The following table presents the changes in the allowance for doubtful accounts during the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
(2,189 |
) |
$ |
(2,321 |
) |
$ |
(2,153 |
) |
$ |
(2,472 |
) |
Bad debt expense reversal, net |
|
428 |
|
103 |
|
359 |
|
189 |
| ||||
Write-offs, net of recoveries |
|
690 |
|
(21 |
) |
723 |
|
44 |
| ||||
Ending balance |
|
$ |
(1,071 |
) |
$ |
(2,239 |
) |
$ |
(1,071 |
) |
$ |
(2,239 |
) |
|
The following table presents the Company’s financial assets and liabilities, that were accounted for at fair value, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 1 |
|
Level 2 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents (1) |
|
$ |
99,510 |
|
$ |
— |
|
$ |
119,073 |
|
$ |
— |
|
Trading investments for deferred compensation plan: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
3,311 |
|
— |
|
4,220 |
|
— |
| ||||
Mutual funds |
|
12,124 |
|
— |
|
11,379 |
|
— |
| ||||
Foreign exchange derivative assets |
|
— |
|
126 |
|
— |
|
1,197 |
| ||||
Total assets at fair value |
|
$ |
114,945 |
|
$ |
126 |
|
$ |
134,672 |
|
$ |
1,197 |
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange derivative liabilities |
|
$ |
— |
|
$ |
1,546 |
|
$ |
— |
|
$ |
707 |
|
Total liabilities at fair value |
|
$ |
— |
|
$ |
1,546 |
|
$ |
— |
|
$ |
707 |
|
(1) Excludes cash balances of $195.3 million as of September 30, 2013 and $214.7 million as of March 31, 2013.
The following table presents the changes in the Company’s Level 3 available-for-sale securities during the six months ended September 30, 2013 and 2012 (in thousands):
|
|
September 30, 2013 |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Beginning balance |
|
$ |
— |
|
$ |
429 |
|
Proceeds from sales of securities |
|
— |
|
(917 |
) | ||
Reversal of unrealized gains previously recognized in accumulated other comprehensive loss |
|
— |
|
831 |
| ||
Reversal of unrealized losses previously recognized in accumulated other comprehensive loss |
|
— |
|
(343 |
) | ||
Ending balance |
|
$ |
— |
|
$ |
— |
|
The following table presents the fair values of the Company’s derivative instruments and their locations on its Consolidated Balance Sheets as of September 30 and March 31, 2013 (in thousands):
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||||||||
|
|
|
|
Fair Value |
|
|
|
Fair Value |
| ||||||||
|
|
|
|
September 30, |
|
March 31, |
|
|
|
September 30, |
|
March 31, |
| ||||
|
|
Location |
|
2013 |
|
2013 |
|
Location |
|
2013 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flow hedges |
|
Other assets |
|
$ |
8 |
|
$ |
1,165 |
|
Other liabilities |
|
$ |
754 |
|
$ |
— |
|
|
|
|
|
8 |
|
1,165 |
|
|
|
754 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange forward contracts |
|
Other assets |
|
118 |
|
— |
|
Other liabilities |
|
240 |
|
270 |
| ||||
Foreign exchange swap contracts |
|
Other assets |
|
— |
|
32 |
|
Other liabilities |
|
552 |
|
437 |
| ||||
|
|
|
|
118 |
|
32 |
|
|
|
792 |
|
707 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
$ |
126 |
|
$ |
1,197 |
|
|
|
$ |
1,546 |
|
$ |
707 |
|
The following table presents the amounts of gains and losses on the Company’s derivative instruments for the three and six months ended September 30, 2013 and 2012 and their locations on its consolidated statements of operations (in thousands):
|
|
Net Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
| ||||||||||||
|
|
2013 |
|
2012 |
|
Loss into Income |
|
2013 |
|
2012 |
|
Immediately |
|
2013 |
|
2012 |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flow hedges |
|
$ |
(1,467 |
) |
$ |
(3,783 |
) |
Cost of goods sold |
|
$ |
(94 |
) |
$ |
(1,683 |
) |
Other income/expense |
|
$ |
16 |
|
$ |
120 |
|
|
|
(1,467 |
) |
(3,783 |
) |
|
|
(94 |
) |
(1,683 |
) |
|
|
16 |
|
120 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange forward contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
(482 |
) |
(92 |
) | ||||||
Foreign exchange swap contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
5 |
|
(390 |
) | ||||||
|
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
(477 |
) |
(482 |
) | ||||||
|
|
$ |
(1,467 |
) |
$ |
(3,783 |
) |
|
|
$ |
(94 |
) |
$ |
(1,683 |
) |
|
|
$ |
(461 |
) |
$ |
(362 |
) |
|
|
Net Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
|
Location of |
|
Amount of Gain/(Loss) |
| ||||||||||||
|
|
2013 |
|
2012 |
|
Loss into Income |
|
2013 |
|
2012 |
|
Immediately |
|
2013 |
|
2012 |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flow hedges |
|
$ |
(2,102 |
) |
$ |
(2,684 |
) |
Cost of goods sold |
|
$ |
184 |
|
$ |
(1,577 |
) |
Other income/expense |
|
$ |
46 |
|
$ |
172 |
|
|
|
(2,102 |
) |
(2,684 |
) |
|
|
184 |
|
(1,577 |
) |
|
|
46 |
|
172 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign exchange forward contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
165 |
|
(837 |
) | ||||||
Foreign exchange swap contracts |
|
— |
|
— |
|
|
|
|
|
— |
|
Other income/expense |
|
743 |
|
435 |
| ||||||
|
|
— |
|
— |
|
|
|
|
|
— |
|
|
|
908 |
|
(402 |
) | ||||||
|
|
$ |
(2,102 |
) |
$ |
(2,684 |
) |
|
|
$ |
184 |
|
$ |
(1,577 |
) |
|
|
$ |
954 |
|
$ |
(230 |
) |
|
The following table summarizes the activity in the Company’s goodwill during the six months ended September 30, 2013 (in thousands):
|
|
September 30, 2013 |
| |||||||
|
|
Peripherals |
|
Video |
|
Total |
| |||
Beginning balance |
|
$ |
216,744 |
|
$ |
124,613 |
|
$ |
341,357 |
|
Additions |
|
202 |
|
— |
|
202 |
| |||
Foreign currency movements |
|
— |
|
731 |
|
731 |
| |||
Reclassified from assets held for sale |
|
2,469 |
|
— |
|
2,469 |
| |||
Ending balance |
|
$ |
219,415 |
|
$ |
125,344 |
|
$ |
344,759 |
|
The Company’s acquired other intangible assets subject to amortization were as follows (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||||||||||||||
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
| ||||||
|
|
Amount |
|
Amortization |
|
Amount |
|
Amount |
|
Amortization |
|
Amount |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trademark/tradename |
|
$ |
32,085 |
|
$ |
(30,127 |
) |
$ |
1,958 |
|
$ |
29,842 |
|
$ |
(26,558 |
) |
$ |
3,284 |
|
Technology (1) |
|
92,007 |
|
(84,144 |
) |
7,863 |
|
73,249 |
|
(61,560 |
) |
11,689 |
| ||||||
Customer contracts |
|
40,345 |
|
(32,419 |
) |
7,926 |
|
39,068 |
|
(28,017 |
) |
11,051 |
| ||||||
|
|
$ |
164,437 |
|
$ |
(146,690 |
) |
$ |
17,747 |
|
$ |
142,159 |
|
$ |
(116,135 |
) |
$ |
26,024 |
|
(1) During the six months ended September 30, 2013, the Company changed its classification of its Retail - Remote product category and digital video security product line from assets held for sale to assets held and used. The increase in gross carrying amount and accumulated amortization between March 31, 2013 and September 30, 2013 was due to this change in classification.
|
The following table describes changes to the Company’s asset retirement obligation liability for the three and six months ended September 30, 2013 and 2012 (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
1,532 |
|
$ |
2,001 |
|
$ |
1,750 |
|
$ |
1,918 |
|
Liabilities incurred |
|
— |
|
— |
|
— |
|
— |
| ||||
Liabilities settled |
|
(375 |
) |
— |
|
(596 |
) |
— |
| ||||
Accretion expense |
|
9 |
|
4 |
|
11 |
|
16 |
| ||||
Foreign currency translation |
|
12 |
|
(135 |
) |
13 |
|
(64 |
) | ||||
Ending balance |
|
$ |
1,178 |
|
$ |
1,870 |
|
$ |
1,178 |
|
$ |
1,870 |
|
Changes in the Company’s warranty liability for the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
As Revised |
|
|
|
As Revised |
| ||||
Beginning balance |
|
$ |
22,655 |
|
$ |
23,966 |
|
$ |
20,538 |
|
$ |
25,494 |
|
Provision during the period |
|
3,356 |
|
3,444 |
|
6,645 |
|
5,981 |
| ||||
Settlements made during the year, net of adjustments |
|
(3,926 |
) |
(3,873 |
) |
(7,425 |
) |
(7,938 |
) | ||||
Amount classified as liabilities held for sale (1) |
|
— |
|
— |
|
2,327 |
|
— |
| ||||
Ending balance |
|
$ |
22,085 |
|
$ |
23,537 |
|
$ |
22,085 |
|
$ |
23,537 |
|
(1) Represents warranty liability previously allocated to the Company’s Retail — Remotes product category which was classified as an asset held for sale as of March 31, 2013.
Change in the Company’s deferred services revenue during the three and six months ended September 30, 2013 and 2012 were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
|
$ |
29,080 |
|
$ |
26,340 |
|
$ |
29,328 |
|
$ |
24,568 |
|
Additions for extended warranties issued during the period |
|
7,914 |
|
8,112 |
|
15,830 |
|
16,394 |
| ||||
Amortization of deferred revenue for the period |
|
(7,926 |
) |
(7,333 |
) |
(16,090 |
) |
(13,843 |
) | ||||
Ending balance |
|
$ |
29,068 |
|
$ |
27,119 |
|
$ |
29,068 |
|
$ |
27,119 |
|
|
|
September 30, 2013 |
| |
|
|
|
| |
Inventory purchases |
|
$ |
132,782 |
|
Operating expenses |
|
63,426 |
| |
Capital expenditures |
|
18,372 |
| |
|
|
$ |
214,580 |
|
|
Net sales by product family, excluding intercompany transactions, were as follows (in thousands):
|
|
Three Months ended |
|
Six Months ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012(1) |
|
2013 |
|
2012(1) |
| ||||
Peripherals |
|
|
|
|
|
|
|
|
| ||||
Retail - Pointing Devices |
|
$ |
130,656 |
|
$ |
122,524 |
|
$ |
245,307 |
|
$ |
238,353 |
|
Retail - PC Keyboards & Desktops |
|
105,236 |
|
97,069 |
|
203,186 |
|
191,628 |
| ||||
Retail - Tablet Accessories |
|
34,711 |
|
33,737 |
|
73,270 |
|
49,623 |
| ||||
Retail - Audio PC |
|
67,199 |
|
77,267 |
|
119,164 |
|
138,792 |
| ||||
Retail - Audio - Wearables & Wireless |
|
25,648 |
|
19,108 |
|
44,723 |
|
33,707 |
| ||||
Retail - Video |
|
41,061 |
|
49,453 |
|
76,319 |
|
86,612 |
| ||||
Retail - PC Gaming |
|
41,493 |
|
46,673 |
|
81,110 |
|
73,456 |
| ||||
Retail - Remotes |
|
13,327 |
|
16,434 |
|
27,901 |
|
30,166 |
| ||||
Retail - Other |
|
5,522 |
|
14,214 |
|
7,109 |
|
29,243 |
| ||||
OEM |
|
37,526 |
|
36,718 |
|
72,039 |
|
73,393 |
| ||||
Total peripherals |
|
502,379 |
|
513,197 |
|
950,128 |
|
944,973 |
| ||||
Video conferencing |
|
29,593 |
|
34,496 |
|
59,768 |
|
71,324 |
| ||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
(1) Certain products within the retail product families as presented in the prior year have been reclassified to conform to the current year presentation, with no impact on previously reported total peripheral sales.
Net sales and operating income (loss) for the Company’s reporting segments were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales by reporting segment: |
|
|
|
|
|
|
|
|
| ||||
Peripherals |
|
$ |
502,379 |
|
$ |
513,197 |
|
$ |
950,128 |
|
$ |
944,973 |
|
Video conferencing |
|
29,593 |
|
34,496 |
|
59,768 |
|
71,324 |
| ||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
|
|
|
|
|
|
|
|
|
| ||||
Operating income (loss) by segment: |
|
|
|
|
|
|
|
|
| ||||
Peripherals (1) |
|
$ |
39,281 |
|
$ |
39,097 |
|
$ |
52,151 |
|
$ |
(5,505 |
) |
Video conferencing (1) |
|
(12,708 |
) |
(1,811 |
) |
(15,877 |
) |
(2,921 |
) | ||||
Operating income (loss) before other charges |
|
26,573 |
|
37,286 |
|
36,274 |
|
(8,426 |
) | ||||
Other charges: |
|
|
|
|
|
|
|
|
| ||||
Share-based compensation |
|
(4,109 |
) |
(7,266 |
) |
(8,499 |
) |
(13,437 |
) | ||||
Amortization |
|
(5,254 |
) |
(6,191 |
) |
(10,518 |
) |
(12,589 |
) | ||||
Total operating income (loss) |
|
$ |
17,210 |
|
$ |
23,829 |
|
$ |
17,257 |
|
$ |
(34,452 |
) |
(1) The previously-reported operating income (loss) for the three and six months ended September 30, 2012 was impacted by the errors described in Note 2 as follows: (a) For the three and six months ended September 30, 2012, Peripherals operating income (loss) decreased by an immaterial amount and increased by $1.2 million, respectively, and (b) For the three and six months ended September 30, 2012, Video Conferencing operating loss decreased by less than $0.1 million and $0.2 million, respectively. These changes resulted from the warranty accrual and amortization of intangibles error correction.
Net sales to unaffiliated customers by geographic region were as follows (in thousands):
|
|
Three Months ended September 30, |
|
Six Months ended September 30, |
| ||||||||||||||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||||||||||||
|
|
|
|
As Reported |
|
Adjustments (1) |
|
As Revised |
|
|
|
As Reported |
|
Adjustments (1) |
|
As Revised |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Americas |
|
$ |
202,381 |
|
$ |
216,596 |
|
$ |
(17,079 |
) |
$ |
199,517 |
|
$ |
402,834 |
|
$ |
420,522 |
|
$ |
(36,438 |
) |
$ |
384,084 |
|
EMEA |
|
203,353 |
|
212,050 |
|
10,939 |
|
222,989 |
|
358,576 |
|
362,056 |
|
24,306 |
|
386,362 |
| ||||||||
Asia Pacific |
|
126,238 |
|
119,047 |
|
6,140 |
|
125,187 |
|
248,486 |
|
233,719 |
|
12,132 |
|
245,851 |
| ||||||||
Total net sales |
|
$ |
531,972 |
|
$ |
547,693 |
|
$ |
— |
|
$ |
547,693 |
|
$ |
1,009,896 |
|
$ |
1,016,297 |
|
$ |
— |
|
$ |
1,016,297 |
|
(1) During fiscal year 2013, the Company determined that net sales to unaffiliated customers by geographic regions previously reported, including the three and six months ended September 30, 2012, were not properly stated since amounts related to its Video Conferencing segment and other businesses were improperly allocated solely to the Americas region.
Long-lived assets by geographic region were as follows (in thousands):
|
|
September 30, 2013 |
|
March 31, 2013 |
| ||
|
|
|
|
|
| ||
Americas |
|
$ |
43,386 |
|
$ |
43,357 |
|
EMEA |
|
5,875 |
|
8,315 |
| ||
Asia Pacific |
|
42,396 |
|
40,952 |
| ||
Total long-lived assets |
|
$ |
91,657 |
|
$ |
92,624 |
|
|
The following table summarizes restructuring related activities (in thousands):
|
|
Total |
|
Termination |
|
Lease Exit |
|
Other |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at March 31, 2012 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
31,227 |
|
28,655 |
|
1,472 |
|
1,100 |
| ||||
Cash payments |
|
(5,195 |
) |
(4,766 |
) |
— |
|
(429 |
) | ||||
Foreign exchange |
|
63 |
|
63 |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at June 30, 2012 |
|
26,095 |
|
23,952 |
|
1,472 |
|
671 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
(2,671 |
) |
(3,816 |
) |
48 |
|
1,097 |
| ||||
Cash payments |
|
(17,652 |
) |
(16,642 |
) |
(52 |
) |
(958 |
) | ||||
Foreign exchange |
|
14 |
|
— |
|
— |
|
14 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at September 30, 2012 |
|
$ |
5,786 |
|
$ |
3,494 |
|
$ |
1,468 |
|
$ |
824 |
|
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
(358 |
) |
(188 |
) |
(182 |
) |
12 |
| ||||
Cash payments |
|
(4,511 |
) |
(2,633 |
) |
(1,104 |
) |
(774 |
) | ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at December 30, 2012 |
|
917 |
|
673 |
|
182 |
|
62 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges (credits) |
|
15,507 |
|
16,437 |
|
(30 |
) |
(900 |
) | ||||
Cash payments |
|
(2,966 |
) |
(3,727 |
) |
(77 |
) |
838 |
| ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at March 31, 2013 |
|
13,458 |
|
13,383 |
|
75 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
2,334 |
|
2,004 |
|
330 |
|
— |
| ||||
Cash payments |
|
(8,422 |
) |
(8,422 |
) |
— |
|
— |
| ||||
Foreign exchange |
|
(170 |
) |
(170 |
) |
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at June 30, 2013 |
|
7,200 |
|
6,795 |
|
405 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Charges |
|
5,465 |
|
4,562 |
(1) |
903 |
(1) |
— |
| ||||
Cash payments |
|
(7,099 |
) |
(6,535 |
) |
(564 |
) |
— |
| ||||
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance at September 30, 2013 |
|
$ |
5,566 |
|
$ |
4,822 |
|
$ |
744 |
|
$ |
— |
|
(1) During the three months ended September 30, 2013, the Company incurred $4.6 million in termination benefits, $5.4 million charge related to the restructuring plan initiated during the second quarter of fiscal year 2014 offset by a $0.8 million credit related to the restructuring plan initiated during the fourth quarter of fiscal year 2013. During the same period, the Company also incurred $0.9 million in lease exit costs, $0.6 million related to the restructuring plan initiated during the second quarter of fiscal year 2014 and $0.3 million related to the restructuring plan initiated during the fourth quarter of fiscal year 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|