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Form 10-Q LOGITECH INTERNATIONAL For: Jun 30

July 28, 2022 5:19 PM
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2022
 
Or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                to                
 
Commission File Number: 0-29174
 
LOGITECH INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
 
Canton of Vaud,SwitzerlandNone
  (State or other jurisdiction
  of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
Logitech International S.A.
EPFL - Quartier de l'Innovation
Daniel Borel Innovation Center
1015 Lausanne, Switzerland
c/o Logitech Inc.
7700 Gateway Boulevard
Newark, California 94560
(Address of principal executive offices and zip code)
 
510 795-8500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Registered Shares
LOGN
SIX Swiss Exchange
Registered Shares
LOGI
Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ý  No  o


Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer ý Smaller reporting company
Accelerated filer
 Emerging Growth Company
Non-accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes    No  ý
 
As of July 14, 2022, there were 163,631,242 shares of the Registrant’s share capital outstanding.




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TABLE OF CONTENTS
 
  Page
   
Part IFINANCIAL INFORMATION 
 
 
Exhibits

In this document, unless otherwise indicated, references to the “Company,” “Logitech,” "we," "our," and "us" are to Logitech International S.A. and its consolidated subsidiaries. Unless otherwise specified, all references to U.S. Dollar, Dollar or $ are to the United States Dollar, the legal currency of the United States of America. All references to CHF are to the Swiss Franc, the legal currency of Switzerland.
 
Logitech, the Logitech logo, and the Logitech products referred to herein are either the trademarks or the registered trademarks of Logitech. All other trademarks are the property of their respective owners.

Our fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The first quarter of fiscal year 2023 ended on July 1, 2022. The same quarter in the prior fiscal year ended on July 2, 2021. For purposes of presentation, we have indicated our quarterly periods end on the last day of the calendar quarter.
The term “sales” means net sales, except as otherwise specified.
We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission ("SEC").

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We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website at https://ir.logitech.com. Additionally, we provide notifications of news or announcements regarding our operations and financial performance, including SEC filings, investor events, and press and earnings releases as part of our investor relations website. We intend to use our investor relations website as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Our corporate governance information also is available on our investor relations website.

All references to our websites are intended to be inactive textual references only, and the content of such websites do not constitute a part of and are not intended to be incorporated into this Quarterly Report on Form 10-Q.


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PART I — FINANCIAL INFORMATION 

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED) 

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
Three Months Ended
June 30,
 20222021
Net sales$1,159,865 $1,312,058 
Cost of goods sold697,220 739,066 
Amortization of intangible assets3,042 4,066 
Gross profit459,603 568,926 
Operating expenses:  
Marketing and selling229,378 252,314 
Research and development75,517 69,246 
General and administrative35,860 40,542 
Amortization of intangible assets and acquisition-related costs3,369 5,217 
Change in fair value of contingent consideration for business acquisition (1,474)
Total operating expenses344,124 365,845 
Operating income115,479 203,081 
Interest income1,449 316 
Other income (expense), net5,624 8,435 
Income before income taxes122,552 211,832 
Provision for income taxes21,716 24,991 
Net income$100,836 $186,841 
Net income per share:  
Basic$0.61 $1.11 
Diluted$0.61 $1.09 
Weighted average shares used to compute net income per share:  
Basic164,679 168,372 
Diluted166,406 172,020 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
Three Months Ended
June 30,
 20222021
Net income$100,836 $186,841 
Other comprehensive income (loss):  
Currency translation gain (loss):
Currency translation gain (loss), net of taxes(21,220)804 
Reclassification of cumulative translation adjustments included in other income (expense), net 1,046 
Defined benefit plans:  
Net gain (loss) and prior service costs, net of taxes84 (500)
Reclassification of amortization included in other income (expense), net(113)211 
Hedging gain (loss):  
Deferred hedging gain, net of taxes6,629 530 
Reclassification of hedging gain included in cost of goods sold(2,091)(594)
Total other comprehensive income (loss)(16,711)1,497 
Total comprehensive income$84,125 $188,338 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
June 30, 2022March 31, 2022
Assets
Current assets:  
Cash and cash equivalents$1,106,657 $1,328,716 
Accounts receivable, net706,886 675,604 
Inventories917,356 933,124 
Other current assets126,689 135,478 
Total current assets2,857,588 3,072,922 
Non-current assets:  
Property, plant and equipment, net112,240 109,807 
Goodwill451,209 448,175 
Other intangible assets, net79,820 83,779 
Other assets
328,855 320,722 
Total assets$3,829,712 $4,035,405 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Accounts payable$558,983 $636,306 
Accrued and other current liabilities 693,784 784,848 
Total current liabilities1,252,767 1,421,154 
Non-current liabilities:  
Income taxes payable82,887 83,380 
Other non-current liabilities
131,700 132,133 
Total liabilities1,467,354 1,636,667 
Commitments and contingencies (Note 10)
Shareholders’ equity:  
Registered shares, CHF 0.25 par value:
30,148 30,148 
Issued shares — 173,106 at June 30, 2022 and March 31, 2022
Additional shares that may be issued out of conditional capitals — 50,000 at June 30, 2022 and March 31, 2022
Additional shares that may be issued out of authorized capital — 17,311 at June 30, 2022 and March 31, 2022
Additional paid-in capital98,800 129,925 
Shares in treasury, at cost — 9,051 at June 30, 2022 and 7,855 at March 31, 2022
(722,273)(632,893)
Retained earnings3,076,517 2,975,681 
Accumulated other comprehensive loss(120,834)(104,123)
Total shareholders’ equity2,362,358 2,398,738 
Total liabilities and shareholders’ equity$3,829,712 $4,035,405 
 


The accompanying notes are an integral part of these condensed consolidated financial statements.

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LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
June 30,
 20222021
Cash flows from operating activities:  
Net income$100,836 $186,841 
Adjustments to reconcile net income to net cash used in operating activities:  
Depreciation18,626 20,462 
Amortization of intangible assets6,229 8,843 
Gain on investments(11,357)(1,071)
Share-based compensation expense23,690 23,651 
Deferred income taxes265 (4,158)
Change in fair value of contingent consideration for business acquisition (1,474)
Other(124)1,045 
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable, net(44,572)73,308 
Inventories(324)(115,166)
Other assets4,932 (30,796)
Accounts payable(70,034)(115,620)
Accrued and other liabilities(63,835)(160,835)
Net cash used in operating activities(35,668)(114,970)
Cash flows from investing activities:  
Purchases of property, plant and equipment(19,563)(24,514)
Investment in privately held companies(2,088)(501)
Acquisitions, net of cash acquired(5,839)(15,586)
Purchases of deferred compensation investments(922)(1,091)
Proceeds from sales of deferred compensation investments943 1,345 
Net cash used in investing activities(27,469)(40,347)
Cash flows from financing activities:  
Purchases of registered shares(120,619)(54,872)
Proceeds from exercises of stock options and purchase rights 2,750 
Tax withholdings related to net share settlements of restricted stock units(24,144)(50,411)
Net cash used in financing activities(144,763)(102,533)
Effect of exchange rate changes on cash and cash equivalents (14,159)5,244 
Net decrease in cash and cash equivalents (222,059)(252,606)
Cash and cash equivalents, beginning of the period1,328,716 1,750,327 
Cash and cash equivalents, end of the period$1,106,657 $1,497,721 
Supplementary Cash Flow Disclosures:
Non-cash investing and financing activities:  
Property, plant and equipment purchased during the period and included in period end liability accounts$14,069 $13,051 
Non-cash contingent consideration for acquisition$1,151 $9,973 
Supplemental cash flow information:
Income taxes paid, net$32,901 $134,766 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(unaudited)
Three Months Ended June 30, 2022

Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
March 31, 2022173,106 $30,148 $129,925 7,855 $(632,893)$2,975,681 $(104,123)$2,398,738 
Total comprehensive income— — — — — 100,836 (16,711)84,125 
Purchases of registered shares— — — 1,980 (120,619)— — (120,619)
Issuance of shares upon vesting of restricted stock units— — (55,383)(784)31,239 — — (24,144)
Share-based compensation— — 24,258 — — — — 24,258 
June 30, 2022173,106 $30,148 $98,800 9,051 $(722,273)$3,076,517 $(120,834)$2,362,358 



Three Months Ended June 30, 2021

   Additional Paid-in Capital   Accumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
March 31, 2021173,106 $30,148 $129,519 4,799 $(279,541)$2,490,578 $(108,915)$2,261,789 
Total comprehensive income— — — — — 186,841 1,497 188,338 
Purchases of registered shares— — — 505 (54,872)— — (54,872)
Sales of shares upon exercise of stock options and purchase rights— — 221 (71)2,529 — — 2,750 
Issuance of shares upon vesting of restricted stock units— — (79,689)(826)29,278 — — (50,411)
Share-based compensation — — 24,897 — — — — 24,897 
June 30, 2021173,106 $30,148 $74,948 4,407 $(302,606)$2,677,419 $(107,418)$2,372,491 
 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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LOGITECH INTERNATIONAL S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 — The Company and Summary of Significant Accounting Policies and Estimates

The Company
 
Logitech International S.A, together with its consolidated subsidiaries ("Logitech" or the "Company"), designs, manufactures and markets products that help connect people to digital and cloud experiences. Forty years ago, Logitech created products to improve experiences around the personal computer ("PC") platform, and today it is a multi-brand, multi-category company designing products that enable better experiences consuming, sharing and creating any digital content such as computing, gaming, video, and music, whether it is on a computer, mobile device or in the cloud.  
The Company sells its products to a broad network of domestic and international customers, including direct sales to retailers, e-tailers and enterprise customers, and indirect sales through distributors.
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 Hautemorges, Switzerland, and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa ("EMEA") and Asia Pacific. Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange under the trading symbol LOGN and the Nasdaq Global Select Market under the trading symbol LOGI.
Basis of Presentation
 
The condensed consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2022, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 18, 2022. 

In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of only normal and recurring adjustments, necessary and in all material aspects, for a fair statement of the results of operations, comprehensive income, financial position, cash flows and changes in shareholders' equity for the periods presented. Operating results for the three months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2023, or any future periods.

Changes in Significant Accounting Policies

Other than the recent accounting pronouncements adopted and discussed below under Recent Accounting Pronouncements Adopted, there have been no material changes in the Company’s significant accounting policies during the three months ended June 30, 2022 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve the fair value of goodwill and intangible assets acquired from business acquisitions, contingent consideration for a business acquisition and periodic reassessment of its fair value, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, accruals for customer incentives, cooperative marketing, and pricing programs and related breakage when appropriate, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these
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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 materially from those estimates.
 
Risks and Uncertainties
Impacts of Macroeconomic and Geopolitical Conditions on the Company's Business
During the first quarter of fiscal year 2023, the Company was impacted by adverse macroeconomic and geopolitical conditions. These conditions include but are not limited to inflation, foreign currency fluctuations, and lower consumer spending. The Company also continues to be affected by supply chain challenges, and the war in Ukraine has further increased existing global supply chain, logistics, and inflationary challenges. Such global or regional economic and political conditions adversely affect demand for the Company's products. These conditions also have an impact on its suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials and higher shipping and transportation rates, and as a result impacting the pricing of its products. Price increases may not successfully offset cost increases or may cause the Company to lose market share and in turn adversely impact its results of operations.
Impacts of COVID-19 on the Company's Business
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the world. The COVID-19 pandemic has resulted in, and could continue to result in, industry-wide global supply chain challenges, including manufacturing, transportation and logistics. The Company purchases certain products and key components from a limited number of sources, and depends on the supply chain, including freight, to receive components, transport finished goods and deliver its products across the world. While the Company proactively manages its supply chain, it expects to continue to be impacted by higher logistics and component costs, prolonged delays, and challenges with component availability. Most recently, Shanghai, China, experienced a two-month lockdown beginning in late March 2022 due to another outbreak of COVID-19, resulting in a lockdown of the city, closures of ports and airports, and disruption of commercial activities, further constraining the Company's supply chain. If additional lockdowns or similar measures are instituted in Shanghai or Suzhou, where the Company's manufacturing facility is located, or other places where the Company's suppliers and partners are located, such measures, depending on their duration, could cause additional negative impact on the Company's business and results of operations.
It is still difficult to predict the progression, the duration and all of the effects of COVID-19, how restrictions and shelter-at-home guidelines will continue evolving on a global basis, how consumer demand, supply chain challenges, including inventory and logistical effects and costs, may change over time, and the impact on the Company's future sales and results of operations. The full extent of the impact of the COVID-19 pandemic on the Company's business and operational and financial performance remains uncertain and will depend on many factors outside the Company's control.

Recent Accounting Pronouncements Adopted
In October 2021, the Financial Accounting Standard Board ("FASB") issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" (ASU 2021-08). The update requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company early adopted the standard effective April 1, 2022 and applies the standard prospectively to business combinations that occurred on or after April 1, 2022. The adoption of ASU 2021-08 did not have a material impact on the Company's condensed consolidated financial statements.


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Note 2 — Net Income Per Share
 
The following table summarizes the computations of basic and diluted net income per share for the three months ended June 30, 2022 and 2021 (in thousands, except per share amounts):
Three Months Ended
June 30,
 20222021
Net income$100,836 $186,841 
Shares used in net income per share computation:  
Weighted average shares outstanding - basic164,679 168,372 
Effect of potentially dilutive equivalent shares1,727 3,648 
Weighted average shares outstanding - diluted166,406 172,020 
Net income per share:  
Basic$0.61 $1.11 
Diluted$0.61 $1.09 
 
Share equivalents attributable to outstanding stock options, restricted stock units ("RSUs") and employee share purchase plans ("ESPP") totaling 3.4 million and 0.5 million for the three months ended June 30, 2022 and 2021, respectively, were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive. A small number of performance-based awards were not included in the calculation because all necessary conditions had not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the performance contingency period.
 
Note 3 — Employee Benefit Plans
 
Employee Share Purchase Plans and Stock Incentive Plans
 
As of June 30, 2022, the Company offers the 2006 Employee Share Purchase Plan, as amended and restated (Non-U.S.) ("2006 ESPP"), the 1996 Employee Share Purchase Plan (U.S.), as amended and restated ("1996 ESPP"), and the 2006 Stock Incentive Plan ("2006 Plan") as amended and restated. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.

The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended
June 30,
 20222021
Cost of goods sold$1,461 $1,369 
Marketing and selling9,797 8,530 
Research and development5,532 5,061 
General and administrative6,900 8,691 
Total share-based compensation expense23,690 23,651 
Income tax benefit(4,322)(16,594)
Total share-based compensation expense, net of income tax benefit$19,368 $7,057 

The income tax benefit in the respective periods primarily consisted of tax benefits related to the share-based compensation expense for the period and direct tax benefit realized, including net excess tax benefits recognized from share-based awards vested or exercised during the period.

During the three months ended June 30, 2022 and 2021, share-based compensation costs of $1.8 million and $1.7 million, respectively, were capitalized as part of inventory.
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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. The costs recorded of $2.8 million and $3.3 million for the three months ended June 30, 2022 and 2021, respectively, were primarily related to service costs.
 
Note 4 — 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 (benefit from) income taxes are generated outside of Switzerland.

The income tax provision for the three months ended June 30, 2022 was $21.7 million based on an effective income tax rate of 17.7% of pre-tax income, compared to an income tax provision of $25.0 million based on an effective income tax rate of 11.8% of pre-tax income for the three months ended June 30, 2021.

The change in the effective income tax rate for the three months ended June 30, 2022, compared to the same period ended June 30, 2021 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. There were discrete tax benefits of $1.4 million and $1.2 million from the recognition of excess tax benefits in the United States and reversal of uncertain tax positions from the expiration of statutes of limitations, respectively, in the three month period ended June 30, 2022, compared with $13.7 million and $1.0 million, respectively, in the three month period ended June 30, 2021.

As of June 30, 2022 and March 31, 2022, the total amount of unrecognized tax benefits due to uncertain tax positions was $174.3 million and $176.0 million, respectively, all of which would affect the effective income tax rate if recognized.

As of June 30, 2022 and March 31, 2022, the Company had $82.9 million and $83.4 million, respectively, in non-current income taxes payable including interest and penalties, related to the Company's income tax liability for uncertain tax positions.
 
The Company recognizes interest and penalties related to unrecognized tax positions in the income tax provision. As of June 30, 2022 and March 31, 2022, the Company had $4.3 million and $3.6 million, respectively, of accrued interest and penalties related to uncertain tax positions in non-current income taxes payable.
 
Although the Company has adequately provided for uncertain tax positions, the provisions related to these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. During fiscal year 2023, the Company continues to review its tax positions and provide for or reverse unrecognized tax benefits as they arise. During the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly due to changes in tax law in various jurisdictions, new tax audits and changes in the U.S. dollar as compared to other currencies. Excluding these factors, uncertain tax positions may decrease by as much as $4.2 million from the lapse of the statutes of limitations in various jurisdictions during the next twelve months.

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Note 5 — Balance Sheet Components
 
The following table presents the components of certain balance sheet asset amounts (in thousands): 
June 30, 2022March 31, 2022
Accounts receivable, net:  
Accounts receivable$961,266 $964,766 
Allowance for doubtful accounts(174)(2,212)
Allowance for sales returns(9,779)(12,321)
Allowance for cooperative marketing arrangements(47,025)(56,372)
Allowance for customer incentive programs(95,215)(97,460)
Allowance for pricing programs(102,187)(120,797)
 $706,886 $675,604 
Inventories:  
Raw materials$243,780 $226,155 
Finished goods673,576 706,969 
 $917,356 $933,124 
Other current assets:  
Value-added tax ("VAT") receivables$44,018 $58,850 
Prepaid expenses and other assets82,671 76,628 
 $126,689 $135,478 
Property, plant and equipment, net:  
Property, plant and equipment$477,941 $459,413 
  Less: accumulated depreciation and amortization(365,701)(349,606)
$112,240 $109,807 
Other assets:  
Deferred tax assets$187,544 $193,629 
Investments in privately held companies56,512 43,068 
Right-of-use assets 41,422 40,661 
Investments for deferred compensation plan28,310 28,431 
Other assets15,067 14,933 
 $328,855 $320,722 
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The following table presents the components of certain balance sheet liability amounts (in thousands): 
June 30, 2022March 31, 2022
Accrued and other current liabilities:  
Accrued customer marketing, pricing and incentive programs$214,342 $232,393 
Accrued personnel expenses115,168 165,090 
Accrued sales return liability43,737 40,507 
Warranty accrual31,368 32,987 
Accrued payables - non-inventory20,661 26,722 
VAT payable20,443 39,602 
Income taxes payable19,239 35,355 
Operating lease liabilities13,121 13,690 
Contingent consideration12,013 8,042 
Other current liabilities203,692 190,460 
 $693,784 $784,848 
Other non-current liabilities:  
Employee benefit plan obligations$48,604 $50,741 
Operating lease liabilities28,873 28,207 
Obligation for deferred compensation plan28,310 28,431 
Warranty accrual12,473 13,232 
Deferred tax liabilities3,154 1,962 
Contingent consideration1,388 4,217 
Other non-current liabilities8,898 5,343 
 $131,700 $132,133 

Note 6 — Fair Value Measurements
 
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.

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The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands): 
 June 30, 2022March 31, 2022
 Level 1Level 2Level 3Level 1Level 2Level 3
Assets:    
Cash equivalents$665,410 $ $ $762,055 $ $ 
       
Investments for deferred compensation plan included in other assets:    
Cash$138 $ $ $108 $ $ 
Common stock1,631   2,329   
Money market funds7,991   6,765   
Mutual funds18,550   19,229   
Total of investments for deferred compensation plan$28,310 $ $ $28,431 $ $ 
Currency derivative assets
included in other current assets
$ $3,147 $ $ $1,517 $ 
Liabilities:
Contingent consideration included in accrued and other current liabilities$ $ $12,013 $ $ $8,042 
Contingent consideration included in other non-current liabilities$ $ $1,142 $ $ $3,971 
Currency derivative liabilities
included in accrued and other current liabilities
$ $160 $ $ $165 $ 
Contingent Consideration for Business Acquisitions

The following table summarizes the change in the fair value of the Company's contingent consideration balance during the three months ended June 30, 2022 and 2021 (in thousands):
Three Months Ended
June 30,
20222021
Beginning of the period$12,259 $6,967 
Fair value of contingent consideration upon acquisition (1)
1,142 9,973 
Change in fair value of contingent consideration (1,474)
End of the period $13,401 $15,466 
    
(1) Represents the contingent consideration related to the technology acquisitions during the periods.

The contingent consideration arising from the technology acquisition on May 19, 2021, represents the future potential earn-out payments of up to $10.0 million payable in cash only upon the achievement of three technical development milestones required to be completed as of December 31, 2021, June 30, 2022, and June 30, 2023. The fair value of the contingent consideration as of the acquisition date was $10.0 million, which was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During the third quarter of fiscal year 2022, $0.9 million of the contingent consideration was released from other current liabilities upon cash settlement of the contingent consideration for the first technical development milestone. During the first quarter of fiscal year 2023, the second technical development milestone was achieved and the related contingent consideration is expected to be paid in fiscal year 2023.

The contingent consideration arising from the Mevo Acquisition on February 17, 2021 represents the future potential earn-out payments of up to $17.0 million payable in cash only upon the achievement of certain net sales for the period from December 26, 2020 to December 31, 2021. As of March 31, 2021 the fair value of the contingent consideration was $3.4 million. As of December 31, 2021, the fair value of the contingent consideration was
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released from other current liabilities as the net sales milestone was not achieved upon completion of the earn-out period.

The contingent consideration arising from the technology acquisition on January 4, 2021, represents the future potential earn-out payments of up to $3.0 million payable in cash upon the achievement of two technical development milestones required to be completed as of December 31, 2021 and March 31, 2022. The fair value of the contingent amount was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. The contingent consideration is expected to be paid in fiscal year 2023.

Although the estimate of contingent consideration is based on management’s best knowledge of current events, the estimate could change significantly from period to period. Actual results that differ from the assumptions used and any changes to the significant assumptions and unobservable inputs used could have an impact on future results of operations.

Investment for Deferred Compensation Plan
 
The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $28.3 million and $28.4 million, as of June 30, 2022 and March 31, 2022, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized gains (losses) related to marketable securities for the three months ended June 30, 2022 and 2021 were not material and were included in other income (expense), net in the Company's condensed consolidated statements of operations.

Equity Method Investments

The Company has certain non-marketable investments included in other assets that are accounted for under the equity method of accounting, with a carrying value of $44.8 million and $40.2 million as of June 30, 2022 and March 31, 2022, respectively. Unrealized gains (losses) related to equity investments for the three months ended June 30, 2022 and 2021 were not material and are included in other income (expense), net in the Company's condensed consolidated statements of operations. There was no impairment of these assets during the three months ended June 30, 2022 or 2021.

Other Assets Measured at Fair Value on a Nonrecurring Basis

Financial Assets.  The Company has certain investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The carrying value is also adjusted for observable price changes with the same or similar security from the same issuer. The amount of these investments included in other assets was $11.7 million and $2.9 million as of June 30, 2022 and March 31, 2022, respectively. During the three months ended June 30, 2022, the Company recorded an unrealized gain, before tax, of $6.9 million for its investment in a private company as a result of observable price changes for similar securities issued by this company (level 2 fair value measurement). There was no impairment of these assets during the three months ended June 30, 2022 or 2021.

Non-Financial Assets. Goodwill, intangible assets, and property, plant and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur (or tested at least annually for goodwill) such that a non-financial instrument is required to be evaluated for impairment and an impairment is recorded to reduce the non-financial instrument's carrying value to the fair value as a result of such triggering events, the non-financial assets and liabilities are measured at fair value during such period. There was no impairment of non-financial assets during the three months ended June 30, 2022 and 2021.
 
Note 7 — Derivative Financial Instruments
 
Under certain agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same type with a single net amount payable by one party to the other. However, the Company presents its derivative assets and derivative liabilities on a gross basis in other current assets and accrued and other current liabilities, respectively, on the
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condensed consolidated balance sheets as of June 30, 2022 and March 31, 2022. See Note 6 for the fair values of the Company’s derivative instruments as of June 30, 2022 or March 31, 2022.  

Cash Flow Hedges

The Company enters into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within four months. 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. Cash flows from such hedges are classified as operating activities in the condensed consolidated statements of cash flows. Hedging relationships are discontinued when hedging contract is no longer eligible for hedge accounting, or is sold, terminated or exercised, or when the Company removes hedge designation for the contract. Gains and losses in the fair value of the effective portion of the discontinued hedges continue to be reported in accumulated other comprehensive loss until the hedged inventory purchases are sold, unless it is probable that the forecasted inventory purchases will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter.

The notional amounts of foreign currency exchange forward contracts outstanding related to forecasted inventory purchases were $96.2 million and $125.4 million as of June 30, 2022 and March 31, 2022, respectively. The Company had $6.4 million of net gains related to its cash flow hedges included in accumulated other comprehensive loss as of June 30, 2022, which will be reclassified into earnings within the next twelve months.

 The following table presents the amounts of gains on the Company’s derivative instruments designated as hedging instruments for the three months ended June 30, 2022 and 2021 and their locations on its condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (in thousands):
Three Months Ended
June 30,
Amount of Gain
Deferred as a Component of Accumulated
Other Comprehensive Loss
Amount of Gain
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
 2022202120222021
Cash flow hedges$6,629 $530 $(2,091)$(594)

The Company presents the earnings impact from forward points in the same line item that is used to present the earnings impact of the hedged item, i.e. cost of goods sold, for hedging forecasted inventory purchases and such amount is not material for all periods presented.
 
Other Derivatives
 
The Company also enters into foreign currency exchange forward and swap contracts to reduce the short-term effects of currency exchange rate fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of its subsidiaries. These contracts generally mature within a month. The primary risk managed by using forward and swap contracts is the currency exchange rate risk. The gains or losses on these contracts are not material and included in other income (expense), net in the condensed consolidated statements of operations based on the changes in fair value. The notional amounts of these contracts outstanding as of June 30, 2022 and March 31, 2022 were $206.4 million and $226.5 million, respectively. Foreign currency exchange forward and swap contracts outstanding as of June 30, 2022 and March 31, 2022 consisted of contracts in Japanese Yen, Australian Dollars, Canadian Dollars, Chinese Renminbi, Mexican Pesos, New Taiwan Dollars, and Brazilian Real, to be settled at future dates at pre-determined exchange rates.
 
The fair value of all foreign currency exchange forward and 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 condensed consolidated statements of cash flows.

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Note 8 — Goodwill and Other Intangible Assets

The Company conducts its impairment analysis of goodwill and indefinite life intangible assets annually at December 31 or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of the Company’s reporting unit may be less than its carrying amount. There have been no triggering events identified affecting the valuation of goodwill and indefinite life intangible assets during the three months ended June 30, 2022 and 2021.

The following table summarizes the activities in the Company’s goodwill balance (in thousands):

As of March 31, 2022$448,175 
Acquisition4,980 
Effects of foreign currency translation(1,946)
As of June 30, 2022$451,209 

The Company's acquired intangible assets were as follows (in thousands):
 June 30, 2022March 31, 2022
 Gross Carrying AmountAccumulated
Amortization
Net Carrying AmountGross Carrying AmountAccumulated
Amortization
Net Carrying Amount
Trademark and trade names$36,790 $(23,470)$13,320 $36,790 $(22,295)$14,495 
Developed technology122,075 (86,631)35,444 119,407 (83,540)35,867 
Customer contracts/relationships71,110 (42,612)28,498 71,110 (40,971)30,139 
In-process R&D3,526 — 3,526 3,826 — 3,826 
Effects of foreign currency translation(1,183)215 (968)(634)86 (548)
Total$232,318 $(152,498)$79,820 $230,499 $(146,720)$83,779 

Note 9 — Financing Arrangements
 
The Company had several uncommitted, unsecured bank lines of credit aggregating $185.9 million and $195.0 million as of June 30, 2022 and March 31, 2022, respectively. There are no financial covenants under these lines of credit with which the Company must comply. As of June 30, 2022 and March 31, 2022, the Company had outstanding bank guarantees of $23.9 million and $25.5 million, respectively, under these lines of credit. There was no borrowing outstanding under these lines of credit as of June 30, 2022 or March 31, 2022.

Note 10 — Commitments and Contingencies
 
Product Warranties
 
Changes in the Company’s warranty liability for the three months ended June 30, 2022 and 2021 were as follows (in thousands): 
Three Months Ended
June 30,
 20222021
Beginning of the period$46,219 $48,832 
Provision6,623 8,446 
Settlements(8,281)(8,315)
Effects of foreign currency translation(720)130 
End of the period$43,841 $49,093 

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Indemnifications
 
The Company 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. As of June 30, 2022, no material amounts have been accrued for these indemnification provisions. 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.
 
The Company 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. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not limited, 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 position, 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 position, cash flows or results of operations in a particular period. Any claims or proceedings against the Company, 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 a necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect the Company's business.

Note 11 — Shareholders’ Equity

Share Repurchases

In May 2020, the Company's Board of Directors approved the 2020 share repurchase program, which authorized the Company to use up to $250.0 million to purchase up to 17.3 million of Logitech shares. The Company's share repurchase program is expected to remain in effect for a period of three years through July 27, 2023. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. In April 2021, the Company's Board of Directors approved an increase of $750.0 million of the 2020 share repurchase program, to an aggregate amount of $1.0 billion. The Swiss Takeover Board approved this increase and it became effective on May 21, 2021. As of June 30, 2022, $303.1 million is still available for repurchase under the 2020 repurchase program.

In July 2022, the Company’s Board of Directors approved an increase of $500 million to the 2020 share repurchase program, to an aggregate amount of up to $1.5 billion to purchase up to 17.3 million of Logitech shares. This increase is subject to approval by the Swiss Takeover Board.

Accumulated Other Comprehensive Income (Loss)
 
The accumulated other comprehensive income (loss) was as follows (in thousands):
Cumulative
Translation
Adjustment
Defined
Benefit
Plans
Deferred Hedging Gains Total
March 31, 2022$(102,461)$(3,495)$1,833 $(104,123)
Other comprehensive income (loss)(21,220)(29)4,538 (16,711)
June 30, 2022$(123,681)$(3,524)$6,371 $(120,834)
 
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Note 12 — Segment Information
 
The Company operates in a single operating segment that encompasses the design, manufacturing and marketing of peripherals for PCs, tablets and other digital platforms. Operating performance measures are provided directly to the Company's CEO, who is considered to be the Company’s Chief Operating Decision Maker. The CEO periodically reviews information such as sales and adjusted operating income (loss) to make business decisions. These operating performance measures do not include share-based compensation expense, amortization of intangible assets, acquisition-related costs and change in fair value of contingent consideration from business acquisition.

Sales by product categories and sales channels, excluding intercompany transactions, for the three months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended
June 30,
 20222021
Pointing Devices$183,283 $182,878 
Keyboards & Combos227,720 218,357 
PC Webcams59,386 109,918 
Tablet & Other Accessories66,585 79,272 
Gaming (1)
282,806 335,397 
Video Collaboration246,242 234,885 
Mobile Speakers22,310 28,484 
Audio & Wearables69,446 116,607 
Other (2)
2,087 6,260 
Total Sales$1,159,865 $1,312,058 
(1) Gaming includes streaming services revenue generated by Streamlabs.
(2) Other includes Smart Home.
Sales by geographic region (based on the customers’ locations) for the three months ended June 30, 2022 and 2021 were as follows (in thousands):
Three Months Ended
June 30,
20222021
Americas$502,307 $612,566 
EMEA290,479 357,957 
Asia Pacific367,079 341,535 
Total sales$1,159,865 $1,312,058 
 
Revenue from sales to customers in the United States, Germany and China each represented 10% or more of the total consolidated sales for each of the periods presented herein. No other countries represented 10% or more of the Company’s total consolidated sales for the periods presented herein.

Switzerland, the Company’s home domicile, represented 2% and 3% of the Company's total consolidated sales for the three months ended June 30, 2022 and 2021, respectively.

Three and two customers of the Company each represented 10% or more of the total consolidated sales for the three months ended June 30, 2022 and 2021, respectively.
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Property, plant and equipment, net (excluding software) and right-of-use assets by geographic region were as follows (in thousands):
June 30, 2022March 31, 2022
Americas$20,198 $22,578 
EMEA