LOGITECH INTERNATIONAL SA - Shareholder.com

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Table of Contents Interest Income, Net Interest income and expense for fiscal years 2006 and 2005 were as follows (in thousands): Interest income was higher compared with the prior year due to higher invested cash balances and higher returns earned on invested amounts. Interest expense decreased due to lower interest, including lower amortization of the accreted redemption premium, as a result of conversion of the convertible bonds during the third quarter of fiscal year 2006. Other Income, Net 2006 2005 Change % Interest income $ 5,512 $ 3,771 46 % Interest expense (1,921 ) (3,630 ) (47 )% Interest income, net $ 3,591 $ 141 2447 % Other income and expense for fiscal years 2006 and 2005 were as follows (in thousands): 2006 2005 Change % Foreign currency exchange gains, net $ 7,580 $ 3,522 115 % Gain on sale of investments 560 — — Write-off of investments (1,168 ) — — Other, net 380 269 (41 )% Other income, net $ 7,352 $ 3,791 94 % The increase in net foreign currency exchange gains in fiscal year 2006 primarily resulted from a one-time gain of $3.1 million related to an exchange of the Company’s Euro currency for U.S. dollars. The Company does not speculate in currency positions, but is alert to opportunities to maximize its foreign exchange gains. The Company also impaired an investment and recorded a gain on the sale of another investment. Provision for Income Taxes The provision for income taxes and effective tax rate for fiscal years 2006 and 2005 were as follows (in thousands): 2006 2005 Provision for income taxes $ 28,749 $ 26,340 Effective income tax rate 13.7 % 15.0 % The provision for income taxes consists of income and withholding taxes. The decrease in effective tax rate is primarily due to changes in the geographic mix of income. Liquidity and Capital Resources Cash Balances, Available Borrowings, and Capital Resources At March 31, 2007, net working capital was $542.4 million, compared with $407.9 million at March 31, 2006. The increase in working capital was primarily due to a significant increase in cash flow from operations, partially offset by an increase in accrued liabilities. Cash, cash equivalents and short-term investments totaled $410.8 million at March 31, 2007, an increase of $165.8 million from March 31, 2006. Operating activities provided $303.8 million in cash. We used $138.1 million to repurchase shares under the share buyback program and $47.2 million for capital expenditures, including investments for information system upgrades, manufacturing equipment and tooling costs. We also had net purchases of short-term investments of $214.6 million, and used $20.6 for an acquisition. 45
Table of Contents The Company’s normal short-term liquidity and long-term capital resource requirements are provided from three sources: cash flow generated from operations, cash and cash equivalents on hand and borrowings, as needed, under our credit facilities. We have lines of credit with several European and Asian banks totaling $126.2 million as of March 31, 2007. As is common for businesses in European and Asian countries, these credit lines are uncommitted and unsecured. Despite the lack of formal commitments from our banks, we believe these lines of credit will continue to be made available because of our long-standing relationships with these banks. As of March 31, 2007, $112.0 million was available under these facilities. There are no financial covenants under these lines of credit with which the Company must comply. Cash Flow from Operating Activities The following table presents selected financial information and statistics for fiscal years 2007, 2006 and 2005 (dollars in thousands): 2007 2006 2005 Accounts receivable, net $ 310,377 $ 289,849 $ 229,234 Inventories $ 217,964 $ 196,864 $ 175,986 Working capital $ 542,356 $ 407,923 $ 452,663 Days sales in accounts receivable (DSO) (1) 54 days 56 days 51 days Inventory turnover (ITO) (2) 6.2x 6.4x 6.1x Net cash provided by operating activities $ 303,825 $ 152,217 $ 213,674 (1) DSO is determined using ending accounts receivable as of the most recent quarter-end and net sales for the most recent quarter. (2) ITO is determined using ending inventories and annualized cost of goods sold (based on the most recent quarterly cost of goods sold). During fiscal year 2007, the Company’s operating activities generated net cash of $303.8 million compared with $152.2 million in the prior year. Higher accounts receivable and inventory balances reflected increased sales levels, but were more than offset by increased accounts payable and accrued liabilities balances. Accounts receivable increased 7% in fiscal year 2007 compared with the 15% increase in net sales. Combined with higher collections of accounts receivable, DSO improved by 2 days as of March 31, 2007 compared with 2006. The higher levels of accounts payable and accrued liabilities reflected more effective working capital management. During fiscal year 2006, our operating activities generated net cash of $152.2 million compared with $213.7 million in the prior year. Stronger business results were offset by increased accounts receivable balances, resulting from significantly higher sales in fiscal year 2006 and an increase in DSO. Although partially offset by higher collections, accounts receivable increased to $289.8 million at March 31, 2006, compared with $229.2 million at March 31, 2005. In addition, we increased our inventory levels and purchases to respond to the sales increases in fiscal year 2006. At March 31, 2006, inventory was $196.9 million compared with $176.0 million at March 31, 2005. The increase was predominantly in finished goods, intended to ensure sufficient supply on hand to meet demand. Increased operating expenses also affected cash flow from operating activities in fiscal year 2006. 46
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Table of Contents LOGITECH INTERNAT
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LOGITECH INTERNATIONAL S.A. LIST OF
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CONSENT OF INDEPENDENT REGISTERED P
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REPORT ON CORPORATE GOVERNANCE Logi
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An additional 40 million shares hav
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The Company has not issued non-voti
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Trustees of the Santa Fe Institute,
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is responsible for leading the tran
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(4) Mr. Okamoto will retire from th
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Compensation Committee The Compensa
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the Chairman and the Chief Executiv
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eight years at Weiser Lock, a divis
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During 2007, stock option grants to
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proceedings that may arise by reaso
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5.7 Additional Fees and Remuneratio
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Shareholders is sent and re-opens o
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Independent Registered Public Accou
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LOGITECH INTERNATIONAL S.A. Consoli
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I, Mark J. Hawkins, certify that: C
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