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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 September 30, 2020
 
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,
Switzerland
None
 
  (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 class
Trading 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 standard s 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 October 7, 2020, there were 169,149,642 shares of the Registrant’s share capital outstanding.
 



1


TABLE OF CONTENTS
 
 
 
Page
 
 
 
Part I
FINANCIAL 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.

The Company’s fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The second quarter of fiscal year 2021 ended on September 25, 2020. The same quarter in the prior fiscal year ended on September 27, 2019. For purposes of presentation, the Company has indicated its quarterly periods end on the last day of the calendar quarter.
The term “sales” means net sales, except as otherwise specified.
Our Internet website and the information contained, incorporated or referenced therein do not constitute a part of and are not intended to be incorporated into this Quarterly Report on Form 10-Q.


      

3


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
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Net sales
 
$
1,257,158

 
$
719,691

 
$
2,049,052

 
$
1,363,916

Cost of goods sold
 
684,599

 
444,344

 
1,167,237

 
846,322

Amortization of intangible assets and purchase accounting effect on inventory
 
2,836

 
3,271

 
6,359

 
6,542

Gross profit
 
569,723

 
272,076

 
875,456

 
511,052

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 

 
 

 
 

 
 

Marketing and selling
 
158,797

 
134,155

 
292,035

 
257,188

Research and development
 
53,379

 
41,964

 
103,104

 
84,207

General and administrative
 
31,664

 
24,048

 
60,735

 
46,207

Amortization of intangible assets and acquisition-related costs
 
4,331

 
4,218

 
8,940

 
7,814

Change in fair value of contingent consideration for business acquisition
 

 

 
5,716

 

Restructuring charges (credits), net
 
(1
)
 
(364
)
 
(54
)
 
114

Total operating expenses
 
248,170

 
204,021

 
470,476

 
395,530

 
 
 
 
 
 
 
 
 
Operating income
 
321,553

 
68,055

 
404,980

 
115,522

Interest income
 
513

 
2,390

 
1,133

 
4,943

Other income (expense), net
 
1,149

 
(110
)
 
3,178

 
1,751

Income before income taxes
 
323,215

 
70,335

 
409,291

 
122,216

Provision for (benefit from) income taxes
 
56,301

 
(2,598
)
 
70,304

 
3,938

Net income
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278


 
 
 
 
 
 
 
 
Net income per share:
 
 

 
 

 
 
 
 
Basic
 
$
1.58

 
$
0.44

 
$
2.02

 
$
0.71

Diluted
 
$
1.56

 
$
0.43

 
$
1.99

 
$
0.70

 
 
 
 
 
 
 
 
 
Weighted average shares used to compute net income per share:
 
 

 
 

 
 
 
 
Basic
 
168,645

 
166,662

 
168,140

 
166,484

Diluted
 
171,382

 
169,027

 
170,766

 
168,914

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

4


LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Net income
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278

Other comprehensive income (loss):
 
 

 
 

 
 
 
 
Currency translation gain (loss), net of taxes
 
3,205

 
(4,097
)
 
4,444

 
(4,375
)
Reclassification of currency translation gain included in other income (expense), net
 
(1,738
)
 

 
(1,738
)
 

Defined benefit plans:
 
 

 
 

 


 
 
Net gain (loss) and prior service costs, net of taxes
 
(434
)
 
268

 
544

 
(43
)
Amortization included in other income (expense), net
 
176

 
54

 
345

 
107

Hedging gain (loss):
 
 

 
 

 
 
 
 
Deferred hedging gain (loss), net of taxes
 
(1,059
)
 
2,380

 
(3,426
)
 
1,437

Reclassification of hedging loss included in cost of goods sold
 
1,969

 
(132
)
 
1,639

 
(358
)
Total other comprehensive income (loss)
 
2,119

 
(1,527
)
 
1,808

 
(3,232
)
Total comprehensive income
 
$
269,033

 
$
71,406

 
$
340,795

 
$
115,046

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


5


LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
 
 
September 30, 2020
 
March 31, 2020
Assets
 


 
 
Current assets:
 
 

 
 

Cash and cash equivalents
 
$
917,221

 
$
715,566

Accounts receivable, net
 
750,749

 
394,743

Inventories
 
394,708

 
229,249

Other current assets
 
94,753

 
74,920

Total current assets
 
2,157,431

 
1,414,478

Non-current assets:
 
 

 
 

Property, plant and equipment, net
 
86,386

 
76,119

Goodwill
 
400,953

 
400,917

Other intangible assets, net
 
111,702

 
126,941

Other assets 
 
339,397

 
345,019

Total assets
 
$
3,095,869

 
$
2,363,474

Liabilities and Shareholders’ Equity
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
662,873

 
$
259,120

Accrued and other current liabilities
 
541,977

 
455,024

Total current liabilities
 
1,204,850

 
714,144

Non-current liabilities:
 
 

 
 

Income taxes payable
 
54,507

 
40,788

Other non-current liabilities 
 
130,549

 
119,274

Total liabilities
 
1,389,906

 
874,206

Commitments and contingencies (Note 10)
 


 


Shareholders’ equity:
 
 

 
 

Registered shares, CHF 0.25 par value:
 
30,148

 
30,148

Issued shares — 173,106 at September 30 and March 31, 2020
 


 


Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2020
 


 


Additional shares that may be issued out of authorized capital — 17,311 at September 30 and 34,621 at March 31, 2020
 
 
 
 
Additional paid-in capital
 
78,617

 
75,097

Shares in treasury, at cost — 4,357 at September 30, 2020 and 6,210 at March 31, 2020
 
(166,258
)
 
(185,896
)
Retained earnings
 
1,882,308

 
1,690,579

Accumulated other comprehensive loss
 
(118,852
)
 
(120,660
)
Total shareholders’ equity
 
1,705,963

 
1,489,268

Total liabilities and shareholders’ equity
 
$
3,095,869

 
$
2,363,474

 


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


6


LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
 
Six Months Ended
September 30,
 
 
2020
 
2019
Cash flows from operating activities:
 
 

 
 

Net income
 
$
338,987

 
$
118,278

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation
 
22,601

 
21,386

Amortization of intangible assets
 
15,239

 
13,735

Loss on investments
 
2,519

 
63

Share-based compensation expense
 
44,900

 
26,470

Deferred income taxes
 
20,152

 
(8,978
)
Change in fair value of contingent consideration for business acquisition
 
5,716

 

Other
 
(1,877
)
 
(2
)
Changes in assets and liabilities, net of acquisitions:
 
 

 
 

Accounts receivable, net
 
(346,838
)
 
(85,955
)
Inventories
 
(161,120
)
 
(47,773
)
Other assets
 
(31,567
)
 
(14,083
)
Accounts payable
 
399,176

 
129,101

Accrued and other liabilities
 
90,631

 
(9,223
)
Net cash provided by operating activities
 
398,519

 
143,019

Cash flows from investing activities:
 
 

 
 

Purchases of property, plant and equipment
 
(27,774
)
 
(18,092
)
Investment in privately held companies
 
(3,405
)
 
(170
)
Acquisitions, net of cash acquired
 

 
(366
)
Purchases of trading investments
 
(8,199
)
 
(2,525
)
Proceeds from sales of trading investments
 
8,839

 
2,571

Net cash used in investing activities
 
(30,539
)
 
(18,582
)
Cash flows from financing activities:
 
 

 
 

Payment of cash dividends
 
(146,705
)
 
(124,180
)
Purchases of registered shares
 
(22,454
)
 
(15,127
)
Proceeds from exercises of stock options and purchase rights
 
26,066

 
9,331

Tax withholdings related to net share settlements of restricted stock units
 
(25,744
)
 
(20,908
)
Net cash used in financing activities
 
(168,837
)
 
(150,884
)
Effect of exchange rate changes on cash and cash equivalents
 
2,512

 
(3,605
)
Net increase (decrease) in cash and cash equivalents
 
201,655

 
(30,052
)
Cash and cash equivalents, beginning of the period
 
715,566

 
604,516

Cash and cash equivalents, end of the period
 
$
917,221

 
$
574,464

Supplementary Cash Flow Disclosures:
 
 
 
 
Non-cash investing activities:
 
 

 
 

Property, plant and equipment purchased during the period and included in period end liability accounts
 
$
9,594

 
$
4,412

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

7


LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(unaudited)
Three Months ended September 30, 2019

 
 
 
 
 
Additional Paid-in Capital
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Shareholders’ Equity
 
Registered Shares
 
 
Treasury Shares
 
Retained Earnings
 
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
June 30, 2019
173,106

 
$
30,148

 
$
35,048

 
6,642

 
$
(170,140
)
 
$
1,410,381

 
$
(107,403
)
 
$
1,198,034

Total comprehensive income

 

 

 

 

 
72,933

 
(1,527
)
 
71,406

Sales of shares upon exercise of stock options and purchase rights

 

 
4,150

 
(366
)
 
5,357

 

 

 
9,507

Issuance of shares upon vesting of restricted stock units

 

 
(2,593
)
 
(73
)
 
1,055

 

 

 
(1,538
)
Share-based compensation

 

 
14,308

 

 

 

 

 
14,308

Cash dividends ($0.74 per share)

 

 

 

 

 
(124,180
)
 

 
(124,180
)
September 30, 2019
173,106

 
$
30,148

 
$
50,913

 
6,203

 
$
(163,728
)
 
$
1,359,134

 
$
(108,930
)
 
$
1,167,537



Six Months ended September 30, 2019

 
 
 
 
 
Additional Paid-in Capital
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Shareholders’ Equity
 
Registered Shares
 
 
Treasury Shares
 
Retained Earnings
 
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
March 31, 2019
173,106

 
$
30,148

 
$
56,655

 
7,244

 
$
(169,802
)
 
$
1,365,036

 
$
(105,698
)
 
$
1,176,339

Total comprehensive income

 

 

 

 

 
118,278

 
(3,232
)
 
115,046

Purchases of registered shares

 

 

 
389

 
(15,127
)
 

 

 
(15,127
)
Sales of shares upon exercise of stock options and purchase rights

 

 
4,158

 
(391
)
 
5,742

 

 

 
9,900

Issuance of shares upon vesting of restricted stock units

 

 
(36,367
)
 
(1,039
)
 
15,459

 

 

 
(20,908
)
Share-based compensation

 

 
26,467

 

 

 

 

 
26,467

Cash dividends ($0.74 per share)

 

 

 

 

 
(124,180
)
 

 
(124,180
)
September 30, 2019
173,106

 
$
30,148

 
$
50,913

 
6,203

 
$
(163,728
)
 
$
1,359,134

 
$
(108,930
)
 
$
1,167,537







8


Three Months ended September 30, 2020

 
 
 
 
 
Additional Paid-in Capital
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Shareholders’ Equity
 
Registered Shares
 
 
Treasury Shares
 
Retained Earnings
 
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
June 30, 2020
173,106

 
$
30,148

 
$
54,668

 
4,689

 
$
(158,463
)
 
$
1,762,099

 
$
(120,971
)
 
$
1,567,481

Total comprehensive income

 

 

 

 

 
266,914

 
2,119

 
269,033

Purchases of registered shares

 

 

 
312

 
(22,454
)
 

 

 
(22,454
)
Sales of shares upon exercise of stock options and purchase rights

 

 
3,255

 
(568
)
 
12,819

 

 

 
16,074

Issuance of shares upon vesting of restricted stock units

 

 
(4,463
)
 
(76
)
 
1,840

 

 

 
(2,623
)
Share-based compensation

 

 
25,157

 

 

 

 

 
25,157

Cash dividends ($0.87 per share)

 

 

 

 

 
(146,705
)
 

 
(146,705
)
September 30, 2020
173,106

 
$
30,148

 
$
78,617

 
4,357

 
$
(166,258
)
 
$
1,882,308

 
$
(118,852
)
 
$
1,705,963

 


Six Months ended September 30, 2020

 
 
 
 
 
Additional Paid-in Capital
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Shareholders’ Equity
 
Registered Shares
 
 
Treasury Shares
 
Retained Earnings
 
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
March 31, 2020
173,106

 
$
30,148

 
$
75,097

 
6,210

 
$
(185,896
)
 
$
1,690,579

 
$
(120,660
)
 
$
1,489,268

Total comprehensive income

 

 

 

 

 
338,987

 
1,808

 
340,795

Cumulative effect of adoption of new accounting standard (Note 1)

 

 

 

 

 
(553
)
 

 
(553
)
Purchases of registered shares

 

 

 
312

 
(22,454
)
 

 

 
(22,454
)
Sales of shares upon exercise of stock options and purchase rights

 

 
1,365

 
(1,211
)
 
24,701

 

 

 
26,066

Issuance of shares upon vesting of restricted stock units

 

 
(43,135
)
 
(954
)
 
17,391

 

 

 
(25,744
)
Share-based compensation

 

 
45,290

 

 

 

 

 
45,290

Cash dividends ($0.87 per share)

 

 

 

 

 
(146,705
)
 

 
(146,705
)
September 30, 2020
173,106

 
$
30,148

 
$
78,617

 
4,357

 
$
(166,258
)
 
$
1,882,308

 
$
(118,852
)
 
$
1,705,963



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


9


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 have an everyday place in people's lives, connecting them to the digital experiences they care about. More than 35 years ago, Logitech created products to improve experiences around the personal 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 and e-tailers 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 Apples, 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 (GAAP) for interim financial information and therefore do not include all the information required by 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, 2020, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 27, 2020. 

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 and six months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021, or any future periods.

Changes in Significant Accounting Policies

Other than the recent accounting pronouncements adopted and discussed below under Recent Accounting Pronouncements Adopted and Summary of Significant Accounting Policies, there have been no material changes in the Company’s significant accounting policies during the six months ended September 30, 2020 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2020.


10


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. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve fair value of goodwill and intangible assets acquired from business acquisitions, valuation of right-of-use assets, valuation of investment in privately held companies classified under Level 3 of the fair value hierarchy, pensions obligations, warranty liabilities, accruals for customer incentives, cooperative marketing, and pricing programs (Customer Programs) and related breakage when appropriate, accrued sales return liability, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. 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 materially from these estimates.
 
Risks and Uncertainties
We are subject to risks and uncertainties as a result of the novel coronavirus (COVID-19). The measures taken by many countries in response have contributed to a general slowdown in the global economy and adversely affected, and could in the future continue to adversely affect, the Company's business and operations. Capital markets and economies worldwide have also been negatively impacted by COVID-19 and it is still unclear how lasting and deep the economic impacts will be. During the three and six months ended September 30, 2020, as well as in the fourth quarter of fiscal year 2020, the COVID-19 pandemic had mixed effects on the Company’s results of operations, and it may continue to have mixed or adverse effects. While there was high demand and consumption of certain of our products that led to increased sales and operating income during the fourth quarter of fiscal year 2020 and the three and six months ended September 30, 2020, at the same time the Company experienced disruptions to supply chain and logistics services, inventory constraints and increased logistics costs. The ongoing and full extent of the impact of the COVID-19 pandemic on the Company's business and operational and financial performance and condition, including the sustainability of its effect on trends positive to the Company, is uncertain and will depend on many factors outside the Company's control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the development and availability of effective treatments and vaccines, the imposition of effective public safety and other protective measures, the impact of COVID-19 on the global economy and demand for the Company's products and services. Should the COVID-19 pandemic or global economic slowdown not improve or worsen, or if the Company's attempt to mitigate its impact on its operations and costs is not successful, the Company's business, results of operations, financial condition and prospects may be adversely affected.
Recent Accounting Pronouncements Adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), which was further updated and clarified by the FASB through issuance of additional related ASUs, replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this standard effective April 1, 2020, using a modified retrospective approach. Upon adoption, the Company updated its credit loss models to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including accounts receivable. The cumulative effect adjustment from adoption was not material to the Company's condensed consolidated financial statements.  

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements" (ASU 2018-13), which eliminates, adds and modifies certain disclosure requirements for fair value measurements, including eliminating the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and requiring the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. Some of these disclosure changes must be applied prospectively while others retrospectively depending on requirement. The Company adopted this standard effective April 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company's condensed consolidated financial statements.


11


In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefits Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans" (ASU 2018-14), which requires that the Company remove various disclosures that no longer are considered cost-beneficial, namely amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. Further, ASU 2018-14 requires disclosure or clarification of the reasons for significant gains or losses related to changes in the benefit obligation for the period. The Company adopted this standard effective April 1, 2020 using a retrospective approach and the updated disclosures will be included in the Company's Form 10-K for the fiscal year ending March 31, 2021. The adoption of ASU 2018-14 did not have an impact on the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" (ASU 2019-12), which eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact of ASU 2019-12 on its consolidated financial statements and plans to adopt the standard effective April 1, 2021.

Note 2 — Net Income Per Share
 
The following table summarizes the computations of basic and diluted net income per share for the three and six months ended September 30, 2020 and September 30, 2019 (in thousands, except per share amounts):
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Net income
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278

 
 
 
 
 
 
 
 
 
Shares used in net income per share computation:
 
 

 
 

 
 

 
 

Weighted average shares outstanding - basic
 
168,645

 
166,662

 
168,140

 
166,484

Effect of potentially dilutive equivalent shares
 
2,737

 
2,365

 
2,626

 
2,430

Weighted average shares outstanding - diluted
 
171,382

 
169,027

 
170,766

 
168,914

 
 
 
 
 
 
 
 
 
Net income per share:
 
 

 
 

 
 

 
 

Basic
 
$
1.58

 
$
0.44

 
$
2.02

 
$
0.71

Diluted
 
$
1.56

 
$
0.43

 
$
1.99

 
$
0.70


 
Share equivalents attributable to outstanding stock options, restricted stock units ("RSUs") and employee share purchase plan ("ESPP") rights totaling 0.4 million and 1.9 million for the three months ended September 30, 2020 and 2019, respectively, and 0.4 million and 2.0 million for the six months ended September 30, 2020 and 2019, respectively, were excluded from the calculation of diluted net income per share because the combined exercise price and average unamortized grant date fair value upon exercise of these options and ESPP rights or vesting of RSUs were greater than the average market price of the Company's shares during the periods presented herein, and therefore their inclusion would have been anti-dilutive. The majority of performance-based awards were not included because all necessary conditions have 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.
 

12


Note 3 — Employee Benefit Plans
 
Employee Share Purchase Plans and Stock Incentive Plans
 
As of September 30, 2020, 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), the 2006 Stock Incentive Plan, as amended and restated (2006 Plan), and the 2012 Stock Inducement Equity Plan (2012 Plan).

The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three and six months ended September 30, 2020 and 2019 (in thousands):
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Cost of goods sold
 
$
1,772

 
$
1,184

 
$
3,172

 
$
2,342

Marketing and selling
 
10,377

 
6,951

 
19,169

 
13,800

Research and development
 
3,763

 
2,248

 
6,866

 
4,402

General and administrative
 
8,873

 
3,869

 
15,693

 
5,926

Total share-based compensation expense
 
24,785

 
14,252

 
44,900

 
26,470

Income tax benefit
 
(3,958
)
 
(2,723
)
 
(12,069
)
 
(9,523
)
Total share-based compensation expense, net of income tax benefit
 
$
20,827

 
$
11,529

 
$
32,831

 
$
16,947



The income tax benefit in the respective period primarily consists of tax benefit 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.

As of September 30, 2020 and 2019, the balance of capitalized share-based compensation included in inventory was $1.3 million and $0.9 million, respectively.
 
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 $2.7 million and $2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $5.4 million and $4.8 million for the six months ended September 30, 2020 and 2019, 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 canton of Vaud enacted the Federal Act on Tax Reform and AHV Financing ("TRAF"), a major reform to better align the Swiss tax system with international tax standards, on March 10, 2020 to take effect as of January 1, 2020. The longstanding tax ruling from the canton of Vaud was applicable through December 31, 2019.

The income tax provision for the three months ended September 30, 2020 was $56.3 million based on an effective income tax rate of 17.4% of pre-tax income, compared to an income tax benefit of $2.6 million based on an effective income tax rate of (3.7)% of pre-tax income for the three months ended September 30, 2019. The income tax provision for the six months ended September 30, 2020 was $70.3 million based on an effective income tax rate of 17.2% of pre-tax income, compared to an income tax provision of $3.9 million based on an effective income tax rate of 3.2% of pre-tax income for the six months ended September 30, 2019.

13



The change in the effective income tax rate for the three months ended September 30, 2020, compared to the same period ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. The Swiss income tax provision in the three months ended September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. In the same period ended September 30, 2019 when TRAF was yet to be enacted at the federal and cantonal levels, the transition income tax provision reflects the application of the longstanding tax ruling through December 31, 2019 including a retroactive adjustment made to the preceding three-month period ended June 30, 2019 when the transition income tax provision was quantified at the full statutory income tax rate of 13.63% because at the time the canton of Vaud permitted the application of the longstanding tax ruling only through March 31, 2019. The retroactive adjustment resulted in a tax benefit of $5.9 million in the three months ended September 30, 2019. In addition, there was a discrete tax benefit of $4.0 million from adjusting deferred tax assets and liabilities in Switzerland in the three months ended September 30, 2019.

The change in the effective income tax rate for the six months ended September 30, 2020, compared to the same period ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. The Swiss income tax provision in the six months ended September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. The income tax provision in the six months ended September 30, 2019 reflects the application of the longstanding tax ruling through December 31, 2019 as stated above. In the six months ended September 30, 2019, there was a discrete tax benefit of $1.7 million from adjusting deferred tax assets and liabilities in Switzerland. Furthermore, there were discrete tax benefits of $5.8 million and $1.5 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 six-month period ended September 30, 2020, compared with $6.7 million and $1.8 million, respectively, in the six-month period ended September 30, 2019.

As of September 30, 2020 and March 31, 2020, the total amount of unrecognized tax benefits due to uncertain tax positions was $152.5 million and $140.8 million, respectively, all of which would affect the effective income tax rate if recognized.

As of September 30, 2020 and March 31, 2020, the Company had $54.5 million and $40.8 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 September 30, 2020 and March 31, 2020, the Company had $4.8 million and $4.5 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 2021, 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 $4.7 million from the lapse of the statutes of limitations in various jurisdictions during the next twelve months.


14


Note 5 — Balance Sheet Components
 
The following table presents the components of certain balance sheet asset amounts as of September 30 and March 31, 2020 (in thousands): 
 
 
September 30, 2020
 
March 31, 2020
Accounts receivable, net:
 
 

 
 

Accounts receivable
 
$
973,523

 
$
597,939

Allowance for doubtful accounts
 
(1,358
)
 
(1,894
)
Allowance for sales returns
 
(10,487
)
 
(6,599
)
Allowance for cooperative marketing arrangements
 
(40,396
)
 
(38,794
)
Allowance for customer incentive programs
 
(63,051
)
 
(55,741
)
Allowance for pricing programs
 
(107,482
)
 
(100,168
)
 
 
$
750,749

 
$
394,743

Inventories:
 
 

 
 

Raw materials
 
$
60,606

 
$
56,052

Finished goods
 
334,102

 
173,197

 
 
$
394,708

 
$
229,249

Other current assets:
 
 

 
 

Value-added tax receivables
 
$
41,862

 
$
33,616

Prepaid expenses and other assets
 
52,891

 
41,304

 
 
$
94,753

 
$
74,920

Property, plant and equipment, net:
 
 

 
 

Property, plant and equipment at cost
 
$
378,392

 
$
346,506

Accumulated depreciation and amortization
 
(292,006
)
 
(270,387
)
 
 
$
86,386

 
$
76,119

Other assets:
 
 

 
 

Deferred tax assets
 
$
222,763

 
$
240,528

Right-of-use assets
 
31,386

 
25,557

Trading investments for deferred compensation plan
 
24,559

 
20,085

Investments in privately held companies
 
46,942

 
45,949

Other assets
 
13,747

 
12,900

 
 
$
339,397

 
$
345,019



15



The following table presents the components of certain balance sheet liability amounts as of September 30 and March 31, 2020 (in thousands): 
 
 
September 30, 2020
 
March 31, 2020
Accrued and other current liabilities:
 
 

 
 

Accrued personnel expenses
 
$
105,159

 
$
104,423

Accrued sales return liability
 
28,990

 
30,267

Accrued customer marketing, pricing and incentive programs
 
143,597

 
130,220

Operating lease liability
 
12,868

 
10,945

Accrued freight and duty
 
27,954

 
13,284

Warranty accrual
 
27,303

 
25,905

Income taxes payable
 
40,884

 
8,823

Contingent consideration
 
29,000

 
23,284

Other current liabilities
 
126,222

 
107,873

 
 
$
541,977

 
$
455,024

Other non-current liabilities:
 
 

 
 

Warranty accrual
 
$
14,479

 
$
14,134

Obligation for deferred compensation plan
 
24,559

 
20,085

Employee benefit plan obligations
 
63,837

 
61,303

Operating lease liability
 
23,017

 
19,536

Deferred tax liability
 
1,931

 
1,931

Other non-current liabilities
 
2,726

 
2,285

 
 
$
130,549

 
$
119,274




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.


16


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): 
 
 
September 30, 2020
 
March 31, 2020
 
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 
 
 
 
 

 
 

 
 

Cash equivalents
 
$
301,090

 
$

 
$

 
$
564,952

 
$

 
$

 
 
 

 
 

 
 

 
 

 
 

 
 

Trading investments for deferred compensation plan included in other assets:
 
 

 
 
 
 
 
 

 
 

 
 

Cash
 
$
233

 
$


$

 
$
846

 
$


$

Common stock
 
1,388

 









Money market funds
 
8,650

 

 

 
7,147

 

 

Mutual funds
 
14,288

 

 

 
12,092

 

 

Total of trading investments for deferred compensation plan
 
$
24,559

 
$

 
$

 
$
20,085

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Currency exchange derivative assets
included in other current assets
 
$

 
$
1,836

 
$

 
$

 
$
129

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration for business acquisition included in accrued and other current liabilities
 
$

 
$

 
$

 
$

 
$

 
$
23,284

Currency exchange derivative liabilities
included in accrued and other current liabilities
 
$

 
$
130

 
$

 
$

 
$
719

 
$


The following table summarizes the change in the fair value of the Company's contingent consideration balance during the six months ended September 30, 2020 (in thousands):
 
Six Months Ended
September 30, 2020
Beginning of the period
$
23,284

Change in fair value of contingent consideration
5,716

End of the period (1)
$
29,000


(1) As of June 30, 2020, the earn-out period was completed. The earn-out payment of $29.0 million is based on the actual net sales of Streamlabs services and no longer subject to fair value measurement and was accordingly transferred out of Level 3. The expected earn-out payment is included in the accrued and other current liabilities of the unaudited condensed consolidated balance sheet.

Investment Securities
 
The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $24.6 million and $20.1 million, as of September 30, 2020 and March 31, 2020, 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 trading securities for the three and six months ended September 30, 2020 and 2019 were not material and are included in other income, net in the Company's condensed consolidated statements of operations.

Contingent Consideration for Business Acquisition

On October 31, 2019 (the "Streamlabs Acquisition Date"), the Company acquired all of the equity interests of General Workings, Inc. ("Streamlabs"). The contingent consideration for business acquisition arising from the Streamlabs Acquisition represents the future potential earn-out payments of $29.0 million payable in stock only upon the achievement of certain net sales for the period beginning on January 1, 2020 and ending on June 30, 2020. The fair value of the earn-out as of the Streamlabs Acquisition Date was $0.04 million, and increased to $23.3

17


million as of March 31, 2020, which was determined by using a Black-Scholes-Merton valuation model to calculate the probability of the earn-out threshold being met and times the value of the earn-out payment, and discounted at the risk-free rate. The valuation included significant assumptions and unobservable inputs such as the projected sales of Streamlabs over the earn-out period, the risk-free rate, and the net sales volatility. The fair value was increased by $5.7 million to $29.0 million as of June 30, 2020, based on actual sales. The fair value of the contingent consideration no longer needs to be remeasured at each reporting period, as the earn-out period has been completed.

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 $42.3 million and $42.1 million as of September 30, 2020 and March 31, 2020, respectively. There was no impairment of these assets during the three and six months ended September 30, 2020 or 2019.

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 a same or similar security from the same issuer. The amount of these investments included in other assets was immaterial as of September 30, 2020 and March 31, 2020. There was no impairment of these assets during the three and six months ended September 30, 2020 or 2019.

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 for the period such triggering events occur. There was no impairment of these assets during the three and six months ended September 30, 2020 or 2019.
 
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 on the condensed consolidated balance sheets as of September 30, 2020 and March 31, 2020.

The fair value of the Company’s derivative instruments was not material as of September 30, 2020 or March 31, 2020. The amount of gain (loss) recognized on derivatives not designated as hedging instruments was not material in all periods presented herein. The following table presents the amounts of gains (losses) on the Company’s derivative instruments designated as hedging instruments and their locations on its condensed consolidated statements of operations and condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2020 and 2019 (in thousands):
 
 
Three Months Ended
September 30,
 
 
Amount of Gain (Loss)
Deferred as a Component of Accumulated
Other Comprehensive Loss
 
Amount of Loss (Gain)
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
 
 
2020
 
2019
 
2020
 
2019
Cash flow hedges
 
$
(1,059
)
 
$
2,380

 
$
1,969

 
$
(132
)



18


 
 
Six Months Ended
September 30,
 
 
Amount of Gain (Loss)
Deferred as a Component of Accumulated
Other Comprehensive Loss
 
Amount of Loss (Gain)
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
 
 
2020
 
2019
 
2020
 
2019
Cash flow hedges
 
$
(3,426
)
 
$
1,437

 
$
1,639

 
$
(358
)


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 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. In all periods presented herein, there have been no forecasted inventory purchases that were probable to 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 $155.5 million as of September 30, 2020 and $48.0 million as of March 31, 2020. The Company had $2.0 million of net losses related to its cash flow hedges included in accumulated other comprehensive loss as of September 30, 2020, which will be reclassified into earnings within the next 12 months.
 
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 one 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 recognized in other income, net in the condensed consolidated statements of operations based on the changes in fair value. The notional amounts of these contracts outstanding as of September 30, 2020 and March 31, 2020 were $86.5 million and $64.7 million, respectively. Open forward and swap contracts outstanding as of September 30, 2020 and March 31, 2020 consisted of contracts in Mexican Pesos, Japanese Yen, Canadian Dollars, Taiwan New Dollars and Australian Dollars 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.

Note 8 — Goodwill and Other Intangible Assets

The Company conducts its impairment analysis of goodwill annually at December 31 and as necessary, 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 events or circumstances during the six months ended September 30, 2020 that have required the Company to perform an interim assessment of goodwill.

The following table summarizes the activities in the Company’s goodwill balance during the six months ended September 30, 2020 (in thousands):
As of March 31, 2020
 
$
400,917

Currency translation
 
36

As of September 30, 2020
 
$
400,953



19


The Company's acquired intangible assets subject to amortization were as follows (in thousands):
 
 
September 30, 2020
 
March 31, 2020
 
 
Gross Carrying Amount
 
Accumulated
Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated
Amortization
 
Net Carrying Amount
Trademark and trade names
 
$
45,570

 
$
(22,097
)
 
$
23,473

 
$
45,570

 
$
(19,061
)
 
$
26,509

Developed technology
 
118,807

 
(83,481
)
 
35,326

 
118,807

 
(77,126
)
 
41,681

Customer contracts/relationships
 
90,610

 
(37,707
)
 
52,903

 
90,610

 
(31,859
)
 
58,751

Total
 
$
254,987

 
$
(143,285
)
 
$
111,702

 
$
254,987

 
$
(128,046
)
 
$
126,941



Note 9 — Financing Arrangements
 
The Company had several uncommitted, unsecured bank lines of credit aggregating $84.2 million as of September 30, 2020. There are no financial covenants under these lines of credit with which the Company must comply. As of September 30, 2020, the Company had outstanding bank guarantees of $22.9 million under these lines of credit. There was no borrowing outstanding under these lines of credit as of September 30, 2020 or March 31, 2020.

Note 10 — Commitments and Contingencies
 
Product Warranties
 
Changes in the Company’s warranty liability for the three and six months ended September 30, 2020 and 2019 were as follows (in thousands): 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
2020
 
2019
 
2020
 
2019
Beginning of the period
$
39,450

 
$
35,814

 
$
40,039

 
$
34,229

Provision
9,494

 
8,509

 
14,883

 
17,044

Settlements
(7,541
)
 
(6,727
)
 
(13,702
)
 
(13,704
)
Currency translation
379

 
(374
)
 
562

 
(347
)
End of the period
$
41,782

 
$
37,222

 
$
41,782

 
$
37,222



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 September 30, 2020, no 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.


20


Legal Proceedings
 
From time to time the Company is involved in claims and legal proceedings that 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 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 Repurchase Program

In March 2017, the Company's Board of Directors approved the 2017 share buyback program, which authorized the Company to use up to $250.0 million to purchase up to 17.3 million shares of Logitech shares. This share buyback program expired in April 2020. The Company did not repurchase any of its registered shares during April 2020.

In May 2020, the Company's Board of Directors approved the 2020 share buyback 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 buyback program is expected to remain in effect for a period of three years. 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. As of September 30, 2020, $227.6 million is still available for repurchase under the 2020 buyback program.

Dividends

During the three and six months ended September 30, 2020, the Company declared and paid cash dividends of CHF 0.79 (USD equivalent of $0.87) per share, totaling $146.7 million on the Company's outstanding shares. During the three and six months ended September 30, 2019, the Company declared and paid cash dividends of CHF 0.73 (USD equivalent of $0.74) per share, totaling $124.2 million on the Company's outstanding shares.

Any future dividends will be subject to approval of the Company's shareholders.

Additional Authorized and Conditional Shares

The Company has reserved conditional capital of 25,000,000 shares for potential issuance on the exercise of rights granted under the Company's employee equity incentive plans and additional conditional capital for financing purposes, representing the issuance of up to 25,000,000 shares to cover any conversion rights under a future convertible bond issuance. At the 2018 Annual General Meeting, the shareholders of the Company authorized the Board of Directors to issue up to an additional 34,621,324 shares of the Company until September 5, 2020, which authority expired on that date. At the 2020 Annual General Meeting, the shareholders of the Company authorized the Board of Directors to issue up to an additional 17,310,662 shares of the Company until September 9, 2022.


21


Accumulated Other Comprehensive Income (Loss)
 
The accumulated other comprehensive income (loss) was as follows (in thousands):
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
Cumulative
Translation
Adjustment
 
Defined
Benefit
Plan
 
Deferred Hedging Losses
 
Total
March 31, 2020
 
$
(100,418
)
 
$
(20,016
)
 
$
(226
)
 
$
(120,660
)
Other comprehensive income (loss)
 
2,706

 
889

 
(1,787
)
 
1,808

September 30, 2020
 
$
(97,712
)
 
$
(19,127
)
 
$
(2,013
)
 
$
(118,852
)

 
Note 12 — Segment Information
 
The Company has determined that it 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 restructuring charges (credits), net, share-based compensation expense, amortization of intangible assets, charges from the purchase accounting effect on inventory, acquisition-related costs or change in fair value of contingent consideration from business acquisition.

Sales by product categories and sales channels, excluding intercompany transactions, for the three and six months ended September 30, 2020 and 2019 were as follows (in thousands):
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Pointing Devices
 
$
169,121

 
$
132,770

 
$
289,590

 
$
254,753

Keyboards & Combos
 
201,617

 
139,049

 
346,977

 
267,728

PC Webcams
 
102,469

 
28,748

 
163,320

 
56,876

Tablet & Other Accessories
 
83,086

 
33,847

 
129,134

 
72,186

Gaming
 
297,711

 
161,014

 
479,614

 
295,529

Video Collaboration
 
236,704

 
89,553

 
366,778

 
162,977

Mobile Speakers
 
43,581

 
57,232

 
72,590

 
107,648

Audio & Wearables
 
114,275

 
68,018

 
185,640

 
126,642

Smart Home
 
8,573

 
9,434

 
15,383

 
19,298

Other (1)
 
21

 
26

 
26

 
279

Total sales
 
$
1,257,158

 
$
719,691

 
$
2,049,052

 
$
1,363,916


(1) Other category includes products that the Company currently intends to phase out, or has already phased out, because they are no longer strategic to the Company's business.
Sales by geographic region (based on the customers’ locations) for the three and six months ended September 30, 2020 and 2019 were as follows (in thousands):
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
 
2020
 
2019
 
2020
 
2019
Americas
 
$
542,319

 
$
296,837

 
$
898,503

 
$
590,282

EMEA
 
389,578

 
231,981

 
600,349