Discontinued Operations

12 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations

Discontinued Operations

During the third quarter of fiscal year 2016, the Company's Board of Directors approved a plan to divest the Lifesize video conferencing business. On December 28, 2015 during the fourth quarter of fiscal year 2016, Logitech International S.A. (the "Company"), and Lifesize, Inc., a wholly owned subsidiary of the Company (“Lifesize”) which holds the assets of the Company’s video conferencing reportable segment, entered into a stock purchase agreement (the “Stock Purchase Agreement”) with entities affiliated with three venture capital investment firms (the "Venture Investors"). Pursuant to the terms of the Stock Purchase Agreement, the Company sold 2,500,000 shares of Series B Preferred Stock of Lifesize to the Venture Investors for cash proceeds of $2,500,000 and retained 12,000,000 non-voting shares of Series A Preferred Stock of Lifesize. The shares of Series A Preferred Stock of Lifesize retained by the Company represent 37.5% of the shares outstanding immediately after the closing of the transactions contemplated by the Stock Purchase Agreement (the “Closing”). Lifesize also issued 17,500,000 shares of Series B Preferred Stock to the Venture Investors for cash proceeds of $17,500,000. The shares of Series B Preferred Stock held by the Venture Investors represent 62.5% of the shares outstanding immediately after the Closing. In addition, Lifesize has reserved 8,000,000 shares of common stock for issuance pursuant to a stock plan to be adopted by Lifesize following the Closing (the “Employee Pool”), none of which are issued or outstanding at the Closing. Post the divestiture, continuing involvement with the discontinued operations includes certain customary services and support which are expected to be provided to Lifesize during the transition period from December 28, 2015 until approximately the end of the third quarter of fiscal year 2017.

The Company has classified the results of its Lifesize video conferencing business as discontinued operations in its consolidated statement of operations for all periods presented since the disposition of the Lifesize video conferencing business represents a strategic shift as that has a major effect on the Company's operations and financial results. Additionally, the related assets and liabilities associated with the discontinued operations are classified separately in the assets and liability on its consolidated balance sheets for all periods presented. Evaluating whether the disposal of the business represents a strategic shift requires the Company's judgment. Also, evaluating whether the strategic shift will have a "major effect" on the Company's operations and financial results requires assessing not only quantitative factors but also the magnitude of qualitative factors.

The retained Series A Preferred Stock gives the Company no voting rights or any other significant influence over the disposed Lifesize video conferencing business, and therefore is accounted for as a cost method investment which is initially recognized at fair value of $5.6 million at the date of disposition of Lifesize Video Conferencing business. The fair value was determined by using the option pricing methodology with reference to the price of Lifesize’s Series B Preferred Stock paid by Venture Investors. The fair value of the Company’s investment in Series A Preferred Stock is classified as Level 3 as application of the option pricing methodology requires use of significant unobservable inputs including asset volatility of 50%, expected term to exit of three years, and lack of marketability discount of 27%.

Discontinued operations include results of the Lifesize video conferencing business. Discontinued operations also include other costs incurred by Logitech to effect the divestiture of the Lifesize video conferencing business. These costs include transaction charges, advisory and consulting fees and restructuring cost related to the Lifesize video conferencing business.

The following table presents financial results of the video conferencing classified as discontinued operations (in thousands):

	Years Ended March 31,
	2016			2015			2014
Net sales	$	65,554		$	109,039		$	120,684
Cost of goods sold	24,951			40,299			54,355
Gross profit	40,603			68,740			66,329
Operating expenses:
Marketing and selling	32,260			56,856			57,040
Research and development	16,526			22,706			26,939
General and administrative	5,254			5,439			6,251
Impairment of goodwill (#)	—			122,734			—
Restructuring charges (credits), net	7,900			(111		)	5,810
Operating expenses	61,940			207,624			96,040
Operating loss from discontinued operations	(21,337		)	(138,884		)	(29,711		)
Interest expense and other, net	205			426			11
Gain on disposal of discontinued operations	13,684			—			—
Loss from discontinued operations before income taxes	(7,858		)	(139,310		)	(29,722		)
Provision for (benefit from) income taxes	1,187			(164		)	1,965
Net loss from discontinued operations	$	(9,045	)	$	(139,146	)	$	(31,687	)

(#) The Company recognized $122.7 million impairment of goodwill in its discontinued operations as result of its impairment analysis as of March 31, 2015. Refer to the Company's Annual Report on Form 10-K for fiscal year 2015.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities removed from the consolidated balance sheet immediately before the disposition and assets liabilities of discontinued operations as of March 31, 2015 (in thousands):

	Immediately before the disposition		March 31, 2015
Carrying amounts of assets included as part of discontinued operations:
Cash and cash equivalents	$	3,895	$	3,659
Accounts receivable, net	10,360		12,627
Inventories	12,708		14,749
Other current assets	1,930		1,067
Total current assets	28,893		32,102
Property, plant and equipment, net	3,962		5,115
Other assets	1,125		2,521
Total non-current assets	5,087		7,636
Total assets classified as assets from discontinued operations on the consolidated balance sheets	$	33,980	$	39,738
Carrying amounts of liabilities included as part of discontinued operations:
Accounts payable	$	2,382	$	7,198
Accrued and other current liabilities	31,664		31,568
Total current liabilities	34,046		38,766
Non-current liabilities	9,915		10,337
Total liabilities classified as liabilities from discontinued operations on the consolidated balance sheets	$	43,961	$	49,103

The Company recognized a gain on its divestiture of Lifesize video conferencing business as follows (in thousands):

	Year Ended
	March 31, 2016
Proceeds received from disposition of discontinued operations	$	2,500
Fair value of retained cost method investment as a result of divestiture of discontinued operations	5,591
Net liabilities of discontinued operations disposed	9,981
Currency translation loss released due to disposition of discontinued operations (1)	(3,913		)
Transaction related costs	(475		)
Gain on disposal of discontinued operations (2)	$	13,684

(1) Currency translation loss recognized as a result of substantial liquidation of a subsidiary using non-USD functional currency, which is part of discontinued operations

(2) Gain on disposal of discontinued operation was included in loss from discontinued operations, net of income taxes, in the Company's consolidated statement of operations