Employee Benefit Plans

12 Months Ended

Mar. 31, 2014

Employee Benefit Plans

Employee Benefit Plans

Note 5—Employee Benefit Plans

Employee Share Purchase Plans and Stock Incentive Plans

        As of March 31, 2014, the Company offers the 2006 ESPP (2006 Employee Share Purchase Plan (Non-U.S.)), the 1996 ESPP (1996 Employee Share Purchase Plan (U.S.)), the 2006 Plan (2006 Stock Incentive Plan) and the 2012 Plan (2012 Stock Inducement Equity Plan). The 2012 Plan was approved by the Board of Directors in April 2012. On April 13, 2012, the Company filed registration statements to register 5.0 million additional shares to be issued pursuant to the 2006 ESPP and 1.8 million shares under the 2012 Plan. On September 5, 2012, at the fiscal year 2012 Annual General Meeting of Shareholders, Logitech shareholders approved amendments to and restatement of the 2006 Plan, which included the increase of 7.3 million additional shares to be issued under this plan and to prohibit the repricing of options or stock appreciation rights. On October 25, 2012, the Company filed a registration statement to register the 7.3 million additional shares under the 2006 Plan. On September 4, 2013, at the 2013 Annual General Meeting of Shareholders, the Company's shareholders approved amendments to, and restatement of, the 1996 ESPP and the 2006 ESPP, which included the increase of 8.0 million additional shares to be issued under these ESPP plans. On December 9, 2013, the Company filed a registration statement to register the 8.0 million additional shares under the 1996 ESPP and 2006 ESPP. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury.

        The following table summarizes share-based compensation expense and related tax benefit recognized for fiscal years 2014, 2013 and 2012 (in thousands):

	Years Ended March 31,
	2014			2013			2012
Cost of goods sold	$	2,518		$	2,499		$	3,620
Research and development		4,546			7,532			7,187
Marketing and selling		8,298			7,825			12,716
General and administrative		10,184			7,342			8,006
Total share-based compensation expense		25,546			25,198			31,529
Income tax benefit		(4,902	)		(5,356	)		(6,294	)
Total share-based compensation expense, net of income tax	$	20,644		$	19,842		$	25,235

        During the years ended March 31, 2014, 2013, and 2012, the Company capitalized $0.4 million, $0.4 million and $0.7 million, respectively, of stock-based compensation expenses as inventory.

        The following table summarizes total unamortized share-based compensation expense and the remaining months over which such expense is expected to be recognized, on a weighted-average basis by type of grant (in thousands, except number of months):

	March 31, 2014
	Unamortized Expense		Remaining Months
Stock options and ESPP	$	980		17
Premium-priced stock options		789		19
Market-based stock options		1,304		9
Time-based RSUs		37,379		22
Market-based RSUs		4,901		27
	$	45,353

        Under the 1996 ESPP and 2006 ESPP plans, eligible employees may purchase shares at the lower of 85% of the fair market value at the beginning or the end of each six-month offering period. Subject to continued participation in these plans, purchase agreements are automatically executed at the end of each offering period. An aggregate of 29,000,000 shares was reserved for issuance under the 1996 and 2006 ESPP plans. As of March 31, 2014, a total of 8,266,700 shares were available for issuance under these plans.

        The 2006 Plan provides for the grant to eligible employees and non-employee directors of stock options, stock appreciation rights, restricted stock and RSUs. Awards under the 2006 Plan may be conditioned on continued employment, the passage of time or the satisfaction of performance vesting criteria. The 2006 Stock Plan has an expiration date of June 16, 2016. Stock options granted under the 2006 Plan generally vest over three years for non-executive Directors and over four years for employees. All stock options under this plan have terms not exceeding ten years and are issued at exercise prices not less than the fair market value on the date of grant. Premium-priced stock options granted to executives under the 2006 Plan vest only when performance criteria is met as determined by a third party vendor. Time-based RSUs granted to employees under the 2006 Plan generally vest in four equal annual installments on the grant date anniversary. Time-based RSUs granted to non-executive board members under the 2006 Plan vest in one annual installment on the grant date anniversary. Market-based options and RSUs granted under the 2006 Plan vest at the end of the performance period upon meeting certain share price performance criteria measured against market conditions. The performance period is four years for market-based options granted in fiscal year 2013. The performance period is three years for market-based RSU grants made in fiscal years 2014, 2013 and 2012. An aggregate of 24,800,000 shares was reserved for issuance under the 2006 Plan. As of March 31, 2014, a total of 9,136,223 shares were available for issuance under this plan.

        Under the 2012 Stock Inducement Equity Plan, stock options and RSUs may be granted to eligible employees to serve as inducement material to enter into employment with the Company. Awards under the 2012 Stock Inducement Equity Plan may be conditioned on continued employment, the passage of time or the satisfaction of performance vesting criteria, based on individual written employment offer letter. The 2012 Stock Inducement Equity Plan has an expiration date of March 28, 2022. An aggregate of 1,800,000 shares was reserved for issuance under the 2012 Stock Inducement Equity Plan. As of March 31, 2014, no shares were available for issuance under this plan.

        A summary of the Company's stock option activity for fiscal years 2014, 2013 and 2012 is as follows (in thousands, except per share data; exercise prices are weighted averages):

	Years Ended March 31,
	2014					2013					2012
	Shares			Exercise Price		Shares			Exercise Price		Shares			Exercise Price
Outstanding, beginning of year		13,684		$	16		13,034		$	19		16,312		$	19
Granted		—		$	—		3,718		$	8		—		$	—
Exercised		(551	)	$	9		(389	)	$	6		(316	)	$	8
Cancelled or expired		(3,317	)	$	15		(2,679	)	$	20		(2,962	)	$	22
Outstanding, end of year		9,816		$	16		13,684		$	16		13,034		$	19
Exercisable, end of year		7,056		$	19		9,355		$	19		10,867		$	20

        The total pretax intrinsic value of stock options exercised during the fiscal years 2014, 2013 and 2012 was $2.0 million, $1.1 million and $0.8 million, respectively, and the tax benefit realized for the tax deduction from options exercised during those periods was $0.5 million, $0.3 million and $0.2 million, respectively. The total fair value of options exercisable as of March 31, 2014, 2013 and 2012 was $42.8 million, $60.5 million and $76.0 million, respectively.

        The fair value of employee stock options granted and shares purchased under the Company's employee purchase plans was estimated using the Black-Scholes-Merton option-pricing valuation model applying the following assumptions and values.

	Purchase Plans									Stock Option Plans					Premium Priced Options					Market-based Stock Option Plan
	Fiscal Years Ended March 31,									Fiscal Years Ended March 31,					Fiscal Years Ended March 31,					Fiscal Years Ended March 31,
	2014			2013			2012			2014	2013			2012	2014	2013			2012	2014	2013			2012
Dividend yield		0.43	%		0	%		0	%	n/a		0	%	n/a	n/a		0	%	n/a	n/a		0	%	n/a
Risk-free interest rate		0.07	%		0.09	%		0.13	%	n/a		1.20	%	n/a	n/a		2.00	%	n/a	n/a		1.93	%	n/a
Expected volatility		36	%		47	%		52	%	n/a		46	%	n/a	n/a		46	%	n/a	n/a		44	%	n/a
Expected life (years)		0.5			0.5			0.5		n/a		6.0		n/a	n/a		7.0		n/a	n/a		6.0		n/a
Weighted average fair value	$	2.46		$	2.14		$	2.96		n/a	$	3.64		n/a	n/a	$	2.52		n/a	n/a	$	2.58		n/a

        The dividend yield assumption is based on the Company's history and future expectations of dividend payouts. In September 2012, the Company's shareholders approved, and the Company paid, a one-time cash dividend of CHF 125.7 million ($133.5 million in U.S. Dollars), out of retained earnings to Logitech's existing shareholders. The dividend qualified as a distribution of qualifying additional paid-in-capital. In May 2013, the Company announced its plan to issue an annual dividend on a recurring basis. In September 2013, the Company's shareholders approved, and the Company paid, a cash dividend of CHF 33.7 million ($36.1 million in U.S. dollars) to the existing shareholders. The unvested or unexercised options and RSUs are not eligible for these dividends. The expected option life represents the weighted-average period the stock options or purchase offerings are expected to remain outstanding. The expected life is based on historical settlement rates, which the Company believes are most representative of future exercise and post-vesting termination behaviors. Expected share price volatility is based on historical volatility using the Company's daily closing prices over the term of past options or purchase offerings. The Company considers the historical price volatility of its shares as most representative of future volatility. The risk-free interest rate assumptions are based upon the implied yield of U.S. Treasury zero-coupon issues appropriate for the term of the Company's stock options or purchase offerings.

        The Company estimates option forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

        As of March 31, 2014, the exercise price of outstanding options ranged from $1 to $35 per option, the weighted average remaining contractual life of outstanding options was 4.9 years, and the weighted average remaining contractual life of exercisable options was 3.6 years. As of March 31, 2014, the aggregate intrinsic value of outstanding options was $20.1 million and the aggregate intrinsic value of exercisable options was $6.5 million.

        The total number of fully vested in-the-money options exercisable as of March 31, 2014 was 2,500,762 and 2,756,753 options were unvested, of which 2,370,808 are expected to vest, based on an estimated forfeiture rate of 14%.

        A summary of the Company's time- and market-based RSU activity for fiscal years 2014, 2013 and 2012 is as follows (in thousands, except per share values; grant-date fair values are weighted averages):

	Years Ended March 31,
	2014					2013					2012
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Outstanding, beginning of year		4,642		$	10		4,125		$	13		2,370		$	21
Granted—time-based		3,104		$	11		2,219		$	7		2,496		$	9
Granted—market-based		1,060		$	8		101		$	6		516		$	11
Vested		(1,560	)	$	9		(1,097	)	$	11		(399	)	$	19
Cancelled or expired		(1,158	)	$	15		(706	)	$	13		(858	)	$	19
Outstanding, end of year		6,088		$	10		4,642		$	10		4,125		$	13

        The total pretax intrinsic value of RSUs that vested during the fiscal years 2014, 2013 and 2012 was $ 17.8 million, $8.3 million and $3.8 million, respectively. The tax benefit realized for the tax deduction from RSUs that vested during the fiscal years 2014, 2013 and 2012 was $4.7 million, $1.9 million and $0.9 million, respectively.

        The Company determines the fair value of the time-based RSUs based on the market price on the date of grant. The fair value of the market-based RSUs is estimated using the Monte-Carlo simulation model applying the following assumptions:

	Years Ended March 31,
	2014			2013			2012
Dividend yield		0.75	%		0	%		0	%
Risk-free interest rate		1.09	%		0.31	%		0.99	%
Expected volatility		46	%		47	%		49	%
Expected life (years)		2.9			3.0			3.0

        The dividend yield assumption is based on the Company's history and future expectations of dividend payouts. The expected life of the market-based RSUs is the service period at the end of which the RSUs will vest if the market conditions are satisfied. The volatility assumption is based on the actual volatility of Logitech's daily closing share price over a look-back period equal to the years of expected life. The risk free interest rate is derived from the yield on U.S. Treasury Bonds for a term of the same number of years as the expected life.

        As of March 31, 2014, the grant date fair values of outstanding RSUs ranged from $6 to $20 per RSU.

        In April 2012, Logitech's Board of Directors approved the 2012 Stock Inducement Equity Plan. Under this plan, Logitech's newly hired President, Bracken P. Darrell, who became President and Chief Executive Officer in January 2013, was granted the following equity incentive awards with a ten year term (in thousands, except per share exercise price and vesting period):

Type of Grant	Shares		Exercise Price		Fair Value		Vesting(1) (in years)
Stock options		500	$	8	$	1,820		4.0
Time based RSUs		100		—		803		4.0
Premium-priced stock options(2):
First tranche		400		14		1,100		2.5
Second tranche		400		16		1,024		3.0
Third tranche		400		20		896		3.9

(1)

Vesting period for premium-priced stock options represents estimated requisite service period.

(2)

Each grant of premium-priced stock options will vest in full if and only when Logitech's average closing share price, over a consecutive ninety-day trading period, meets or exceeds the exercise price of the grant.

Defined Contribution Plans

        Certain of the Company's subsidiaries have defined contribution employee benefit plans covering all or a portion of their employees. Contributions to these plans are discretionary for certain plans and are based on specified or statutory requirements for others. The charges to expense for these plans for fiscal years 2014, 2013 and 2012, were $6.6 million, $6.9 million and $11.6 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.

        During fiscal year 2013, the Company's Swiss defined benefit pension plan was subject to re-measurement due to the number of plan participants affected by the restructurings implemented during fiscal year 2013, as described in Note 15, Restructuring. The re-measurement resulted in the realization of $2.2 million in previously unrecognized losses which resided within accumulated other comprehensive loss and which the Company entirely recognized during fiscal year 2013. The Company's restructuring plan implemented during the fourth quarter of fiscal year 2013 resulted in an additional $1.2 million in previously unrecognized losses related to affected plan participants which resided within accumulated other comprehensive income (loss) and which the Company entirely recognized during the quarter ended March 31, 2013.

        The Company recognizes the underfunded or overfunded status of defined benefit pension plans and non-retirement post-employment benefit obligations as an asset or liability in its consolidated balance sheets, and recognizes changes in the funded status of defined benefit pension plans in the year in which the changes occur through accumulated other comprehensive income (loss), which is a component of shareholders' equity. Each plan's assets and benefit obligations are measured as of March 31 each year.

        The net periodic benefit cost of the defined benefit pension plans and the non-retirement post-employment benefit obligations for fiscal years 2014, 2013 and 2012 was as follows (in thousands):

	Years Ended March 31,
	2014			2013			2012
				As Revised			As Restated
Service costs	$	8,591		$	7,842		$	6,856
Interest costs		1,794			1,852			2,263
Expected return on plan assets		(1,727	)		(1,710	)		(1,969	)
Amortization of net transition obligation		4			5			5
Net period service costs recognized		210			712			156
Net actuarial loss recognized		592			846			205
Settlement costs		769			2,658			—
	$	10,233		$	12,205		$	7,516

        The changes in projected benefit obligations for fiscal years 2014 and 2013 were as follows (in thousands):

	Years Ended March 31,
	2014			2013
				As Revised
Projected benefit obligation, beginning of year	$	90,234		$	97,459
Service costs		8,591			7,842
Interest costs		1,794			1,852
Plan participant contributions		2,726			2,814
Actuarial (gains) losses		(2,942	)		7,146
Benefits paid		(1,841	)		(2,285	)
Plan amendments		—			(1,456	)
Settlement and curtailment		(1,261	)		(18,758	)
Administrative expense paid		(174	)		(164	)
Foreign currency exchange rate changes		5,256			(4,216	)
Projected benefit obligation, end of year	$	102,383		$	90,234

        The accumulated benefit obligation for all defined benefit pension plans as of March 31, 2014 and 2013 was $83.2 million and $69.9 million.

        The following table presents the changes in the fair value of defined benefit pension plan assets for fiscal years 2014 and 2013 (in thousands):

	Years Ended March 31,
	2014			2013
				As Revised
Fair value of plan assets, beginning of year	$	48,689		$	53,594
Actual return on plan assets		5,334			2,913
Employer contributions		5,390			6,352
Plan participant contributions		2,726			2,814
Benefits paid		(1,841	)		(2,285	)
Settlement		(500	)		(11,874	)
Administrative expenses paid		(174	)		(164	)
Foreign currency exchange rate changes		3,760			(2,661	)
Fair value of plan assets, end of year	$	63,384		$	48,689

        The Company's investment objectives are to ensure that the assets of its defined benefit plans are invested to provide an optimal rate of investment return on the total investment portfolio, consistent with the assumption of a reasonable risk level, and to ensure that pension funds are available to meet the plans' benefit obligations as they become due. The Company believes that a well-diversified investment portfolio will result in the highest attainable investment return with an acceptable level of overall risk. Investment strategies and allocation decisions are also governed by applicable governmental regulatory agencies. The Company's investment strategy with respect to its largest defined benefit plan, which is available only to Swiss employees, is to invest in the following allocation ranges starting from January 2014: 20-55% for equities, 25-60% for bonds, and 0-10% for cash and cash equivalents. The Company also can invest in real estate funds, commodity funds, and hedge funds depend upon economic conditions. Prior to January 2014, the Company followed the following allocation ranges: 28-43% for equities, 33-63% for Swiss bonds, 5-15% for foreign bonds, 5-15% for hedge and investment funds, and 0-20% for cash and cash equivalents. The Company's other defined benefit plans, which comprise 6.2% of total defined benefit plan assets as of March 31, 2014, have similar investment and allocation strategies.

        The following tables present the fair value of the defined benefit pension plan assets by major categories and by levels within the fair value hierarchy as of March 31, 2014 and 2013 (in thousands):

	March 31,
	2014								2013
									As Revised
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	10,339	$	—	$	—	$	10,339	$	7,143	$	—	$	—	$	7,143
Equity securities		17,324		—		—		17,324		14,802		—		—		14,802
Debt securities		20,300		—		—		20,300		20,663		—		—		20,663
Swiss real estate funds		8,970		—		—		8,970		3,968		—		—		3,968
Hedge funds		—		3,611		—		3,611		—		1,062		—		1,062
Commodity funds		—		—		—		—		693		—		—		693
Insurance contracts		—		—		2,598		2,598		—		—		—		—
Other		43		199		—		242		106		252		—		358
	$	56,976	$	3,810	$	2,598	$	63,384	$	47,375	$	1,314	$	—	$	48,689

        The funded status of the defined benefit pension plans is the fair value of plan assets less benefit obligations. The funded status of the non-retirement post-employment benefits is the fair value of the benefit obligations. Projected benefit obligations exceeded plan assets for all plans by $39.0 million and $41.5 million as of March 31, 2014 and 2013.

        Amounts recognized on the balance sheet for the plans were as follows (in thousands):

	March 31,
	2014			2013
				As Revised
Current assets	$	—		$	—
Current liabilities		(1,100	)		(994	)
Non-current liabilities		(37,899	)		(40,551	)
Net liabilities	$	(38,999	)	$	(41,545	)

        Amounts recognized in accumulated other comprehensive loss related to defined benefit pension plans were as follows (in thousands):

	March 31,
	2014			2013			2012
				As Revised
Net prior service costs	$	(2,149	)	$	(2,307	)	$	(1,918	)
Net actuarial loss		(12,319	)		(19,850	)		(28,172	)
Amortization of net transition obligation		(12	)		(14	)		(24	)
Accumulated other comprehensive loss		(14,480	)		(22,171	)		(30,114	)
Deferred tax benefit		192			315			752
Accumulated other comprehensive loss, net of tax	$	(14,288	)	$	(21,856	)	$	(29,362	)

        Changes in accumulated other comprehensive loss related to the defined benefit pension plans were as follows (in thousands):

	Years Ended March 31,
	2014			2013			2012
				As Revised			As Restated
Accumulated other comprehensive loss, beginning of year	$	(21,856	)	$	(29,362	)	$	(18,073	)
Transition obligation recognized		4			5			—
Prior service cost (credit) recognized		210			153			(15	)
Actuarial loss recognized		1,056			1,199			275
Curtailment loss		761			2,600			—
Settlement gain recognized		747			2,276			—
Gain (loss)		6,087			1,351			(11,808	)
Prior service credit		—			(944	)		—
Deferred tax benefit (expense)		(123	)		(435	)		170
Foreign currency exchange rate changes		(1,174	)		1,301			89
Accumulated other comprehensive loss, end of year	$	(14,288	)	$	(21,856	)	$	(29,362	)

        The following table presents the amounts included in accumulated other comprehensive loss as of March 31, 2014, which are expected to be recognized as a component of net periodic benefit cost in fiscal year 2015 (in thousands):

	Year Ending March 31, 2015
Amortization of net transition obligation	$	4
Amortization of net prior service costs		212
Amortization of net actuarial loss		368
	$	584

        The Company reassesses its benefit plan assumptions on a regular basis. The actuarial assumptions for the pension plans for fiscal years 2014 and 2013 were as follows:

	Years Ended March 31,
	2014
			2013
	Benefit Obligation
		Periodic Costs	Benefit Obligation	Periodic Costs
Discount rate	1.50%-9.25%	1.50%-8.00%	1.50%-8.00%	1.75%-8.50%
Estimated rate of compensation increase	3.00%-8.00%	3.00%-4.00%	3.00%-10.00%	3.00%-10.00%
Expected average rate of return on plan assets	1.00%-3.50%	0.75%-3.50%	1.00%-3.50%	0.75%-3.75%

        The discount rate is estimated based on corporate bond yields or securities of similar quality in the respective country, with a duration approximating the period over which the benefit obligations are expected to be paid. The Company bases the compensation increase assumptions on historical experience and future expectations. The expected average rate of return for the Company's defined benefit pension plans represents the average rate of return expected to be earned on plan assets over the period that the benefit obligations are expected to be paid, based on government bond notes in the respective country, adjusted for corporate risk premiums as appropriate.

        The following table reflects the benefit payments that the Company expects the plans to pay in the periods noted (in thousands):

Years Ending March 31,
2015	$	4,573
2016		5,144
2017		4,988
2018		5,481
2019		5,615
Thereafter		29,018
	$	54,819

        The Company expects to contribute $5.3 million to its defined benefit pension plans during fiscal year 2015.

Deferred Compensation Plan

        One of the Company's subsidiaries offers a deferred compensation plan that permits eligible employees to make 100% vested salary and incentive compensation deferrals within established limits. The Company does not make contributions to the plan.

        The fair value of the deferred compensation plan's assets is included in other assets in the consolidated balance sheets. The marketable securities are classified as trading investments and were recorded at a fair value of $16.6 million and $15.6 million as of March 31, 2014 and 2013, based on quoted market prices. The Company also had $16.6 million and $15.6 million deferred compensation liability as of March 31, 2014 and 2013, respectively. Earnings, gains and losses on trading investments are included in other income (expense), net and corresponding changes in deferred compensation liability are included in operating expenses and cost of goods sold.