10-Q 1 logi-20210930.htm 10-Q logi-20210930
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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, 2021
 
Or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                to                
 
Commission File Number: 0-29174
 
LOGITECH INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
 
Canton of Vaud,SwitzerlandNone
  (State or other jurisdiction
  of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
Logitech International S.A.
EPFL - Quartier de l'Innovation
Daniel Borel Innovation Center
1015 Lausanne, Switzerland
c/o Logitech Inc.
7700 Gateway Boulevard
Newark, California 94560
(Address of principal executive offices and zip code)
 
510 795-8500
(Registrant’s telephone number, including area code)

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

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


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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes    No  ý
 
As of October 13, 2021, there were 167,474,200 shares of the Registrant’s share capital outstanding.


1

TABLE OF CONTENTS
 
  Page
   
Part IFINANCIAL INFORMATION 
 
 
Exhibits

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

Our fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The second quarter of fiscal year 2022 ended on October 1, 2021. The same quarter in the prior fiscal year ended on September 25, 2020. For purposes of presentation, we have indicated our quarterly periods end on the last day of the calendar quarter.
The term “sales” means net sales, except as otherwise specified.
We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission ("SEC").

3

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

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


4

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,
 2021202020212020
Net sales$1,306,267 $1,257,158 $2,618,325 $2,049,052 
Cost of goods sold760,268 684,599 1,499,334 1,167,237 
Amortization of intangible assets3,836 2,836 7,902 6,359 
Gross profit542,163 569,723 1,111,089 875,456 
Operating expenses:    
Marketing and selling256,627 158,797 508,941 292,035 
Research and development68,661 53,379 137,907 103,104 
General and administrative33,271 31,664 73,813 60,735 
Amortization of intangible assets and acquisition-related costs5,107 4,331 10,324 8,940 
Change in fair value of contingent consideration for business acquisition(925) (2,399)5,716 
Restructuring charges (credits), net11 (1)11 (54)
Total operating expenses362,752 248,170 728,597 470,476 
Operating income179,411 321,553 382,492 404,980 
Interest income201 513 517 1,133 
Other income (expense), net(6,703)1,149 1,732 3,178 
Income before income taxes172,909 323,215 384,741 409,291 
Provision for income taxes33,453 56,301 58,444 70,304 
Net income$139,456 $266,914 $326,297 $338,987 
Net income per share:  
Basic$0.83 $1.58 $1.94 $2.02 
Diluted$0.81 $1.56 $1.90 $1.99 
Weighted average shares used to compute net income per share:  
Basic168,389 168,645 168,380 168,140 
Diluted171,343 171,382 171,682 170,766 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,
 2021202020212020
Net income$139,456 $266,914 $326,297 $338,987 
Other comprehensive income (loss):  
Currency translation gain (loss), net of taxes(4,731)3,205 (3,927)4,444 
Reclassification of cumulative translation adjustment to other income (expense), net5 (1,738)1,051 (1,738)
Defined benefit plans:  
Net gain (loss) and prior service costs, net of taxes95 (434)(405)544 
Amortization included in other income (expense), net212 176 423 345 
Hedging gain (loss):  
Deferred hedging gain (loss), net of taxes2,132 (1,059)2,662 (3,426)
Reclassification of net hedging impact into cost of goods sold(1,314)1,969 (1,908)1,639 
Total other comprehensive income (loss)(3,601)2,119 (2,104)1,808 
Total comprehensive income$135,855 $269,033 $324,193 $340,795 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
September 30, 2021March 31, 2021
Assets
Current assets:  
Cash and cash equivalents$1,137,296 $1,750,327 
Accounts receivable, net728,074 612,225 
Inventories827,710 661,116 
Other current assets166,731 135,650 
Total current assets2,859,811 3,159,318 
Non-current assets:  
Property, plant and equipment, net111,625 114,060 
Goodwill449,357 429,604 
Other intangible assets, net103,501 115,148 
Other assets
331,870 324,248 
Total assets$3,856,164 $4,142,378 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Accounts payable$660,720 $823,233 
Accrued and other current liabilities 709,878 858,617 
Total current liabilities1,370,598 1,681,850 
Non-current liabilities:  
Income taxes payable67,651 59,237 
Other non-current liabilities
155,232 139,502 
Total liabilities1,593,481 1,880,589 
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, 2021
Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2021
Additional shares that may be issued out of authorized capital — 17,311 at September 30 and March 31, 2021
Additional paid-in capital99,434 129,519 
Shares in treasury, at cost — 5,331 at September 30, 2021 and 4,799 at March 31, 2021
(413,345)(279,541)
Retained earnings2,657,465 2,490,578 
Accumulated other comprehensive loss(111,019)(108,915)
Total shareholders’ equity2,262,683 2,261,789 
Total liabilities and shareholders’ equity$3,856,164 $4,142,378 
 


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

7

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended
September 30,
 20212020
Cash flows from operating activities:  
Net income$326,297 $338,987 
Adjustments to reconcile net income to net cash provided by/ (used in) operating activities:  
Depreciation43,474 22,601 
Amortization of intangible assets17,468 15,239 
Loss on investments961 2,519 
Share-based compensation expense47,673 44,900 
Deferred income taxes6,808 20,152 
Change in fair value of contingent consideration for business acquisition(2,399)5,716 
Other1,059 (1,877)
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable, net(113,008)(346,838)
Inventories(167,588)(161,120)
Other assets(48,440)(31,567)
Accounts payable(155,482)399,176 
Accrued and other liabilities(134,671)90,631 
Net cash provided by / (used in) operating activities(177,848)398,519 
Cash flows from investing activities:  
Purchases of property, plant and equipment(47,232)(27,774)
Investment in privately held companies(901)(3,405)
Acquisition, net of cash acquired(15,586) 
Purchases of trading investments(2,466)(8,199)
Proceeds from sales of trading investments2,977 8,839 
Net cash used in investing activities(63,208)(30,539)
Cash flows from financing activities:  
Payment of cash dividends(159,410)(146,705)
Purchases of registered shares(174,380)(22,454)
Proceeds from exercises of stock options and purchase rights16,636 26,066 
Tax withholdings related to net share settlements of restricted stock units(54,751)(25,744)
Net cash used in financing activities(371,905)(168,837)
Effect of exchange rate changes on cash and cash equivalents (70)2,512 
Net increase / (decrease) in cash and cash equivalents (613,031)201,655 
Cash and cash equivalents, beginning of the period1,750,327 715,566 
Cash and cash equivalents, end of the period$1,137,296 $917,221 
Supplementary Cash Flow Disclosures:
Non-cash investing and financing activities:  
Property, plant and equipment purchased during the period and included in period end liability accounts$10,369 $9,594 
Non-cash contingent consideration for acquisition$9,973 $ 
Supplemental cash flow information:
Income taxes paid, net$166,127 $ 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(unaudited)
Three Months Ended September 30, 2020

Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
June 30, 2020173,106 $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, 2020173,106 $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 CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
Registered SharesTreasury SharesRetained Earnings
SharesAmountSharesAmount
March 31, 2020173,106 $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, 2020173,106 $30,148 $78,617 4,357 $(166,258)$1,882,308 $(118,852)$1,705,963 



9


Three Months Ended September 30, 2021

   Additional Paid-in Capital   Accumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
June 30, 2021173,106 $30,148 $74,948 4,407 $(302,606)$2,677,419 $(107,418)$2,372,491 
Total comprehensive income— — — — — 139,456 (3,601)135,855 
Purchases of registered shares— — — 1,151 (119,508)— — (119,508)
Sales of shares upon exercise of stock options and purchase rights— — 8,168 (155)5,718 — — 13,886 
Issuance of shares upon vesting of restricted stock units— — (7,391)(72)3,051 — — (4,340)
Share-based compensation — — 23,709 — — — — 23,709 
Cash dividends ($0.95 per share)
— — — — — (159,410)— (159,410)
September 30, 2021173,106 $30,148 $99,434 5,331 $(413,345)$2,657,465 $(111,019)$2,262,683 
Six Months Ended September, 2021
Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
Registered SharesTreasury SharesRetained Earnings
SharesAmountSharesAmount
March 31, 2021173,106 $30,148 $129,519 4,799 $(279,541)$2,490,578 $(108,915)$2,261,789 
Total comprehensive income— — — — — 326,297 (2,104)324,193 
Purchases of registered shares— — — 1,656 (174,380)— — (174,380)
Sales of shares upon exercise of stock options and purchase rights— — 8,389 (226)8,247 — — 16,636 
Issuance of shares upon vesting of restricted stock units— — (87,080)(898)32,329 — — (54,751)
Share-based compensation— — 48,606 — — — — 48,606 
Cash dividends ($0.95 per share)
— — — — — (159,410)— (159,410)
September 30, 2021173,106 $30,148 $99,434 5,331 $(413,345)$2,657,465 $(111,019)$2,262,683 
 



The accompanying notes are an integral part of these condensed consolidated financial statements.
10

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. Forty 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 ("U.S. GAAP") for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2021, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 12, 2021. 

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, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022, or any future periods.

Changes in Significant Accounting Policies

Other than the recent accounting pronouncements adopted and discussed below under Recent Accounting Pronouncements Adopted, there have been no material changes in the Company’s significant accounting policies during the six months ended September 30, 2021 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

11

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 the fair value of goodwill and intangible assets acquired from business acquisitions, contingent consideration for a business acquisition and periodic reassessment of its fair value, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, accruals for customer incentives, cooperative marketing, and pricing programs and related breakage when appropriate, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates.
 
Risks and Uncertainties
We are subject to risks and uncertainties as a result of the novel coronavirus ("COVID-19"). Capital markets and economies worldwide have 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, 2021, the COVID-19 pandemic had mixed effects on the Company’s results of operations. While the Company experienced increased sales for the three and six months ended September 30, 2021, compared to the same period of the prior fiscal year, we also experienced supply and demand volatility, as the COVID-19 pandemic and related safety measures and restrictions have evolved differently across the world. In addition, we experienced industry-wide supply chain challenges. 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 vaccination rates, the development of effective treatments, the imposition of effective public safety and other protective measures and the public's response to such 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 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 adopted this standard effective April 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements.


12

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, 2021 and September 30, 2020 (in thousands, except per share amounts):
Three Months Ended
September 30,
Six Months Ended
September 30,
 2021202020212020
Net income$139,456 $266,914 $326,297 $338,987 
Shares used in net income per share computation:    
Weighted average shares outstanding - basic168,389 168,645 168,380 168,140 
Effect of potentially dilutive equivalent shares2,954 2,737 3,302 2,626 
Weighted average shares outstanding - diluted171,343 171,382 171,682 170,766 
Net income per share:    
Basic$0.83 $1.58 $1.94 $2.02 
Diluted$0.81 $1.56 $1.90 $1.99 
 
Share equivalents attributable to outstanding stock options, restricted stock units ("RSUs") and employee share purchase plans ("ESPP") totaling 0.5 million and 0.4 million for the three months ended September 30, 2021 and 2020, respectively, and 0.5 million and 0.4 million for the six months ended September 30, 2021 and 2020, 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. A small number of performance-based awards were not included in the calculation because all necessary conditions had not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the performance contingency period.
 
Note 3 — Employee Benefit Plans
 
Employee Share Purchase Plans and Stock Incentive Plans
 
As of September 30, 2021, the Company offers the 2006 Employee Share Purchase Plan (Non-U.S.), as amended and restated, the 1996 Employee Share Purchase Plan (U.S.), as amended and restated, the 2006 Stock Incentive Plan, as amended and restated, and the 2012 Stock Inducement Equity Plan. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.

The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three and six months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended
September 30,
Six Months Ended
September 30,
 2021202020212020
Cost of goods sold$2,102 $1,772 $3,471 $3,172 
Marketing and selling9,758 10,377 18,288 19,169 
Research and development4,724 3,763 9,785 6,866 
General and administrative7,438 8,873 16,129 15,693 
Total share-based compensation expense24,022 24,785 47,673 44,900 
Income tax benefit(3,285)(3,958)(19,879)(12,069)
Total share-based compensation expense, net of income tax benefit$20,737 $20,827 $27,794 $32,831 

13

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

As of September 30, 2021 and 2020, the balance of capitalized share-based compensation included in inventory was $1.3 million and $1.3 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 $3.3 million and $2.7 million for the three months ended September 30, 2021 and 2020, respectively, and $6.6 million and $5.4 million for the six months ended September 30, 2021 and 2020, respectively, were primarily related to service costs.
 
Note 4 — Income Taxes
 
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company’s income before taxes and the provision for (benefit from) income taxes are generated outside of Switzerland.

The income tax provision for the three months ended September 30, 2021 was $33.5 million based on an effective income tax rate of 19.3% of pre-tax income, compared to an income tax provision of $56.3 million based on an effective income tax rate of 17.4% of pre-tax income for the three months ended September 30, 2020. The income tax provision for the six months ended September 30, 2021 was $58.4 million based on an effective income tax rate of 15.2% of pre-tax income, compared to an income tax provision of $70.3 million based on an effective income tax rate of 17.2% of pre-tax income for the six months ended September 30, 2020.

The change in the effective income tax rate for the three and six months ended September 30, 2021, compared to the same periods ended September 30, 2020 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. There were discrete tax benefits of $0.6 million and $0.5 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 three-month period ended September 30, 2021, compared with $0.8 million and $0.5 million, respectively, in the three-month period ended September 30, 2020. There were discrete tax benefits of $14.3 million and $1.5 million from the recognition of excess tax benefits in the United States and the reversal of uncertain tax positions from the expiration of statutes of limitations, respectively, in the six-month period ended September 30, 2021, compared with $5.8 million and $1.5 million, respectively, in the six-month period ended September 30, 2020.

As of September 30, 2021 and March 31, 2021, the total amount of unrecognized tax benefits due to uncertain tax positions was $170.2 million and $160.3 million, respectively, all of which would affect the effective income tax rate if recognized.

As of September 30, 2021 and March 31, 2021, the Company had $67.7 million and $59.2 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, 2021 and March 31, 2021, the Company had $5.5 million and $4.9 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 2022, 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
14

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 $4.9 million from the lapse of the statutes of limitations in various jurisdictions during the next twelve months.

Note 5 — Balance Sheet Components
 
The following table presents the components of certain balance sheet asset amounts as of September 30 and March 31, 2021 (in thousands): 
September 30, 2021March 31, 2021
Accounts receivable, net:  
Accounts receivable$1,034,726 $867,868 
Allowance for doubtful accounts(249)(1,161)
Allowance for sales returns(10,857)(14,438)
Allowance for cooperative marketing arrangements(64,216)(43,276)
Allowance for customer incentive programs(94,413)(76,200)
Allowance for pricing programs(136,917)(120,568)
 $728,074 $612,225 
Inventories:  
Raw materials$205,991 $146,886 
Finished goods621,719 514,230 
 $827,710 $661,116 
Other current assets:  
Value-added tax receivables$79,381 $67,710 
Prepaid expenses and other assets87,350 67,940 
 $166,731 $135,650 
Property, plant and equipment, net:  
Property, plant and equipment at cost$454,417 $417,520 
Accumulated depreciation and amortization(342,792)(303,460)
$111,625 $114,060 
Other assets:  
Deferred tax assets$204,655 $210,888 
Right-of-use assets 41,234 31,169 
Trading investments for deferred compensation plan28,375 24,809 
Investments in privately held companies42,749 43,402 
Other assets14,857 13,980 
 $331,870 $324,248 
15


The following table presents the components of certain balance sheet liability amounts as of September 30 and March 31, 2021 (in thousands): 
September 30, 2021March 31, 2021
Accrued and other current liabilities:  
Accrued customer marketing, pricing and incentive programs$208,207 $185,394 
Accrued personnel expenses113,818 173,360 
VAT payable61,441 50,620 
Accrued sales return liability45,064 43,178 
Accrued payables - non-inventory36,736 52,392 
Warranty accrual34,646 33,228 
Income taxes payable11,954 131,408 
Operating lease liability13,754 13,101 
Contingent consideration10,570 6,967 
Other current liabilities173,688 168,969 
 $709,878 $858,617 
Other non-current liabilities:  
Employee benefit plan obligations$73,534 $72,321 
Obligation for deferred compensation plan28,375 24,809 
Operating lease liability29,940 21,319 
Warranty accrual14,527 15,604 
Contingent consideration3,971  
Deferred tax liability1,679 1,679 
Other non-current liabilities3,206 3,770 
 $155,232 $139,502 


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, 2021March 31, 2021
 Level 1Level 2Level 3Level 1Level 2Level 3
Assets:    
Cash equivalents$402,219 $ $ $669,759 $ $ 
       
Trading investments for deferred compensation plan included in other assets:    
Cash$63 $ $ $31 $ $ 
Common stock1,850   1,569   
Money market funds7,661   6,734   
Mutual funds18,801   16,475   
Total of trading investments for deferred compensation plan$28,375 $ $ $24,809 $ $ 
Currency exchange derivative assets
included in other current assets
$ $2,153 $ $ $5,452