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
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and Six Months ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended September 30, 2020 and 2019	5
	Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020	6
	Condensed Consolidated Statements of Cash Flows for the Six Months ended September 30, 2020 and 2019	7
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months ended September 30, 2020 and 2019	8
	Notes to the Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibit Index	60
Signatures

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.

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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.

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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.

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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

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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.

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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	$	—	$	—