Business Acquisitions

Fiscal Year 2018 Acquisitions

ASTRO Acquisition

On August 11, 2017 (the ASTRO Acquisition Date), the Company acquired certain assets and liabilities constituting the ASTRO Gaming business (ASTRO) from AG Acquisition Corporation for a purchase price of $85.0 million in cash (the ASTRO Acquisition). ASTRO is a leading console gaming accessory brand with a history of producing award-winning headsets for professional gamers and enthusiasts. ASTRO provides the Company with a strong growth platform in the console gaming accessories market.

ASTRO meets the definition of a business, and its acquisition is accounted for using the acquisition method. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the ASTRO Acquisition Date (in thousands):



	Estimated Fair Value
Inventories	$	10,331
Property, plant and equipment	2,760
Intangible assets	52,520
Other assets	605
Total identifiable assets acquired	66,216
Accrued liabilities	(2,982		)
Net identifiable assets acquired	63,234
Goodwill	21,766
Net assets acquired	$	85,000

Goodwill related to the transaction is primarily attributable to opportunities and economies of scale from combining the operations and technologies of Logitech and ASTRO. Goodwill is expected to be deductible for tax purposes.

The fair value of the inventories acquired is estimated at their net realizable value, which uses the estimated selling prices, less the costs of disposal and a reasonable profit allowance for the selling efforts. The difference between the fair value of the inventories and the amount recorded by ASTRO immediately before the ASTRO Acquisition Date is $0.8 million, which has been recognized in "amortization of intangibles assets and purchase accounting effect on inventory" in the consolidated statements of operations upon the sales of the acquired inventories.

The Company included ASTRO's estimated fair value of assets acquired and liabilities assumed in its consolidated balance sheets beginning on the ASTRO Acquisition Date. The results of operations for ASTRO have been included in, but are not material to, the Company's consolidated statements of operations from the ASTRO Acquisition Date.

The following table summarizes the estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired as of the ASTRO Acquisition Date (Dollars in thousands):



	Fair Value		Estimated Useful Life (years)
Developed technology	$	12,540	4.0
Customer relationships	33,100		8.0
Trade name	6,880		6.0
Total intangible assets acquired	$	52,520	6.8

Intangible assets acquired as a result of the ASTRO Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization. Amortization of acquired developed technology of $2.0 million during the year ended March 31, 2018, is included in "amortization of intangible assets and purchase accounting effect of inventory" in the consolidated statements of operations. Amortization of the acquired customer relationships and trade name of $3.3 million during the year ended March 31, 2018, is included in "amortization of intangible assets and acquisition-related costs" in the consolidated statements of operations.

Developed technology relates to existing ASTRO gaming headset products. The economic useful life was determined based on the technology cycle related to developed technology of existing products, as well as the cash flows anticipated over the forecasted periods.

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of ASTRO. The economic useful life was determined based on historical customer turnover rates and industry benchmarks.

Trade name relates to the “ASTRO” trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.

The fair value of developed technology and trade name was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate is applied to the projected revenues associated with the intangible assets to determine the amount of savings, which is then discounted to determine the fair value. The developed technology and trade name were valued using royalty rates of 10% and 2%, respectively, and both were discounted at a rate of 13%.

The fair value of customer relationships was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contributed to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the customer relationships, which were discounted at a rate of 13%.

The Company believes the value of purchased intangible assets recorded above represents the fair values of, and approximates the amounts a market participant would pay for, these intangible assets as of the ASTRO Acquisition Date.

For the year ended March 31, 2018, ASTRO contributed approximately 2 points to net sales growth.

In November 2017, the Company also made a small technology acquisition for a total consideration of $5.2 million, including cash acquired of $0.9 million. $1.0 million of the total consideration was retained by the Company for the purpose of ensuring the seller's representations, warranties and covenants.

Fiscal Year 2017 Acquisitions

Jaybird Acquisition

On April 20, 2016 (the Jaybird Acquisition Date), the Company acquired all of the equity interests of JayBird, LLC (Jaybird), a Utah limited liability company that develops Bluetooth earbuds, activity trackers, and accessories for sports and active lifestyles, for a purchase price of $54.2 million in cash, including a working capital adjustment and payment of a line-of-credit on behalf of Jaybird, with an additional earn-out of up to $45.0 million based on the achievement of certain net revenue growth targets over approximately a two year period (the Jaybird Acquisition). If the net revenue growth targets would have been met, the Company would have paid a maximum of $25.0 million and $20.0 million in fiscal years 2018 and 2019, respectively. In October 2017, Logitech and the sellers of Jaybird entered into an agreement fully, irrevocably and unconditionally releasing Logitech from the earn-out rights and payments in exchange for $5.0 million in cash, which was paid in November 2017. The Jaybird Acquisition has accelerated the Company's entry into the wireless wearables space.

Jaybird meets the definition of a business and its acquisition is accounted for using the acquisition method. The fair value of consideration transferred for the Jaybird Acquisition consists of the following (in thousands):



Purchase price	$	54,242
Fair value of contingent consideration (earn-out)	18,000
Fair value of total consideration transferred	$	72,242

The fair value of the earn-out payments at the Jaybird Acquisition Date was determined by providing risk-adjusted earnings projections using a Monte Carlo Simulation, which includes inputs that are not observable in the market, and therefore representing a Level 3 measurement. The fair value of this earn-out is discussed further in "Note 10 - Fair Value Measurements" to the consolidated financial statements.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Jaybird Acquisition Date (in thousands):



	Estimated Fair Value
Cash and cash equivalents	$	255
Accounts receivable	272
Inventories	10,214
Other current assets	611
Property, plant, and equipment	1,165
Intangible assets	50,280
Other assets	27
Total identifiable assets acquired	62,824
Accounts payable	(10,513		)
Accrued liabilities	(1,227		)
Other current liabilities	(5,226		)
Other long-term liabilities	(283		)
Net identifiable assets acquired	45,575
Goodwill	26,667
Net assets acquired	$	72,242

Goodwill related to the transaction is primarily attributable to opportunities and economies of scale from combining the operations and technologies of Logitech and Jaybird. Goodwill is expected to be deductible for tax purposes.

The difference between the fair value of the inventories and the amount recorded by Jaybird immediately before the acquisition date was $0.7 million, which was recognized in "amortization of intangibles assets and purchase accounting effect on inventory" in the consolidated statements of operations upon the sales of the acquired inventories.

The Company included Jaybird's estimated fair value of assets acquired and liabilities assumed in its consolidated balance sheets beginning April 20, 2016. The results of operations for Jaybird have been included in, but are not material to, the Company's consolidated statements of operations from the Jaybird Acquisition Date.

The following table summarizes the estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired at their estimated fair values and their estimated useful lives as of the Jaybird Acquisition Date (Dollars in thousands):



	Fair Value		Estimated Useful Life (years)
Developed technology	$	18,450	4.0
Customer relationships	19,900		8.0
Trade name	9,380		6.0
Intangible assets with finite lives acquired	47,730		6.1
In-process research & development (IPR&D)	2,550		Not Applicable
Total intangible assets acquired	$	50,280

Except for IPR&D, intangible assets acquired as a result of the Jaybird Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization. Amortization of acquired developed technology of $5.1 million and $4.4 million, respectively, during fiscal years 2018 and 2017 is included in "amortization of intangible assets and purchase accounting effect on inventory" in the gross profit of the consolidated statements of operations. Amortization of the acquired customer relationships and trade name of $4.0 million and $3.8 million, respectively, during fiscal years 2018 and 2017 is included in "amortization of intangible assets and acquisition-related costs" in the consolidated statements of operations.

Developed technology relates to existing Bluetooth wireless sports earbuds. The economic useful life was determined based on the technology cycle related to the developed technology of existing products, as well as the cash flows anticipated over the forecasted periods.

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of Jaybird. The economic useful life was determined based on historical customer turnover rates and industry benchmarks.

Trade name relates to the “Jaybird” trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.

The fair value of developed technology and trade name was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate is applied to the projected revenues associated with the intangible assets to determine the amount of savings, which is then discounted to determine the fair value. The developed technology and trade name were valued using royalty rates of 10% and 2.5%, respectively, and both were discounted at a rate of 16%.

The fair value of customer relationships was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the customer relationships, which were discounted at a rate of 16%.

The IPR&D is accounted for as an indefinite-lived intangible asset and is not amortized until completion or abandonment of the associated research and development efforts. The IPR&D acquired was reclassified as developed technology intangible assets during the third quarter of fiscal year 2017 when the underlying projects were completed and developed technology is amortized over its estimated useful life of five years.

Saitek Acquisition

On September 15, 2016, the Company completed the acquisition of the Saitek product line for a total cash consideration of approximately $13.0 million (the Saitek Acquisition). Out of the total consideration, $6.7 million was attributed to intangible assets, $4.9 million was attributed to goodwill, and $1.4 million was attributed to net tangible assets acquired. The Saitek Acquisition enhances the breadth and depth of the Company's product offerings in the Gaming category and expands the Company's engineering capabilities in simulation products. The amount of goodwill generated from the Saitek Acquisition is deductible for tax purposes.

Acquisition-related costs and pro forma results of operations

The Company incurred acquisition-related costs of approximately $1.4 million and $1.5 million, in aggregate, for the year ended March 31, 2018 and 2017, respectively. The acquisition-related costs are included in "Amortization of intangible assets and acquisition-related costs" in the consolidated statements of operations.

Pro forma results of operations for the ASTRO Acquisition, the Jaybird Acquisition and the Saitek Acquisition have not been presented because these acquisitions are not material to the consolidated statements of operations individually or in aggregate.