CIRRUS LOGIC INC, 10-K filed on 5/30/2018
Annual Report
v3.8.0.1
Document and Entity Information - USD ($)
12 Months Ended
Mar. 31, 2018
May 25, 2018
Sep. 23, 2017
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Entity Registrant Name CIRRUS LOGIC INC    
Entity Central Index Key 0000772406    
Entity Filer Category Large Accelerated Filer    
Entity Well-known Seasoned Issuer Yes    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Document Period End Date Mar. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Current Fiscal Year End Date --03-31    
Entity Common Stock, Shares Outstanding   60,978,789  
Entity Public Float     $ 2,433,893,534
v3.8.0.1
Consolidated Balance Sheets - USD ($)
Mar. 31, 2018
Mar. 25, 2017
Current assets:    
Cash and cash equivalents $ 235,604,000 $ 351,166,000
Marketable securities 26,397,000 99,813,000
Accounts receivable, net 100,801,000 119,974,000
Inventories 205,760,000 167,895,000
Prepaid assets 31,235,000 24,987,000
Other current assets 13,877,000 12,093,000
Total current assets 613,674,000 775,928,000
Long-term marketable securities 172,499,000 0
Property and equipment, net 191,154,000 168,139,000
Intangibles, net 111,547,000 135,188,000
Goodwill 288,718,000 286,767,000
Deferred tax assets 14,716,000 32,841,000
Other assets 37,809,000 14,607,000
Total assets 1,430,117,000 1,413,470,000
Current liabilities:    
Accounts payable 69,850,000 73,811,000
Accrued salaries and benefits 35,721,000 40,190,000
Software license agreements 21,981,000 14,990,000
Other accrued liabilities 12,657,000 15,084,000
Total current liabilities 140,209,000 144,075,000
Long-term liabilities:    
Debt 0 60,000,000
Software license agreements 27,765,000 3,146,000
Non-current income taxes 92,753,000 50,876,000
Other long-term liabilities 7,662,000 3,681,000
Total long-term liabilities 128,180,000 117,703,000
Stockholders’ equity:    
Preferred stock, 5.0 million shares authorized but unissued 0 0
Common stock, $0.001 par value, 280,000 shares authorized, 61,960 shares and 64,295 shares issued and outstanding at March 31, 2018 and March 25, 2017, respectively 62,000 64,000
Additional paid-in capital 1,312,372,000 1,259,215,000
Accumulated deficit (139,345,000) (107,014,000)
Accumulated other comprehensive loss (11,361,000) (573,000)
Total stockholders’ equity 1,161,728,000 1,151,692,000
Total liabilities and stockholders’ equity $ 1,430,117,000 $ 1,413,470,000
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Mar. 25, 2017
Statement of Financial Position [Abstract]    
Preferred stock, shares authorized but unissued (in shares) 5,000,000.0 5,000,000
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 280,000,000 280,000,000
Common stock, shares issued (in shares) 61,960,000 64,295,000
Common stock, shares outstanding (in shares) 61,960,000 64,295,000
v3.8.0.1
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Mar. 31, 2018
Mar. 25, 2017
Mar. 26, 2016
Income Statement [Abstract]      
Net sales $ 1,532,186 $ 1,538,940 $ 1,169,251
Cost of sales 771,470 781,125 614,411
Gross profit 760,716 757,815 554,840
Operating expenses      
Research and development 366,444 303,658 269,217
Selling, general and administrative 131,811 127,265 117,082
Asset impairment 0 9,842 0
Patent agreement and other 0 0 (11,670)
Total operating expenses 498,255 440,765 374,629
Income from operations 262,461 317,050 180,211
Interest income 4,762 1,676 877
Interest expense (1,153) (3,600) (3,308)
Other expense (971) (79) (1,791)
Income before income taxes 265,099 315,047 175,989
Provision for income taxes 103,104 53,838 52,359
Net income $ 161,995 $ 261,209 $ 123,630
Basic earnings per share (in dollars per share) $ 2.55 $ 4.12 $ 1.96
Diluted earnings per share (in dollars per share) $ 2.46 $ 3.92 $ 1.87
Basic weighted average common shares outstanding (in shares) 63,407 63,329 63,197
Diluted weighted average common shares outstanding (in shares) 65,951 66,561 65,993
v3.8.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2018
Mar. 25, 2017
Mar. 26, 2016
Statement of Comprehensive Income [Abstract]      
Net income $ 161,995 $ 261,209 $ 123,630
Other comprehensive income (loss), before tax      
Foreign currency translation gain (loss) 2,791 (826) 294
Unrealized gain (loss) on marketable securities (2,380) 47 (24)
Actuarial gain (loss) on defined benefit pension plan (14,729) (79) 2,660
Reclassification of actuarial (gain) loss to net income 0 (89) 49
Benefit (provision) for income taxes 3,530 42 (537)
Comprehensive income $ 151,207 $ 260,304 $ 126,072
v3.8.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2018
Mar. 25, 2017
Mar. 26, 2016
Cash flows from operating activities:      
Net income $ 161,995 $ 261,209 $ 123,630
Adjustments to net cash provided by operating activities:      
Depreciation and amortization 81,399 63,433 58,060
Stock compensation expense 48,741 39,593 33,506
Deferred income taxes 11,646 10,885 23,202
Loss on retirement or write-off of long-lived assets 626 10,387 2,753
(Payments) charges for defined benefit pension plan (10,929) 116 729
Excess tax benefit from employee stock awards 0 0 (3,850)
Other non-cash charges (3,864) 8,980 19,702
Net change in operating assets and liabilities:      
Accounts receivable, net 19,173 (31,442) 24,156
Inventories (37,865) (25,880) (57,819)
Other assets 16,824 575 (1,522)
Accounts payable 143 1,772 (41,456)
Accrued salaries and benefits (4,469) 18,951 (2,993)
Deferred income 0 0 (6,105)
Income taxes payable 22,983 10,969 (11,807)
Other accrued liabilities 12,308 203 (11,140)
Net cash provided by operating activities 318,711 369,751 149,046
Cash flows from investing activities:      
Maturities and sales of available-for-sale marketable securities 138,221 212,863 125,660
Purchases of available-for-sale marketable securities (238,434) (231,432) (22,570)
Purchases of property, equipment and software (55,180) (41,849) (41,569)
Investments in technology (29,323) (9,447) (4,519)
Acquisition of businesses, net of cash obtained 0 0 (36,759)
Net cash (used in) provided by investing activities (184,716) (69,865) 20,243
Cash flows from financing activities:      
Principal payments on long-term revolver (60,000) (100,439) (20,000)
Debt issuance costs 0 (2,152) 0
Payments on capital lease agreements 0 (699) 0
Issuance of common stock, net of shares withheld for taxes 4,417 16,518 6,617
Repurchase of stock to satisfy employee tax withholding obligations (17,806) (14,089) (6,861)
Repurchase and retirement of common stock (175,776) (15,439) (60,503)
Excess tax benefit from employee stock awards 0 0 3,850
Contingent consideration payments (392) (1,213) 0
Net cash used in financing activities (249,557) (117,513) (76,897)
Net (decrease) increase in cash and cash equivalents (115,562) 182,373 92,392
Cash and cash equivalents at beginning of period 351,166 168,793 76,401
Cash and cash equivalents at end of period 235,604 351,166 168,793
Cash payments during the year for:      
Income taxes 34,385 8,001 23,785
Interest $ 835 $ 2,947 $ 3,318
v3.8.0.1
Consolidated Statements of Stockholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income / (Loss) [Member]
Balance (in shares) at Mar. 28, 2015   63,085      
Balance at Mar. 28, 2015 $ 756,771 $ 63 $ 1,159,431 $ (400,613) $ (2,110)
Net income 123,630     123,630  
Change in unrealized gain (loss) on marketable securities, net of tax (15)       (15)
Change in defined benefit pension plan liability, net of tax 2,163       2,163
Change in foreign currency translation adjustments 294       294
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes (in shares)   1,552      
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes (242) $ 2 6,617 (6,861)  
Repurchase and retirement of common stock (in shares)   (2,007)      
Repurchase and retirement of common stock (60,503) $ (2)   (60,501)  
Amortization of deferred stock compensation 33,535   33,535    
Excess tax benefit from employee stock awards 3,850   3,850    
Balance (in shares) at Mar. 26, 2016   62,630      
Balance at Mar. 26, 2016 859,483 $ 63 1,203,433 (344,345) 332
Cumulative effect of adoption of new ASU | Accounting Standards Update 2016-09 [Member] 5,649     5,649  
Net income 261,209     261,209  
Change in unrealized gain (loss) on marketable securities, net of tax 31       31
Change in defined benefit pension plan liability, net of tax (110)       (110)
Change in foreign currency translation adjustments (826)       (826)
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes (in shares)   2,145      
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes 2,429 $ 2 16,516 (14,089)  
Repurchase and retirement of common stock (in shares)   (480)      
Repurchase and retirement of common stock (15,439) $ (1)   (15,438)  
Amortization of deferred stock compensation 39,593   39,593    
Excess tax benefit from employee stock awards (327)   (327)    
Balance (in shares) at Mar. 25, 2017   64,295      
Balance at Mar. 25, 2017 1,151,692 $ 64 1,259,215 (107,014) (573)
Cumulative effect of adoption of new ASU | Accounting Standards Update 2016-16 (747)     (747)  
Net income 161,995     161,995  
Change in unrealized gain (loss) on marketable securities, net of tax (1,630)       (1,630)
Change in defined benefit pension plan liability, net of tax (11,949)       (11,949)
Change in foreign currency translation adjustments 2,791       2,791
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes (in shares)   1,054      
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes (13,389) $ 1 4,416 (17,806)  
Repurchase and retirement of common stock (in shares)   (3,389)      
Repurchase and retirement of common stock (175,776) $ (3)   (175,773)  
Amortization of deferred stock compensation 48,741   48,741    
Balance (in shares) at Mar. 31, 2018   61,960      
Balance at Mar. 31, 2018 $ 1,161,728 $ 62 $ 1,312,372 $ (139,345) $ (11,361)
v3.8.0.1
Description of Business
12 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business
Description of Business

Description of Business
Cirrus Logic, Inc. (“Cirrus Logic,” “We,” “Us,” “Our,” or the “Company”) is a leader in high performance, low-power integrated circuits (“ICs”) for audio and voice signal processing applications. Cirrus Logic’s products span the entire audio signal chain, from capture to playback, providing innovative products for the world’s top smartphones, tablets, digital headsets, wearables and emerging smart home applications.
We were incorporated in California in 1984, became a public company in 1989, and were reincorporated in the State of Delaware in February 1999. Our primary facility housing engineering, sales and marketing, and administration functions is located in Austin, Texas. We also have offices in various other locations in the United States, United Kingdom, Sweden, Spain, Australia and Asia, including the People’s Republic of China, Hong Kong, South Korea, Japan, Singapore, and Taiwan. Our common stock, which has been publicly traded since 1989, is listed on the NASDAQ's Global Select Market under the symbol CRUS.
Basis of Presentation
We prepare financial statements on a 52- or 53-week year that ends on the last Saturday in March. Fiscal years 2017 and 2016 were 52-week years. Fiscal year 2018 was a 53-week year.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles (U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation of financial information.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the use of management estimates. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
v3.8.0.1
Summary of Significant Accounting Policies
12 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Cash and Cash Equivalents
Cash and cash equivalents consist primarily of money market funds, commercial paper, and U.S. Government Treasury and Agency instruments with original maturities of three months or less at the date of purchase.
Inventories
We use the lower of cost or net realizable value to value our inventories, with cost being determined on a first-in, first-out basis. One of the factors we consistently evaluate in the application of this method is the extent to which products are accepted into the marketplace. By policy, we evaluate market acceptance based on known business factors and conditions by comparing forecasted customer unit demand for our products over a specific future period, or demand horizon, to quantities on hand at the end of each accounting period.

On a quarterly and annual basis, we analyze inventories on a part-by-part basis. Product life cycles and the competitive nature of the industry are factors considered in the evaluation of customer unit demand at the end of each quarterly accounting period. Inventory on-hand in excess of forecasted demand is considered to have reduced market value and, therefore, the cost basis is adjusted to the lower of cost or net realizable value. Typically, market values for excess or obsolete inventories are considered to be zero. Inventory charges recorded for excess and obsolete inventory, including scrapped inventory, were $9.7 million and $6.7 million, in fiscal year 2018 and 2017, respectively. Inventory charges in fiscal year 2018 and 2017 related to a combination of quality issues and inventory exceeding demand.
Inventories were comprised of the following (in thousands):
 
 
March 31, 2018
 
March 25, 2017
Work in process
$
97,138

 
$
83,332

Finished goods
108,622

 
84,563

 
$
205,760

 
$
167,895


Property, Plant and Equipment, net
Property, plant and equipment is recorded at cost, net of depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis over estimated economic lives, ranging from three to 39 years. Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated useful life. Furniture, fixtures, machinery, and equipment are all depreciated over a useful life of 3 to 10 years, while buildings are depreciated over a period of up to 39 years. In general, our capitalized software is amortized over a useful life of 3 years, with capitalized enterprise resource planning software being amortized over a useful life of 10 years. Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred. Additionally, if impairment indicators exist, the Company will assess the carrying value of the associated asset. In the fourth quarter of fiscal year 2017, the Company reassessed the carrying value of the property located in Edinburgh, Scotland, resulting in an asset impairment charge of $9.8 million.
Property, plant and equipment was comprised of the following (in thousands):
 
 
March 31, 2018
 
March 25, 2017
Land
$
26,379

 
$
26,379

Buildings
71,354

 
74,266

Furniture and fixtures
22,138

 
14,231

Leasehold improvements
35,569

 
4,355

Machinery and equipment
143,509

 
123,054

Capitalized software
25,949

 
24,839

Construction in progress
6,086

 
22,972

Total property, plant and equipment
330,984

 
290,096

Less: Accumulated depreciation and amortization
(139,830
)
 
(121,957
)
Property, plant and equipment, net
$
191,154

 
$
168,139


Depreciation and amortization expense on property, plant, and equipment for fiscal years 2018, 2017, and 2016 was $27.7 million, $26.1 million, and $22.3 million, respectively.
Goodwill and Intangibles, net
Intangible assets include purchased technology licenses and patents that are reported at cost and are amortized on a straight-line basis over their useful lives, generally ranging from 1 to 10 years. Acquired intangibles include existing technology, core technology or patents, license agreements, in-process research & development, trademarks, tradenames, customer relationships, non-compete agreements, and backlog. These assets are amortized on a straight-line basis over lives ranging from one to fifteen years.
Goodwill is recorded at the time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. The Company tests goodwill and indefinite lived intangibles for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management’s assessment of qualitative factors to determine whether it is more likely than not that goodwill and other intangible assets are impaired. If management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists, then a quantitative impairment test will be performed involving management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in these evaluations. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. The Company has recorded no goodwill impairments in fiscal years 2018, 2017, and 2016. There were no material intangible asset impairments in fiscal years 2018, 2017, or 2016.
Long-Lived Assets
We test for impairment losses on long-lived assets and definite-lived intangibles used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. We measure any impairment loss by comparing the fair value of the asset to its carrying amount. We estimate fair value based on discounted future cash flows, quoted market prices, or independent appraisals.
Foreign Currency Translation
Some of the Company's subsidiaries utilize the local currency as the functional currency. The Company’s main entities, including the entities that generate the majority of sales and employ the majority of employees, are US dollar functional.
Defined Benefit Pension Plan
Defined benefit pension plans are accounted for based upon the provisions of ASC Topic 715, “Compensation — Retirement Benefits.
The funded status of the plan is recognized in the Consolidated Balance Sheet. Prior to the buy-in transaction discussed in Note 8, any re-measurement of plan assets and benefit obligations deemed necessary in an interim period, would be reflected in the Consolidated Balance Sheet in the subsequent interim period to reflect the overfunded or underfunded status of the plan.
The Company engages external actuaries on at least an annual basis to provide a valuation of the plan’s assets and projected benefit obligation and is used to record the net periodic pension cost. On a quarterly basis, the Company evaluated current information available to determine whether the plan’s assets and projected benefit obligation should be re-measured.

Concentration of Credit Risk
Financial instruments that potentially subject us to material concentrations of credit risk consist primarily of cash equivalents, marketable securities, long-term marketable securities, and trade accounts receivable. We are exposed to credit risk to the extent of the amounts recorded on the balance sheet. By policy, our cash equivalents, marketable securities, and long-term marketable securities are subject to certain nationally recognized credit standards, issuer concentrations, sovereign risk, and marketability or liquidity considerations.
In evaluating our trade receivables, we perform credit evaluations of our major customers’ financial condition and monitor closely all of our receivables to limit our financial exposure by limiting the length of time and amount of credit extended. In certain situations, we may require payment in advance or utilize letters of credit to reduce credit risk. By policy, we establish a reserve for trade accounts receivable based on the type of business in which a customer is engaged, the length of time a trade account receivable is outstanding, and other knowledge that we may possess relating to the probability that a trade receivable is at risk for non-payment.
We had three contract manufacturers, Pegatron, Jabil Circuits, and Hongfujin Precision who represented 24 percent, 18 percent, and 11 percent, respectively of our consolidated gross trade accounts receivable as of the end of fiscal year 2018. Hongfujin Precision, Protek and Jabil Circuits represented 20 percent, 15 percent, and 13 percent, respectively of our consolidated gross trade accounts receivable as of the end of fiscal year 2017. No other distributor or customer had receivable balances that represented more than 10 percent of consolidated gross trade accounts receivable as of the end of fiscal year 2018 and 2017.
Since the components we produce are largely proprietary and generally not available from second sources, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, from a distributor, or through a third-party manufacturer contracted to produce their end product. For fiscal years 2018, 2017, and 2016, our ten largest end customers represented approximately 92 percent, 92 percent, and 89 percent, of our sales, respectively. For fiscal years 2018, 2017, and 2016, we had one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 81 percent, 79 percent, and 66 percent, of the Company’s total sales, respectively. Samsung Electronics represented 15 percent of the Company’s total sales in fiscal year 2016. No other customer or distributor represented more than 10 percent of net sales in fiscal years 2018, 2017, or 2016.
Revenue Recognition
We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Prior to the fourth quarter of fiscal year 2016, we had a number of arrangements with distributors whereby we deferred revenue at the time of shipment of our products to those distributors. As part of those arrangements, when a distributor resold those products to an end customer, the Company would credit the distributor the difference between (1) the original distributor price and the distributor’s agreed upon margin and (2) the final sales price to the end customer (known as the “Ship and Debit Arrangement”). For those transactions, revenue was deferred until the product was resold by the distributor and we determined that the final sales price to the distributor was fixed or determinable. For certain of our smaller distributors, we did not have similar Ship and Debit Arrangements and the distributors were billed at a fixed upfront price. For those transactions, revenue was recognized upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company determined that the revenue recognition criteria were met.
In light of the fact that the distributor program had been declining as a portion of the overall business for several years, in fiscal year 2016 the Company performed a review of all distributor arrangements in an effort to streamline our distribution program and reduce overhead costs. Based upon this review, the Company terminated its Ship and Debit Arrangements with Distributors during the fourth quarter of fiscal year 2016. Subsequent to the termination of the Ship and Debit Arrangements, the Company began recognizing revenue for all distributors upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company’s final sales price to the distributor was fixed and determinable and the Company determined that all four criteria for revenue recognition were met.
Although the Company terminated its Ship and Debit Arrangements with all distributors along with certain ancillary agreements related to the Ship and Debit Arrangements, the Company continues to grant varying levels of stock rotation and price protection rights based on individual distributor agreements. To the extent these rights are implicated in any transaction with a distributor, we continue to evaluate their effect on when the revenue recognition criteria have been met.
Warranty Expense
We warrant our products and maintain a provision for warranty repair or replacement of shipped products. The accrual represents management’s estimate of probable returns. Our estimate is based on an analysis of our overall sales volume and historical claims experience. The estimate is re-evaluated periodically for accuracy.
Shipping Costs
Our shipping and handling costs are included in cost of sales for all periods presented in the Consolidated Statements of Income.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $1.4 million, $1.7 million, and $1.6 million, in fiscal years 2018, 2017, and 2016, respectively.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards and is recognized as an expense, on a ratable basis, over the vesting period, which is generally between 0 and 4 years. Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of stock options and performance awards (also called market stock units). The Company calculates the grant-date fair value for stock options and market stock units using the Black-Scholes valuation model and the Monte Carlo simulation, respectively. The use of valuation models requires the Company to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates. The grant-date fair value of restricted stock units is the market value at grant date multiplied by the number of units.
Income Taxes
We are required to calculate income taxes in each of the jurisdictions in which we operate. This process involves calculating the actual current tax liability as well as assessing temporary differences in the recognition of income or loss for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company evaluates the ability to realize its deferred tax assets based on all the facts and circumstances, including projections of future taxable income and expiration dates of carryover tax attributes.
The calculation of our tax liabilities involves assessing uncertainties with respect to the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. We recognize liabilities for uncertain tax positions based on the required two-step process. The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. A change in the recognition step or measurement step would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.
Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, we cannot assure that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material effect on our income tax provision and net income in the period or periods for which that determination is made. We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been made for all periods.
Net Income Per Share
Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. These potentially dilutive items consist primarily of outstanding stock options and restricted stock grants.
The following table details the calculation of basic and diluted earnings per share for fiscal years 2018, 2017, and 2016, (in thousands, except per share amounts):
 
 
Fiscal Years Ended
 
March 31, 2018
 
March 25, 2017
 
March 26, 2016
Numerator:
 
 
 
 
 
Net income
161,995

 
$
261,209

 
$
123,630

Denominator:
 
 
 
 
 
Weighted average shares outstanding
63,407

 
63,329

 
63,197

Effect of dilutive securities
2,544

 
3,232

 
2,796

Weighted average diluted shares
65,951

 
66,561

 
65,993

Basic earnings per share
$
2.55

 
$
4.12

 
$
1.96

Diluted earnings per share
$
2.46

 
$
3.92

 
$
1.87


The weighted outstanding shares excluded from our diluted calculation for the years ended March 31, 2018March 25, 2017, and March 26, 2016 were 326 thousand, 389 thousand, and 468 thousand, respectively, as the exercise price of certain outstanding stock options exceeded the average market price during the period.
Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments, unrealized gains and losses on investments classified as available-for-sale and actuarial gains and losses on our defined benefit pension plan assets. See Note 13 — Accumulated Other Comprehensive Loss for additional discussion.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606).  The purpose of this ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  The Company has completed the process of reviewing our customers’ contracts in respect of performance obligation identification and satisfaction, pricing, warranties, and return rights, among other considerations. Through this process, the Company currently expects an immaterial balance sheet impact to its first quarter fiscal year 2019 financials, upon adoption of this ASU. The standard may be adopted by full retrospective method, which applies retrospectively to each prior period presented, or by modified retrospective method with the cumulative effect adjustment recognized in beginning retained earnings as of the date of adoption. We anticipate using the modified retrospective adoption method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details.  Lessees would recognize operating leases on the balance sheet under this ASU — with the future lease payments recognized as a liability, measured at present value, and the right-of-use asset recognized for the lease term. A single lease cost would be recognized over the lease term. For terms less than twelve months, a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The modified retrospective approach is the only allowed adoption method. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon adoption, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption of this ASU.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  This ASU requires credit losses on available-for-sale debt securities to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings.  This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods.  Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods.  The Company is currently evaluating the impact of this ASU with no expected material impact.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.  This ASU relates to income tax consequences of non-inventory intercompany asset transfers.  This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods.  Early adoption is permitted, as of the beginning of an annual reporting period.  The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. The Company early adopted this ASU in the first quarter of fiscal year 2018 with a $0.7 million impact to beginning retained earnings.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  The update states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, and should be treated as an asset acquisition instead. This ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods.  Early adoption is permitted under specific circumstances, including in an interim period, with prospective application on or after the effective date. The Company adopted this ASU and applied the related guidance to an asset acquisition in the first quarter of fiscal year 2018.
In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.  This ASU eliminates step two of the goodwill impairment test. An impairment charge is to be recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods.  Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017, and should be applied prospectively. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. The Company is currently evaluating the impact of this ASU with no expected material impact.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU applies to any company that changes the terms or conditions of a share-based award, considered a modification. Modification accounting would be applied unless certain conditions were met related to the fair value of the award, the vesting conditions and the classification of the modified award. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The standard should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the financial statement impact of this ASU with no expected material impact.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows for the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This ASU is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The standard should be applied in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in tax rate is recognized. The Company is currently evaluating the potential financial statement impact of this ASU.
v3.8.0.1
Marketable Securities
12 Months Ended
Mar. 31, 2018
Marketable Securities [Abstract]  
Marketable Securities
Marketable Securities

The Company’s investments have been classified as available-for-sale securities in accordance with U.S. GAAP. Marketable securities are categorized on the Consolidated Balance Sheet as “Marketable securities” within the short-term or long-term classification, as appropriate.

The following table is a summary of available-for-sale securities (in thousands):
 
As of March 31, 2018
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair Value
(Net Carrying Amount)
Corporate debt securities
$
185,636

 
$
4

 
$
(2,318
)
 
$
183,322

Non-US government securities
14,730

 

 
(111
)
 
14,619

Certificates of deposit
500

 

 

 
500

Agency discount notes
459

 

 
(4
)
 
455

Total securities
$
201,325

 
$
4

 
$
(2,433
)
 
$
198,896


The Company typically invests in highly-rated securities with original maturities generally ranging from one to three years. The Company's specifically identified gross unrealized loss of $2.4 million related to securities with a total amortized cost of approximately $198.2 million at March 31, 2018. No securities had been in a continuous unrealized loss position for more than 12 months as of March 31, 2018. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipated or actual changes in credit rating and duration management.  When evaluating an investment for other-than-temporary impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of March 31, 2018, the Company does not consider any of its investments to be other-than-temporarily impaired.
 
As of March 25, 2017
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair Value
(Net Carrying Amount)
Corporate debt securities
$
33,350

 
$

 
$
(20
)
 
$
33,330

Commercial paper
66,518

 

 
(35
)
 
66,483

Total securities
$
99,868

 
$

 
$
(55
)
 
$
99,813


The Company’s specifically identified gross unrealized losses of $55 thousand related to securities with a total amortized cost of approximately $99.9 million at March 25, 2017. Four securities had been in a continuous unrealized loss position for more than 12 months as of March 25, 2017. The gross unrealized loss on these securities was less than one tenth of one percent of the position value. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipated or actual changes in credit rating and duration management.  When evaluating an investment for other-than-temporary impairment, the Company reviews factors including the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, changes in market interest rates and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of March 25, 2017, the Company did not consider any of its investments to be other-than-temporarily impaired.
The cost and estimated fair value of available-for-sale investments by contractual maturity were as follows:
 
 
March 31, 2018
 
March 25, 2017
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Within 1 year
$
26,560

 
$
26,397

 
$
99,868

 
$
99,813

After 1 year
174,765

 
172,499

 

 

Total
$
201,325

 
$
198,896

 
$
99,868

 
$
99,813

v3.8.0.1
Fair Value of Financial Instruments
12 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Fair Value of Financial Instruments

The Company has determined that the only assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents, investment portfolio, pension plan assets/liabilities and contingent consideration. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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.
The Company’s cash equivalents and investment portfolio assets consist of corporate debt securities, money market funds, non-U.S government securities, securities of U.S. government-sponsored enterprises, commercial paper and certificates of deposit and are reflected on our Consolidated Balance Sheet under the headings cash and cash equivalents, marketable securities, and long-term marketable securities. The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party pricing providers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.
In connection with one of the Company’s second quarter fiscal year 2016 acquisitions, the Company reported contingent consideration based upon achievement of certain milestones.  This liability was classified as Level 3 and was valued using a discounted cash flow model.  The assumptions used in preparing the discounted cash flow included discount rate estimates and cash flow amounts. The final payment related to the contingent consideration was made in the fourth quarter of fiscal year 2018 and no further liability remains at March 31, 2018.
The Company’s long-term revolving facility, described in Note 7, bears interest at a base rate plus applicable margin or LIBOR plus applicable margin. As of March 31, 2018, there are no amounts drawn under the facility and the fair value is zero.
As of March 31, 2018 and March 25, 2017, the Company classified all investment portfolio assets and pension plan assets (discussed in Note 8) as Level 1 or Level 2 assets and liabilities. The only Level 3 liability was the contingent consideration described above and below. The Company has no Level 3 assets. There were no transfers between Level 1, Level 2, or Level 3 measurements for the years ending March 31, 2018 and March 25, 2017.
The following summarizes the fair value of our financial instruments, exclusive of pension plan assets detailed in Note 8, at March 31, 2018 (in thousands):
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
Level 1
 
Significant
Other
Observable
Inputs
Level 2
 
Significant
Unobservable
Inputs
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
Money market funds
$
211,891

 
$

 
$

 
$
211,891

Available-for-sale securities
 
 
 
 
 
 
 
Corporate debt securities
$

 
$
183,322

 
$

 
$
183,322

Non-US government securities

 
14,619

 

 
14,619

Certificates of deposit

 
500

 

 
500

Agency discount notes

 
455

 

 
455

 
$

 
$
198,896

 
$

 
$
198,896


The following summarizes the fair value of our financial instruments at March 25, 2017 (in thousands):
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
Level 1
 
Significant
Other
Observable
Inputs
Level 2
 
Significant
Unobservable
Inputs
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
Money market funds
$
313,982

 
$

 
$

 
$
313,982

Available-for-sale securities
 
 
 
 
 
 
 
Corporate debt securities
$

 
$
33,330

 
$

 
$
33,330

Commercial paper

 
66,483

 

 
66,483

 
$

 
$
99,813

 
$

 
$
99,813

Liabilities:
 
 
 
 
 
 
 
Other accrued liabilities
 
 
 
 
 
 
 
Contingent consideration — short-term
$

 
$

 
$
4,695

 
$
4,695


Contingent consideration
The following summarizes the fair value of the contingent consideration at March 31, 2018:
 
 
Maximum Value if
Milestones Achieved
(in thousands)
 
Estimated
Discount
Rate (%)
 
Fair Value
(in thousands)
Tranche A — 18 month earn out period
5,000

 
7.0
 

Tranche B — 30 month earn out period
5,000

 
7.7
 


 
 
 
Fiscal Year Ended
 
 
March 31, 2018
 
March 25, 2017
 
 
(in thousands)
Beginning balance
 
$
4,695

 
$
9,068

Adjustment to estimates (research and development expense)
 
(4,328
)
 
(3,579
)
Payout of Tranche A contingent consideration
 

 
(1,213
)
Payout of Tranche B contingent consideration
 
(392
)
 

Fair value charge recognized in earnings (research and development expense)
 
25

 
419

Ending balance
 
$

 
$
4,695


The valuation of contingent consideration was based on a weighted-average discounted cash flows model.  The fair value was reviewed and estimated on a quarterly basis based on the probability of achieving defined milestones and current interest rates.  Changes in any of the unobservable inputs used in the fair value measurement of contingent consideration resulted in a lower or higher fair value.  A change in projected outcomes if milestones were achieved was accompanied by a directionally similar change in fair value.  A change in discount rate was accompanied by a directionally opposite change in fair value.  Changes to the fair value due to changes in assumptions were reported in research and development expense in the Consolidated Statements of Income. In the second quarter of fiscal year 2017, changes in the probability of achieving certain milestones associated with Tranche A of the earn-out were determined following a review of product shipment forecasts within the earn-out period.  The revised estimates reduced the fair value of the liability prior to the pay out in the fourth quarter of fiscal year 2017.  In the first quarter of the current fiscal year, changes in the probability of achieving certain milestones associated with Tranche B of the earn-out were determined following a review of product shipment forecasts within the earn-out period.  The revised estimates reduced the fair value of the liability prior to the pay out in the fourth quarter of fiscal year 2018.
v3.8.0.1
Accounts Receivable, Net
12 Months Ended
Mar. 31, 2018
Accounts Receivable, Net [Abstract]  
Accounts Receivable, Net
Accounts Receivable, net

The following are the components of accounts receivable, net (in thousands):
 
 
 
March 31, 2018
 
March 25, 2017
Gross accounts receivable
 
$
101,004

 
$
120,408

Allowance for doubtful accounts
 
(203
)
 
(434
)
Accounts receivable, net
 
$
100,801

 
$
119,974


The following table summarizes the changes in the allowance for doubtful accounts (in thousands):
 
Balance, March 28, 2015
$
(356
)
Bad debt expense, net of recoveries
(119
)
Balance, March 26, 2016
(475
)
Adjustment to bad debt
41

Balance, March 25, 2017
(434
)
Adjustment to bad debt
231

Balance, March 31, 2018
$
(203
)

Recoveries on bad debt were immaterial for the three years presented above.
v3.8.0.1
Intangibles, net and Goodwill
12 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangibles, net and Goodwill
Intangibles, net and Goodwill

The intangibles, net balance included on the Consolidated Balance Sheet was $111.5 million and $135.2 million at March 31, 2018 and March 25, 2017, respectively.
The following information details the gross carrying amount and accumulated amortization of our intangible assets (in thousands):
 
 
 
March 31, 2018
 
March 25, 2017
Intangible Category / Weighted-Average Amortization
period (in years)
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Core technology (a)
 
$
1,390

 
$
(1,390
)
 
$
1,390

 
$
(1,390
)
License agreement (a)
 
440

 
(440
)
 
440

 
(440
)
Existing technology (6.1)
 
117,976

 
(75,048
)
 
117,975

 
(53,960
)
In-process research & development (“IPR&D”) (5.8)
 
97,972

 
(49,556
)
 
72,750

 
(24,245
)
Trademarks and tradename (10.0)
 
3,037

 
(2,333
)
 
3,037

 
(2,208
)
Customer relationships (10.0)
 
15,381

 
(5,732
)
 
15,381

 
(4,191
)
Backlog (a)
 
220

 
(220
)
 
220

 
(220
)
Non-compete agreements (a)
 
470

 
(470
)
 
470

 
(470
)
Technology licenses (3.0)
 
28,063

 
(18,213
)
 
24,540

 
(13,891
)
Total
 
$
264,949

 
$
(153,402
)
 
$
236,203

 
$
(101,015
)

 
(a)
Intangible assets are fully amortized.
Amortization expense for intangibles in fiscal years 2018, 2017, and 2016 was $53.7 million, $37.4 million, and $35.7 million, respectively. The following table details the estimated aggregate amortization expense for all intangibles owned as of March 31, 2018, for each of the five succeeding fiscal years and in the aggregate thereafter (in thousands):
 
For the year ended March 30, 2019
$
46,867

For the year ended March 28, 2020
$
27,540

For the year ended March 27, 2021
$
16,094

For the year ended March 26, 2022
$
12,145

For the year ended March 25, 2023
$
6,663

Thereafter
$
2,238


The goodwill balance included on the Consolidated Balance Sheet is $288.7 million and $286.8 million at March 31, 2018 and March 25, 2017, respectively.
v3.8.0.1
Revolving Credit Facility
12 Months Ended
Mar. 31, 2018
Line of Credit Facility [Abstract]  
Revolving Credit Facility
Revolving Credit Facility

On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto, for the purpose of refinancing an existing credit facility and providing ongoing working capital. The Amended Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Amended Facility”). The Amended Facility matures on July 12, 2021.  The Amended Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Amended Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.
Borrowings under the Amended Facility may, at Cirrus Logic’s election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR Rate plus the applicable margin (“LIBOR Rate Loans”).  The applicable margin ranges from 0% to 0.50% per annum for Base Rate Loans and 1.25% to 2.00% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below). A commitment fee accrues at a rate per annum ranging from 0.20% to 0.30% (based on the Leverage Ratio) on the average daily unused portion of the commitment of the lenders. The Amended Credit Agreement contains certain financial covenants providing that (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four consecutive quarters must not be greater than 3.00 to 1.00 (the “Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive fiscal quarters to consolidated fixed charges (including amounts paid in cash for consolidated interest expenses, capital expenditures, scheduled principal payments of indebtedness, and income taxes) for the prior four consecutive fiscal quarters must not be less than 1.25 to 1.00 as of the end of each fiscal quarter.  The Amended Credit Agreement also contains negative covenants limiting the Company’s or any Subsidiary’s ability to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.
As of March 31, 2018, the Company had no amounts outstanding under the Amended Facility and was in compliance with all covenants under the Amended Credit Facility.
v3.8.0.1
Postretirement Benefit Plans
12 Months Ended
Mar. 31, 2018
Retirement Benefits [Abstract]  
Pension Benefit Plans
Postretirement Benefit Plans

Defined Benefit Pension Plan
As a result of our acquisition of Wolfson in fiscal year 2015, the Company now fully funds a defined benefit pension scheme (“the Scheme”), for some of the employees in the United Kingdom. The Scheme was closed to new participants as of July 2, 2002.  As of April 30, 2011, the participants in the Scheme no longer accrue benefits and therefore the Company will not be required to pay contributions in respect of future accrual.
The Scheme is a trustee-administered fund that is legally separate from the Company, which holds the pension plan assets to meet long-term pension liabilities. The pension fund trustees were comprised of one employee and one employer representative and an independent chairman until November 1, 2017, when an independent corporate trustee was appointed sole trustee. The trustees are required by law to act in the best interests of the Scheme’s beneficiaries and the trustees are responsible, in consultation with the Company, for setting certain policies (including the investment policies and strategies) of the fund.
The Company initiated an Enhanced Transfer Value (ETV) offer to 49 Scheme participants in fiscal year 2017.  The ETV offer expired on December 23, 2016, and 9 participants accepted. As a result, the Company paid the required ETV contribution of $0.5 million and recorded the associated pension expense of $0.4 million.
During fiscal year 2018, the Company authorized the termination of the Scheme under which 60 participants had accrued benefits. On March 16, 2018, the Scheme completed a buy-in transaction whereby the assets of the Scheme, together with a final contribution from the Company of $11.0 million, were invested in a bulk purchase annuity contract that fully insures the benefits payable to the members of the Scheme. As the buy-in transaction has resulted in the defined benefit obligations being fully insured, the Company has no further material contributions to make.
The bulk purchase annuity contract is structured to enable the Scheme to move to full buy-out (following which the insurance company would become directly responsible for the pension payments) and the intention is to proceed on this basis. When the buy-out is complete, a settlement loss will be recognized which will include any unamortized loss currently recorded within Other Comprehensive Income.
The following tables set forth the benefit obligation, the fair value of plan assets, and the funded status of the Scheme (in thousands): 
 
 
March 31,
2018
 
March 25,
2017
Change in benefit obligation:
 
 
 
 
Beginning balance
 
$
21,123

 
$
23,968

Interest cost
 
651

 
759

Plan settlements
 

 
(4,517
)
Benefits paid and expenses
 
(312
)
 
(264
)
Change in foreign currency exchange rate
 
2,869

 
(2,763
)
Actuarial (gain) / loss
 
16,270

 
3,940

Total benefit obligation ending balance
 
40,601

 
21,123

Change in plan assets:
 
 
 
 
Beginning balance
 
22,143

 
25,688

Actual return on plan assets
 
2,700

 
3,933

Employer contributions
 
12,877

 
990

Plan settlements
 

 
(5,243
)
Change in foreign currency exchange rate
 
3,193

 
(2,961
)
Benefits paid and expenses
 
(312
)
 
(264
)
Fair value of plan assets ending balance
 
40,601

 
22,143

Funded status of Scheme at end of year
 
$

 
$
1,020


The assets and obligations of the Scheme are denominated in British Pound Sterling. Following the purchase of the bulk purchase annuity contract as of March 31, 2018, the Scheme is fully insured and the net funded status is zero as reflected in the Company’s Consolidated Balance Sheet under the caption “Other assets”. The Company’s plan assets and obligations are measured as of the fiscal year-end. As of March 31, 2018, the plan assets and obligations were measured with reference to the price of the bulk purchase annuity contract. The weighted-average discount rate assumption used to determine benefit obligations as of March 25, 2017 and March 26, 2016 was 2.7%, and 3.6%, respectively.
The components of the Company’s net periodic pension expense (income) are as follows (in thousands):
 
 
 
Fiscal Years Ended
 
 
March 31,
2018
 
March 25,
2017
 
March 26,
2016
Expenses
 
$

 
$

 
$
15

Interest cost
 
651

 
759

 
821

Expected return on plan assets
 
(1,159
)
 
(1,126
)
 
(1,212
)
Settlement (gain) loss
 

 
1,063

 

Amortization of actuarial (gain) loss
 

 
(89
)
 
49

 
 
$
(508
)
 
$
607

 
$
(327
)

The following weighted-average assumptions were used to determine net periodic benefit costs for the year ended March 31, 2018March 25, 2017 and March 26, 2016:
 
 
 
2018
 
2017
 
2016
Discount rate
 
2.70
%
 
3.60
%
 
3.20
%
Expected long-term return on plan assets
 
4.23
%
 
4.93
%
 
4.65
%

We report and measure the plan assets of our defined benefit pension at fair value. The Company’s pension plan assets consist of insurance contracts, cash, equity securities, corporate debt securities, and diversified growth funds. The fair value of the pension plan assets as of March 31, 2018 is based on the price of the bulk purchase annuity contract. In previous years, the fair value of the pension plan assets was determined through an external actuarial valuation, following a similar process of obtaining inputs as described above.
The table below sets forth the fair value of our plan assets as of March 31, 2018, using the same three-level hierarchy of fair-value inputs described in Note 4 (in thousands): 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
Level 1
 
Significant
Other
Observable
Inputs
Level 2
 
Significant
Unobservable
Inputs
Level 3
 
Total
Plan Assets:
 
 
 
 
 
 
 
 
Insurance contracts
 
$

 
$
40,601

 
$

 
$
40,601

The table below sets forth the fair value of our plan assets as of March 25, 2017, (in thousands): 
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
Level 1
 
Significant
Other
Observable
Inputs
Level 2
 
Significant
Unobservable
Inputs
Level 3
 
Total
Plan Assets:
 
 
 
 
 
 
 
 
Cash
 
$
160

 
$

 
$

 
$
160

Pension funds
 

 
21,983

 

 
21,983

 
 
$
160

 
$
21,983

 
$

 
$
22,143



Amounts recognized in accumulated other comprehensive loss for the period that have not yet been recognized as components of net periodic benefit cost consist of (in thousands): 
 
Fiscal Year
 
2018
Net actuarial loss
$
(14,729
)
Accumulated other comprehensive loss, before tax
$
(14,729
)

When the buy-out described above is complete, the settlement loss recognized will include the net unamortized loss of $11.2 million currently recorded within Other Comprehensive Income as of March 31, 2018.
The Company contributed $12.9 million to the pension plan in fiscal year 2018. No benefit payments, reflecting expected future service, are expected to be paid in the future by the Company due to the buy-out discussed above.
The expected long-term return on plan assets is based on historical actual return experience and estimates of future long-term performance with consideration to the expected investment mix of the plan assets. It is the policy of the Trustees and the Company to review the investment strategy periodically. The Trustees’ investment objectives and the processes undertaken to measure and manage the risks inherent in the Scheme investment strategy are illustrated by the current asset allocation. The current mix of the assets is as follows: 
 
 
Actual Allocation
 
 
2018
 
2017
Equity securities
 
%
 
33
%
Corporate bonds
 
%
 
48
%
Diversified growth
 
%
 
19
%
Insurance contracts
 
100
%
 
%
Total
 
100
%
 
100
%

See the related fair value of the assets above.
The Scheme previously exposed the Company to actuarial risks such as investment (market) risk, interest rate risk, mortality risk, longevity risk and currency risk. A decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to the Scheme liabilities and may give rise to increased benefit expenses in future periods. Caps on inflationary increases are currently in place to protect the Scheme against extreme inflation, however. Following the purchase of the bulk purchase annuity contract, the Scheme is fully insured and not exposed to these risks.
Defined Contribution Plans
We have Defined Contribution Plans (“the Plans”) covering all of our qualifying employees. Under the Plans, employees may elect to contribute any percentage of their annual compensation up to the annual regulatory limits. The Company made matching employee contributions of $6.7 million, $5.5 million, and $4.3 million during fiscal years 2018, 2017, and 2016, respectively.
v3.8.0.1
Equity Compensation
12 Months Ended
Mar. 31, 2018
Share-based Compensation [Abstract]  
Equity Compensation
Equity Compensation

The Company is currently granting equity awards from the 2006 Stock Incentive Plan (the “Plan”), which was approved by stockholders in July 2006. The Plan provides for granting of stock options, restricted stock awards, performance awards, phantom stock awards, and bonus stock awards, or any combination of the foregoing.  To date, the Company has granted stock options, restricted stock awards, phantom stock awards (also called restricted stock units), and performance awards (also called market stock units) under the Plan. Each stock option granted reduces the total shares available for grant under the Plan by one share. Each full value award granted (including restricted stock awards, restricted stock units and market stock units) reduces the total shares available for grant under the Plan by 1.5 shares. Stock options generally vest between zero and four years, and are exercisable for a period of ten years from the date of grant.  Restricted stock units are generally subject to vesting from zero to three years, depending upon the terms of the grant. Market stock units are subject to a vesting schedule of three years.
The following table summarizes the activity in total shares available for grant (in thousands):
 
 
Shares
 
Available for
 
Grant
Balance, March 28, 2015
3,896

Shares added
4,900

Granted
(2,676
)
Forfeited
167

Balance, March 26, 2016
6,287

Shares added

Granted
(1,719
)
Forfeited
124

Balance, March 25, 2017
4,692

Shares added

Granted
(1,755
)
Forfeited
128

Balance, March 31, 2018
3,065


As of March 31, 2018, approximately 11.9 million shares of common stock were reserved for issuance under the Plan.

Stock Compensation Expense
The following table summarizes the effects of stock-based compensation on cost of goods sold, research and development, sales, general and administrative, pre-tax income, and net income after taxes for shares granted under the Plan (in thousands, except per share amounts):
 
 
 
Fiscal Year
 
 
2018
 
2017
 
2016
Cost of sales
 
$
1,474

 
$
1,071

 
$
1,145

Research and development
 
26,137

 
21,186

 
17,173

Sales, general and administrative
 
21,130

 
17,336

 
15,188

Effect on pre-tax income
 
48,741

 
39,593

 
33,506

Income Tax Benefit
 
(5,953
)
 
(12,482
)
 
(10,306
)
Total share-based compensation expense (net of taxes)
 
42,788

 
27,111

 
23,200

Share-based compensation effects on basic earnings per share
 
$
0.67

 
$
0.43

 
$
0.37

Share-based compensation effects on diluted earnings per share
 
0.65

 
0.41

 
0.35


The total share based compensation expense included in the table above and which is attributable to restricted stock units and market stock units was $44.2 million, $35.5 million, $30.3 million, for fiscal years 2018, 2017, and 2016, respectively. Share based compensation expense recognized is presented within operating activities in the Consolidated Statement of Cash Flows.
As of March 31, 2018, there was $83.1 million of compensation costs related to non-vested stock options, restricted stock units, and market stock units granted under the Company’s equity incentive plans not yet recognized in the Company’s financial statements. The unrecognized compensation cost is expected to be recognized over a weighted average period of 1.27 years for stock options, 1.44 years for restricted stock units, and 1.42 years for market stock units.
In addition to the income tax benefit of share-based compensation expense shown in the table above, the Company recognized excess tax benefits of $11.7 million and $22.9 million in fiscal years 2018 and 2017, respectively, as a result of the Company’s early adoption of ASU 2016-09. No excess tax benefits were recognized within income tax expense in fiscal year 2016.
Stock Options
We estimated the fair value of each stock option granted on the date of grant using the Black-Scholes option-pricing model using a dividend yield of zero and the following additional assumptions:
 
 
 
March 31, 2018
 
March 25, 2017
 
March 26, 2016
Expected stock price volatility
 
37.36
%
 
47.66
%
 
40.13 - 45.07%
Risk-free interest rate
 
1.67
%
 
1.13
%
 
0.94 - 1.05%
Expected term (in years)
 
3.03

 
2.79

 
2.72 - 2.97

The Black-Scholes valuation calculation requires us to estimate key assumptions such as stock price volatility, expected term, risk-free interest rate and dividend yield. The expected stock price volatility is based upon implied volatility from traded options on our stock in the marketplace. The expected term of options granted is derived from an analysis of historical exercises and remaining contractual life of stock options, and represents the period of time that options granted are expected to be outstanding after becoming vested. The risk-free interest rate reflects the yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption. Finally, we have never paid cash dividends, do not currently intend to pay cash dividends, and thus have assumed a zero percent dividend yield.
Using the Black-Scholes option valuation model, the weighted average estimated fair values of employee stock options granted in fiscal years 2018, 2017, and 2016, were $19.87, $22.84, and $12.58, respectively.
During fiscal years 2018, 2017, and 2016, we received a net $4.4 million, $16.4 million, $6.5 million, respectively, from the exercise of 0.2 million, 1.4 million, and 0.8 million, respectively, stock options granted under the Company’s Stock Plan.
The total intrinsic value of stock options exercised during fiscal year 2018, 2017, and 2016, was $9.8 million, $52.2 million, and $19.7 million, respectively. Intrinsic value represents the difference between the market value of the Company’s common stock at the time of exercise and the strike price of the stock option.
Additional information with respect to stock option activity is as follows (in thousands, except per share amounts):
 
 
 
Outstanding Options
 
 
Number
 
Weighted
Average
Exercise Price
Balance, March 28, 2015
 
3,333

 
$
14.31

Options granted
 
387

 
31.39

Options exercised
 
(773
)
 
8.46

Options forfeited
 

 

Options expired
 
(22
)
 
35.41

Balance, March 26, 2016
 
2,925

 
$
17.96

Options granted
 
215

 
54.65

Options exercised
 
(1,382
)
 
11.87

Options forfeited
 

 

Options expired
 

 

Balance, March 25, 2017
 
1,758

 
$
27.25

Options granted
 
216

 
55.72

Options exercised
 
(234
)
 
18.84

Options forfeited
 

 

Options expired
 

 

Balance, March 31, 2018
 
1,740

 
$
31.91


Additional information with regards to outstanding options that are vesting, expected to vest, or exercisable as of March 31, 2018 is as follows (in thousands, except years and per share amounts):
 
 
 
Number of
Options
 
Weighted
Average
Exercise price
 
Weighted Average
Remaining Contractual
Term (years)
 
Aggregate
Intrinsic Value
Vested and expected to vest
 
1,738

 
$
31.89

 
6.11
 
$
21,446

Exercisable
 
1,182

 
$
25.20

 
4.96
 
$
19,243


In accordance with U.S. GAAP, stock options outstanding that are expected to vest are presented net of estimated future option forfeitures, which are estimated as compensation costs are recognized. Options with a fair value of $3.8 million, $3.8 million, and $3.4 million, became vested during fiscal years 2018, 2017, and 2016, respectively.
The following table summarizes information regarding outstanding and exercisable options as of March 31, 2018 (in thousands, except per share amounts):
 
 
 
Options Outstanding
 
Options Exercisable
 
 
 
 
Weighted Average
Remaining
Contractual Life
 
Weighted
Average Exercise
 
Number
 
Weighted
Average
Range of Exercise Prices
 
Number
 
(years)
 
Price
 
Exercisable
 
Exercise Price
$2.90 - $16.25
 
403

 
2.58
 
$
13.09

 
403

 
$
13.09

$16.28 - $23.34
 
354

 
5.87
 
21.78

 
320

 
21.91

$23.80 - $23.80
 
3

 
5.43
 
23.80

 
3

 
23.80

$31.25 - $31.25
 
321

 
7.60
 
31.25

 
170

 
31.25

$32.29 - $54.65
 
443

 
6.74
 
46.06

 
286

 
42.37

$55.72 - $55.72
 
216

 
9.59
 
55.72

 

 

 
 
1,740

 
6.11
 
$
31.91

 
1,182

 
$
25.20


As of March 31, 2018 and March 25, 2017, the number of options exercisable was 1.2 million and 1.1 million, respectively.
Restricted Stock Units
Commencing in fiscal year 2011, the Company began granting restricted stock units (“RSU’s”) to select employees. These awards are valued as of the grant date and amortized over the requisite vesting period. Generally, RSU’s vest 100 percent on the first to third anniversary of the grant date depending on the vesting specifications. A summary of the activity for RSU’s in fiscal year 2018, 2017, and 2016 is presented below (in thousands, except year and per share amounts):
 
 
 
Shares
 
Weighted
Average
Fair Value
March 28, 2015
 
2,821

 
$
25.57

Granted
 
1,437

 
31.51

Vested
 
(992
)
 
32.48

Forfeited
 
(103
)
 
24.75

March 26, 2016
 
3,163

 
26.14

Granted
 
947

 
52.40

Vested
 
(1,032
)
 
24.67

Forfeited
 
(83
)
 
28.40

March 25, 2017
 
2,995

 
34.91

Granted
 
936

 
55.79

Vested
 
(1,077
)
 
24.79

Forfeited
 
(85
)
 
41.09

March 31, 2018
 
2,769

 
$
45.70



The aggregate intrinsic value of RSU’s outstanding as of March 31, 2018 was $112.5 million. Additional information with regards to outstanding restricted stock units that are expected to vest as of March 31, 2018, is as follows (in thousands, except year and per share amounts):
 
 
 
Shares
 
Weighted
Average
Fair Value
 
Weighted Average
Remaining Contractual
Term (years)
Expected to vest
 
2,682

 
$
45.53

 
1.42

RSU’s outstanding that are expected to vest are presented net of estimated future forfeitures, which are estimated as compensation costs are recognized. RSU’s with a fair value of $26.7 million and $25.5 million became vested during fiscal years 2018 and 2017, respectively. The majority of RSUs that vested in 2018 and 2017 were net settled such that the Company withheld a portion of the shares at fair value to satisfy tax withholding requirements. In fiscal years 2018 and 2017, the vesting of RSU’s reduced the authorized and unissued share balance by approximately 1.1 million and 1.0 million, respectively. Total shares withheld and subsequently retired out of the Plan were approximately 0.3 million and 0.3 million, and total payments for the employees’ tax obligations to taxing authorities were $17.8 million and $14.1 million for fiscal years 2018 and 2017, respectively.
Market Stock Units
In fiscal year 2015, the Company began granting market stock units (“MSU’s”) to select employees. MSU’s vest based upon the relative total shareholder return (“TSR”) of the Company as compared to that of the Philadelphia Semiconductor Index (“the Index”). The requisite service period for these MSU’s is also the vesting period, which is three years. The fair value of each MSU granted was determined on the date of grant using the Monte Carlo simulation, which calculates the present value of the potential outcomes of future stock prices of the Company and the Index over the requisite service period. The fair value is based on the risk-free rate of return, the volatilities of the stock price of the Company and the Index, the correlation of the stock price of the Company with the Index, and the dividend yield.
The fair values estimated from the Monte Carlo simulation were calculated using a dividend yield of zero and the following additional assumptions:
 
 
 
Year Ended
 
 
March 31,
2018
 
March 25,
2017
Expected stock price volatility
 
37.36
%
 
47.66
%
Risk-free interest rate
 
1.74
%
 
0.98
%
Expected term (in years)
 
3.00

 
3.00



Using the Monte Carlo simulation, the weighted average estimated fair value of the MSU’s granted in fiscal year 2018 was $63.36. A summary of the activity for MSU’s in fiscal year 2018, 2017, and 2016 is presented below (in thousands, except year and per share amounts):
 
 
 
Shares
 
Weighted
Average
Fair Value
March 28, 2015
 
35

 
$
22.00

Granted
 
90

 
39.86

Vested
 

 

Forfeited
 

 

March 26, 2016
 
125

 
$
34.85

Granted
 
55

 
75.58

Vested