LOGITECH INTERNATIONAL SA, 10-K filed on 5/21/2018
Annual Report
v3.8.0.1
Document and Entity Information - USD ($)
12 Months Ended
Mar. 31, 2018
May 04, 2018
Sep. 29, 2017
Document and Entity Information      
Entity Registrant Name LOGITECH INTERNATIONAL SA    
Document Period End Date Mar. 31, 2018    
Entity Central Index Key 0001032975    
Document Type 10-K    
Amendment Flag false    
Current Fiscal Year End Date --03-31    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Common Stock, Shares Outstanding   165,449,160  
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Entity Public Float     $ 5,609,748,434
v3.8.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS
shares in Thousands, $ in Thousands
12 Months Ended
Mar. 31, 2018
USD ($)
$ / shares
shares
Mar. 31, 2017
USD ($)
$ / shares
shares
Mar. 31, 2016
USD ($)
$ / shares
shares
Income Statement [Abstract]      
Net sales $ 2,566,863 $ 2,221,427 $ 2,018,100
Cost of goods sold 1,648,744 1,395,211 1,337,053
Amortization of intangible assets and purchase accounting effect on inventory 8,878 6,175 0
Gross profit 909,241 820,041 681,047
Operating expenses:      
Marketing and selling 435,489 379,641 319,015
Research and development 143,760 130,525 113,176
General and administrative 96,353 100,270 101,012
Amortization of intangible assets and acquisition-related costs 8,930 5,814 984
Change in fair value of contingent consideration for business acquisition (4,908) (8,092) 0
Restructuring charges (credits), net (116) 23 17,802
Total operating expenses 679,508 608,181 551,989
Operating income 229,733 211,860 129,058
Interest income 4,969 1,452 790
Other income (expense), net (2,437) 1,677 1,624
Income from continuing operations before income taxes 232,265 214,989 131,472
Provision for income taxes 23,723 9,113 3,110
Net income from continuing operations 208,542 205,876 128,362
Loss from discontinued operations, net of income taxes 0 0 (9,045)
Net income $ 208,542 $ 205,876 $ 119,317
Net income (loss) per share - basic:      
Continuing operations (in dollars per share) | $ / shares $ 1.27 $ 1.27 $ 0.79
Discontinued operations (in dollars per share) | $ / shares 0.00 0.00 (0.06)
Net income per share - basic (in dollars per share) | $ / shares 1.27 1.27 0.73
Net income (loss) per share - diluted:      
Continuing operations (in dollars per share) | $ / shares 1.23 1.24 0.77
Discontinued operations (in dollars per share) | $ / shares 0.00 0.00 (0.05)
Net income per share - diluted (in dollars per share) | $ / shares $ 1.23 $ 1.24 $ 0.72
Weighted average shares used to compute net income (loss) per share:      
Basic (in shares) | shares 164,038 162,058 163,296
Diluted (in shares) | shares 168,971 165,540 165,792
Cash dividend per share (in dollars per share) | (per share) $ 0.63 $ 0.57 $ 0.53
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]      
Net income $ 208,542 $ 205,876 $ 119,317
Currency translation gain (loss):      
Currency translation gain (loss), net of taxes 5,860 (5,670) 2,273
Reclassification of currency translation loss included in other income (expense), net 0 0 3,913
Defined benefit plans:      
Net gain (loss) and prior service credits (costs), net of taxes 3,955 14,201 (837)
Reclassification of amortization included in operating expenses 127 1,490 1,630
Hedging gain (loss):      
Deferred hedging gain (loss), net of taxes (8,499) 2,928 (2,431)
Reclassification of hedging loss (gain) included in cost of goods sold 5,808 (1,670) (3,296)
Total other comprehensive income 7,251 11,279 1,252
Total comprehensive income $ 215,793 $ 217,155 $ 120,569
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CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2018
Mar. 31, 2017
Current assets:    
Cash and cash equivalents $ 641,947 $ 547,533
Accounts receivable, net 214,885 185,179
Inventories 259,906 253,401
Other current assets 56,362 41,732
Total current assets 1,173,100 1,027,845
Non-current assets:    
Property, plant and equipment, net 86,304 85,408
Goodwill 275,451 249,741
Other intangible assets, net 87,547 47,564
Other assets 120,755 88,119
Total assets 1,743,157 1,498,677
Current liabilities:    
Accounts payable 293,988 274,805
Accrued and other current liabilities 281,732 232,273
Total current liabilities 575,720 507,078
Non-current liabilities:    
Income taxes payable 34,956 51,797
Other non-current liabilities 81,924 83,691
Total liabilities 692,600 642,566
Commitments and contingencies (Note 14)
Shareholders' equity:    
Registered shares, CHF 0.25 par value: Issued and authorized shares - 173,106 at March 31, 2018 and March 31, 2017 Conditionally authorized shares - 50,000 at March 31, 2018 and March 31, 2017 30,148 30,148
Additional paid-in capital 47,234 26,596
Treasury shares, at cost—8,527 and 10,727 shares at March 31, 2018 and 2017, respectively (165,686) (174,037)
Retained earnings 1,232,316 1,074,110
Accumulated other comprehensive loss (93,455) (100,706)
Total shareholders' equity 1,050,557 856,111
Total liabilities and shareholders' equity $ 1,743,157 $ 1,498,677
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - SFr / shares
Mar. 31, 2018
Mar. 31, 2017
Statement of Financial Position [Abstract]    
Shares, par value (in CHF per share) SFr 0.25 SFr 0.25
Issued shares (in shares) 173,106,620 173,106,620
Authorized shares (in shares) 173,106,620 173,106,620
Conditionally authorized shares (in shares) 50,000,000 50,000,000
Treasury shares (in shares) 8,526,642 10,727,000
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:      
Net income $ 208,542 $ 205,876 $ 119,317
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 41,295 41,121 51,108
Amortization of intangible assets 15,607 9,367 1,885
Share-based compensation expense 44,138 35,890 27,351
Gain on investment in privately held companies (669) (569) (469)
Net gain on divestiture of discontinued operations 0 0 (13,684)
Deferred income taxes 7,141 (2,397) 6,604
Change in fair value of contingent consideration for business acquisition (4,908) (8,092) 0
Other (11) 107 0
Changes in assets and liabilities, net of acquisitions:      
Accounts receivable, net (26,363) (46,553) 25,513
Inventories 16,047 (15,428) 31,966
Other assets (16,908) (5,309) (1,975)
Accounts payable 17,695 24,459 (58,104)
Accrued and other liabilities 44,655 49,917 (4,317)
Net cash provided by operating activities 346,261 288,389 185,195
Cash flows from investing activities:      
Purchases of property, plant and equipment (39,748) (31,804) (56,615)
Investment in privately held companies (1,240) (960) (2,419)
Proceeds from the return of investment in privately held companies 237 0 0
Payments for the divestiture of discontinued operations, net of cash sold 0 0 (1,395)
Changes in restricted cash 0 715 (715)
Acquisitions, net of cash acquired (88,323) (66,987) 0
Purchases of short-term investments (6,789) 0 0
Purchases of trading investments 6,789 0 0
Purchases of trading investments (6,053) (7,052) (9,619)
Proceeds from sales of trading investments 6,423 7,124 10,073
Net cash used in investing activities (128,704) (98,964) (60,690)
Cash flows from financing activities:      
Payment of cash dividends (104,248) (93,093) (85,915)
Purchases of registered shares (30,722) (83,786) (70,358)
Payment of contingent consideration for business acquisition (5,000) 0 0
Proceeds from exercise of stock options and purchase rights 41,910 39,574 19,767
Tax withholdings related to net share settlements of restricted stock units (29,813) (18,412) (7,247)
Net cash used in financing activities (127,873) (155,717) (143,753)
Effect of exchange rate changes on cash and cash equivalents 4,730 (5,370) 1,405
Net increase (decrease) in cash and cash equivalents 94,414 28,338 (17,843)
Cash and cash equivalents at beginning of the period 547,533 519,195 537,038
Cash and cash equivalents at end of the period 641,947 547,533 519,195
Non-cash investing activities:      
Property, plant and equipment purchased during the period and included in period end liability accounts 3,869 5,072 4,958
Unpaid purchase price for business acquisition 1,000 0 0
Fair value of retained cost method investment as a result of the divestiture of discontinued operations 0 0 5,591
Supplemental cash flow information:      
Income taxes paid, net 15,051 11,323 11,499
The following amounts reflected in the consolidated statements of cash flows are included in discontinued operations:      
Depreciation 0 0 2,207
Amortization of intangible assets 0 0 1,438
Share-based compensation 0 0 332
Purchases of property, plant and equipment 0 0 1,431
Cash and cash equivalents, beginning of the period 0 0 3,659
Cash and cash equivalents, end of the period $ 0 $ 0 $ 0
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Registered shares
Additional paid-in capital
Treasury shares
Retained earnings
Accumulated other comprehensive loss
Beginning of the period (in shares) at Mar. 31, 2015   173,106   8,625    
Beginning of the period at Mar. 31, 2015 $ 758,134 $ 30,148 $ 0 $ (88,951) $ 930,174 $ (113,237)
Increase (Decrease) in Shareholders' Equity            
Total comprehensive income 120,569       119,317 1,252
Purchases of registered shares (in shares)       4,951    
Purchases of registered shares (70,358)     $ (70,358)    
Tax effects from share-based awards (2,353)   (2,353)      
Sale of shares upon exercise of stock options and purchase rights 19,767   (737) $ 20,504    
Sale of shares upon exercise of options and purchase rights (in shares)       (1,812)    
Issuance of shares upon vesting of restricted stock units (7,247)   (17,645) $ 10,398  
Issuance of shares upon vesting of restricted stock units (in shares)       (1,067)    
Share-based compensation 27,351   27,351      
Cash dividends (85,915)       (85,915)  
End of the period (in shares) at Mar. 31, 2016   173,106   10,697    
End of the period balance at Mar. 31, 2016 759,948 $ 30,148 6,616 $ (128,407) 963,576 (111,985)
Increase (Decrease) in Shareholders' Equity            
Total comprehensive income 217,155       205,876 11,279
Purchases of registered shares (in shares)       4,027    
Purchases of registered shares (83,786)     $ (83,786)    
Tax effects from share-based awards (1,251)   (1,251)      
Sale of shares upon exercise of stock options and purchase rights 39,574   15,403 $ 24,171    
Sale of shares upon exercise of options and purchase rights (in shares)       (2,513)    
Issuance of shares upon vesting of restricted stock units (18,412)   (30,148) $ 13,985 (2,249)  
Issuance of shares upon vesting of restricted stock units (in shares)       (1,484)    
Share-based compensation 35,976   35,976      
Cash dividends (93,093)       (93,093)  
End of the period (in shares) at Mar. 31, 2017   173,106   10,727    
End of the period balance at Mar. 31, 2017 856,111 $ 30,148 26,596 $ (174,037) 1,074,110 (100,706)
Increase (Decrease) in Shareholders' Equity            
Cumulative effect of new accounting principle in period of adoption 57,209   3,297   53,912  
Total comprehensive income 215,793       208,542 7,251
Purchases of registered shares (in shares)       863    
Purchases of registered shares (30,722)     $ (30,722)    
Sale of shares upon exercise of stock options and purchase rights 41,910   21,315 $ 20,595    
Sale of shares upon exercise of options and purchase rights (in shares)       (1,527)    
Issuance of shares upon vesting of restricted stock units (29,813)   (48,291) $ 18,478  
Issuance of shares upon vesting of restricted stock units (in shares)       (1,536)    
Share-based compensation 44,317   44,317      
Cash dividends (104,248)       (104,248)  
End of the period (in shares) at Mar. 31, 2018   173,106   8,527    
End of the period balance at Mar. 31, 2018 $ 1,050,557 $ 30,148 $ 47,234 $ (165,686) $ 1,232,316 $ (93,455)
v3.8.0.1
The Company
12 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company
The Company
Logitech International S.A, together with its consolidated subsidiaries (Logitech or the Company), is a world leader in designing, manufacturing and marketing products that help connect people to digital and cloud experiences. 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 music, gaming, video and computing, 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, 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, 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.
Business Acquisitions
During fiscal year 2018, the Company acquired ASTRO Gaming business and another small technology company. During fiscal year 2017, the Company acquired Jaybird LLC and Saitek product line. See "Note 3 - Business Acquisitions" for more information.
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Summary of Significant Accounting Policies
12 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The consolidated financial statements are presented in accordance with U.S. GAAP.
During the fourth quarter of fiscal year 2016, the Company completed the disposition of the Lifesize video conferencing business. As a result, the Company has classified the historical results of Lifesize video conferencing business as discontinued operations in its consolidated statements of operations. See "Note 4 - Discontinued Operations" for more information.
Unless indicated otherwise, the information in the Notes to the consolidated financial statements relates to the Company's continuing operations and does not include results of Lifesize video conferencing business, which is classified as discontinued operations.
Fiscal Year
The Company's fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. For purposes of presentation, the Company has indicated its quarterly periods end on the last day of the calendar quarter.
Reclassification
Certain amounts from the comparative periods in the accompanying consolidated financial statements have been reclassified to conform to the consolidated financial statement presentation as of and for the year ended March 31, 2018.
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 consolidated financial statements. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve the fair value of goodwill, intangible assets acquired from business acquisitions, warranty liabilities, accruals for customer programs and related breakage when appropriate, sales return reserves, allowance for doubtful accounts, inventory valuation, contingent consideration from business acquisitions and periodical reassessment of its fair value, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates.
Foreign Currencies
The functional currency of the Company's operations is primarily the U.S. Dollar. Certain operations use the Euro, Chinese Renminbi, Swiss Franc, or other local currencies as their functional currencies. The financial statements of the Company's subsidiaries whose functional currency is other than the U.S. Dollar are translated to U.S. Dollars using period-end rates of exchange for assets and liabilities and monthly average rates for net sales, income and expenses. Cumulative translation gains and losses are included as a component of shareholders' equity in accumulated other comprehensive loss. Gains and losses arising from transactions denominated in currencies other than a subsidiary's functional currency are reported in other income (expense), net in the consolidated statements of operations.
Revenue Recognition
Revenue is recognized when all of the following criteria are met:
Evidence of an arrangement exists;
Delivery has occurred and title and risk of loss has transferred to a customer;
Price of a product is fixed or determinable; and
Collectability is reasonably assured.
For sales of most hardware peripherals products and hardware bundled with software essential to its functionality, these criteria are met at the time delivery has occurred and title and risk of loss have transferred to the customer.
Revenues from sales to distributors and authorized resellers are recognized upon shipment net of estimated product returns and expected payments for cooperative marketing arrangements, customer incentive and pricing programs. The estimated cost of these programs is recorded as a reduction of sales or as an operating expense if the Company receives a separately identifiable benefit from the customer and can reasonably estimate the fair value of that benefit. Significant management judgments and estimates are used to determine the cost of these programs in any accounting period. Certain customer programs require management to estimate the percentage of those programs which will not be claimed or will not be earned by customers based on historical experience and on the specific terms and conditions of particular programs. The percentage of these customer programs that will not be claimed or earned is commonly referred to as "breakage".
The Company enters into cooperative marketing arrangements with many of its customers, and with certain indirect partners, allowing customers to receive a credit equal to a set percentage of their purchases of the Company's products, or a fixed dollar credit for various marketing and incentive programs. The objective of these arrangements is to encourage advertising and promotional events to increase sales of the Company's products. Accruals for these marketing arrangements are recorded at the later of the date the revenue is recognized or the date the incentive is offered, based on negotiated terms, historical experience and inventory levels in the channel.
Customer incentive programs include consumer rebate and performance-based incentives. The Company offers performance-based incentives to its customers and indirect partners based on pre-determined performance criteria. Accruals for performance-based incentives are recognized as a reduction of the sale price at the time of sale. Estimates of required accruals are determined based on negotiated terms, consideration of historical experience, anticipated volume of future purchases, and inventory levels in the channel. Consumer rebates are offered from time to time at the Company's discretion for the primary benefit of end-users. Accruals for the estimated costs of consumer rebates and similar incentives are recorded at the later of the date the revenue is recognized or when the incentive is offered, based on the specific terms and conditions.
The Company has agreements with certain of its customers that contain terms allowing price protection credits to be issued in the event of a subsequent price reduction. At management's discretion, the Company also offers special pricing discounts to certain customers. Special pricing discounts are usually offered only for limited time periods or for sales of selected products to specific indirect partners. Management's decision to make price reductions is influenced by product life cycle stage, market acceptance of products, the competitive environment, new product introductions and other factors. Accruals for estimated expected future pricing actions are recognized at the time of sale based on analyses of historical pricing actions by customer and by product, inventories owned by and located at distributors and retailers, current customer demand, current operating conditions, and other relevant customer and product information, such as stage of product life-cycle.
The Company grants limited rights to return products. Return rights vary by customer and range from the right to return defective products to the stock rotation rights limited to a percentage of sales approved by management. Estimates of expected future product returns are recognized at the time of sale based on analyses of historical return trends by customer and by product, inventories owned by and located at customers, current customer demand, current operating conditions, and other relevant customer and product information. Upon recognition, the Company reduces sales and cost of goods sold for the estimated return. Return trends are influenced by product life cycle status, new product introductions, market acceptance of products, sales levels, product sell-through, the type of customer, seasonality, product quality issues, competitive pressures, operational policies and procedures, and other factors.
Return rates can fluctuate over time but are sufficiently predictable to allow the Company to estimate expected future product returns.
The Company applies a breakage rate to reduce its accruals of customer incentive, cooperative marketing, and pricing programs based on the estimated percentage of these customer programs that will not be claimed or earned. The breakage rate is applied when the Company is able to reasonably estimate the amounts that will be ultimately claimed by customers. Significant management judgments and estimates are used to determine the breakage of the programs in any accounting period. The Company recognized an increase in net sales of $14.4 million during the fourth quarter of the fiscal year 2017, primarily as a result of change in the estimate of breakage. Significant management judgments and estimates are used to determine the breakage of the programs in any accounting period.
The Company regularly evaluates the adequacy of its estimates for cooperative marketing arrangements, customer incentive programs and pricing programs, and product returns. Future market conditions and product transitions may require the Company to take action to change such programs. When the variables used to estimate these costs change, or if actual costs differ significantly from the estimates, the Company would be required to record incremental increases or reductions to sales, cost of goods sold or operating expenses. If, at any future time, the Company becomes unable to reasonably estimate these costs, recognition of revenue might be deferred until products are sold to users, which would adversely impact sales in the period of transition.
Shipping and Handling Costs
The Company's shipping and handling costs are included in cost of goods sold in the consolidated statements of operations for all periods presented.
Research and Development Costs
Costs related to research, design and development of products, which consist primarily of personnel, product design and infrastructure expenses, are charged to research and development expense as they are incurred.
Advertising Costs
Advertising costs are recorded as either a marketing and selling expense or a deduction from revenue. Advertising costs paid or reimbursed by the Company to direct or indirect customers must have an identifiable benefit and an estimable fair value in order to be classified as an operating expense. If these criteria are not met, the payment is classified as a reduction of revenue. Advertising costs recorded as marketing and selling expense are expensed as incurred. Total advertising costs including those characterized as revenue deductions during fiscal years 2018, 2017 and 2016 were $233.7 million, $208.7 million and $181.7 million, respectively, out of which $36.7 million, $32.2 million and $23.6 million, respectively, were included as operating expense in the consolidated statements of operations.
Cash Equivalents
The Company classifies all highly liquid instruments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates their fair value.
All of the Company's bank time deposits have an original maturity of three months or less and are classified as cash equivalents and are recorded at cost, which approximates their fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various financial institutions to limit exposure with any one financial institution, but is exposed to credit risk in the event of default by financial institutions to the extent that cash balances with individual financial institutions are in excess of amounts that are insured.
The Company sells to large distributors and retailers and, as a result, maintains individually significant receivable balances with such customers. In fiscal years 2018, 2017 and 2016, sales to one customer group represented 15%, 15% and 14%, respectively, of the Company's sales. In fiscal years 2018, 2017 and 2016, sales to another customer group represented 13%, 12% and 10%, respectively, of the Company's sales. No other sales to a single customer represented more than 10% of the Company's sales during fiscal years 2018, 2017 or 2016. As of March 31, 2018, three customer groups each represented 15%, 12% and 11% of total accounts receivable, respectively. As of March 31, 2017, two customer groups each represented 18% and 12% of total accounts receivable, respectively. Typical payment terms require customers to pay for product sales generally within 30 to 60 days; however, terms may vary by customer type, by country and by selling season. Extended payment terms are sometimes offered to a limited number of customers during the second and third fiscal quarters. The Company does not modify payment terms on existing receivables.
The Company manages its accounts receivable credit risk through ongoing credit evaluation of its customers' financial conditions. The Company generally does not require collateral from its customers.
Allowances for Doubtful Accounts
Allowances for doubtful accounts are maintained for estimated losses resulting from the Company's customers' inability to make required payments. The allowances are based on the Company's regular assessment of the credit-worthiness and financial condition of specific customers, as well as its historical experience with bad debts and customer deductions, receivables aging, current economic trends, geographic or country-specific risks and the financial condition of its distribution channels.
Inventories
Inventories are stated at the lower of cost and net realizable value. Costs are computed under the standard cost method, which approximates actual costs determined on the first-in, first-out basis. The Company records write-downs of inventories which are obsolete or in excess of anticipated demand or net realizable value based on a consideration of marketability and product life cycle stage, product development plans, component cost trends, historical net sales and demand forecasts which consider the assumptions about future demand and market conditions. Inventory on hand which is not expected to be sold or utilized is considered excess, and the Company recognizes the write-down in cost of goods sold at the time of such determination. The write-down is determined by the excess of cost over net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At the time of loss recognition, new cost basis per unit and lower-cost basis for that inventory are established and subsequent changes in facts and circumstances would not result in an increase in the cost basis.
As of March 31, 2018 and 2017, the Company also recorded a liability of $12.6 million and $7.2 million, respectively, arising from firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand or net realizable value consistent with its valuation of excess and obsolete inventory. Such liability is included in accrued and other current liabilities on the consolidated balance sheets.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements are capitalized, and maintenance and repairs are expensed as incurred. The Company capitalizes the cost of software developed for internal use in connection with major projects. Costs incurred during the feasibility stage are expensed, whereas direct costs incurred during the application development stage are capitalized.
Depreciation expense is recognized using the straight-line method. Plant and buildings are depreciated over estimated useful lives of twenty-five years, equipment over useful lives from three to five years, internal-use software over useful lives from three to seven years, tooling over useful lives from six months to one year, and leasehold improvements over the lesser of the useful life of the improvement or the term of the lease.
When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are relieved from the accounts and the net gain or loss is included in operating expenses.
Intangible Assets
The Company's intangible assets principally include goodwill, acquired technology, trademarks, and customer relationships and contracts. Intangible assets with finite lives, which include acquired technology, trademarks, customer relationships and contracts, and others are carried at cost and amortized using the straight-line method over their useful lives ranging from four to eight years. Intangible assets with indefinite lives, which include only goodwill, are recorded at cost and evaluated at least annually for impairment.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as property and equipment, and finite-lived intangible assets, for impairment whenever events indicate that the carrying amounts might not be recoverable. Recoverability of property and equipment, and other finite-lived intangible asset is measured by comparing the projected undiscounted net cash flows associated with those assets to their carrying values. If an asset is considered impaired, it is written down to its fair value, which is determined based on the asset's projected discounted cash flows or appraised value, depending on the nature of the asset. For purposes of recognition of impairment for assets held for use, the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable.
Impairment of Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. The Company conducts a goodwill impairment analysis annually at December 31 or more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. A significant amount of judgments are involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.

In reviewing goodwill for impairment, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the quantitative impairment test, otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether an entity chooses to perform the qualitative assessment or proceeds directly to the quantitative impairment test.
Income Taxes
The Company provides for income taxes using the asset and liability method, which requires that deferred tax assets and liabilities be recognized for the expected future tax consequences of temporary differences resulting from differing treatment of items for tax and financial reporting purposes, and for operating losses and tax credit carryforwards. In estimating future tax consequences, expected future events are taken into consideration, with the exception of potential tax law or tax rate changes. The Company records a valuation allowance to reduce deferred tax assets to amounts management believes are more likely than not to be realized.
The Company's assessment of uncertain tax positions requires that management makes estimates and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event that uncertain tax positions are resolved for amounts different than the Company's estimates, or the related statutes of limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of the related assets and liabilities in the period in which such events occur. Such adjustments may have a material impact on the Company's income tax provision and its results of operations.
Fair Value of Financial Instruments
The carrying value of certain of the Company's financial instruments, including cash equivalents, accounts receivable and accounts payable approximates their fair value due to their short maturities.
The Company's investment securities portfolio consists of bank time deposits with an original maturity of three months or less and marketable securities (money market and mutual funds) related to a deferred compensation plan.
The Company's trading investments related to the deferred compensation plan are reported at fair value based on quoted market prices. The marketable securities related to the deferred compensation plan are classified as non-current trading investments, as they are intended to fund the deferred compensation plan long-term liability. Since participants in the deferred compensation plan may select the mutual funds in which their compensation deferrals are invested within the confines of the Rabbi Trust which holds the marketable securities, the Company has designated these marketable securities as trading investments, although there is no intent to actively buy and sell securities within the objective of generating profits on short-term differences in market prices. These securities are recorded at fair value based on quoted market prices. Earnings, gains and losses on trading investments are included in other income (expense), net in the consolidated statements of operations.
The Company also holds non-marketable investments in equity and other securities that are accounted for as either cost or equity method investments, which are classified as other assets. The Company reviews the fair value of its non-marketable investments on a regular basis to determine whether the investments in these companies are other-than-temporarily impaired. The Company considers investee financial performance and other information received from the investee companies, as well as any other available estimates of the fair value of the investee companies in its review. If the Company determines that the carrying value of an investment exceeds its fair value, and that difference is other than temporary, the Company writes down the value of the investment to its fair value. The carrying value of cost investments is not adjusted if there are no identified adverse events or changes in circumstances that may have a material effect on the fair value of the investments.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average outstanding shares. Diluted net income (loss) per share is computed using the weighted average outstanding shares and dilutive share equivalents. Dilutive share equivalents consist of share-based awards, including stock options, purchase rights under employee share purchase plan, and restricted stock units (RSUs).
The dilutive effect of in-the-money share-based compensation awards is calculated based on the average share price for each fiscal period using the treasury stock method.
Share-Based Compensation Expense
Share-based compensation expense includes compensation expense, reduced for estimated forfeitures, for share-based awards granted based on the grant date fair value. The grant date fair value for stock options and stock purchase rights is estimated using the Black-Scholes-Merton option-pricing valuation model. The grant date fair value of RSUs which vest upon meeting certain market conditions is estimated using the Monte-Carlo simulation method. The grant date fair value of time-based and performance-based RSUs is calculated based on the market price on the date of grant, reduced by estimated dividends yield prior to vesting. With respect to awards with service conditions only, compensation expense is recognized ratably over the vesting period of the awards. For performance-based RSUs, the Company recognizes the estimated expense using a graded-vesting method over requisite service periods of one to three years when the performance condition is determined to be probable. The performance period and the service period of the market-based grants of the Company granted are both approximately three years and the estimated expense is recognized ratably over the service period.
Effective April 1, 2017, the Company adopted Accounting Standards Update (ASU) 2016-09 and accounts for forfeitures as they occur. Refer to "Recent Accounting Pronouncements Adopted" below for details of the impact from the change in accounting.
Product Warranty Accrual
The Company estimates cost of product warranties at the time the related revenue is recognized based on historical warranty claim rates, historical costs, and knowledge of specific product failures that are outside of the Company's typical experience. The Company accrues a warranty liability for estimated costs to provide products, parts or services to repair or replace products in satisfaction of the warranty obligation. Each quarter, the Company reevaluates estimates to assess the adequacy of recorded warranty liabilities considering the size of the installed base of products subject to warranty protection and adjusts the amounts as necessary. When the Company experiences changes in warranty claim activity or costs associated with fulfilling those claims, the warranty liability is adjusted accordingly. If actual product failure rates or repair costs differ from estimates, revisions to the estimated warranty liabilities would be required and could materially affect the Company's results of operations.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the total change in shareholders' equity during the period other than from transactions with shareholders. Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of currency translation adjustments from those entities not using the U.S. Dollar as their functional currency, unrealized gains and losses on marketable equity securities, net deferred gains and losses and prior service costs and credits for defined benefit pension plans, and net deferred gains and losses on hedging activity.
Treasury Shares
The Company periodically repurchases shares in the market at fair value. Shares repurchased are recorded at cost as a reduction of total shareholders' equity. Treasury shares held may be reissued to satisfy the exercise of employee stock options and purchase rights and the vesting of restricted stock units, or may be canceled with shareholder approval. Treasury shares that are reissued are accounted for using the first-in, first-out basis.
Derivative Financial Instruments
The Company enters into foreign exchange forward contracts to reduce the short-term effects of currency fluctuations on certain foreign currency receivables or payables and to hedge against exposure to changes in currency exchange rates related to its subsidiaries' forecasted inventory purchases. These forward contracts generally mature within four months.
Gains and losses for changes in the fair value of the effective portion of the Company's forward contracts related to forecasted inventory purchases are deferred as a component of accumulated other comprehensive income (loss) until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold. Gains or losses from changes in the fair value of forward contracts that offset translation losses or gains on foreign currency receivables or payables are recognized immediately and included in other income (expense), net in the consolidated statements of operations.
Restructuring Charges
The Company's restructuring charges consist of employee severance, one-time termination benefits and ongoing benefits related to the reduction of its workforce, lease exit costs, and other costs. Liabilities for costs associated with a restructuring activity are measured at fair value and are recognized when the liability is incurred, as opposed to when management commits to a restructuring plan. One-time termination benefits are expensed at the date the entity notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Ongoing benefits are expensed when restructuring activities are probable and the benefit amounts are estimable. Costs to terminate a lease before the end of its term are recognized when the property is vacated. Other costs primarily consist of legal, consulting, and other costs related to employee terminations are expensed when incurred. Termination benefits are calculated based on regional benefit practices and local statutory requirements.
Segments 
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Reportable segments are operating segments that meet certain quantitative thresholds. As a result of the divestiture of the Lifesize video conferencing business on December 28, 2015, the composition of the Company's previously reported segments changed, such that the remaining peripheral segment is the only segment reported in continuing operations.
Recent Accounting Pronouncements Adopted
In July 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-11, "Simplifying the Measurement of Inventory (Topic 330)" (ASU 2015-11). Topic 330 previously required an entity to measure inventory at the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value and is effective for fiscal years beginning after December 15, 2016. The Company adopted this standard effective April 1, 2017, which has not had a material impact on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)": Improvements to Employee Share-Based Payment Accounting" (ASU 2016-09). ASU 2016-09 simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefits and employee taxes paid when an employer withholds shares for tax withholding purposes. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016. The Company adopted this standard effective April 1, 2017. Changes to the statements of cash flows related to the classification of excess tax benefits were implemented on a retroactive basis and accordingly, to conform to the current year presentation, the Company reclassified $9.7 million and $2.1 million of excess tax benefits previously reported under financing activities to operating activities for the year ended March 31, 2017 and 2016, respectively, on its consolidated statements of cash flows. Under the new standard, the Company accounts for forfeitures as they occur. The change in accounting for forfeitures resulted in a cumulative-effect adjustment to decrease retained earnings as of March 31, 2017 by $3.3 million. The Company further recognized a cumulative-effect adjustment to increase retained earnings as of March 31, 2017 by $57.2 million upon adoption of the new guidance to account for gross excess tax benefits of $75.2 million that were previously not recognized because the related tax deduction had not reduced current income taxes, offset by a valuation allowance of $18.0 million to reduce the deferred tax assets to amounts that are more likely than not to be realized.

In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment (Topic 350)" (ASU 2017-04), which removes Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual or any interim goodwill impairments in annual periods beginning December 15, 2019, with early adoption permitted. The Company adopted this standard effective April 1, 2017, which has not had a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting" (ASU 2017-09), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company adopted this standard effective April 1, 2017, which has not had a material impact on its consolidated financial statements.
Recent Accounting Pronouncements To Be Adopted
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" (ASU 2014-09) which supersedes the revenue recognition requirements under ASC 605, Revenue Recognition. Topic 606 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires reporting companies to disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will become effective for the Company on April 1, 2018 (the adoption date). The Company will adopt Topic 606 utilizing the modified retrospective transition method, which recognizes the cumulative effect of initially applying Topic 606 as an adjustment to retained earnings at the adoption date. The Company has identified major revenue streams, performed an analysis of its contracts to evaluate the impact of Topic 606, and drafted its accounting policies, and is substantially complete with its evaluation of the impact this new standard will have on its accruals for customer programs. The Company does not expect the adoption to have a material impact to the nature and timing of its revenues, results of operations or retained earnings at the date of adoption. The Company has determined that certain allowance balances for customer incentive, cooperative marketing and pricing programs and customer return rights currently presented net within accounts receivable may need to be presented within current liabilities upon adoption.

Under ASC 605, accruals for certain cooperative marketing arrangements, customer incentive programs and pricing programs are recognized as a reduction of revenue at the later of when the related revenue is recognized or when the program is offered to the customer. Under Topic 606, these programs qualify as variable considerations and are recorded as a reduction of the transaction price at the contract inception based on the expected value method. Certain of these programs will require the Company to record an estimate of yet to be committed future sales incentives with respect to revenue already recognized upon adoption.

Under Topic 606, variable consideration must be estimated at the outset of the arrangement, subject to the constraint guidance to ensure that a significant revenue reversal will not occur. As a result, upon adoption of Topic 606, breakage will be recognized sooner as compared to the existing revenue guidance.

The Company will continue to monitor additional changes, modifications, clarifications or interpretations of Topic 606, which may impact current expectations. It is possible that during the first quarter of fiscal year 2019, the Company could identify items that result in additional changes to its consolidated financial statements other than what is described above.

In January 2016, the FASB issued ASU 2016-01 “Financial Instruments- Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)” (ASU 2016-01), which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect the adoption of ASU 2016-01 will have a material impact on its consolidated financial statements and has adopted this guidance effective April 1, 2018.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)" (ASU 2016-02), which requires the recognition of lease assets and lease liabilities arising from operating leases in the statement of financial position. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company expects the adoption of ASU 2016-02 will have a material impact on its consolidated balance sheets, but is still in the process of evaluating the full impact, and will adopt the standard effective April 1, 2019.

In October 2016, the FASB issued ASU 2016-16 "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory" (ASU 2016-16), which eliminates the deferral of income tax effects of intra-entity asset transfers until the transferred asset is sold to an unrelated party or recovered through use.  ASU 2016-16, however, does not apply to intra-entity transfer of inventory.  The guidance is effective for annual periods beginning after December 15, 2017 and interim reporting periods within those annual periods.  Early adoption is permitted but only in the first interim period of a fiscal year.  The cumulative effect of change on equity upon adoption is to be quantified under the modified retrospective approach and recorded as of the beginning of the period of adoption.  The Company does not expect the adoption of ASU 2016-16 will have a material impact on its consolidated financial statements and has adopted this guidance effective April 1, 2018.

In December 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash" (ASU 2016-18), which requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The standard is effective for annual periods beginning after December 15, 2017 and interim reporting periods within those annual periods, with early adoption permitted. The adoption of this standard should be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of ASU 2016-18 will have a material impact on its consolidated financial statements and has adopted this standard effective April 1, 2018.

In January 2017, the FASB issued ASU 2017-01, "Business Combination (Topic 805): Clarifying the Definition of a Business" (ASU 2017-01), which changes the definition of a business to assist with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for annual or any interim periods in annual periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-01 will have a material impact on its consolidated financial statements and has adopted this standard effective April 1, 2018.

In March 2017, the FASB issued ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07), which requires that the Company disaggregate the service cost component from the other components of net benefit cost, and also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The standard is effective for the Company for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. The Company does not expect the adoption of ASU 2017-07 will have a material impact on its consolidated financial statements and has adopted this guidance effective April 1, 2018.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and simplifies the application of the hedge accounting guidance. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-12 will have a material impact on its consolidated financial statements and has adopted this standard effective April 1, 2018.
v3.8.0.1
Business Acquisitions
12 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Business Acquisitions
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.
v3.8.0.1
Discontinued Operations
12 Months Ended
Mar. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations

During the third quarter of fiscal year 2016, the Company's Board of Directors approved a plan to divest the Lifesize video conferencing business. On December 28, 2015 during the fourth quarter of fiscal year 2016, the Company, and Lifesize, Inc., a wholly owned subsidiary of the Company (Lifesize) which held the assets of the Company’s video conferencing reportable segment, entered into a stock purchase agreement (the Stock Purchase Agreement) with entities affiliated with three venture capital investment firms (the Venture Investors). Pursuant to the terms of the Stock Purchase Agreement, the Company sold 2.5 million shares of Series B Preferred Stock of Lifesize to the Venture Investors for cash proceeds of $2.5 million and retained 12.0 million non-voting shares of Series A Preferred Stock of Lifesize. The shares of Series A Preferred Stock of Lifesize retained by the Company represent 37.5% of the shares outstanding immediately after the closing of the transactions contemplated by the Stock Purchase Agreement (the Closing). Lifesize also issued 17.5 million shares of Series B Preferred Stock to the Venture Investors for cash proceeds of $17.5 million. The shares of Series B Preferred Stock held by the Venture Investors represent 62.5% of the shares outstanding immediately after the Closing. In addition, Lifesize has reserved 8.0 million shares of common stock for issuance pursuant to a stock plan to be adopted by Lifesize following the Closing, none of which are issued or outstanding at the Closing. The Company substantially completed its transition services for Lifesize during the third quarter of fiscal year 2017.

The Company has classified the historical results of its Lifesize video conferencing business as discontinued operations in its consolidated statements of operations since the divestiture of the Lifesize video conferencing business represents a strategic shift that has a major effect on the Company's operations and financial results. Evaluating whether the divestiture of the business represents a strategic shift requires the Company's judgment. Also, evaluating whether the strategic shift will have a "major effect" on the Company's operations and financial results requires assessing not only quantitative factors but also the magnitude of qualitative factors.

The retained Series A Preferred Stock gives the Company no voting rights or any other significant influence over the divested Lifesize video conferencing business, and therefore is accounted for as a cost method investment which was initially recognized at fair value of $5.6 million at the date of divestiture of Lifesize Video Conferencing business. The fair value was determined by using the option pricing methodology with reference to the price of Lifesize’s Series B Preferred Stock paid by Venture Investors. The fair value of the Company’s investment in Series A Preferred Stock is classified as Level 3 as the application of the option pricing methodology requires the use of significant unobservable inputs including asset volatility of 50%, expected term to exit of three years, and lack of marketability discount of 27%.
 
Discontinued operations include results of the Lifesize video conferencing business. Discontinued operations also include other costs incurred by Logitech to effect the divestiture of the Lifesize video conferencing business. These costs include transaction charges, advisory and consulting fees and restructuring cost related to the Lifesize video conferencing business.

The following table presents financial results of the video conferencing classified as discontinued operations (in thousands):

 
 
Years Ended March 31,
 
 
2016
Net sales
 
$
65,554

Cost of goods sold
 
24,951

Gross profit
 
40,603

Operating expenses:
 


Marketing and selling
 
32,260

Research and development
 
16,526

General and administrative
 
5,254

Restructuring charges, net
 
7,900

Operating expenses
 
61,940

Operating loss from discontinued operations
 
(21,337
)
Interest and other expense, net
 
(205
)
Gain on divestiture of discontinued operations
 
13,684

Loss from discontinued operations before income taxes
 
(7,858
)
Provision for income taxes
 
1,187

Net loss from discontinued operations
 
$
(9,045
)


The Company recognized a gain on its divestiture of Lifesize video conferencing business as follows (in thousands):
 
 
Year Ended
 
 
March 31, 2016
Proceeds received from the divestiture of discontinued operations
 
$
2,500

Fair value of retained cost method investment as a result of the divestiture of discontinued operations
 
5,591

Net liabilities of discontinued operations divested
 
9,981

Currency translation loss released due to the divestiture of discontinued operations (1)
 
(3,913
)
Transaction-related costs
 
(475
)
Gain on divestiture of discontinued operations (2)
 
$
13,684

(1) Currency translation loss recognized as a result of the substantial liquidation of a subsidiary using non-USD functional currency, which is part of discontinued operations

(2) Gain on divestiture of discontinued operation was included in loss from discontinued operations, net of income taxes, in the Company's consolidated statement of operations
v3.8.0.1
Net Income (Loss) per Share
12 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Net Income (Loss) per Share
Net Income (Loss) per Share
The computations of basic and diluted net income (loss) per share for the Company were as follows (in thousands except per share amounts):
 
 
Years Ended March 31,
 
 
2018
 
2017
 
2016
Net Income (loss):
 
 
 
 
 
 
Continuing operations
 
$
208,542

 
$
205,876

 
$
128,362

Discontinued operations
 

 

 
(9,045
)
Net income
 
$
208,542

 
$
205,876

 
$
119,317

 
 
 
 
 
 
 
Shares used in net income (loss) per share computation:
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
164,038

 
162,058

 
163,296

Effect of potentially dilutive equivalent shares
 
4,933

 
3,482

 
2,496

Weighted average shares outstanding - diluted
 
168,971

 
165,540

 
165,792

 
 
 

 
 

 
 

Net income (loss) per share - basic:
 
 
 
 
 
 
Continuing operations
 
$
1.27

 
$
1.27

 
$
0.79

Discontinued operations
 
$

 
$

 
$
(0.06
)
Net income per share - basic
 
$
1.27

 
$
1.27

 
$
0.73

 
 
 
 
 
 
 
Net income (loss) per share - diluted:
 
 
 
 
 
 
Continuing operations
 
$
1.23

 
$
1.24

 
$
0.77

Discontinued operations
 
$

 
$

 
$
(0.05
)
Net income per share - diluted
 
$
1.23

 
$
1.24

 
$
0.72


During fiscal years 2018, 2017 and 2016, 1.1 million, 1.4 million and 5.2 million share equivalents attributable to outstanding stock options, RSUs and ESPP were excluded from the calculation of diluted net income (loss) per share because the combined exercise price, average unamortized fair value and assumed tax benefits upon exercise of these options and ESPP or vesting of RSUs were greater than the average market price of the Company's shares, and therefore their inclusion would have been anti-dilutive.
v3.8.0.1
Employee Benefit Plans
12 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Employee Benefit Plans
Employee Benefit Plans
Employee Share Purchase Plans and Stock Incentive Plans
As of March 31, 2018, the Company offers the 2006 ESPP (2006 Employee Share Purchase Plan (Non-U.S.)), the 1996 ESPP (1996 Employee Share Purchase Plan (U.S.)), the 2006 Plan (2006 Stock Incentive Plan) and the 2012 Plan (2012 Stock Inducement Equity Plan). Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.
The following table summarizes share-based compensation expense and total income tax provision (benefit) recognized for fiscal years 2018, 2017 and 2016 (in thousands):
 
 
Years Ended March 31,
 
 
2018
 
2017
 
2016
Cost of goods sold
 
$
3,733

 
$
2,663

 
$
2,340

Marketing and selling
 
17,765

 
14,723

 
9,273

Research and development
 
6,381

 
4,200

 
3,046

General and administrative
 
16,259

 
14,304

 
12,353

Restructuring
 

 

 
7

Total share-based compensation expense
 
44,138

 
35,890

 
27,019

Income tax benefit
 
(15,998
)
 
(8,536
)
 
(6,297
)
Total share-based compensation expense, net of income tax benefit
 
$
28,140

 
$
27,354

 
$
20,722


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 upon the adoption of ASU 2016-09 on April 1, 2017. The income tax benefit is reduced by income tax provision resulting from the remeasurement of applicable deferred tax assets and liabilities due to the enactment of the Tax Act in the United States on December 22, 2017. See "Note 8 - Income Taxes" for more information.
As of March 31, 2018, 2017 and 2016, the Company capitalized $0.7 million, $0.6 million and $0.5 million, respectively, of stock-based compensation expenses to inventory.
The following table summarizes total unamortized share-based compensation expense and the remaining months over which such expense is expected to be recognized, on a weighted-average basis by type of grant (in thousands, except number of months):
 
 
March 31, 2018
 
 
Unamortized
Expense
 
Remaining
Months
ESPP
 
$
1,337

 
4
Time-based RSUs
 
56,723

 
21
Market-based and performance-based RSUs
 
13,620

 
23
 
 
$
71,680

 
 

Under the 1996 ESPP and 2006 ESPP plans, eligible employees may purchase shares at the lower of 85% of the fair market value at the beginning or the end of each offering period, which is generally six months. Subject to continued participation in these plans, purchase agreements are automatically executed at the end of each offering period. An aggregate of 29.0 million shares was reserved for issuance under the 1996 and 2006 ESPP plans. As of March 31, 2018, a total of 5.9 million shares was available for new awards under these plans.
The 2006 Plan provides for the grant to eligible employees and non-employee directors of stock options, stock appreciation rights, restricted stock and RSUs. Awards under the 2006 Plan may be conditioned on continued employment, the passage of time or the satisfaction of performance and market vesting criteria. The 2006 Plan, as amended, has no expiration date. All stock options under this plan have terms not exceeding ten years and are issued at exercise prices not less than the fair market value on the date of grant. An aggregate of 30.6 million shares was reserved for issuance under the 2006 Plan. As of March 31, 2018, a total of 10.6 million shares was available for new awards under this plan.
Time-based RSUs granted to employees under the 2006 Plan generally vest in four equal annual installments on the grant date anniversary. Time-based RSUs granted to non-executive board members under the 2006 Plan vest in one annual installment on the grant date anniversary, or if earlier and only if the non-executive board member is not re-elected as a director at such annual general meeting, the date of the next annual general meeting following the grant date.
Performance-based RSUs granted in fiscal years 2016 and 2017 under the 2006 Plan vest contingent upon the achievement of predetermined financial metrics, the performance period of which is approximately three years. The performance condition can be achieved before the end of the performance period. Market-based options granted under the 2006 Plan vest upon meeting the Company's share price performance criteria. The number of shares of common stock to be received at vesting for market-based RSUs granted in fiscal years 2016 and 2017 under the 2006 Plan will range from 0 percent to 150 percent of the target number of stock units based on the Company's total stockholder return (TSR) relative to the performance of companies in the NASDAQ-100 Index for each measurement period, generally over a three-year period. In fiscal year 2018, the Company granted RSUs with both performance and market conditions, which vest at the end of the three-year performance period upon meeting predetermined financial metrics over three years, with the number of shares to be received upon vesting determined based on weighted average constant currency revenue growth rate and the Company's TSR relative to the performance of companies in the NASDAQ-100 Index over the same three year period. The Company presents shares granted and vested at 100 percent of the target of the number of stock units that may potentially vest. 
Under the 2012 Plan, stock options and RSUs may be granted to eligible employees to serve as an inducement to enter into employment with the Company. Awards under the 2012 Plan may be conditioned on continued employment, the passage of time or the satisfaction of market stock performance criteria, based on individually written employment offer letter. The 2012 Plan has an expiration date of March 28, 2022. An aggregate of 1.8 million shares was reserved for issuance under the 2012 Plan. As of March 31, 2018, no shares were available for new awards under this plan.
The estimates of share-based compensation expense require a number of complex and subjective assumptions including stock price volatility, employee exercise patterns, future forfeitures, probability of achievement of the set performance condition, dividend yield, related tax effects and the selection of an appropriate fair value model.
The grant date fair value of the awards using the Black-Scholes-Merton option-pricing valuation model and Monte-Carlo simulation method are determined with the following assumptions and values:
 Employee Stock Purchase Plans
 
Years Ended March 31,
 
 
2018
 
2017
 
2016
Dividend yield
 
1.67
%
 
2.50
%
 
3.47
%
Risk-free interest rate
 
1.37
%
 
0.51
%
 
0.29
%
Expected volatility
 
27
%
 
35
%
 
26
%
Expected life (years)
 
0.5

 
0.5

 
0.5

Weighted average grant date fair value per share
 
$
8.69

 
$
5.73

 
$
3.29

RSUs with Market Conditions
 
Years Ended March 31,
 
 
2018
 
2017
 
2016
Dividend yield
 
1.75
%
 
3.29
%
 
3.78
%
Risk-free interest rate
 
1.40
%
 
0.86
%
 
0.84
%
Expected volatility
 
31
%
 
34
%
 
38
%
Expected life (years)
 
3.0

 
3.0

 
3.0


The dividend yield assumption is based on the Company's history and future expectations of dividend payouts. The unvested RSUs or unexercised options are not eligible for these dividends. The expected life is based on the purchase offerings periods expected to remain outstanding, or the performance period for RSUs with market conditions. Expected volatility is based on historical volatility using the Company's daily closing prices, or including the volatility of components of the NASDAQ 100 index for market-based RSUs, over the expected life. The Company considers the historical price volatility of its shares as most representative of future volatility. The risk-free interest rate assumptions are based upon the implied yield of U.S. Treasury zero-coupon issues appropriate for the expected life of the Company's share-based awards.
The Company estimated awards forfeitures at the time of grant and revised those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company used historical data to estimate pre-vesting option and RSU forfeitures and recorded share-based compensation expense only for those awards that are expected to vest. Effective April 1, 2017, the Company adopted ASU 2016-09 and accounts for forfeitures as they occur. The impact from the change in accounting for forfeitures did not have a material impact on the Company's consolidated financial statements.
For RSUs with performance conditions, the Company estimates the probability and timing of the achievement of the set performance condition at the time of the grant based on the historical financial performance and the financial forecast in the remaining performance period and reassesses the probability in subsequent periods when actual results or new information become available.
A summary of the Company's stock option activities under all stock plans for fiscal years 2018, 2017 and 2016 is as follows (including discontinued operations for fiscal year 2016):
 
 
Number of Shares
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Term

 
Aggregate Intrinsic Value
 
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding, March 31, 2015
 
7,876

 


 
 
 
 
Granted
 

 


 
 
 
 
Exercised
 
(746
)
 


 
 
 
$
4,026

Canceled or expired
 
(1,796
)
 


 
 
 
 
Outstanding, March 31, 2016
 
5,334

 


 
 
 
 
Granted
 

 


 
 
 
 
Exercised
 
(1,784
)
 


 
 
 
$
14,627

Canceled or expired
 
(500
)
 


 
 
 
 
Outstanding, March 31, 2017
 
3,050

 
$
18

 

 


Granted
 

 

 

 


Exercised
 
(994
)
 
$
28

 

 
$
8,347

Canceled or expired
 
(16
)
 
$
35

 

 


Outstanding, March 31, 2018
 
2,040

 
$
14

 
4.0
 
$
46,630

Vested and exercisable, March 31, 2018
 
2,040

 
$
14

 
4.0
 
$
46,630


As of March 31, 2018, the exercise price of outstanding options ranged from $4 to $26 per share option.
The tax benefit realized for the tax deduction from options exercised during the fiscal years 2018, 2017 and 2016 was $1.8 million, $4.2 million and $1.2 million, respectively.
A summary of the Company's time-based, market-based, and performance-based RSU activities for fiscal years 2018, 2017 and 2016 is as follows (including discontinued operations for all the periods presented):
 
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
 
Weighted-Average Remaining Vesting Period
 
Aggregate
Fair Value
 
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding, March 31, 2015
 
4,939

 


 
 
 
 
Granted—time-based
 
2,247

 
$
13

 
 
 
 
Granted—market-based
 
356

 
$
14

 
 
 
 
Granted - performance-based
 
356

 
$
13

 
 
 
 
Vested
 
(1,557
)
 


 
 
 
$
22,823

Canceled or expired
 
(820
)
 


 
 
 
 
Outstanding, March 31, 2016
 
5,521

 


 
 
 
 
Granted—time-based
 
2,390

 
$
16

 
 
 
 
Granted—market-based
 
160

 
$
15

 
 
 
 
Granted - performance-based
 
604

 
$
15

 
 
 
 
Vested
 
(2,126
)
 


 
 
 
$
48,644

Canceled or expired
 
(368
)
 


 
 
 
 
Outstanding, March 31, 2017
 
6,181

 
$
14

 
 
 
 
Granted—time-based
 
1,212

 
$
33

 
 
 
 
Granted—market and performance based
 
409

 
$
33

 
 
 
 
Vested
 
(2,248
)
 
$
14

 
 
 
$
81,582

Canceled or expired
 
(333
)
 
$
17

 
 
 
 
Outstanding, March 31, 2018
 
5,221

 
$
20

 
1.4
 
$
191,777

The RSU outstanding as of March 31, 2018 above includes 1.4 million shares with market-based and performance-based vesting conditions.
The tax benefit realized for the tax deduction from RSUs that vested during the fiscal years 2018, 2017 and 2016 was $20.3 million, $13.1 million and $5.1 million, respectively.
Defined Contribution Plans
Certain of the Company's subsidiaries have defined contribution employee benefit plans covering all or a portion of their employees. Contributions to these plans are discretionary for certain plans and are based on specified or statutory requirements for others. The charges to expense for these plans for fiscal years 2018, 2017 and 2016, were $7.6 million, $5.8 million and $6.8 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 Company recognizes the overfunded or underfunded status of defined benefit pension plans and non-retirement post-employment benefit obligations as an asset or liability in its consolidated balance sheets and recognizes changes in the funded status of defined benefit pension plans in the year in which the changes occur through accumulated other comprehensive income (loss), which is a component of shareholders' equity. Each plan's assets and benefit obligations are remeasured as of March 31 each year.
All the amounts in this "Defined Benefit Plans" section include activities from both continuing and discontinued operations for fiscal year 2016, and the amounts from discontinued operations are not material for that period.
The net periodic benefit cost of the defined benefit pension plans and the non-retirement post-employment benefit obligations for fiscal years 2018, 2017 and 2016 was as follows (in thousands):
 
 
Years Ended March 31,
 
 
2018
 
2017
 
2016
Service costs
 
$
9,715

 
$
10,385

 
$
10,117

Interest costs
 
1,126

 
800

 
1,147

Expected return on plan assets
 
(1,792
)
 
(1,724
)
 
(1,657
)
Amortization:
 
 
 
 
 
 
    Net transition obligation
 

 
4

 
4

Net prior service credit recognized
 
(51
)
 
(117
)
 
(124
)
Net actuarial loss recognized
 
242

 
1,032

 
1,854

 
 
$
9,240

 
$
10,380

 
$
11,341


The changes in projected benefit obligations for fiscal years 2018 and 2017 were as follows (in thousands):
 
 
Years Ended March 31,
 
 
2018
 
2017
Projected benefit obligations, beginning of the year
 
$
114,640

 
$
120,473

Service costs
 
9,715

 
10,385

Interest costs
 
1,126

 
800

Plan participant contributions
 
3,522

 
3,020

Actuarial gains
 
(1,580
)
 
(11,081
)
Benefits paid
 
(1,202
)
 
(5,214
)
Plan amendment related to statutory change
 
(2,519
)
 
65

Administrative expense paid
 
(144
)
 
(132
)
Currency exchange rate changes
 
5,357

 
(3,676
)
Projected benefit obligations, end of the year
 
$
128,915

 
$
114,640


The accumulated benefit obligation for all defined benefit pension plans as of March 31, 2018 and 2017 was $108.9 million and $94.3 million, respectively.    
The following table presents the changes in the fair value of defined benefit pension plan assets for fiscal years 2018 and 2017 (in thousands):
 
 
Years Ended March 31,
 
 
2018
 
2017
Fair value of plan assets, beginning of the year
 
$
71,376

 
$
65,279

Actual return on plan assets
 
1,824

 
4,733

Employer contributions
 
5,995

 
5,865

Plan participant contributions
 
3,522

 
3,020

Benefits paid
 
(1,202
)
 
(5,214
)
Administrative expenses paid
 
(144
)
 
(132
)
Currency exchange rate changes
 
3,347

 
(2,175
)
Fair value of plan assets, end of the year
 
$
84,718

 
$
71,376


The Company's investment objectives are to ensure that the assets of its defined benefit plans are invested to provide an optimal rate of investment return on the total investment portfolio, consistent with the assumption of a reasonable risk level, and to ensure that pension funds are available to meet the plans' benefit obligations as they become due. The Company believes that a well-diversified investment portfolio will result in the highest attainable investment return with an acceptable level of overall risk. Investment strategies and allocation decisions are also governed by applicable governmental regulatory agencies. The Company's investment strategy with respect to its largest defined benefit plan, which is available only to Swiss employees, is to invest in the following allocation ranges: 29.5-36.5% for equities, 29.0-39.0% for bonds, and 5.0-15.0% for cash and cash equivalents. The Company also can invest in real estate funds, commodity funds, and hedge funds depending upon economic conditions.
The following tables present the fair value of the defined benefit pension plan assets by major categories and by levels within the fair value hierarchy as of March 31, 2018 and 2017 (in thousands):
 
 
March 31,
 
 
2018
 
2017
 
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash and cash equivalents
 
$
18,331

 
$
24

 
$
18,355

 
$
11,864

 
$
46

 
$
11,910

Equity securities
 
26,204

 

 
26,204

 
20,985

 

 
20,985

Debt securities
 
25,150

 

 
25,150

 
22,373

 

 
22,373

Swiss real estate funds
 
12,096

 

 
12,096

 
9,699

 

 
9,699

Hedge funds
 

 

 

 

 
3,507

 
3,507

Insurance contracts
 

 
32

 
32

 

 
61

 
61

Other
 
2,623

 
258

 
2,881

 
2,654

 
187

 
2,841

 
 
$
84,404

 
$
314

 
$
84,718

 
$
67,575

 
$
3,801

 
$
71,376


The funded status of the plans was as follows (in thousands):
 
 
Years Ended March 31,
 
 
2018
 
2017
Fair value of plan assets
 
$
84,718

 
$
71,376

Less: projected benefit obligations
 
128,915

 
114,640

Underfunded status 
 
$
(44,197
)
 
$
(43,264
)

Amounts recognized on the balance sheet for the plans were as follows (in thousands):
 
 
March 31,
 
 
2018
 
2017
Current liabilities
 
$
(1,763
)
 
$
(1,266
)
Non-current liabilities
 
(42,434
)
 
(41,998
)
Net liabilities
 
$
(44,197
)
 
$
(43,264
)

Amounts recognized in accumulated other comprehensive loss related to defined benefit pension plans were as follows (in thousands):
 
 
March 31,
 
 
2018
 
2017
 
2016
Net prior service credits
 
$
3,843

 
$
1,274

 
$
1,613

Net actuarial loss
 
(9,821
)
 
(11,407
)
 
(27,612
)
Net transition obligation
 

 

 
(4
)
Accumulated other comprehensive loss
 
(5,978
)
 
(10,133
)
 
(26,003
)
Deferred tax benefit
 
(420
)
 
(347
)
 
(168
)
Accumulated other comprehensive loss, net of tax
 
$
(6,398
)
 
$
(10,480
)
 
$
(26,171
)

The following table presents the amounts included in accumulated other comprehensive loss as of March 31, 2018, which are expected to be recognized as a component of net periodic benefit cost in fiscal year 2019 (in thousands):
 
 
Year Ending
March 31, 2019
Amortization of net prior service credits
 
$
(381
)
Amortization of net actuarial loss
 
95

 
 
$
(286
)

The Company reassesses its benefit plan assumptions on a regular basis. The actuarial assumptions for the defined benefit plans for fiscal years 2018 and 2017 were as follows:
 
 
Years Ended March 31,
 
 
2018
 
2017
Benefit Obligations:
 
 
 
 
Discount rate
 
0.85%-7.5%
 
0.75%-7.00%
Estimated rate of compensation increase
 
2.25%-10.00%
 
2.5%-10.00%
Periodic Costs:
 
 
 
 
Discount rate
 
0.75%-7.00%
 
0.5%-8.00%
Estimated rate of compensation increase
 
2.5%-10.00%
 
2.5%-10.00%
Expected average rate of return on plan assets
 
1.0%-2.5%
 
1.0%-2.75%

The discount rate is estimated based on corporate bond yields or securities of similar quality in the respective country, with a duration approximating the period over which the benefit obligations are expected to be paid. The Company bases the compensation increase assumptions on historical experience and future expectations. The expected average rate of return for the Company's defined benefit pension plans represents the average rate of return expected to be earned on plan assets over the period that the benefit obligations are expected to be paid, based on government bond notes in the respective country, adjusted for corporate risk premiums as appropriate.
The following table reflects the benefit payments that the Company expects the plans to pay in the periods noted (in thousands):
Years Ending March 31,
 
 
2019
 
$
7,199

2020
 
7,701

2021