LOGITECH INTERNATIONAL S.A., 10-K filed on 5/27/2020
Annual Report
v3.20.1
COVER PAGE - USD ($)
12 Months Ended
Mar. 31, 2020
May 18, 2020
Sep. 27, 2019
Cover [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Mar. 31, 2020    
Document Transition Report false    
Entity File Number 0-29174    
Entity Registrant Name LOGITECH INTERNATIONAL S.A.    
Entity Incorporation, State or Country Code V8    
Entity Address, Address Line One 1015 Lausanne    
Entity Address, Country CH    
Entity Address, Address Line Two c/o Logitech Inc.    
Entity Address, Address Line Three 7700 Gateway Boulevard    
Entity Address, City or Town Newark    
Entity Address, State or Province CA    
Entity Address, Postal Zip Code 94560    
City Area Code 510    
Local Phone Number 795-8500    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 6,703,496,937
Entity Common Stock, Shares Outstanding   167,817,568  
Documents Incorporated by Reference Portions of the registrant's Proxy Statement for the 2020 Annual Meeting of Shareholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended March 31, 2020.    
Entity Central Index Key 0001032975    
Amendment Flag false    
Current Fiscal Year End Date --03-31    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
v3.20.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]      
Net sales $ 2,975,851 $ 2,788,322 $ 2,566,863
Cost of goods sold 1,838,685 1,737,969 1,648,744
Amortization of intangible assets and purchase accounting effect on inventory 14,785 13,342 8,878
Gross profit 1,122,381 1,037,011 909,241
Operating expenses:      
Marketing and selling 533,324 488,263 435,489
Research and development 177,593 161,230 143,760
General and administrative 94,015 98,732 96,353
Amortization of intangible assets and acquisition-related costs 17,563 14,290 8,930
Change in fair value of contingent consideration for business acquisition 23,247 0 (4,908)
Restructuring charges (credits), net 144 11,302 (116)
Total operating expenses 845,886 773,817 679,508
Operating income 276,495 263,194 229,733
Interest income 9,619 8,375 4,969
Other income (expense), net 38,212 (436) (2,437)
Income before income taxes 324,326 271,133 232,265
Provision for (benefit from) income taxes (125,397) 13,560 23,723
Net income $ 449,723 $ 257,573 $ 208,542
Net income per share:      
Basic (in dollars per share) $ 2.70 $ 1.56 $ 1.27
Diluted (in dollars per share) $ 2.66 $ 1.52 $ 1.23
Weighted average shares used to compute net income per share:      
Basic (in shares) 166,837 165,609 164,038
Diluted (in shares) 169,381 168,965 168,971
v3.20.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income $ 449,723 $ 257,573 $ 208,542
Currency translation gain (loss):      
Currency translation gain (loss), net of taxes (8,270) (7,790) 5,860
Reclassification of currency translation loss included in other income (expense), net 0 (510) 0
Defined benefit plans:      
Net gain (loss) and prior service credits (costs), net of taxes (6,846) (7,353) 3,955
Reclassification of amortization included in other income (expense), net 762 (181) 127
Hedging gain (loss):      
Deferred hedging gain (loss), net of taxes 205 1,781 (8,499)
Reclassification of hedging loss (gain) included in cost of goods sold (813) 1,810 5,808
Total other comprehensive income (loss) (14,962) (12,243) 7,251
Total comprehensive income $ 434,761 $ 245,330 $ 215,793
v3.20.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2020
Mar. 31, 2019
Current assets:    
Cash and cash equivalents $ 715,566 $ 604,516
Accounts receivable, net 394,743 383,309
Inventories 229,249 293,495
Other current assets 74,920 69,116
Total current assets 1,414,478 1,350,436
Non-current assets:    
Property, plant and equipment, net 76,119 78,552
Goodwill 400,917 343,684
Other intangible assets, net 126,941 118,999
Other assets 345,019 132,453
Total assets 2,363,474 2,024,124
Current liabilities:    
Accounts payable 259,120 283,922
Accrued and other current liabilities 455,024 433,897
Total current liabilities 714,144 717,819
Non-current liabilities:    
Income taxes payable 40,788 36,384
Other non-current liabilities 119,274 93,582
Total liabilities 874,206 847,785
Commitments and contingencies (Note 13)
Shareholders' equity:    
Registered shares, CHF 0.25 par value 30,148 30,148
Additional paid-in capital 75,097 56,655
Shares in treasury, at cost— 6,210 and 7,244 shares at March 31, 2020 and 2019, respectively (185,896) (169,802)
Retained earnings 1,690,579 1,365,036
Accumulated other comprehensive loss (120,660) (105,698)
Total shareholders' equity 1,489,268 1,176,339
Total liabilities and shareholders' equity $ 2,363,474 $ 2,024,124
v3.20.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - SFr / shares
Mar. 31, 2020
Mar. 31, 2019
Statement of Financial Position [Abstract]    
Shares, par value (in CHF per share) SFr 0.25 SFr 0.25
Issued shares (in shares) 173,106,620 173,107,000
Shares that may be issued out of conditional capital (in shares) 50,000,000 50,000,000
Shares that may be issued out of authorized capital (in shares) 34,621,000 34,621,000
Treasury shares (in shares) 6,209,647 7,244,000
v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2018
Cash flows from operating activities:      
Net income $ 449,723 $ 257,573 $ 208,542
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 42,893 43,471 41,295
Amortization of intangible assets 30,858 24,180 15,607
Share-based compensation expense 54,870 50,265 44,138
Loss (gain) on investments 756 (816) (669)
Deferred income taxes (159,853) (12,257) 7,141
Change in fair value of contingent consideration for business acquisition 23,247 0 (4,908)
Other (936) (230) (11)
Gain on sale of investment in a privately held company (39,767) 0 0
Changes in assets and liabilities, net of acquisitions:      
Accounts receivable, net (15,768) (58,798) (26,363)
Inventories 60,388 (21,551) 16,047
Other assets 18,319 (8,800) (16,908)
Accounts payable (24,250) (19,134) 17,695
Accrued and other liabilities (15,480) 51,278 44,655
Net cash provided by operating activities 425,000 305,181 346,261
Cash flows from investing activities:      
Purchases of property, plant and equipment (39,484) (35,930) (39,748)
Investment in privately held companies (345) (2,717) (1,240)
Acquisitions, net of cash acquired (91,569) (133,814) (88,323)
Proceeds from return of investments 0 124 237
Purchases of short-term investments 0 (1,505) (6,789)
Sales of short-term investments 0 0 6,789
Proceeds from sale of property, plant and equipment 1,037 0 0
Purchases of trading investments (11,964) (5,203) (6,053)
Proceeds from sales of trading investments 12,091 5,700 6,423
Net cash used in investing activities (130,234) (173,345) (128,704)
Cash flows from financing activities:      
Payment of cash dividends (124,180) (113,971) (104,248)
Purchases of registered shares (50,437) (32,449) (30,722)
Payment of contingent consideration for business acquisition 0 0 (5,000)
Proceeds from exercises of stock options and purchase rights 22,241 18,057 41,910
Tax withholdings related to net share settlements of restricted stock units (24,280) (30,770) (29,813)
Net cash used in financing activities (176,656) (159,133) (127,873)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (7,060) (10,134) 4,730
Net increase (decrease) in cash, cash equivalents and restricted cash 111,050 (37,431) 94,414
Cash, cash equivalents and restricted cash at beginning of the period 604,516 641,947 547,533
Cash, cash equivalents and restricted cash at end of the period 715,566 604,516 641,947
Non-cash investing activities:      
Property, plant and equipment purchased during the period and included in period end liability accounts 5,021 3,983 3,869
Equity and debt investment in a privately held company 42,350 0 0
Supplemental cash flow information:      
Income taxes paid, net $ 20,851 $ 15,312 $ 15,051
v3.20.1
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, 2017   173,106   10,727    
Beginning of the period 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 adoption of new accounting standard (Note 2) 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 options and purchase rights (in shares)       (1,527)    
Sale of shares upon exercise of stock options and purchase rights 41,910   21,315 $ 20,595    
Issuance of shares upon vesting of restricted stock units (in shares)       (1,536)    
Issuance of shares upon vesting of restricted stock units (29,813)   (48,291) $ 18,478    
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)
Increase (Decrease) in Shareholders' Equity            
Cumulative effect of adoption of new accounting standard (Note 2) 245,330       257,573 (12,243)
Purchases of registered shares (in shares)       808    
Purchases of registered shares (32,449)     $ (32,449)    
Sale of shares upon exercise of options and purchase rights (in shares)       (575)    
Sale of shares upon exercise of stock options and purchase rights 18,057   10,526 $ 7,531    
Issuance of shares upon vesting of restricted stock units (in shares)       (1,516)    
Issuance of shares upon vesting of restricted stock units (30,770)   (51,572) $ 20,802    
Share-based compensation 50,467   50,467      
Cash dividends (113,971)       (113,971)  
End of the period (in shares) at Mar. 31, 2019   173,106   7,244    
End of the period balance at Mar. 31, 2019 1,176,339 $ 30,148 56,655 $ (169,802) 1,365,036 (105,698)
Increase (Decrease) in Shareholders' Equity            
Cumulative effect of adoption of new accounting standard (Note 2) 434,761       449,723 (14,962)
Purchases of registered shares (in shares)       1,251    
Purchases of registered shares (50,437)     $ (50,437)    
Sale of shares upon exercise of options and purchase rights (in shares)       (1,101)    
Sale of shares upon exercise of stock options and purchase rights 22,241   5,582 $ 16,659    
Issuance of shares upon vesting of restricted stock units (in shares)       (1,184)    
Issuance of shares upon vesting of restricted stock units (24,280)   (41,964) $ 17,684    
Share-based compensation 54,824   54,824      
Cash dividends (124,180)       (124,180)  
End of the period (in shares) at Mar. 31, 2020   173,106   6,210    
End of the period balance at Mar. 31, 2020 $ 1,489,268 $ 30,148 $ 75,097 $ (185,896) $ 1,690,579 $ (120,660)
v3.20.1
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical)
1 Months Ended 12 Months Ended
Sep. 30, 2019
SFr / shares
Sep. 30, 2019
$ / shares
Sep. 30, 2018
SFr / shares
Sep. 30, 2018
$ / shares
Sep. 30, 2017
SFr / shares
Sep. 30, 2017
$ / shares
Mar. 31, 2020
$ / shares
Mar. 31, 2019
$ / shares
Mar. 31, 2018
$ / shares
Statement of Stockholders' Equity [Abstract]                  
Cash dividends per share (in dollars) | (per share) SFr 0.73 $ 0.74 SFr 0.67 $ 0.69 SFr 0.61 $ 0.63 $ 0.74 $ 0.69 $ 0.63
v3.20.1
The Company
12 Months Ended
Mar. 31, 2020
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), designs, manufactures and markets products that have an everyday place in people's lives, connecting them to the digital experiences they care about. More than 35 years ago, Logitech created products to improve experiences around the personal PC platform, and today it is a multi-brand, multi-category company designing products that enable better experiences consuming, sharing and creating any digital content such as 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 and e-tailers, and indirect sales through distributors.
Logitech was founded in Switzerland in 1981 and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Apples, Switzerland and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific. Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange under the trading symbol LOGN and the Nasdaq Global Select Market under the trading symbol LOGI.
Business Acquisitions
In October 2019, the Company acquired General Workings, Inc. During fiscal year 2019, the Company acquired Blue Microphones Holding Corporation. See "Note 3 - Business Acquisitions" for more information.
Reference to Sales
References to "sales" in the notes to the consolidated financial statements means net sales, except as otherwise specified.
v3.20.1
Summary of Significant Accounting Policies
12 Months Ended
Mar. 31, 2020
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 accounting principles generally accepted in the United States (U.S. GAAP).
Fiscal Year
The Company's fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday. For purposes of presentation, the Company has indicated its quarterly periods end on the last day of the calendar quarter.
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, contingent consideration for a business acquisition and periodic reassessment of its fair value, valuation of right-of-use assets, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, warranty liabilities, accruals for customer incentives, cooperative marketing, and pricing programs (Customer Programs) and related breakage when appropriate, accrued sales return liability, allowance for doubtful accounts, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates.
Risks and Uncertainties
COVID-19 and the measures taken by many countries in response have contributed to a general slowdown in the global economy and adversely affected, and could in the future adversely affect, the Company's business and operations. The Company has experienced disruptions and higher costs in manufacturing, supply chain, logistical operations and outsourced services, and shortages of the Company's products in distribution channels. The full extent of the impact of the COVID-19 pandemic on the Company's business and operational and financial performance and condition is currently uncertain and will depend on many factors outside the Company's control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the development and availability of effective treatments and vaccines, the imposition of effective public safety and other protective measures, the impact of COVID-19 on the global economy and demand for the Company's products and services. Should the COVID-19 pandemic not improve or worsen, or if the Company's attempt to mitigate its impact on its operations and costs is not successful, the Company's business, results of operations, financial condition and prospects may be adversely affected.
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 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 a customer obtains control of promised goods or service in an amount that reflects the transaction price the Company expects to receive in exchange for those goods or services.
    
Substantially all revenue recognized by the Company relates to the contracts with customers to sell products that allow people to connect through music, gaming, video, computing, and other digital platforms. These products are hardware devices, which may include embedded software that function together, and are considered as one performance obligation. Hardware devices are generally plug and play, requiring no configuration and little or no installation. Revenue is recognized at a point in time when control of the products is transferred to the customer which generally occurs upon shipment. The Company’s sales contracts with its customers have a one year or shorter term. The Company applies the practical expedient of not disclosing the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

The Company also provides post-contract customer support (“PCS”) for certain products and related software, which includes unspecified software updates and upgrades, bug fixes and maintenance. The transaction price is allocated to two performance obligations in such contracts, based on a relative standalone selling price. The transaction price allocated to PCS is recognized as revenue on a straight-line basis, which reflects the pattern of delivery of PCS, over the estimated term of the support that is between one to two years. Deferred revenue associated with remaining PCS performance obligation as of March 31, 2020 and March 31, 2019 was not material.

The Company normally requires payment from customers within thirty to sixty days from the invoice date. 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's contracts with customers do not include significant financing components as the period between the satisfaction of performance obligations and timing of payment are generally within one year.

The transaction price received by the Company from sales to its distributors, retail companies ("retailers"), and authorized resellers is calculated as selling price net of variable consideration which may include product returns and the Company’s payments for Customer Programs related to current period product revenue. The estimated impact of these programs is recorded as a reduction of transaction price or as an operating expense if the Company receives a distinct good or service from the customer and can reasonably estimate the fair value of that good or service received. 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 accounts for breakage as part of variable consideration, subject to constraint, and records the estimated impact in the same period when revenue is recognized at the expected value. Significant management judgments and estimates are used to determine the impact of the program and breakage in any accounting period.

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 amount 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.
    
Customer incentive programs include consumer rebates and performance-based incentives. Consumer rebates are offered to the Company's customers and indirect partners at the Company's discretion for the primary benefit of end-users. In addition, the Company offers performance-based incentives to many of its customers and indirect partners based on predetermined performance criteria. 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.

Cooperative marketing arrangements and customer incentive programs are considered variable consideration, which the Company estimates and records as a reduction to revenue at the time of sale based on negotiated terms, historical experiences, forecasted incentives, anticipated volume of future purchases, and inventory levels in the channel.

The Company has agreements with certain customers that contain terms allowing price protection credits to be issued in the event of a subsequent price reduction. 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 customers, current customer demand, current operating conditions, and other relevant customer and product information, such as stage of product life-cycle.

Product return rights vary by customer. Estimates of expected future product returns qualify as variable consideration and are recorded as a reduction of the transaction price of the contract at the time of sale based on an 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. The Company assesses the estimated asset for recovery value for impairment and adjusts the value of the asset for any impairment. 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.

Typically, variable consideration does not need to be constrained as estimates are based on predictive historical data or future commitments that are planned and controlled by the Company. However, the Company continues to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur.

The Company regularly evaluates the adequacy of its estimates for Customer Programs and product returns. Future market conditions and product transitions may require the Company to take action to change such programs and related estimates. When the variables used to estimate these costs change, or if actual costs differ significantly from the estimates, the Company would be required to increase or reduce revenue or operating expenses to reflect the impact. During the year ended March 31, 2020, changes to these estimates related to performance obligations satisfied in prior periods were not material.

Sales taxes and value-added taxes (“VAT”) collected from customers, if applicable, which are remitted to governmental authorities are not included in revenue, and are reflected as a liability on the consolidated balance sheets.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customer (Topic 606)" (ASU 2014-09). The Company adopted this standard effective April 1, 2018 using the modified retrospective method applied to those contracts that were not completed as of April 1, 2018. ASU 2014-09 outlines a new, single,
comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes existing revenue recognition guidance, including industry-specific guidance. Under the new guidance, recognition of revenue occurs when a customer obtains controls 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 standard requires reporting companies to disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

As a result of the adoption of the new standard, the Company recorded: a) a reduction to retained earnings as of April 1, 2018, and b) reclassifications of certain allowances for sales returns and certain other Customer Programs from accounts receivable, net to accrued and other current liabilities and other current assets.

The cumulative effect of the changes to the consolidated balance sheet from the adoption of Topic 606 was as follows (in thousands):
 
 
As of
 March 31, 2018
 
Effect of Adoption of Topic 606
 
As of
April 1, 2018
Accounts receivable, net
 
$
214,885

 
$
105,768

 
$
320,653

Other current assets
 
56,362

 
6,195

 
62,557

Accrued and other current liabilities
 
281,732

 
122,845

 
404,577

Retained earnings
 
1,232,316

 
(10,882
)
 
1,221,434



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.
Contract Balances
The Company records accounts receivable from contracts with customers when it has an unconditional right to consideration, as accounts receivable, net on the consolidated balance sheet.
The Company records contract liabilities when cash payments are received or due in advance of performance, primarily for implied support and subscriptions. Contract liabilities are included in accrued and other current liabilities on the consolidated balance sheets.
As of March 31, 2020 and 2019, the Company did not have any material contract liabilities balances or changes.
Contract Costs
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in marketing and selling expenses in the consolidated statements of operations. As of March 31, 2020 and March 31, 2019, the Company did not have any material deferred contract costs.
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 as they are incurred. 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 2020, 2019 and 2018 were $298.6 million, $278.2 million and $233.7 million, respectively, out of which $64.5 million, $58.8 million, and $36.7 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.
The Company had the following customers that individually comprised 10% or more of its gross sales:
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Customer A
 
12
%
 
13
%
 
15
%
Customer B
 
14
%
 
14
%
 
13
%
The Company had the following customers that individually comprised 10% or more of accounts receivable:
 
 
March 31,
 
 
2020
 
2019
Customer A
 
12
%
 
14
%
Customer B
 
12
%
 
15
%

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 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, 2020 and 2019, the Company also recorded a liability of $9.6 million and $14.1 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 ten years, tooling over useful lives from six months to one year, and leasehold improvements over the lesser the term of the lease or ten years.
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 two to ten 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. Significant 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, the Company 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. For the year ended March 31, 2020, the Company elected to perform a qualitative assessment and determined that an impairment was not more likely than not and no further analysis was required. The Company 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 the Company 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's 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 with 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 under the equity method, which are classified as other assets. In addition, the Company has certain investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. The Company elected the measurement alternative to record these investments at cost and to adjust for impairments and observable price changes resulting from transactions with the same issuer within the statement of operations.
Net Income per Share
Basic net income per share is computed by dividing net income by the weighted average outstanding shares. Diluted net income 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 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 are both approximately three years and the estimated expense is recognized ratably over the service period.
In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)": Improvements to Employee Share-Based Payment Accounting" (ASU 2016-09). The Company adopted this standard effective April 1, 2017 using modified retrospective approach. 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 April 1, 2017 by $3.3 million. The Company further recognized a
cumulative-effect adjustment to increase retained earnings as of April 1, 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.
Product Warranty Accrual
All of the Company's products are covered by warranty to be free from defects in material and workmanship for periods ranging from one year to five years. The warranty period varies by product and by region. The Company’s warranty does not provide a service beyond assuring that the product complies with agreed-upon specifications and is not sold separately. The warranty the Company provides qualifies as an assurance warranty and is not treated as a separate performance obligation. 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. 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, 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.
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. The Company presents the earnings impact from forward points in the same line item that is used to present the earnings impact of the hedged item, i.e. cost of goods sold, for hedging forecasted inventory purchases.
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.
Recent Accounting Pronouncements Adopted
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, "Leases (Topic 842)" (ASU 2016-02 or Topic 842), which requires a lessee to recognize right-of-use (ROU) assets and lease liabilities arising from operating and financing leases with terms longer than 12 months on the consolidated balance sheets and to disclose key information about leasing arrangements.

The Company adopted the new standard effective April 1, 2019 and recorded a right-of-use (ROU) asset and lease liability related to its operating leases. The Company used the modified retrospective approach with the effective date as the date of initial application. Accordingly, the Company applied the new lease standard prospectively to leases existing or commencing on or after April 1, 2019. Prior period balances and disclosures have not been restated. The Company elected the package of transitional practical expedients, which among other provisions, allows the Company to not reassess under the new standard the Company's prior conclusions about lease identification, lease classification and initial direct cost, for any existing leases on the adoption date. In addition, for operating leases, the Company elected to account for lease and non-lease components as a single lease component. The Company also made an accounting policy election to not recognize lease liabilities and ROU assets on its consolidated balance sheet for leases that, at the lease commencement date, have a lease term of 12 months or less.

Adoption of the standard resulted in the recognition of $31.3 million of ROU assets and $37.4 million of lease liabilities related to the Company's leases on its consolidated balance sheet on April 1, 2019. The difference of $6.1 million represented deferred and prepaid rent for leases that existed and reclassified to ROU assets as of the date of adoption. The adoption of the standard did not have an impact on the Company's consolidated statement of operations, comprehensive income, changes in shareholders' equity or cash flows.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" (ASU 2018-15), which clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in software licensing arrangements under the internal-use software guidance. ASU 2018-15 is effective for annual and interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. The Company adopted this standard effective April 1, 2019 using a prospective adoption method. The adoption of ASU 2018-15 did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), which was further updated and clarified by the FASB through issuance of additional related ASUs, replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not expect the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements and plans to adopt the standard effective April 1, 2020.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements" (ASU 2018-13), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value measurement disclosures. ASU 2018-13 is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Retrospective adoption is required, except for certain disclosures which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company does not expect the adoption of ASU 2018-13 will have a material impact on its consolidated financial statements and plans to adopt the standard effective April 1, 2020.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefits Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans" (ASU 2018-14), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing defined benefit plan disclosures. ASU 2018-14 is effective for annual periods in fiscal years ending after December 15, 2020. Retrospective adoption is required and early adoption is permitted. The Company does not expect the adoption of ASU 2018-14 will have a material impact on its consolidated financial statements and plans to adopt the standard effective April 1, 2020.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" (ASU 2019-12), which eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently assessing the impact of ASU 2019-12 on its consolidated financial statements and plans to adopt the standard effective April 1, 2021.
v3.20.1
Business Acquisitions
12 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Business Acquisitions Business Acquisitions

Fiscal Year 2020 Acquisition

Streamlabs Acquisition

On October 31, 2019 (the "Streamlabs Acquisition Date"), the Company acquired all equity interests of General Workings, Inc. ("Streamlabs") for a total consideration of $105.7 million (as described in the table below), which included a working capital adjustment, plus additional contingent consideration of $29.0 million payable in stock only upon the achievement of certain net revenues for the period beginning on January 1, 2020 and ending on June 30, 2020 (the "Streamlabs Acquisition").

Streamlabs is a leading provider of software and tools for professional streamers. The Streamlabs Acquisition is complementary to the Company's gaming portfolio.

Streamlabs met the definition of a business, and therefore the acquisition is accounted for using the acquisition method.

The fair value of consideration transferred for the Streamlabs Acquisition consists of the following (in thousands):

 
 
Consideration

Purchase price (cash)
 
$
105,645

Fair value of contingent consideration (earn-out)
 
$
37

Fair value of total consideration transferred
 
$
105,682



The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Streamlabs Acquisition Date, and the value of goodwill resulting from the measurement period adjustments in the three months ending March 31, 2020 (in thousands):

 
 
Estimated Fair Value
Cash and cash equivalents
 
$
17,014

Intangible assets
 
$
37,000

Other identifiable liabilities assumed, net
 
$
(3,701
)
Net identifiable assets acquired
 
50,313

Contingent consideration (earn-out)
 
$
(37
)
Goodwill
 
$
55,406

Net assets acquired
 
$
105,682



Goodwill related to the acquisition is primarily attributable to opportunities and economies of scale from combining the operations and technologies of Logitech and Streamlabs, and is not deductible for tax purposes.

The following table summarizes the preliminary estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired as of the Streamlabs Acquisition Date (Dollars in thousands):
 
Fair Value
 
Estimated Useful Life (years)
Developed technology
$
21,800

 
6.0
Customer relationships
6,000

 
2.0
Trade name
9,200

 
8.0
Total identifiable intangible assets acquired
$
37,000

 
5.9


Intangible assets acquired as a result of the Streamlabs Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization, which materially approximates the distribution of the economic value of the identified intangible assets. Amortization of acquired developed technology of $1.5 million during the year ended March 31, 2020 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 $1.7 million during the year ended March 31, 2020 is included in "Amortization of intangible assets and acquisition-related costs" in the consolidated statements of operations.

Developed technology relates to the software platform which existing Streamlabs services are provided on. The economic useful life was determined based on the technology cycle related to developed technology of the software platform, 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 to existing customers of Streamlabs. The economic useful life was determined based on historical customer turnover rates and industry benchmarks.

Trade name relates to the “Streamlabs” 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 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 developed technology, which were discounted at a rate of 25%.

The fair value of 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. Trade name was valued using royalty rate of 5% and was discounted at a rate of 25%.

The fair value of customer relationships was estimated primarily using the with and without scenario, a discounted cash flow method (Level 3). Under this method, the Company calculated the present value of the after-tax cash flows expected to be generated by the business with and without the customer relationships using a discount rate of 20%. The without scenario incorporates lost revenue and lost profits over the period necessary to retain the asset.

The Company believes the fair values of acquired intangible assets recorded above represents their fair values and approximates the amounts a market participant would pay for these intangible assets as of the Streamlabs Acquisition Date.

The Company included Streamlabs' estimated fair value of assets acquired and liabilities assumed in its consolidated financial statements beginning on the Streamlabs Acquisition Date. The results of operations for Streamlabs subsequent to the Streamlabs Acquisition Date have been included in, but are not material to, the Company's consolidated statements of operations for the year ended March 31, 2020. Streamlabs contributed $13.1 million to the net sales for the year ended March 31, 2020, representing less than 1% of the Company's net sales for the year.

On October 31, 2019, the Company also made an immaterial technology acquisition for a total cash consideration of $3.6 million, which was accounted for using the acquisition method. The Company retained 10% of the total consideration for the purpose of ensuring seller's representations and warranties.

Fiscal Year 2019 Acquisition

Blue Microphones Acquisition

On August 21, 2018 (the "Blue Microphones Acquisition Date"), the Company acquired all equity interests in Blue Microphones Holding Corporation ("Blue Microphones") for a total consideration of $134.8 million in cash (the "Blue Microphones Acquisition"), which included a working capital adjustment and repayment of debt on behalf of Blue Microphones.

Blue Microphones is a leading audio manufacturer that designs and produces microphones, headphones, recording tools, and accessories for audio professionals, musicians and consumers. The Blue Microphones Acquisition supplements the Company's product portfolio. 

Blue Microphones met the definition of a business, and therefore the 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 Blue Microphones Acquisition Date (in thousands):

 
 
Estimated Fair Value
Cash and cash equivalents
 
$
1,110

Accounts receivable
 
10,979

Inventories
 
19,546

Other current assets
 
997

Property, plant and equipment
 
452

Intangible assets
 
55,567

Total identifiable assets acquired
 
$
88,651

Accounts payable
 
(10,322
)
Accrued liabilities
 
(11,162
)
Other long-term liabilities
 
(661
)
Net identifiable assets acquired
 
$
66,506

Goodwill
 
68,269

Net assets acquired
 
$
134,775



Goodwill related to the acquisition is primarily attributable to opportunities and economies of scale from combining the operations and technologies of Logitech and Blue Microphones and is not deductible for tax purposes.

The fair value of the inventory acquired is estimated at its net realizable value, which uses the estimated selling prices, less the cost 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 Blue Microphones immediately before the acquisition is $1.8 million, which has been recognized in "amortization of intangibles assets and purchase accounting effect on inventory" in the consolidated statements of operations upon the sale of the acquired inventory.

The following table summarizes the estimated fair values and estimated useful lives of the components of intangible assets acquired as of the Blue Microphones Acquisition Date (Dollars in thousands):
 
Fair Value
 
Estimated Useful Life (years)
Developed technology
$
17,967

 
5.0
Customer relationships
25,100

 
10.0
Trademark and trade name
12,500

 
7.0
Total intangible assets acquired
$
55,567

 
7.7


Intangible assets acquired as a result of the Blue Microphones Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization, which materially approximates the distribution of the economic value of the intangible assets. Amortization of developed technology of $3.6 million, and $2.1 million during the years ended March 31, 2020 and 2019, respectively, is included in "amortization of intangible assets and purchase accounting effect of inventory" in the consolidated statements of operations. Amortization of customer relationships, trademark and trade names of $4.3 million and $2.5 million during the years ended March 31, 2020 and 2019, respectively, is included in "amortization of intangible assets and acquisition-related costs" in the consolidated statements of operations.

Developed technology relates to existing Blue Microphones 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 Blue Microphones. The economic useful life was determined based on historical customer attrition rates and industry benchmarks.

Trademark and trade name relates to “Blue Microphones”. 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 values of developed technology and trade name were 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 3%, respectively, and both were discounted at a rate of 11%.

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 11%.

The Company believes the fair value of the intangible assets recorded above approximates the amounts a market participant would pay for these intangible assets as of the Blue Microphones Acquisition Date.

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

Acquisition-related costs and pro forma results of operations

The Company incurred acquisition-related costs of approximately $1.5 million, $1.7 million and $1.4 million, in aggregate, for the year ended March 31, 2020, 2019 and 2018, 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 acquisitions completed in fiscal year 2020 and 2019 have not been presented because the effects of these acquisitions are not material to the consolidated statements of operations individually or in aggregate for each year.
v3.20.1
Net Income per Share
12 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Net Income per Share Net Income per Share
The computations of basic and diluted net income per share for the Company were as follows (in thousands except per share amounts):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Net Income
 
$
449,723

 
$
257,573

 
$
208,542

 
 
 
 
 
 
 
Shares used in net income per share computation:
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
166,837

 
165,609

 
164,038

Effect of potentially dilutive equivalent shares
 
2,544

 
3,356

 
4,933

Weighted average shares outstanding - diluted
 
169,381

 
168,965

 
168,971

 
 
 

 
 

 
 

Net income per share:
 
 
 
 
 
 
Basic
 
$
2.70

 
$
1.56

 
$
1.27

Diluted
 
$
2.66

 
$
1.52

 
$
1.23


Share equivalents attributable to outstanding stock options, restricted stock units ("RSUs") and employee share purchase rights (ESPP) totaling 1.7 million, 1.8 million and 1.1 million, respectively, during fiscal years 2020, 2019 and 2018 were excluded from the calculation of diluted net income per share because the combined exercise price and average unamortized grant date fair value of these options and ESPP or vesting of RSUs were greater than the average market price of the Company's shares during the periods presented herein, and therefore their inclusion would have been anti-dilutive. The majority of performance-based awards were excluded because all necessary conditions have not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the contingency period.
v3.20.1
Employee Benefit Plans
12 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Employee Benefit Plans Employee Benefit Plans
Employee Share Purchase Plans and Stock Incentive Plans
As of March 31, 2020, the Company offers the 2006 Employee Share Purchase Plan, as amended and restated (Non-U.S.) (2006 ESPP), the 1996 Employee Share Purchase Plan (U.S.), as amended and restated (1996 ESPP), the 2006 Stock Incentive Plan (2006 Plan) as amended and restated and the 2012 Stock Inducement Equity Plan (2012 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 benefit recognized for fiscal years 2020, 2019 and 2018 (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Cost of goods sold
 
$
4,852

 
$
3,812

 
$
3,733

Marketing and selling
 
26,835

 
20,630

 
17,765

Research and development
 
9,273

 
7,368

 
6,381

General and administrative
 
13,910

 
18,455

 
16,259

Total share-based compensation expense
 
54,870

 
50,265

 
44,138

Income tax benefit
 
(14,109
)
 
(17,091
)
 
(15,998
)
Total share-based compensation expense, net of income tax benefit
 
$
40,761

 
$
33,174

 
$
28,140


The income tax benefit in the respective period primarily consists of tax benefit related to the share-based compensation expense for the period and direct tax benefit realized, including net excess tax benefits recognized from share-based awards vested or exercised during the period upon the adoption of ASU 2016-09 on April 1, 2017. The income tax benefit for the year ended March 31, 2018 was reduced by the 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 7 - Income Taxes" for more information.
As of March 31, 2020, 2019 and 2018, the balance of capitalized stock-based compensation included in inventory was $0.9 million, $0.9 million, and $0.7 million, respectively.
The following table summarizes total unamortized share-based compensation expense and the remaining period 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, 2020
 
 
Unamortized
Expense
 
Remaining
Months
ESPP
 
$
1,442

 
4
Stock Options
 
4,369

 
24
Time-based RSUs
 
71,545

 
26
Market-based and performance-based RSUs
 
13,180

 
21
Total unamortized share-based compensation expense

 
$
90,536

 
 

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, 2020, a total of 4.9 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, 2020, a total of 8.6 million shares were 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 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.
In fiscal years 2020, 2019 and 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 years 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, 2020, 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, 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 is determined with the following assumptions and values:
 
 
Stock Options
 
 Employee Stock Purchase Plans
 
 
Years Ended March 31,
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
 
2020
 
2019
 
2018
Dividend yield
 
*
 
1.72
%
 
*
 
1.74
%
 
1.73
%
 
1.67
%
Risk-free interest rate
 
*
 
2.45
%
 
*
 
1.81
%
 
2.35
%
 
1.37
%
Expected volatility
 
*
 
33
%
 
*
 
24
%
 
31
%
 
27
%
Expected life (years)
 
*
 
6.2

 
*
 
0.5

 
0.5

 
0.5

Weighted average grant date fair value per share
 
*
 
$11.55
 
*
 
$
9.35

 
$
9.33

 
$
8.69

* Not applicable as no stock options were granted in the period.
RSUs with Market Conditions
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Dividend yield
 
1.76
%
 
1.59
%
 
1.75
%
Risk-free interest rate
 
2.11
%
 
2.51
%
 
1.40
%
Expected volatility
 
30
%
 
30
%
 
31
%
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 for employee stock purchase plan, or the performance period for RSUs with market conditions. The expected life for stock options is based on historical settlement rates, which the Company believes are most representative of future exercise and post-vesting termination behaviors. 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.
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 2020, 2019 and 2018 is as follows:
 
 
Number of Shares
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Term

 
Aggregate Intrinsic Value
 
 
(In thousands)
 
 
 
(Years)
 
(In thousands)
Outstanding, March 31, 2017
 
3,050

 


 
 
 
 
Granted
 

 


 
 
 
 
Exercised
 
(994
)
 


 
 
 
$
8,347

Canceled or expired
 
(16
)
 


 
 
 
 
Outstanding, March 31, 2018
 
2,040

 


 
 
 
 
Granted
 
649

 


 
 
 
 
Exercised
 
(82
)
 


 
 
 
$
1,707

Canceled or expired
 

 


 
 
 
 
Outstanding, March 31, 2019
 
2,607

 
$
20

 

 


Granted
 

 


 

 


Exercised
 
(573
)
 
$
9

 

 
$
19,339

Canceled or expired
 
(65
)
 
$
39

 

 


Outstanding, March 31, 2020
 
1,969

 
$
22

 
4.2
 
$
40,549

Vested and exercisable, March 31, 2020
 
1,530

 
$
18

 
2.8
 
$
38,733


As of March 31, 2020, the exercise price of outstanding options ranged from $2 to $40 per share option.
The tax benefit realized for the tax deduction from options exercised during fiscal years 2020, 2019 and 2018 was $0.05 million, $0.2 million and $1.8 million, respectively.
A summary of the Company's time-based, market-based and performance-based RSU activities for fiscal years 2020, 2019 and 2018 is as follows:
 
 
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, 2017
 
6,181

 
$
14

 
 
 
 
Granted—time-based
 
1,212

 
$
33

 
 
 
 
Granted—market and performance-based
 
409

 
$
33

 
 
 
 
Vested
 
(2,248
)
 


 
 
 
$
81,582

Canceled or expired
 
(333
)
 


 
 
 
 
Outstanding, March 31, 2018
 
5,221

 
$
20

 
 
 
 
Granted—time-based
 
1,290

 
$
40

 
 
 
 
Granted—market and performance-based
 
381

 
$
39

 
 
 
 
Vested
 
(2,148
)
 


 
 
 
$
89,159

Canceled or expired
 
(323
)
 


 
 
 
 
Outstanding, March 31, 2019
 
4,421

 
$
29

 

 
 
Granted—time-based
 
1,431

 
$
38

 
 
 
 
Granted—market and performance-based
 
365

 
$
40

 
 
 
 
Vested
 
(1,705
)
 
$
22

 
 
 
$
76,389

Canceled or expired
 
(561
)
 
$
32

 
 
 
 
Outstanding, March 31, 2020
 
3,951

 
$
36

 
1.3
 
$
167,298

The RSUs outstanding as of March 31, 2020 above include 1.0 million shares with both market-based and performance-based vesting conditions.
The tax benefit realized for the tax deduction from RSUs that vested during fiscal years 2020, 2019 and 2018 was $12.1 million, $16.2 million and $20.3 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 2020, 2019 and 2018, were $8.6 million, $8.7 million and $7.6 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.

The net periodic benefit cost of the defined benefit pension plans and the non-retirement post-employment benefit obligations for fiscal years 2020, 2019 and 2018 was as follows (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Service costs
 
$
11,008

 
$
10,564

 
$
9,715

Interest costs
 
1,055

 
1,301

 
1,126

Expected return on plan assets
 
(2,616
)
 
(2,167
)
 
(1,792
)
Amortization:
 
 
 
 
 
 
Net prior service credit recognized
 
(435
)
 
(443
)
 
(51
)
Net actuarial loss recognized
 
1,386

 
450

 
242

Settlement
 
(97
)
 
(97
)
 

Total net periodic benefit cost

 
$
10,301

 
$
9,608

 
$
9,240


The components of net periodic benefit cost other than the service costs component are included in the line “other income (expense), net” in the consolidated statements of operations.
The changes in projected benefit obligations for fiscal years 2020 and 2019 were as follows (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
Projected benefit obligations, beginning of the year
 
$
143,662

 
$
128,915

Service costs
 
11,008

 
10,564

Interest costs
 
1,055

 
1,301

Plan participant contributions
 
3,733

 
3,666

Actuarial gains
 
2,246

 
9,506

Benefits paid
 
(3,507
)
 
(3,793
)
Plan amendment related to statutory change
 

 
(705
)
Settlement
 
(941
)
 
(335
)
Administrative expense paid
 
(141
)
 
(142
)
Currency exchange rate changes and other
 
3,799

 
(5,315
)
Projected benefit obligations, end of the year
 
$
160,914

 
$
143,662


The accumulated benefit obligation for all defined benefit pension plans as of March 31, 2020 and 2019 was $135.0 million and $118.7 million, respectively.    
The following table presents the changes in the fair value of defined benefit pension plan assets for fiscal years 2020 and 2019 (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
Fair value of plan assets, beginning of the year
 
$
90,365

 
$
84,718

Actual return on plan assets
 
(830
)
 
3,350

Employer contributions
 
6,531

 
6,383

Plan participant contributions
 
3,733

 
3,666

Benefits paid
 
(3,507
)
 
(3,793
)
Settlement
 
(941
)
 
(335
)
Administrative expenses paid
 
(141
)
 
(142
)
Currency exchange rate changes
 
2,800

 
(3,482
)
Fair value of plan assets, end of the year
 
$
98,010

 
$
90,365


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 per the following allocation: 33% in equities, 34% in bonds, 28% in real estate, 2% in cash and cash equivalents and the remaining in other investments. 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, 2020 and 2019 (in thousands):
 
 
March 31,
 
 
2020
 
2019
 
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash and cash equivalents
 
$
14,213

 
$

 
$
14,213

 
$
10,737

 
$

 
$
10,737

Equity securities
 
28,329

 

 
28,329

 
27,559

 

 
27,559

Debt securities
 
26,605

 

 
26,605

 
26,823

 

 
26,823

Swiss real estate funds
 
16,476

 
8,168

 
24,644

 
21,659

 

 
21,659

Hedge funds
 

 
1,882

 
1,882

 

 
912

 
912

Other
 
2,084

 
253

 
2,337

 
2,377

 
298

 
2,675

  Total fair value of plan assets
 
$
87,707

 
$
10,303

 
$
98,010

 
$
89,155

 
$
1,210

 
$
90,365


The funded status of the plans was as follows (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
Fair value of plan assets
 
$
98,010

 
$
90,365

Less: projected benefit obligations
 
160,914

 
143,662

Underfunded status 
 
$
(62,904
)
 
$
(53,297
)

Amounts recognized on the balance sheet for the plans were as follows (in thousands):
 
 
March 31,
 
 
2020
 
2019
Current liabilities
 
$
2,126

 
$
1,849

Non-current liabilities
 
60,778

 
51,448

  Total liabilities
 
$
62,904

 
$
53,297


Amounts recognized in accumulated other comprehensive loss related to defined benefit pension plans were as follows (in thousands):
 
 
March 31,
 
 
2020
 
2019
 
2018
Net prior service credits
 
$
3,647

 
$
3,965

 
$
3,843

Net actuarial loss
 
(22,722
)
 
(17,630
)
 
(9,821
)
  Accumulated other comprehensive loss
 
(19,075
)
 
(13,665
)
 
(5,978
)
Deferred tax
 
(941
)
 
(267
)
 
(420
)
  Accumulated other comprehensive loss, net of tax
 
$
(20,016
)
 
$
(13,932
)
 
$
(6,398
)

The following table presents the amounts included in accumulated other comprehensive loss as of March 31, 2020, which are expected to be recognized as a component of net periodic benefit cost in fiscal year 2021 (in thousands):
 
 
Year Ended
March 31, 2020
Amortization of net prior service credits
 
$
(447
)
Amortization of net actuarial loss
 
1,124

Total
 
$
677


The actuarial assumptions for the defined benefit plans for fiscal years 2020 and 2019 were as follows:
 
 
Years Ended March 31,
 
 
2020
 
2019
Benefit Obligations:
 
 
 
 
Discount rate
 
0.50% - 6.75%
 
0.55%-7.25%
Estimated rate of compensation increase
 
2.25% - 10.00%
 
2.50%-10.00%
Periodic Costs:
 
 
 
 
Discount rate
 
0.55% - 7.25%
 
0.75%-7.50%
Estimated rate of compensation increase
 
2.50% - 10.00%
 
2.50%-10.00%
Expected average rate of return on plan assets
 
0.89% - 3.00%
 
0.75% - 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,
 
 
2021
 
$
8,128

2022
 
8,501

2023
 
8,192

2024
 
8,541

2025
 
8,877

2026-2030
 
43,063

Total expected benefit payments by the plan
 
$
85,302


The Company expects to contribute $5.8 million to its defined benefit pension plans during fiscal year 2020.
Deferred Compensation Plan
One of the Company's subsidiaries offers a deferred compensation plan that permits eligible employees to make 100% vested salary and incentive compensation deferrals within established limits. The Company does not make contributions to the plan.
The deferred compensation plan's assets consist of marketable securities and are included in other assets on the consolidated balance sheets. The marketable securities are classified as trading investments and were recorded at a fair value of $20.1 million and $20.4 million as of March 31, 2020 and 2019, respectively, based on quoted market prices. The Company also had $20.1 million and $20.4 million in deferred compensation liability as of March 31, 2020 and 2019, respectively. Earnings, gains and losses on trading investments are included in other income (expense), net and corresponding changes in deferred compensation liability are included in operating expenses and cost of goods sold.
v3.20.1
Other Income (Expense), net
12 Months Ended
Mar. 31, 2020
Other Income and Expenses [Abstract]  
Other Income (Expense), net Other Income (Expense), net
Other income (expense), net comprises of the following (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Investment income (loss) related to the deferred compensation plan
 
$
(831
)
 
$
664

 
$
1,386

Currency exchange loss, net
 
(909
)
 
(3,608
)
 
(4,613
)
Gain on investment, net
 
39,011

 
816

 
669

Other
 
941

 
1,692

 
121

Other income (expense), net
 
$
38,212

 
$
(436
)
 
$
(2,437
)

Gain on investments, net, represents realized gain (loss) on sales of investments, unrealized gain (loss) from the change in fair value of available-for-sale securities and gain (loss) on equity-method investments during the periods presented.
On March 2, 2020, the Company sold its $5.5 million investment in a privately held company for proceeds with a total fair value of $45.3 million consisting of cash, a subordinated note and an equity interest in another privately held company. As a result, the Company recognized a gain of $39.8 million related to the sale of this investment. Refer to “Note 9 - Fair Value Measurement” for details.
The components of net periodic benefit cost other than the service cost component, which is included in "operating expenses" in the consolidated statements of operations, for the years ended March 31, 2020 and 2019 are included in the line “Other” above as a result of adopting ASU 2017-07 effective April 1, 2018. The impact to the comparative periods was immaterial and therefore the prior period statements of operations were not revised.
v3.20.1
Income Taxes
12 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company's income (loss) before taxes and the provision for (benefit from) income taxes is generated outside of Switzerland.
Income from continuing operations before income taxes for fiscal years 2020, 2019 and 2018 is summarized as follows (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Swiss
 
$
238,303

 
$
212,986

 
$
177,935

Non-Swiss
 
86,023

 
58,147

 
54,330

Income before taxes
 
$
324,326

 
$
271,133

 
$
232,265


The provision for (benefit from) income taxes is summarized as follows (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Current:
 
 
 
 
 
 
Swiss
 
$
5,474

 
$
1,364

 
$
3,526

Non-Swiss
 
29,078

 
24,334

 
13,142

Deferred:
 
 
 
 
 
 
Swiss
 
(153,210
)
 

 

Non-Swiss
 
(6,739
)
 
(12,138
)
 
7,055

Provision for (benefit from) income taxes
 
$
(125,397
)
 
$
13,560

 
$
23,723


The difference between the provision for (benefit from) income taxes and the expected tax provision (tax benefit) at the statutory income tax rate of 8.5% is reconciled below (in thousands):
 
 
Years Ended March 31,
 
 
2020
 
2019
 
2018
Expected tax provision at statutory income tax rates
 
$
27,568

 
$
23,046

 
$
19,743

Income taxes at different rates
 
(5,592
)
 
(10,113
)
 
(9,611
)
Research and development tax credits
 
(4,692
)
 
(5,432
)
 
(4,124
)
Executive compensation
 
1,582

 
3,344

 
1,835

Stock-based compensation
 
(2,735
)
 
(7,288
)
 
(9,376
)