10-K 1 a10-kxcrus53018.htm 10-K
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2018
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to

Commission File Number 0-17795
CIRRUS LOGIC, INC.
(Exact name of registrant as specified in its charter)

DELAWARE |  | 77-0024818
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

800 W. 6 th Street, Austin, TX 78701
(Address of principal executive offices)
Registrant’s telephone number, including area code: (512) 851-4000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ NO ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ |  | Accelerated filer ☐ |  | Non-accelerated filer ☐ |  | Smaller reporting company ☐ |  | Emerging growth company ☐
|  |  |  | (Do not check if a smaller reporting company) |  |

Table of Contents
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO þ
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates was $2,433,893,534 based upon the closing price reported on the NASDAQ Global Select Market as of September 23, 2017. Stock held by directors, officers and stockholders owning 5 percent or more of the outstanding common stock were excluded as they may be deemed affiliates. This determination of affiliate status is not a conclusive determination for any other purpose.
As of May 25, 2018, the number of outstanding shares of the registrant’s common stock, $0.001 par value, was 60,978,789.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the registrant’s proxy statement for its annual meeting of stockholders to be held August 3, 2018 is incorporated by reference in Part II – Item 5. and Part III of this Annual Report on Form 10-K.

Table of Contents
CIRRUS LOGIC, INC.
FORM 10-K
For The Fiscal Year Ended March 31, 2018
INDEX

PART I |
Item 1. | Business | 3
Item 1A. | Risk Factors | 7
Item 1B. | Unresolved Staff Comments | 18
Item 2. | Properties | 18
Item 3. | Legal Proceedings | 19
Item 4. | Mine Safety Disclosures | 19
PART II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20
Item 6. | Selected Financial Data | 21
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 30
Item 8. | Financial Statements and Supplementary Data | 31
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 62
Item 9A. | Controls and Procedures | 62
PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | 63
Item 11. | Executive Compensation | 63
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 63
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 63
Item 14. | Principal Accounting Fees and Services | 63
PART IV |
Item 15. | Exhibits and Financial Statement Schedules | 63
| Signatures | 67

2

Table of Contents
PART I
ITEM 1. Business
Cirrus Logic, Inc. (“Cirrus Logic,” “We,” “Us,” “Our,” or the “Company”) is a leader in high performance, low-power integrated circuits (“ICs”) for audio and voice signal processing applications. Cirrus Logic’s products span the entire audio signal chain, from capture to playback, providing innovative components for the world’s top smartphones, tablets, digital headsets, wearables and emerging smart home applications.
We were incorporated in California in 1984, became a public company in 1989 and were reincorporated in the State of Delaware in February 1999. Our primary facility housing engineering, sales and marketing, and administrative functions is located in Austin, Texas. We also have offices in various other locations in the United States, United Kingdom, Sweden, Spain, Australia, the People’s Republic of China, South Korea, Japan, Singapore, and Taiwan. Our common stock, which has been publicly traded since 1989, is listed on the NASDAQ's Global Select Market under the symbol CRUS.
We maintain a website with the address www.cirrus.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”). We also routinely post other important information on our website, including information specifically addressed to investors. We intend for the investor relations section of our website to be a recognized channel of distribution for disseminating information to the securities marketplace in general. To receive a free copy of this Annual Report on Form 10-K, please forward your written request to Cirrus Logic, Inc., Attn: Investor Relations, 800 W. 6 th Street, Austin, Texas 78701, or via email at Investor.Relations@cirrus.com. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements filed electronically with the SEC by Cirrus Logic.
Company Strategy
Cirrus Logic targets growing markets where we can leverage our expertise in analog and digital signal processing to solve complex problems. Our approach has been to develop custom and general market components that embody our latest innovations, which we use to engage key players in a particular market or application. We focus on building strong engineering relationships with our customers’ product teams and work to develop highly differentiated components that address their technical and price requirements across product tiers. Many of our products include programmable aspects and are comprised of our best-in-class hardware which incorporates software algorithms from some combination of our own intellectual property (“IP”), algorithms that have been ported to our platform by an ecosystem of third-party partners, and our customers’ IP. When we have been successful with this approach, one initial design win has often expanded into additional products. This strategy gives us the opportunity to increase our content with a customer over time through the incorporation of new features, the integration of other system components into our products and the addition of new components.
Markets and Products
The following provides a detailed discussion regarding our portable audio and non-portable audio and other product lines:
Portable Audio Products: High-precision analog and mixed-signal components designed for mobile devices including smartphones, tablets, digital headsets, speakers and wearables.
Non-Portable Audio and Other Products: High-precision analog and mixed-signal components targeting the consumer market, including emerging smart home applications, and the automotive, energy and industrial markets.
PORTABLE AUDIO PRODUCTS
We are a leading supplier of analog and mixed-signal audio converter and digital signal processing products in many of today’s mobile applications. Providing a complete end-to-end solution from capture to playback, we have an extensive portfolio of products that target flagship and mid-tier devices, including “codecs” - chips that integrate analog-to-digital converters (“ADCs”) and digital-to-analog converters (“DACs”) into a single IC, “smart codecs” – codecs with digital signal processing integrated, boosted amplifiers, micro-electromechanical systems (“MEMS”) microphones, as well as standalone digital signal processors (“DSPs”). Additionally, the Company’s SoundClear® technology consists of a broad portfolio of tools, software and algorithms that help to differentiate our customers’ products by improving the user experience with features such as enhanced voice quality, voice capture and audio playback. Our products are designed for use in a wide array of portable applications, including smartphones, tablets, digital headsets, speakers, wearables, such as smart watches and smart bands, VR headsets and action cameras.
3

Table of Contents
NON-PORTABLE AUDIO AND OTHER PRODUCTS
We provide high-precision analog and mixed-signal ICs for a variety of products in consumer applications, including the emerging smart home market, automotive, industrial and energy. The Company supplies a wide range of products including ICs, codecs, ADCs, DACs, digital interfaces and amplifiers. Within the consumer market our products are utilized in laptops, audio/video receivers (AVRs”), home theater systems, set-top boxes, musical instruments and professional audio products. Applications for products in the automotive market include satellite radio systems, telematics and multi-speaker car-audio systems. Our products are also used in a wide array of high-precision industrial and energy-related applications including digital utility meters, power supplies, energy control, energy measurement, and energy exploration applications.
Customers, Marketing, and Sales
We offer products worldwide through both direct and indirect sales channels. Our major customers are among the world’s leading electronics manufacturers. We target both large existing and emerging customers that derive value from our expertise in advanced analog and mixed-signal design processing, systems-level integrated circuit engineering and embedded software development. We derive our revenues from both domestic and international sales. Our domestic sales force includes a network of direct sales offices located primarily in California and Texas. International sales offices and staff are located in Japan, People’s Republic of China, Singapore, South Korea, Taiwan, and the United Kingdom. We supplement our direct sales force with external sales representatives and distributors. We have technical support centers in China, South Korea, Taiwan and the United States. Our worldwide sales force provides geographically specific support to our customers and specialized selling of product lines with unique customer bases. See Note 15—Segment Information, of the Notes to Consolidated Financial Statements contained in Item 8 for further detail and for additional disclosure regarding sales and property, plant and equipment, net, by geographic locations.
Since the components we produce are largely proprietary and generally not available from second sources, we generally consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, through distributors or third party manufacturers contracted to produce their designs. For fiscal years 2018, 2017, and 2016, our ten largest end customers, represented approximately 92 percent, 92 percent, and 89 percent, of our sales, respectively. For fiscal years 2018, 2017, and 2016, we had one end customer, Apple, Inc., who purchased through multiple contract manufacturers and represented approximately 81 percent, 79 percent, and 66 percent, of the Company’s total sales, respectively. Samsung Electronics represented approximately 15 percent of the Company’s total sales for fiscal year 2016. No other customer or distributor represented more than 10 percent of net sales in fiscal years 2018, 2017, or 2016.
Manufacturing
As a fabless semiconductor company, we contract with third parties for wafer fabrication and product assembly and test. We use a variety of foundries in the production of wafers including Taiwan Semiconductor Manufacturing Company, Limited, MagnaChip Semiconductor Corporation and GLOBALFOUNDRIES. The Company’s primary assembly and test houses include Advanced Semiconductor Engineering, Inc., Amkor Technology Inc., Nepes Corporation, SFA Semicon Co., Ltd., Siliconware Precision Industries Co., Ltd, and STATS ChipPAC Pte. Ltd,. Our outsourced manufacturing strategy allows us to concentrate on our design strengths and minimize fixed costs and capital expenditures while giving us access to advanced manufacturing facilities. It also provides the flexibility to source multiple leading-edge technologies through strategic relationships. After wafer fabrication by the foundry, third-party assembly vendors package the wafer die. The finished products are then tested before shipment to our customers. While we do have some redundancy of fabrication processes by using multiple outside foundries, any interruption of supply by one or more of these foundries could materially impact the Company. As a result, we maintain some amount of business interruption insurance to help reduce the risk of wafer supply interruption, but we are not fully insured against such risk. Our supply chain management organization is responsible for the management of all aspects of the manufacturing, assembly, and testing of our products, including process and package development, test program development, and production testing of products in accordance with our ISO-certified quality management system.
Although our products are made from basic materials (principally silicon, metals and plastics), all of which are available from a number of suppliers, capacity at wafer foundries sometimes becomes constrained. The limited availability of certain materials may impact our suppliers’ ability to meet our demand needs or impact the price we are charged. The prices of certain other basic materials, such as metals, gases and chemicals used in the production of circuits can increase as demand grows for these basic commodities. In most cases, we do not procure these materials ourselves; nevertheless, we are reliant on such materials for producing our products because our outside foundry and package and test subcontractors must procure them. To help mitigate risks associated with constrained capacity, we use multiple foundries, assembly and test sources.
4

Table of Contents
Patents, Licenses and Trademarks
We rely on patent, copyright, trademark, and trade secret laws to protect our intellectual property, products, and technology. As of March 31, 2018, we held approximately 3,100 pending and issued patents worldwide, which include approximately 1,050 granted U.S. patents, 480 U.S. pending patent applications and various international patents and applications. Our U.S. patents expire in calendar years 2018 through 2038. While our patents are an important element of our success, our business as a whole is not dependent on any one patent or group of patents. We do not anticipate any material effect on our business due to any patents expiring in 2018, and we continue to obtain new patents through our ongoing research and development.
We have maintained U.S. federal trademark registrations for CIRRUS LOGIC, CIRRUS, Cirrus Logic logo designs, and SoundClear, among others. These U.S. registrations may be renewed as long as the marks continue to be used in interstate commerce. We have also filed or obtained foreign registration for these marks in other countries or jurisdictions where we conduct, or anticipate conducting, international business. To complement our own research and development efforts, we have also licensed and expect to continue to license, a variety of intellectual property and technologies important to our business from third parties.
Segments
We determine our operating segments in accordance with Financial Accounting Standards Board (“FASB”) guidelines. Our Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker as defined by these guidelines.
The Company operates and tracks its results in one reportable segment, but reports revenue performance in two product lines: Portable Audio and Non-Portable Audio and Other. Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level. Additionally, our product lines have similar characteristics and customers. They share operations support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative functions of human resources, legal, finance and information technology. Therefore, there is no discrete financial information maintained for these product lines. For fiscal years 2018, 2017, and 2016, Portable Audio product sales were $1.4 billion, $1.4 billion, and $989.1 million, respectively. For fiscal years 2018, 2017, and 2016, Non-Portable Audio and Other product sales were $168.3 million, $165.1 million, and $180.2 million, respectively.
See Note 15 — Segment Information, of the Notes to Consolidated Financial Statements contained in Item 8 for further details including sales and property, plant and equipment, net, by geographic locations.
Research and Development
We concentrate our research and development efforts on the design and development of new products for each of our principal markets. We also fund certain advanced-process technology development, as well as other emerging product opportunities. Expenditures for research and development in fiscal years 2018, 2017, and 2016 were $366.4 million, $303.7 million, and $269.2 million, respectively. Our future success is highly dependent upon our ability to develop complex new products, transfer new products to volume production, introduce them into the marketplace in a timely fashion, and have them selected for design into products of systems manufacturers. Our future success may also depend on assisting our customers with integration of our components into their new products, including providing support from the concept stage through design, launch and production ramp.
Competition
Markets for our products are highly competitive and we expect that competition will continue to increase. Our ability to compete effectively and to expand our business will depend on our ability to continue to recruit key engineering talent, execute on new product developments, partner with customers to include these new products into their applications, and provide cost efficient versions of existing products. We compete with other semiconductor suppliers that offer standard semiconductors, application-specific standard products and fully customized ICs, including embedded software, chip and board-level products.
While no single company competes with us in all of our product lines, we face significant competition in all markets where our products are available. Within Portable Audio, Cirrus Logic is the leading IC supplier with the complete end-to-end solution from capture to playback including amplifiers, codecs, DSP and MEMS microphones. We expect to face additional competition from new entrants in our markets, which may include both large domestic and international IC manufacturers and smaller, emerging companies. Our primary competitors include, but are not limited to AAC Technologies, AKM Semiconductor Inc., Analog Devices Inc., Austriamicrosystems AG, Avnera Corp., Dialog Semiconductor PLC, DSP Group, ESS Technology, Inc., GoerTek Inc., Knowles Corporation, Maxim Integrated Products Inc., MediaTek Inc., NXP Semiconductors N.V., Qualcomm Incorporated, Realtek Semiconductor Corporation, ST Microelectronics N.V., Synaptics Incorporated and Texas Instruments, Inc.
5

Table of Contents
The principal competitive factors in our markets include: time to market; quality of hardware/software design and end-market systems expertise; price; product performance, features, quality and compatibility with standards; access to advanced process and packaging technologies at competitive prices; and sales and technical support, which includes assisting our customers with integration of our components into their new products and providing support from the concept stage through design, launch and production ramp.
Product life cycles may vary greatly by product category. For example, many portable audio devices have shorter design-in cycles; therefore, our competitors have increasingly frequent opportunities to achieve design wins in next-generation systems. Conversely, this also provides us frequent opportunities to displace competitors in products that have previously not utilized our design. The non-portable audio and other markets typically have longer life cycles, which provide continued revenue streams over longer periods of time.
Backlog
Sales are made primarily pursuant to short-term purchase orders for delivery of products. The quantity actually ordered by the customer, as well as the shipment schedules, are frequently revised, without significant penalty, to reflect changes in the customer’s needs. The majority of our backlog is typically requested for delivery within six months. In markets where the end system life cycles are relatively short, customers typically request delivery in six to twelve weeks. We believe a backlog analysis at any given time gives little indication of our future business except on a short-term basis, principally within the next 60 days.
We utilize backlog as an indicator to assist us in production planning. However, backlog is influenced by several factors including market demand, pricing, and customer order patterns in reaction to product lead times. Quantities actually purchased by customers, as well as prices, are subject to variations between booking and delivery because of changes in customer needs or industry conditions. As a result, we believe that our backlog at any given time is an incomplete indicator of future sales.
Employees
As of March 31, 2018, we had 1,596 full-time employees, an increase of 152 employees, or 11 percent, from the end of fiscal year 2018. The increase was primarily due to expanding our capabilities in the engineering function. Of our full-time employees, 69 percent were engaged in research and product development activities, 25 percent in sales, marketing, general and administrative activities, and 6 percent in manufacturing-related activities. We also employ individuals on a temporary basis and use the services of contractors as necessary, particularly in our software development and test organization. Our future success depends, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing, engineering, and administrative personnel.
We have never had a work stoppage and the majority of our employees are not represented by collective bargaining agreements. We consider our employee relations to be good.
Forward—Looking Statements
This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included or incorporated by reference in this Annual Report on Form 10-K, other than statements that are purely historical, are forward-looking statements. In some cases, forward-looking statements are identified by words such as “expect,” “anticipate,” “target,” “project,” “believe,” “goals,” “estimates,” “will,” “would,” “could,” “can,” “may,” “plan,” and “intend”, and other similar types of words and expressions. Variations of these types of words and similar expressions are intended to identify these forward-looking statements. Any statements that refer to our plans, expectations, strategies or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are predictions based on management's expectations as of the date of this filing and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that could cause actual results to differ materially from those indicated or implied by our forward-looking statements include, but are not limited to, those discussed in Item 1A. Risk Factors and elsewhere in this report, as well as in the documents filed by us with the SEC, specifically the most recent reports on Form 10-Q and 8-K, each as it may be amended from time to time.
We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K, and we undertake no obligation, and expressly disclaim any duty, to revise or update this information, whether as a result of new information, events or circumstances after the filing of this report with the SEC, except as required by law. We urge readers to carefully review and consider the various disclosures made in this Annual Report on Form 10–K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. All forward-looking statements, expressed or implied, included in this Annual Report on Form 10-K and
6

Table of Contents
attributable to Cirrus Logic are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may make or persons acting on our behalf may issue.
ITEM 1A. Risk Factors
Our business faces significant risks. The risk factors set forth below may not be the only risks that we face and there is a risk that we may have failed to identify all possible risk factors. Additional risks that we are not aware of yet or that currently are not significant may adversely affect our business operations. You should read the following cautionary statements in conjunction with the factors discussed elsewhere in this and other Cirrus Logic filings with the SEC. These cautionary statements are intended to highlight certain factors that may affect the financial condition and results of operations of Cirrus Logic and are not meant to be an exhaustive discussion of risks that apply to companies such as ours.
We depend on a limited number of customers and distributors for a substantial portion of our sales, and the loss of, or a significant reduction in orders from, or pricing on products sold to, any key customer or distributor could significantly reduce our sales and our profitability.
While we generate sales from a broad base of customers worldwide, the loss of any of our key customers, or a significant reduction in sales or selling prices to any key customer, or reductions in selling prices made to retain key customer relationships, would significantly reduce our revenue, margins and earnings and adversely affect our business. For the twelve-month periods ending March 31, 2018, March 25, 2017, and March 26, 2016, our ten largest end customers represented approximately 92 percent, 92 percent, and 89 percent of our sales, respectively. For the twelve-month periods ending March 31, 2018, March 25, 2017, and March 26, 2016, we had one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 81 percent, 79 percent and 66 percent of the Company’s total sales, respectively. Samsung Electronics represented approximately 15 percent of the Company’s total sales for fiscal year 2016.
We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:

▪ | most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty;

▪ | our agreements with our customers typically do not require them to purchase a minimum quantity of our products;

▪ | many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers’ decisions to purchase our products;

▪ | many of our customers have sufficient resources to internally develop technology solutions and semiconductor components that could replace the products that we currently supply in our customers’ end products;

▪ | our customers face intense competition from other manufacturers that do not use our products; and

▪ | our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and their ability to either obtain or dual source components from other suppliers.

In addition, our dependence on a limited number of key customers may make it easier for them to pressure us on price reductions. We have experienced pricing pressure from certain key customers and we expect that the average selling prices for certain of our products will decline from time to time, potentially reducing our revenue, our margins and our earnings.
Our key customer relationships often require us to develop new products that may involve significant technological challenges. Our customers frequently place considerable pressure on us to meet their tight development schedules. In addition, we may from time to time enter into customer agreements providing for exclusivity periods during which we may only sell specified products or technology to a specific customer. Accordingly, we may have to devote a substantial amount of resources to strategic relationships, which could detract from or delay our completion of other important development projects or the development of next generation products and technologies.
Moreover, our reliance on certain customers may continue to increase, which could heighten the risks associated with having key customers, including making us more vulnerable to significant reductions in revenue, margins and earnings, pricing pressure, and other adverse effects on our business.
Our lack of diversification in our revenue and customer base increases the risk of an investment in our company, and our consolidated financial condition, results of operations, and stock price may deteriorate if we fail to diversify.
Although we continue to investigate, invest in, and try to develop opportunities to diversify our revenue and customer base, our sales, marketing, and development efforts have historically been focused on a limited number of customers and opportunities. Larger companies have the ability to manage their risk by product, market, and customer diversification. However, we lack diversification, in terms of both the nature and scope of our business, which increases the risk of an
7

Table of Contents
investment in our company. If we cannot diversify our customer and revenue opportunities, our financial condition and results of operations could deteriorate.
We frequently develop our products for the specific system architecture of our customers’ end products. If our customers were to change system architectures, develop competing technologies and integrated circuits, or incorporate some of the functionality of our products into other parts of the system, we risk the potential loss of revenue and reduced average selling prices.
Our customers, particularly in the portable audio market, could potentially transition to different audio architectures, develop their own competing technologies and integrated circuits, or integrate the functionality that our integrated circuits and software have historically provided into other components in their audio systems. In addition, some of the audio and voice functionality that we have historically provided could be performed outside of our customers’ end product — for example, through the use of “cloud-based” systems to perform audio and voice processing. If our customers were to transition to these different system architectures, our results of operations could be adversely affected by the elimination of the need for our current technology and products, resulting in reduced average selling prices for our components and loss of revenue.
We have entered into joint development agreements, custom product arrangements, and strategic relationships with some of our largest customers. These arrangements subject us to a number of risks, and any failure to execute on any of these arrangements could have a material adverse effect on our business, results of operations, and financial condition.
We have entered into joint development, product collaboration and technology licensing arrangements with some of our largest customers, and we expect to enter into new strategic arrangements of these kinds from time to time in the future. Such arrangements can magnify several risks for us, including loss of control over the development and development timeline of jointly developed products, risks associated with the ownership of the intellectual property that is developed pursuant to such arrangements, and increased risk that our joint development activities may result in products that are not commercially successful or that are not available in a timely fashion. In addition, any third party with whom we enter into a joint development, product collaboration or technology licensing arrangement may fail to commit sufficient resources to the project, change its policies or priorities or abandon or fail to perform its obligations related to such arrangement. In addition, we may from time to time enter into customer product arrangements that provide for exclusivity periods during which we may only sell specified products or technologies to that particular customer. Any failure to timely develop commercially successful products through our joint development activities as a result of any of these and other challenges could have a material adverse effect on our business, results of operations, and financial condition.
Our failure to develop and ramp new products into production in a timely manner could harm our operating results.
Our success depends upon our ability to develop new products for new and existing customers, and to introduce these products in a timely and cost-effective manner. New product introductions involve significant investment of resources and potential risks. Delays in new product introductions or less-than-anticipated market acceptance of our new products are possible and would have an adverse effect on our sales and earnings. The development of new products is highly complex and, from time-to-time, we have experienced delays in developing and introducing these new products. Successful product development and introduction depend on a number of factors including, but not limited to:

▪ | proper new product definition;

▪ | timely completion of design and testing of new products;

▪ | assisting our customers with integration of our components into their new products, including providing support from the concept stage through design, launch and production ramp;

▪ | successfully developing and implementing the software necessary to integrate our products into our customers’ products;

▪ | achievement of acceptable manufacturing yields;

▪ | availability of wafer fabrication, assembly, and test capacity; and

▪ | market acceptance of our products and the products of our customers.

Both sales and/or margins may be materially affected if new product introductions are delayed, or if our products are not designed into successive generations of new or existing customers’ products. Our failure to develop and introduce new products successfully could harm our business and operating results.
In addition, difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of outside foundries can lead to reduced yields of our products. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. As a result, yield problems
8

Table of Contents
may not be identified until well into the production process, and resolution of yield problems may require cooperation between our manufacturer and us. This risk could be compounded by the offshore location of certain of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems. Manufacturing defects that we do not discover during the manufacturing or testing process may lead to costly product recalls. These risks may lead to increased costs or delayed product delivery, which would harm our profitability and customer relationships.
We continue to invest in research and development efforts for several new markets, including voice biometrics. If we are unable to commercialize these technologies, our future results and profits could be negatively affected.
Our investments into new markets subjects us to additional risks. We may have limited or no experience in these markets, and our customers may not adopt our new offerings. These new offerings may present new and difficult challenges, including risks related to technology, customers, competitors, product cycles, customer demand, terms and conditions and other industry specific issues which could negatively affect our operating results.
We have recently increased our investment in our MEMS microphone business. We have limited experience in high volume manufacturing in this market, which leads to a number of risks, including risks related to technology, customers, competition, and other industry specific issues.
We are currently increasing our investment in our MEMS microphone business. This is a competitive market with historically lower gross margins than our existing businesses. In addition, our MEMS microphone business involves different manufacturing technologies, materials, and processes than our traditional semiconductor businesses. Therefore, our investment in new markets in which we have limited experience in high volume manufacturing in those markets increases risks related to technology, customers, competitors, and other industry specific issues.
Further, there can be no assurance that we will generate the expected returns and other projected results we anticipate. For example, we may not be successful in this market or we may incur costs in excess of what we anticipate and the product line may generate lower gross margins than our existing businesses.
Our products are increasingly complex and could contain defects, which could result in material costs to us.
Product development in the markets we serve is becoming more focused on the integration of multiple functions on individual devices. There is a general trend towards increasingly complex products. The greater integration of functions and complexity of operations of our products increases the risk that we or our customers or end users could discover latent defects or subtle faults after volumes of product have been shipped. Quality and reliability issues could result in material costs and other adverse consequences to us, including, but not limited to:

▪ | reduced margins;

▪ | damage to our reputation;

▪ | replacement costs for product warranty and support;

▪ | payments to our customers related to recall claims, or the delivery of product replacements as part of a recall claim, as a result of various industry or business practices, contractual requirements, or in order to maintain good customer relationships;

▪ | an adverse impact to our customer relationships by the occurrence of significant defects;

▪ | a delay in recognition or loss of revenues, loss of market share, or failure to achieve market acceptance;

▪ | writing off or reserving the value of inventory of such products; and

▪ | a diversion of the attention of our engineering personnel from our product development efforts.

In addition, any defects or other problems with our products could result in financial losses or other damages to our customers who could seek damages from us for their losses. A product liability or warranty claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend. In particular, the sale of systems and components that are incorporated into certain applications for the automotive industry involves a high degree of risk that such claims may be made.
While we believe that we are reasonably insured against some of these risks and that we have attempted to contractually limit our financial exposure with many of our customers, a warranty or product liability claim against us in excess of our available insurance coverage and established reserves, or a requirement that we participate in a customer product recall, could have material adverse effects on our business, results of operations, and financial condition.
9

Table of Contents
We are subject to risks relating to product concentration.
We derive a substantial portion of our revenues from a limited number of products, and we expect these products to represent a large percentage of our revenues in the near term. Customer acceptance of these products is critical to our future success. Our business, operating results, financial condition and cash flows could therefore be adversely affected by:

▪ | a decline in demand for any of our more significant products;

▪ | a decline in the average selling prices of our more significant products;

▪ | failure of our products to achieve continued market acceptance;

▪ | competitive products;

▪ | new technological standards or changes to existing standards that we are unable to address with our products;

▪ | manufacturing or supply issues that prevent us from meeting our customers’ demand for these products;

▪ | a failure to release new products or enhanced versions of our existing products on a timely basis; and

▪ | the failure of our new products to achieve market acceptance.

Our results may be affected by fluctuation in sales in the consumer entertainment and smartphone markets.
Because we sell products primarily in the consumer entertainment and smartphone markets, we are likely to be affected by any decrease in demand or unit volumes, seasonality in the sales of our products, and the cyclical nature of these markets. Further, a decline in consumer confidence and consumer spending relating to economic conditions, terrorist attacks, armed conflicts, oil prices, global health conditions, natural disasters, and/or the political stability of countries in which we operate or sell products could have a material adverse effect on our business.
In general, our customers may cancel or reschedule orders on short notice without incurring significant penalties; therefore, our sales and operating results in any quarter are difficult to forecast.
In general, we rely on customers issuing purchase orders to buy our products rather than long-term supply contracts. Customers may cancel or reschedule orders on short notice without incurring significant penalties. Therefore, cancellations, reductions, or delays of orders from any significant customer could have a material adverse effect on our business, financial condition, and results of operations.
In addition, a significant portion of our sales and earnings in any quarter depends upon customer orders for our products that we receive and fulfill in that quarter. Because our expense levels are based in part on our expectations as to future revenue and to a large extent are fixed in the short term, we likely will be unable to adjust spending on a timely basis to compensate for any unexpected shortfall in sales or reductions in average selling prices. Accordingly, any significant shortfall of sales in relation to our expectations could hurt our operating results.
Strong competition in the semiconductor market may harm our business.
The IC industry is intensely competitive and is frequently characterized by rapid technological change, price erosion, technological obsolescence, and a push towards IC component integration. Because of shortened product life cycles and even shorter design-in cycles in a number of the markets that we serve, our competitors have increasingly frequent opportunities to achieve design wins in next-generation systems. In the event that competitors succeed in supplanting our products, our market share may not be sustainable and our net sales, gross margin and operating results would be adversely affected.
We compete in a number of markets. Our principal competitors in these markets include AAC Technologies, AKM Semiconductor Inc., Analog Devices Inc., Austriamicrosystems AG, Avnera Corp., Dialog Semiconductor PLC, DSP Group, ESS Technology, Inc., GoerTek Inc., Knowles Corporation, Maxim Integrated Products Inc., MediaTek Inc., NXP Semiconductors N.V., Qualcomm Incorporated, Realtek Semiconductor Corporation, ST Microelectronics N.V., Synaptics Incorporated and Texas Instruments, Inc. Many of these competitors have greater financial, engineering, manufacturing, marketing, technical, distribution, and other resources; broader product lines; and broader intellectual property portfolios. We also expect intensified competition from emerging companies and from customers who develop their own IC products. In addition, some of our current and future competitors maintain their own fabrication facilities, which could benefit them in connection with cost, capacity, and technical issues.
Increased competition could adversely affect our business. We cannot provide assurances that we will be able to compete successfully in the future or that competitive pressures will not adversely affect our financial condition and results of operations. Competitive pressures could reduce market acceptance of our products and result in price reductions and increases in expenses that could adversely affect our business and our financial condition.
10

Table of Contents
Our sales could be materially impacted by the failure of other component suppliers to deliver required parts needed in the final assembly of our customers’ end products.
The products we supply our customers are typically a portion of the many components provided from multiple suppliers in order to complete the final assembly of an end product. If one or more of these other component suppliers are unable to deliver their required component(s) in order for the final end product to be assembled, our customers may delay, or ultimately cancel, their orders from us.
We are dependent on third-party manufacturing and supply chain relationships for the majority of our products. Our reliance on third-party foundries and suppliers involves certain risks that may result in increased costs, delays in meeting our customers’ demand, and loss of revenue.
We do not own or operate a semiconductor fabrication facility and do not have the resources to manufacture the majority of our products internally. We use third parties to manufacture, assemble, package and test the vast majority of our products. As a result, we are subject to risks associated with these third parties, including:

▪ | insufficient capacity available to meet our demand;

▪ | inadequate manufacturing yields and excessive costs;

▪ | inability of these third parties to obtain an adequate supply of raw materials;

▪ | difficulties selecting and integrating new subcontractors;

▪ | limited warranties on products supplied to us;

▪ | potential increases in prices; and

▪ | increased exposure to potential misappropriation of our intellectual property.

Our outside foundries and assembly and test suppliers generally manufacture our products on a purchase order basis, and we have few long-term supply arrangements with these suppliers. Therefore, our third-party manufacturers and suppliers are not obligated to supply us with products for any specific period of time, quantity, or price, except as may be provided in any particular purchase order or in relation to an existing supply agreement. A manufacturing or supply disruption experienced by one or more of our outside suppliers or a disruption of our relationship with an outside foundry could negatively impact the production of certain of our products for a substantial period of time.
In addition, difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of outside foundries can lead to reduced yields of our products. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. As a result, yield problems may not be identified until well into the production process, and resolution of yield problems may require cooperation between our manufacturer and us. This risk could be compounded by the offshore location of certain of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems. Manufacturing defects that we do not discover during the manufacturing or testing process may lead to costly product recalls. These risks may lead to increased costs or delayed product delivery, which would harm our profitability and customer relationships.
In some cases, our requirements may represent a small portion of the total production of the third-party suppliers. As a result, we are subject to the risk that a producer will cease production of an older or lower-volume process that it uses to produce our parts. We cannot provide any assurance that our external foundries will continue to devote resources to the production of parts for our products or continue to advance the process design technologies on which the manufacturing of our products are based. Each of these events could increase our costs, lower our gross margin, and cause us to hold more inventories, or materially impact our ability to deliver our products on time.
We may experience difficulties transitioning to advanced manufacturing process technologies, which could materially adversely affect our results.
Our future success depends in part on our ability to transition our current development and production efforts to advanced manufacturing process technologies. We are currently making a significant investment to transition our products and intellectual property to circuit geometries of 55 and 28 nanometer. To the extent that we do not timely transition to smaller geometries, experience difficulties in shifting to smaller geometries, or have significant quality or reliability issues at these smaller geometries, our results could be materially adversely affected.
11

Table of Contents
System security risks, data protection breaches, cyber-attacks and other related cyber security issues could disrupt our internal operations, and any such disruption could increase our expenses, damage our reputation and adversely affect our stock price.
Our security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management, and other irregularities. For example, experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our websites, products or otherwise exploit any security vulnerabilities of our websites and products. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.
We manage and store various proprietary information and sensitive or confidential data relating to our business. In addition, we manage and store a significant amount of proprietary and sensitive confidential information from our customers. Any breach of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business.
Potential intellectual property claims and litigation could subject us to significant liability for damages and could invalidate our proprietary rights.
The IC industry is characterized by frequent litigation regarding patent and other intellectual property rights. We may find it necessary to initiate lawsuits to assert our patent or other intellectual property rights. These legal proceedings could be expensive, take significant time, and divert management’s attention. We cannot provide assurances that we will ultimately be successful in any lawsuit, nor can we provide assurances that any patent owned by us will not be invalidated, circumvented, or challenged. We cannot provide assurances that rights granted under our patents will provide competitive advantages to us, or that any of our pending or future patent applications will be issued with the scope of the claims sought by us, if at all.
As is typical in the IC industry, our customers and we have, from time to time, received and may in the future receive, communications from third parties asserting patents, mask work rights, or copyrights. In the event third parties were to make a valid intellectual property claim and a license was not available on commercially reasonable terms, our operating results could be harmed. Litigation, which could result in substantial cost to us and diversion of our management, technical and financial resources, may also be necessary to defend us against claimed infringement of the rights of others. An unfavorable outcome in any such litigation could have an adverse effect on our future operations and/or liquidity.
We have significant international sales, and risks associated with these sales could harm our operating results.
International sales represented 98 percent of our net sales in each of fiscal years 2018 and 2017, and 94 percent of our net sales in fiscal year 2016. We expect international sales to continue to represent a significant portion of product sales. This reliance on international sales subjects us to the risks of conducting business internationally, including risks associated with political and economic instability, global health conditions, currency controls, exchange rate fluctuations and changes in import/export regulations, and tariff and freight rates. For example, the political or economic instability in a given region may have an adverse impact on the financial position of end users in the region, which could affect future orders and harm our results of operations. Our international sales operations involve a number of other risks including, but not limited to:

▪ | unexpected changes in government regulatory requirements;

▪ | sales, VAT, or other indirect tax regulations and treaties and potential changes in regulations and treaties in the United States and in and between countries in which we manufacture or sell our products;

▪ | changes to countries’ banking and credit requirements;

▪ | changes in diplomatic and trade relationships;

▪ | delays resulting from difficulties in obtaining export licenses for technology, particularly in China;

▪ | any changes in U.S. trade policy, including potential adoption and expansion of trade restrictions, higher tariffs, or cross border taxation by the U.S. government involving other countries, particularly China, that might impact overall customer demand for our products or affect our ability to manufacture and/or sell our products overseas;

▪ | tariffs and other barriers and restrictions, particularly in China;

▪ | competition with non-U.S. companies or other domestic companies entering the non-U.S. markets in which we operate;

12

Table of Contents

▪ | longer sales and payment cycles;

▪ | problems in collecting accounts receivable;

▪ | changes to economic, social, or political conditions in countries such as China, where we have significant operations; and

▪ | the burdens of complying with a variety of non-U.S. laws.

In addition, our competitive position may be affected by the exchange rate of the U.S. dollar against other currencies. While our sales are predominately denominated in U.S. dollars, increases in the value of the dollar would increase the price in local currencies of our products in non-U.S. markets and make our products relatively more expensive. We cannot provide assurances that regulatory, political and other factors will not adversely affect our operations in the future or require us to modify our current business practices.
We could be subject to changes in tax laws, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.
We are subject to taxes in the U.S. and numerous foreign jurisdictions, including the United Kingdom, where a number of our subsidiaries are organized. Due to economic and political conditions, tax laws in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation, including in the U.S. and the United Kingdom. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service of the United States (the “IRS”) and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. If our effective tax rates were to increase, particularly in the U.S. or the United Kingdom, or if the ultimate determination of taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows, and financial condition could be adversely affected.
Significant judgment is required in the calculation of our tax provision and the resulting tax liabilities. Our estimates of future taxable income and the regional mix of this income can change as new information becomes available. Any such changes in our estimates or assumptions can significantly impact our tax provision in a given period.
The final impacts of the Tax Cuts and Jobs Act could be materially different from our current estimates.
The legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate income tax rate from 35% to 21%, restricts the deductibility of certain business expenses, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. tax and creates new U.S. taxes on certain foreign sourced earnings, among other provisions. As of the end of fiscal year 2018, we have made a reasonable estimate of the effects of the Tax Act and recognized a provisional amount that is included as a component of income tax expense from continuing operations. This provisional amount is based on management's current knowledge and assumptions. Final amounts could be materially different from current estimates based on further analysis of the tax law changes or on additional guidance from Treasury, the IRS, the Commission, or the FASB.
Our international operations subject our business to additional political and economic risks that could have an adverse impact on our business.
In addition to international sales constituting a large portion of our net sales, we maintain international operations, sales, and technical support personnel. International expansion has required, and will continue to require, significant management attention and resources. There are risks inherent in expanding our presence into non-U.S. regions, including, but not limited to:

▪ | difficulties in staffing and managing non-U.S. operations;

▪ | failure in non-U.S. regions to adequately protect our intellectual property, patent, trademarks, copyrights, know-how, and other proprietary rights;

▪ | global health conditions and potential natural disasters;

▪ | political and economic instability in international regions;

▪ | international currency controls and exchange rate fluctuations;

▪ | vulnerability to terrorist groups targeting American interests abroad; and

▪ | legal uncertainty regarding liability and compliance with non-U.S. laws and regulatory requirements.

13

Table of Contents
If we are unable to successfully manage the demands of our international operations, it may have a material adverse effect on our business, financial condition, or results of operations.
On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union (the “E.U.”), commonly referred to as “Brexit.” Following the referendum result, the British government invoked Article 50 of the Lisbon Treaty on March 29, 2017 and have two years from that date to negotiate the terms of the U.K.’s withdrawal from the E.U. and the U.K.’s future relationships with E.U. member states. Although it is unknown what those terms will be, it is possible that there will be greater restrictions on immigration between the U.K. and E.U. countries that make it more difficult to staff our U.K. operations, changes in tax laws that negatively impact our effective tax rate, restrictions on imports and exports between the U.K. and E.U. member states, and increased regulatory complexities. These changes may adversely affect our operations and financial results.
Because we depend on subcontractors internationally to perform key manufacturing functions for us, we are subject to political, economic, and natural disaster risks that could disrupt the fabrication, assembly, packaging, or testing of our products.
We depend on third-party subcontractors, primarily in Asia, for the fabrication, assembly, packaging, and testing of most of our products. International operations may be subject to a variety of risks, including political instability, global health conditions, currency controls, exchange rate fluctuations, changes in import/export regulations, tariff and freight rates, as well as the risks of natural disasters such as earthquakes, tsunamis, and floods. Although we seek to reduce our dependence on any one subcontractor, this concentration of subcontractors and manufacturing operations in Asia subjects us to the risks of conducting business internationally, including associated political and economic conditions. If we experience manufacturing problems at a particular location, or a supplier is unable to continue operating due to financial difficulties, natural disasters, or other reasons, we would be required to transfer manufacturing to a backup supplier. Converting or transferring manufacturing from a primary supplier to a backup facility could be expensive and time consuming. As a result, delays in our production or shipping by the parties to whom we outsource these functions could reduce our sales, damage our customer relationships, and damage our reputation in the marketplace, any of which could harm our business, results of operations, and financial condition.
Our products may be subject to average selling prices that decline over time. If we are unable to maintain average selling prices for existing products, increase our volumes, introduce new or enhanced products with higher selling prices, or reduce our costs, our business and operating results could be harmed.
Historically in the semiconductor industry, average selling prices of products have decreased over time. Moreover, our dependence on a limited number of key customers may make it easier for key customers to pressure us to reduce the prices of the products we sell to them. If the average selling price of any of our products declines and we are unable to increase our unit volumes, introduce new or enhanced products with higher margins, and/or reduce manufacturing costs to offset anticipated decreases in the prices of our existing products, our operating results may be adversely affected. In addition, because of procurement lead times, we are limited in our ability to reduce total costs quickly in response to any reductions in prices or sales shortfalls. Because of these factors, we may experience material adverse fluctuations in our future operating results on a quarterly or annual basis.
As we carry only limited insurance coverage, uninsured or under-insured losses could adversely affect our financial condition and results of operations.
Our insurance policies may not be adequate to fully offset losses from covered incidents, and we do not have coverage for certain losses. For example, there is limited coverage available with respect to the services provided by our third-party foundries and assembly and test subcontractors. Although we believe that our existing insurance coverage is consistent with common practices of companies in our industry, our insurance coverage may be inadequate to protect us against product recalls, natural disasters, and other unforeseen catastrophes that could adversely affect our financial condition and results of operations.
Shifts in industry-wide capacity and our practice of ordering and purchasing our products based on sales forecasts may result in significant fluctuations in inventory and our quarterly and annual operating results.
We rely on independent foundries and assembly and test houses to manufacture our products. Our reliance on these third- party suppliers involves certain risks and uncertainties. For example, shifts in industry-wide capacity from shortages to oversupply, or from oversupply to shortages, may result in significant fluctuations in our quarterly and annual operating results. In addition, we may order wafers and build inventory in advance of receiving purchase orders from our customers. Because our industry is highly cyclical and is subject to significant downturns resulting from excess capacity, overproduction, reduced demand, order cancellations, or technological obsolescence, there is a risk that we will forecast inaccurately and produce excess inventories of particular products. In addition, if we experience supply constraints or manufacturing problems at a particular supplier, we could be required to switch suppliers or qualify additional suppliers. Switching and/or qualifying additional
14

Table of Contents
suppliers could be an expensive process and take as long as six to twelve months to complete, which could result in material adverse fluctuations to our operating results.
We generally order our products through non-cancelable purchase orders from third-party foundries based on our sales forecasts, and our customers can generally cancel or reschedule orders they place with us without significant penalties. If we do not receive orders as anticipated by our forecasts, or our customers cancel orders that are placed, we may experience increased inventory levels.
Due to the product manufacturing cycle characteristic of IC manufacturing and the inherent imprecision in the accuracy of our customers’ forecasts, product inventories may not always correspond to product demand, leading to shortages or surpluses of certain products. As a result of such inventory imbalances, future inventory write-downs and charges to gross margin may occur due to lower of cost or market accounting, excess inventory, and inventory obsolescence.
We have historically experienced fluctuations in our operating results and expect these fluctuations to continue in future periods.
Our quarterly and annual operating results are affected by a wide variety of factors that could materially and adversely affect our net sales, gross margin, and operating results. If our operating results fall below expectations of market analysts or investors, the market price of our common stock could decrease significantly. We are subject to business cycles and it is difficult to predict the timing, length, or volatility of these cycles. These business cycles may create pressure on our sales, gross margin, and/or operating results.
Factors that could cause fluctuations and materially and adversely affect our net sales, gross margin and/or operating results include, but are not limited to:

▪ | the volume and timing of orders received;

▪ | changes in the mix of our products sold;

▪ | market acceptance of our products and the products of our customers;

▪ | excess or obsolete inventory;

▪ | pricing pressures from competitors and key customers;

▪ | our ability to introduce new products on a timely basis;

▪ | the timing and extent of our research and development expenses;

▪ | the failure to anticipate changing customer product requirements;

▪ | disruption in the supply of wafers, assembly, or test services;

▪ | reduction of manufacturing yields;

▪ | certain production and other risks associated with using independent manufacturers, assembly houses, and testers; and

▪ | product obsolescence, price erosion, competitive developments, and other competitive factors.

We may be adversely impacted by global economic conditions. As a result, our financial results and the market price of our common shares may decline.
Global economic conditions could make it difficult for our customers, our suppliers, and us to accurately forecast and plan future business activities, and could cause global businesses to defer or reduce spending on our products, or increase the costs of manufacturing our products. During challenging economic times our customers and distributors may face issues gaining timely access to sufficient credit, which could impact their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for doubtful accounts and our days sales outstanding would increase.
We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery. If the economy or markets in which we operate were to deteriorate, our business, financial condition, and results of operations will likely be materially and/or adversely affected.
Our foreign currency exposures may change over time as the level of activity in foreign markets grows and could have an adverse impact upon financial results.
As a global enterprise, we face exposure to adverse movements in foreign currency exchange rates. Certain of our assets, including certain bank accounts, exist in non-U.S. dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations. The non-U.S. dollar-denominated currencies are principally the British Pound Sterling. We also have a significant number of employees that are paid in foreign currency, the largest group being United Kingdom-based employees who are paid in British Pounds Sterling.
15

Table of Contents
If the value of the U.S. dollar weakens relative to these specific currencies, the cost of doing business in terms of U.S. dollars rises. With the growth of our international business, our foreign currency exposures may grow and under certain circumstances, could harm our business.
We do not currently hedge currency exposures relating to operating expenses incurred outside of the United States, but we may do so in the future. If we do not hedge against these risks, or our attempts to hedge against these risks are not successful, our financial condition and results of operations could be adversely affected.
We may be unable to protect our intellectual property rights.
Our success depends in part on our ability to obtain patents and to preserve our other intellectual property rights covering our products. We seek patent protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. We also rely on trade secrets, proprietary technology, non-disclosure and other contractual terms, and technical measures to protect our technology and manufacturing knowledge. We actively work to foster continuing technological innovation to maintain and protect our competitive position. We cannot provide assurances that steps taken by us to protect our intellectual property will be adequate, that our competitors will not independently develop or design around our patents, or that our intellectual property will not be misappropriated. In addition, the laws of some non-U.S. countries may not protect our intellectual property as well as the laws of the United States.
Any of these events could materially and adversely affect our business, operating results, or financial condition. Policing infringement of our technology is difficult, and litigation may be necessary in the future to enforce our intellectual property rights. Any such litigation could be expensive, take significant time, and divert management’s attention.
If we fail to attract, hire and retain qualified personnel, we may not be able to develop, market, or sell our products or successfully manage our business.
Competition for highly qualified personnel in our industry is intense. The number of technology companies in the geographic areas in which we operate is greater than it has been historically and we expect competition for qualified personnel to intensify. There are only a limited number of individuals in the job market with the requisite skills. Furthermore, changes in immigration laws and regulations, or the administration or enforcement of such laws or regulations, can also impair our ability to attract and retain qualified personnel. Our Human Resources organization focuses significant efforts on attracting and retaining individuals in key technology positions. The loss of the services of key personnel or our inability to hire new personnel with the requisite skills could restrict our ability to develop new products or enhance existing products in a timely manner, sell products to our customers, or manage our business effectively.
If we fail to effectively manage our hiring needs and successfully assimilate new talent, or are unable to hire contractors to support our development efforts, our ability to meet development schedules, productivity, employee morale and retention could be impacted, resulting in an adverse effect on our business and operating results.
We must effectively integrate, develop and motivate new employees, while at the same time not losing key personnel. While managing those risks, we still must sustain the beneficial aspects of our award-winning corporate culture, which we believe fosters innovation, teamwork and mitigates voluntary turnover.
We intend to make substantial investments in our engineering, research and development organizations. If we fail to effectively manage our hiring needs and successfully assimilate new talent, our ability to meet development schedules, productivity, employee morale and retention could be impacted, resulting in an adverse effect on our business and operating results.
In connection with our efforts to cost-effectively manage our headcount growth, we have also increasingly relied on contractors for various functions, including our research and development efforts, and in particular, our software development and test functions. If our contractors do not perform effectively or are unable to provide sufficient resources to meet our growing needs, our product introductions may be delayed and we may incur additional costs.
We may acquire other companies or technologies, which may create additional risks associated with our ability to successfully integrate them into our business.
We continue to consider future acquisitions of other companies, or their technologies or products, to improve our market position, broaden our technological capabilities, and expand our product offerings. If we are able to acquire companies, products or technologies that would enhance our business, we could experience difficulties in integrating them. Integrating acquired businesses involves a number of risks, including, but not limited to:

▪ | the potential disruption of our ongoing business;

▪ | unexpected costs or incurring unknown liabilities;

▪ | the diversion of management resources from other strategic and operational issues;

16

Table of Contents

▪ | the inability to retain the employees of the acquired businesses;

▪ | difficulties relating to integrating the operations and personnel of the acquired businesses;

▪ | adverse effects on our existing customer relationships or the existing customer relationships of acquired businesses;

▪ | the potential incompatibility of the acquired business or their business customers;

▪ | adverse effects associated with entering into markets and acquiring technologies in areas in which we have little experience; and

▪ | acquired intangible assets becoming impaired as a result of technological advancements or worse-than-expected performance of the acquired business.

If we are unable to successfully address any of these risks, our business could be harmed.
Our debt obligations may be a burden on our future cash flows and cash resources.
On August 29, 2014, we entered into a credit agreement (the “Credit Agreement”), which provides for a $250 million senior secured revolving credit facility. On July 12, 2016, we amended the Credit Agreement to increase the facility to $300 million. As of March 31, 2018, the Company did not have an outstanding balance under the facility. The credit facility matures on July 12, 2021. To the extent the Company has an outstanding balance, our ability to repay the principal of, to pay interest on or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive, regulatory and other factors, some of which are beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations or to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, or refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the Credit Agreement.
Our Credit Agreement contains restrictions that could limit our flexibility in operating our business.
Our Credit Agreement contains various covenants that could limit our ability to engage in specified types of transactions under certain conditions. These covenants could limit our ability to, among other things:

▪ | pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;

▪ | incur additional indebtedness or issue certain preferred shares;

▪ | make certain investments;

▪ | sell certain assets;

▪ | create liens;

▪ | consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

▪ | enter into certain transactions with our affiliates.

A breach of any of these covenants could result in a default under Credit Agreement. In the event of a default under the Credit Agreement, the lenders could elect to declare all amounts outstanding to be immediately due and payable. If our lenders accelerate the repayment of borrowings, we may not be able to repay our debt obligations. If we were unable to repay amounts due to the lenders under our credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness.
We are subject to the export control regulations of the U.S. Department of State and the Department of Commerce. A violation of these export control regulations could have a material adverse effect on our business or our results of operations, cash flows, or financial position.
The nature of our international business subjects us to the export control regulations of the U.S. Department of State and the Department of Commerce. Any changes regarding such regulations or U.S. trade policy more generally, including potential adoption and expansion of trade restrictions, particularly with respect to China, might impact overall customer demand for our products or affect our ability to manufacture and/or sell our products overseas. Violation of these export control regulations could result in monetary penalties and denial of export privileges. The U.S. government is very strict with respect to compliance and has served notice generally that failure to comply with these regulations may subject violators to fines and/or imprisonment. Although we are not aware of any material violation of any export control regulations, a failure to comply with any of these regulations could have a material adverse effect on our business.
17

Table of Contents
Our stock price has been and is likely to continue to be volatile.
The market price of our common stock fluctuates significantly. This fluctuation has been or may be the result of numerous factors, including, but not limited to:

▪ | actual or anticipated fluctuations in our operating results;

▪ | announcements concerning our business or those of our competitors, customers, or suppliers;

▪ | loss of a significant customer, or customers;

▪ | changes in financial estimates by securities analysts or our failure to perform as anticipated by the analysts;

▪ | news, commentary, and rumors emanating from the media relating to our customers, the industry, or us. These reports may be unrelated to the actual operating performance of the Company, and in some cases, may be potentially misleading or incorrect;

▪ | announcements regarding technological innovations or new products by us or our competitors;

▪ | announcements by us of significant acquisitions, strategic partnerships, joint ventures, or capital commitments;

▪ | announcements by us of significant divestitures or sale of certain assets or intellectual property;

▪ | litigation arising out of a wide variety of matters, including, among others, employment matters and intellectual property matters;

▪ | departure of key personnel;

▪ | single significant stockholders selling for any reason;

▪ | general conditions in the IC industry; and

▪ | general market conditions and interest rates.

We have provisions in our Certificate of Incorporation and Bylaws, and are subject to certain provisions of Delaware law, which could prevent, delay or impede a change of control of our company. These provisions could affect the market price of our stock.
Certain provisions of Delaware law and of our Certificate of Incorporation and Bylaws could make it more difficult for a third party to acquire us, even if our stockholders support the acquisition. These provisions include, but are not limited to:

▪ | the inability of stockholders to call a special meeting of stockholders;

▪ | a prohibition on stockholder action by written consent; and

▪ | a requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders.

We are also subject to the anti-takeover laws of Delaware that may prevent, delay or impede a third party from acquiring or merging with us, which may adversely affect the market price of our common stock.
We are subject to the risks of owning real property.
We currently own our U.S. headquarters and research facility in Austin, Texas as well as property in Edinburgh, Scotland, United Kingdom. The ownership of our U.S. and United Kingdom properties subjects us to the risks of owning real property, which may include:

▪ | the possibility of environmental contamination and the costs associated with correcting any environmental problems;

▪ | adverse changes in the value of these properties, due to interest rate changes, changes in the neighborhood in which the property is located, or other factors; and

▪ | the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of fire, floods, or other natural disasters.

ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
As of March 31, 2018, our principal facilities are located in Austin, Texas and Edinburgh, Scotland, United Kingdom. The Austin facilities, which we own, consist of approximately 155,000 square feet of office space and are primarily occupied
18

Table of Contents
by research and development personnel and testing equipment. In addition, our failure analysis and reliability facility occupies approximately 27,000 square feet.
Additionally, we have various leased facilities in Austin, Texas, consisting of approximately 157,000 square feet. This includes approximately 128,000 square feet of leased space that houses a mixture of administrative personnel as well as research and development personnel.
In connection with our acquisition of Wolfson Microelectronics (“Wolfson”) on August 21, 2014, we acquired Wolfson’s corporate headquarters located in Edinburgh, Scotland, United Kingdom. This building consists of approximately 50,000 square feet of office space. Additionally, we lease approximately 96,000 square feet of office space and 20,000 square feet of high quality lab space in Edinburgh. The Company is evaluating our future needs related to the use of the previously-mentioned building. A $9.8 million asset impairment was recorded in the fourth quarter of fiscal year 2017, as the future use and fair value of the property were assessed. This charge is presented as a separate line item in the Consolidated Statements of Income as “Asset impairment”. See further details below in Results of Operation.
Below is a detailed schedule that identifies our principal locations of occupied leased and owned property as of March 31, 2018, with various lease terms through calendar year 2026. We believe that these facilities are suitable and adequate to meet our current operating needs.

Design Centers |  | Sales Support Offices – International
Austin, Texas |  | Hong Kong, China
Mesa, Arizona |  | Shanghai, China
Salt Lake City, Utah |  | Shenzhen, China
Edinburgh, Scotland, United Kingdom |  | Tokyo, Japan
Newbury, England, United Kingdom |  | Singapore
London, England, United Kingdom |  | Seoul, South Korea
Melbourne, Australia |  | Taipei, Taiwan
Madrid, Spain |  |
Stockholm, Sweden |  |

See Note 10 — Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Item 8 for further detail.
ITEM 3. Legal Proceedings
From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities. We regularly evaluate the status of legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred and to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made.
Based on current knowledge, management does not believe that there are any pending matters that could potentially have a material adverse effect on our business, financial condition, results of operations or cash flows. However, we are engaged in various legal actions in the normal course of business. While there can be no assurances in light of the inherent uncertainties involved in any potential legal proceedings, some of which are beyond our control, an adverse outcome in any legal proceeding could be material to our results of operations or cash flows for any particular reporting period.
ITEM 4. Mine Safety Disclosures
Not applicable.
19

Table of Contents
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the NASDAQ's Global Select Market under the symbol CRUS.
As of May 25, 2018, there were approximately 445 holders of record of our common stock.
We have not paid cash dividends on our common stock and currently intend to continue a policy of retaining any earnings for reinvestment in our business, potential acquisition, or share repurchases.
The information under the caption “Equity Compensation Plan Information” in the proxy statement to be delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on August 3, 2018 (the “Proxy Statement”) is incorporated herein by reference.
The following table shows, for the periods indicated, the high and low intra-day sales prices for our common stock.

|  | High |  | Low
Fiscal year ended March 31, 2018 |  |  |  |
First quarter |  | $ | 71.97 |  |  | $ | 58.62 |
Second quarter |  | 66.87 |  |  | 53.00 |
Third quarter |  | 58.80 |  |  | 48.61 |
Fourth quarter |  | 55.13 |  |  | 39.22 |
Fiscal year ended March 25, 2017 |  |  |  |
First quarter |  | $ | 40.98 |  |  | $ | 31.00 |
Second quarter |  | 58.08 |  |  | 34.82 |
Third quarter |  | 59.78 |  |  | 49.05 |
Fourth quarter |  | 64.16 |  |  | 52.00 |

Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the three months ended March 31, 2018 (in thousands, except per share amounts):

Monthly Period | Total Number of Shares Purchased |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
December 31, 2017 - January 27, 2018 | — |  |  | $ | — |  |  | — |  |  | $ | — |
January 28, 2018 - February 24, 2018 | 1,427 |  |  | 42.20 |  |  | 1,427 |  |  | 200,000 |
February 25, 2018 - March 31, 2018 | — |  |  | — |  |  | — |  |  | — |
Total | 1,427 |  |  | $ | 42.20 |  |  | 1,427 |  |  | $ | 200,000 |

(1) The Company currently has one active share repurchase program: the $200 million share repurchase program authorized by the Board of Directors in January 2018. The repurchased shares reported above closed out the October 2015 $200 million plan. The Company repurchased 1.4 million shares of its common stock for $60.2 million during the fourth quarter of fiscal year 2018, representing the remaining value of shares related to the October 2015 plan. All of these shares were repurchased in the open market and were funded from existing cash. All shares of our common stock that were repurchased were retired as of March 31, 2018. The repurchases under the January 2018 repurchase program are to be funded from existing cash and intended to be effected from time to time in accordance with applicable securities laws through the open market or in privately negotiated transactions. The timing of the repurchases and the actual amount purchased depend on a variety of factors including general market and economic conditions and other corporate considerations. The program does not have an expiration date, does not obligate the Company to repurchase any particular amount of common stock, and may be modified or suspended at any time at the Company's discretion.
20

Table of Contents
Stock Price Performance Graph
The following graph and table show a comparison of the five-year cumulative total stockholder return, calculated on a dividend reinvestment basis, for Cirrus Logic, the Standard & Poor’s 500 Composite Index (the “S&P 500 Index”), and the Semiconductor Subgroup of the Standard & Poor’s Electronics Index (the “S&P 500 Semiconductors Index”).

|  | 3/30/2013 |  | 3/29/2014 |  | 3/28/2015 |  | 3/26/2016 |  | 3/25/2017 |  | 3/31/2018
Cirrus Logic, Inc. |  | 100.00 |  |  | 85.80 |  |  | 146.33 |  |  | 151.52 |  |  | 264.00 |  |  | 178.59 |
S&P 500 Index |  | 100.00 |  |  | 120.89 |  |  | 136.89 |  |  | 138.16 |  |  | 162.49 |  |  | 186.75 |
S&P 500 Semiconductors Index |  | 100.00 |  |  | 128.69 |  |  | 162.88 |  |  | 164.09 |  |  | 226.59 |  |  | 312.94 |

(1) | The graph assumes that $100 was invested in our common stock and in each index at the market close on March 30, 2013, and that all dividends were reinvested. No cash dividends were declared on our common stock during the periods presented.

(2) | Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

The information in this Annual Report on Form 10-K appearing under the heading “Stock Price Performance Graph” is being “furnished” pursuant to Item 201(e) of Regulation S-K under the Securities Act of 1933, as amended, and shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.
ITEM 6. Selected Financial Data
The information contained below should be read along with Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 – Financial Statements and Supplementary Data (amounts in thousands, except per share amounts).
21

Table of Contents

|  | Fiscal Years
|  | 2018 |  | 2017 |  | 2016 |  | 2015 |  | 2014
|  | (1) |  | (1) |  | (1) |  |  |  |
Net sales |  | $ | 1,532,186 |  |  | $ | 1,538,940 |  |  | $ | 1,169,251 |  |  | $ | 916,568 |  |  | $ | 714,338 |
Net income |  | 161,995 |  |  | 261,209 |  |  | 123,630 |  |  | 55,178 |  |  | 108,111 |
Basic earnings per share |  | $ | 2.55 |  |  | $ | 4.12 |  |  | $ | 1.96 |  |  | $ | 0.88 |  |  | $ | 1.72 |
Diluted earnings per share |  | $ | 2.46 |  |  | $ | 3.92 |  |  | $ | 1.87 |  |  | $ | 0.85 |  |  | $ | 1.65 |
Financial position at year end: |  |  |  |  |  |  |  |  |  |
Cash, cash equivalents, restricted investments and marketable securities |  | $ | 434,500 |  |  | $ | 450,979 |  |  | $ | 250,006 |  |  | $ | 260,719 |  |  | $ | 384,510 |
Total assets |  | 1,430,117 |  |  | 1,413,470 |  |  | 1,181,883 |  |  | 1,148,778 |  |  | 724,744 |
Working capital |  | 473,465 |  |  | 631,853 |  |  | 378,005 |  |  | 275,335 |  |  | 392,810 |
Long-term liabilities |  | 128,180 |  |  | 117,703 |  |  | 194,276 |  |  | 215,429 |  |  | 4,863 |
Total stockholders’ equity |  | $ | 1,161,728 |  |  | $ | 1,151,692 |  |  | $ | 859,483 |  |  | $ | 756,771 |  |  | $ | 637,358 |

(1) | Refer to the consolidated financial statements and the Notes thereto contained in Item 8 of this Form 10-K for fiscal years 2018, 2017, and 2016, for an expanded discussion of factors that materially affect the comparability of the information reflected in the selected consolidated financial data presented above.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Please read the following discussion in conjunction with our audited historical consolidated financial statements and notes thereto, which are included elsewhere in this Form 10-K. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. Actual results could differ materially because of the factors discussed in Part I, Item 1A. “Risk Factors” of this Form 10-K.
Critical Accounting Policies
Our discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements included in this report, which have been prepared in accordance with U. S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts. We evaluate the estimates on an on-going basis. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
We believe the following critical accounting policies involve significant judgments and estimates that are used in the preparation of the consolidated financial statements:

▪ | We report income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the financial reporting basis and tax basis of assets and liabilities, which are measured using the enacted tax laws and tax rates that will be in effect when the differences are expected to reverse. We assess the likelihood that the deferred tax assets will be realized. A valuation allowance is established against deferred tax assets to the extent the Company believes that it is more likely than not that the deferred tax assets will not be realized, taking into consideration the level of historical taxable income and projections for future taxable income over the periods in which the temporary differences are deductible.

The calculation of our tax liabilities involves assessing uncertainties with respect to the application of complex tax rules. Uncertain tax positions must meet a more likely than not threshold to be recognized in the financial statements and the tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon final settlement. See Note 14 — Income Taxes of the Notes to Consolidated Financial Statements contained in Item 8 for additional details.

▪ | We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Prior to the fourth quarter of fiscal year 2016, we had a number of arrangements with distributors whereby we deferred revenue at the time of shipment of our products to those distributors. As part of those arrangements, when a distributor resold those products to an end customer, the Company would credit the distributor the difference between (1) the original distributor price and the distributor’s agreed upon margin and (2) the final sales price to the end

22

Table of Contents
customer (known as the “Ship and Debit Arrangement”). For those transactions, revenue was deferred until the product was resold by the distributor and we determined that the final sales price to the distributor was fixed or determinable. For certain of our smaller distributors, we did not have similar Ship and Debit Arrangements and the distributors were billed at a fixed upfront price. For those transactions, revenue was recognized upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company determined that the revenue recognition criteria were met.
In light of the fact that the distributor program had been declining as a portion of the overall business for several years, in fiscal year 2016 the Company performed a review of all distributor arrangements in an effort to streamline our distribution program and reduce overhead costs. Based upon this review, the Company terminated its Ship and Debit Arrangements with Distributors during the fourth quarter of fiscal year 2016. Subsequent to the termination of the Ship and Debit Arrangements, the Company began recognizing revenue for all distributors upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company’s final sales price to the distributor was fixed and determinable and the Company determined that all four criteria for revenue recognition were met.
Although the Company terminated its Ship and Debit Arrangements with all distributors along with certain ancillary agreements related to the Ship and Debit Arrangements, the Company continues to grant varying levels of stock rotation and price protection rights based on individual distributor agreements. To the extent these rights are implicated in any transaction with a distributor, we continue to evaluate their effect on when the revenue recognition criteria have been met.

▪ | Inventories are recorded at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. We write down inventories to net realizable value based on forecasted demand while taking into account product release schedules and product life cycles, which may drive management judgment. We also review and write down inventory, as appropriate, based on the age and condition of the inventory. Actual demand and market conditions may be different from those projected by management, which could have a material effect on our operating results and financial position. See Note 2 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in Item 8.

▪ | We evaluate the recoverability of property, plant, and equipment and intangible assets by testing for impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. An impairment loss is recognized in the event the carrying value of these assets exceeds the fair value of the applicable assets. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management, which could have a material effect on our operating results and financial position. See Note 6 — Intangibles, net and Goodwill of the Notes to Consolidated Financial Statements contained in Item 8.

▪ | The Company evaluates goodwill and other intangible assets. Goodwill is recorded at the time of an acquisition and is calculated as the difference between the total consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. The Company tests goodwill and other intangible assets for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management’s assessment of qualitative factors to determine whether it is more likely than not that goodwill and other intangible assets are impaired. If management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists, then a quantitative impairment test will be performed involving management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in these evaluations. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. The Company has recorded no goodwill impairments in fiscal years 2018, 2017, and 2016. There were no material intangible asset impairments in fiscal years 2018, 2017, and 2016.

▪ | We are subject to the possibility of loss contingencies for various legal matters. See Note 11 — Legal Matters of the Notes to Consolidated Financial Statements contained in Item 8. We regularly evaluate current information available to us to determine whether any accruals should be made based on the status of the case, the results of the discovery process and other factors. If we ultimately determine that an accrual should be made for a legal matter, this accrual could have a material effect on our operating results and financial position and the ultimate outcome may be materially different than our estimate.

23

Table of Contents
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The purpose of this ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company has completed the process of reviewing our customers’ contracts in respect of performance obligation identification and satisfaction, pricing, warranties, and return rights, among other considerations. Through this process, the Company currently expects an immaterial balance sheet impact to its first quarter fiscal year 2019 financials, upon adoption of this ASU.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details. Lessees would recognize operating leases on the balance sheet under this ASU — with the future lease payments recognized as a liability, measured at present value, and the right-of-use asset recognized for the lease term. A single lease cost would be recognized over the lease term. For terms less than twelve months, a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on available-for-sale debt securities to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods. The Company is currently evaluating the impact of this ASU with no expected material impact.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU relates to income tax consequences of non-inventory intercompany asset transfers. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, as of the beginning of an annual reporting period. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. The Company early adopted this ASU in the first quarter of fiscal year 2018 with a $0.7 million impact to beginning retained earnings.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, and should be treated as an asset acquisition instead. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted under specific circumstances, including in an interim period, with prospective application. The Company adopted this ASU and applied the related guidance to an asset acquisition in the first quarter of fiscal year 2018.
In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates step two of the goodwill impairment test. An impairment charge is to be recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods. Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017 and should be applied prospectively. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. The Company is currently evaluating the impact of this ASU with no expected material impact.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU applies to any company that changes the terms or conditions of a share-based award, considered a
24

Table of Contents
modification. Modification accounting would be applied unless certain conditions were met related to the fair value of the award, the vesting conditions and the classification of the modified award. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The standard should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the financial statement impact of this ASU with no expected material impact.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows for the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This ASU is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The standard should be applied in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in tax rate is recognized. The Company is currently evaluating the potential financial statement impact of this ASU.
Overview
Cirrus Logic develops high-precision analog and mixed-signal ICs for a broad range of innovative customers. We track operating results in one reportable segment, but report revenue performance by product line, currently portable audio and non-portable audio and other products. In fiscal year 2018, the Company increased our penetration in flagship and mid-tier smartphones and expanded our presence in the digital headset market. The Company also began sampling our first 28-nanometer voice biometrics component and introduced our first 55-nanometer boosted amplifier with integrated DSP targeting the audio and haptic markets. In addition to these technology milestones, the Company has been focused on growing our presence in the Android market, where interest in providing consumers a differentiated user experience is driving demand for a variety of audio and voice components.
Fiscal Year 2018
Fiscal year 2018 net sales of $1.53 billion represented a slight decrease over fiscal year 2017 net sales of $1.54 billion. Portable audio product line sales of $1.36 billion in fiscal year 2018 decreased slightly over fiscal year 2017 sales of $1.37 billion, attributable primarily to lower ASP components at a key Android OEM and ASP reductions on certain other portable audio products, partially offset by increased smartphone sales volumes. Non-portable audio and other product line sales of $168.3 million represented a 1.9 percent increase from fiscal year 2017 sales of $165.1 million.
Overall, gross margin for fiscal year 2018 was 50 percent. The increase in gross margin for fiscal year 2018 was primarily due to supply chain efficiencies versus the prior year. The Company’s number of employees increased to 1,596 as of March 31, 2018. The Company achieved net income of $162.0 million in fiscal year 2018, which included an income tax provision in the amount of $103.1 million.
Fiscal Year 2017
Fiscal year 2017 net sales of $1.5 billion represented a 32 percent increase over fiscal year 2016 net sales of $1.2 billion. Portable audio product line sales of $1.4 billion in fiscal year 2017 represented a 39 percent increase over fiscal year 2016 sales of $989.1 million, attributable primarily to significant increases in the sales of smart codecs and boosted amplifiers for the period, which was partially offset by a reduction in revenue generated by certain general market smart codecs as a leading Android customer reverted to a dual sourcing strategy on core chipsets. Non-portable audio and other product line sales of $165.1 million represented an 8 percent decrease from fiscal year 2016 sales of $180.2 million.
Overall, gross margin for fiscal year 2017 was 49 percent. The increase in gross margin for fiscal year 2017 was primarily due to higher volumes and supply chain efficiencies versus fiscal year 2016. The Company’s number of employees increased to 1,444 as of March 25, 2017. The Company achieved net income of $261.2 million in fiscal year 2017, which included an income tax provision in the amount of $53.8 million.
Fiscal Year 2016
Fiscal year 2016 net sales of $1.2 billion represented a 28 percent increase over fiscal year 2015 net sales of $916.6 million. Portable audio product line sales of $989.1 million in fiscal year 2016 represented a 34 percent increase over fiscal year 2015 sales of $740.3 million, attributable primarily to significant increases in the sales of smart codecs and boosted amplifiers for the period. Non-portable audio and other product line sales of $180.2 million represented a 2 percent increase from fiscal year 2015 sales of $176.3 million.
Overall, gross margin for fiscal year 2016 was 47 percent. The Company’s number of employees increased to 1,291 as of March 26, 2016. The Company achieved net income of $123.6 million in fiscal year 2016, which included an income tax provision in the amount of $52.4 million.
25

Table of Contents
Results of Operations
The following table summarizes the results of our operations for each of the past three fiscal years as a percentage of net sales. All percentage amounts were calculated using the underlying data, in thousands:

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Net sales |  | 100 | % |  | 100 | % |  | 100 | %
Gross margin |  | 50 | % |  | 49 | % |  | 47 | %
Research and development |  | 24 | % |  | 20 | % |  | 23 | %
Selling, general and administrative |  | 9 | % |  | 8 | % |  | 10 | %
Asset impairment |  | — | % |  | — | % |  | — | %
Patent agreement and other |  | — | % |  | — | % |  | (1 | )%
Income from operations |  | 17 | % |  | 21 | % |  | 15 | %
Interest income |  | — | % |  | — | % |  | — | %
Interest expense |  | — | % |  | — | % |  | — | %
Other expense |  | — | % |  | — | % |  | — | %
Income before income taxes |  | 17 | % |  | 21 | % |  | 15 | %
Provision for income taxes |  | 6 | % |  | 4 | % |  | 4 | %
Net income |  | 11 | % |  | 17 | % |  | 11 | %

Net Sales
We report sales in two product categories: portable audio products and non-portable audio and other products. Our sales by product line are as follows (in thousands):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Portable Audio Products |  | $ | 1,363,876 |  |  | $ | 1,373,848 |  |  | $ | 989,101 |
Non-Portable Audio and Other Products |  | 168,310 |  |  | 165,092 |  |  | 180,150 |
|  | $ | 1,532,186 |  |  | $ | 1,538,940 |  |  | $ | 1,169,251 |

Net sales for fiscal year 2018 decreased slightly by 0.4% percent, to $1.53 billion from $1.54 billion in fiscal year 2017. The decrease in net sales reflects a $10.0 million decrease in portable audio product sales and a $3.2 million increase in non-portable audio and other product sales. Portable audio product line sales experienced a decrease in net sales attributable to lower ASP components at a key Android OEM and ASP reductions on certain other portable audio products, partially offset by increased smartphone sales volumes versus fiscal year 2017. Non-portable audio and other product line sales of $168.3 million represented a 1.9 percent increase from fiscal year 2017 sales of $165.1 million, which was primarily attributable to increases in computer-related and power meter sales, partially offset by decreases in surround codecs and software sales for the year.
Net sales for fiscal year 2017 increased 32 percent, to $1.5 billion from $1.2 billion in fiscal year 2016. The increase in net sales reflects a $384.7 million increase in portable audio product sales and a $15.1 million decrease in non-portable audio and other product sales. The portable audio products group experienced an increase in net sales attributable to significant increases in the sales of smart codecs and boosted amplifiers for fiscal year 2017. Non-portable audio and other product line sales of $165.1 million represented an 8 percent decrease from fiscal year 2016 sales of $180.2 million, which was primarily attributable to a decrease in sales of DAC and surround codec products for the period.
Sales to non-U.S. customers, principally located in Asia, including sales to U.S.-based end customers that manufacture products through contract manufacturers or plants located overseas, were approximately $1.5 billion in fiscal years 2018 and 2017 and $1.1 billion in fiscal year 2016, representing 98 percent of net sales in each of fiscal years 2018 and 2017, and 94 percent of net sales in fiscal year 2016.
Our sales are denominated primarily in U.S. dollars. No foreign currency hedging contracts were entered into in any period presented.
26

Table of Contents
Gross Margin
Overall gross margin of 50 percent for fiscal year 2018 reflects an increase from fiscal year 2017 gross margin of 49 percent. The increase was primarily attributable to supply chain efficiencies in the current fiscal year versus the prior year. Changes in excess and obsolete inventory charges, including scrapped inventory, and sales of product written down in prior periods did not have a material impact on margin in fiscal year 2018.
Overall gross margin of 49 percent for fiscal year 2017 reflects an increase from fiscal year 2016 gross margin of 47 percent. The increase was primarily attributable to supply chain efficiencies in the fiscal year 2017 versus fiscal year 2016. Changes in excess and obsolete inventory charges, including scrapped inventory, and sales of product written down in prior periods did not have a material impact on margin in fiscal year 2017.
Research and Development Expenses
Fiscal year 2018 research and development expenses of $366.4 million reflect an increase of $62.7 million, or 21 percent, from fiscal year 2017. The increase was attributable to an 8 percent increase in research and development headcount and the associated salary and employee-related expenses, as well as higher product development expenses, including tape-outs and contract labor, increased amortization of acquisition-related intangibles, and higher facilities and infrastructure-related costs in fiscal year 2018 versus fiscal year 2017 related to the increased headcount. These increases were partially offset by a higher UK Research and Development Expenditure Credit (RDEC) in the current fiscal year.
Fiscal year 2017 research and development expenses of $303.7 million reflect an increase of $34.5 million, or 13 percent, from fiscal year 2016. The increase was primarily attributable to a 16 percent increase in research and development headcount and the associated salary and employee-related expenses. The Company also experienced higher facilities-related costs in fiscal year 2017 versus fiscal year 2016, partially offset by adjustments to the contingent consideration liability discussed in Note 4, the RDEC, which went into effect beginning in fiscal year 2017, and a sales tax refund in the third quarter of fiscal year 2017.
Selling, General and Administrative Expenses
Fiscal year 2018 selling, general and administrative expenses of $131.8 million reflect an increase of $4.5 million, or 4 percent, compared to fiscal year 2017. The increase was primarily attributable to increased salary and employee-related expenses in fiscal year 2018.
Fiscal year 2017 selling, general and administrative expenses of $127.3 million reflect an increase of $10.2 million, or 9 percent, compared to fiscal year 2016. The increase was primarily attributable to increased salary and employee-related expenses, as well as higher occupancy costs in fiscal year 2017.
Asset Impairment
In the fourth quarter of fiscal year 2017, the Company reported an asset impairment charge of $9.8 million related to a building owned by the Company in Edinburgh, Scotland. The Company determined that the undiscounted cash flows associated with the property of the asset were less than the carrying value. Considering the fact that the building was no longer used as the primary office space for Edinburgh employees and that market conditions had weakened, the Company hired an independent consultant to assess the fair value of the building. The variance in the assessed valuation amount and the carrying value was recorded in fiscal year 2017 and is presented as a separate line item on the Consolidated Statements of Income under the caption “Asset impairment.”
Patent Agreement and Other
On May 8, 2015, we entered into a patent purchase agreement for the sale of certain Company-owned patents relating to our LED lighting products. As a result of this agreement, on June 22, 2015, the Company received cash consideration of $12.5 million from the purchaser. Under the agreement, the Company undertook to no longer be engaged in LED lighting and received a license under the sold patents for all other fields of use. The proceeds were recorded during fiscal year 2016 as a recovery of costs previously incurred and are reflected as a separate line item on the Consolidated Statements of Income in operating expenses under the caption “Patent agreement and other.” Additionally, in fiscal year 2016, the Company recorded $0.9 million in expense related to negotiated adjustments to a legal settlement.
Interest Income
Interest income in fiscal years 2018, 2017, and 2016, was $4.8 million, $1.7 million, and $0.9 million, respectively. The increase in interest income in fiscal year 2018 and 2017 was due to higher average cash, cash equivalent, and marketable securities balances throughout the year versus the previous year.
27

Table of Contents
Interest Expense
The Company reported interest expense of $1.2 million, $3.6 million and $3.3 million for fiscal years 2018, 2017, and 2016, respectively, primarily as a result of the revolving credit facility and subsequent pay down, described in Note 7.
Other Expense
In fiscal years 2018 and 2016, the Company reported $1.0 million and $1.8 million, respectively, in other expense, primarily foreign exchange costs. The corresponding amount in fiscal year 2017 was immaterial.
Provision for Income Taxes
We recorded income tax expense of $103.1 million in fiscal year 2018 on a pre-tax income of $265.1 million, yielding an effective tax rate of 38.9 percent. Our effective tax rate was higher than the U.S. statutory rate of 31.6 percent, primarily due to the impact of the legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, partially offset by income earned in certain foreign jurisdictions that is taxed below the federal statutory rate and excess benefits from stock based compensation. The Tax Act reduces the U.S. federal corporate income tax rate from 35% to 21%, restricts the deductibility of certain business expenses, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax-deferred, and creates new taxes on certain foreign sourced earnings, among other provisions. The reduction in the U.S. federal corporate income tax rate was effective January 1, 2018. The rate change is administratively effective at the beginning of our fiscal year 2018, resulting in a blended U.S. federal corporate income tax rate of 31.6% for the annual period. This reduction in the statutory U.S. tax rate, when coupled with changes in the deductibility of certain business expenses that are also effective in fiscal year 2018, resulted in an immaterial change to the annual effective tax rate for fiscal year 2018. In addition, we recorded $60.1 million of income tax expense during fiscal year 2018 as a provisional estimate of the discrete tax effects of the Tax Act. See Note 14 - Income Taxes.
We recorded income tax expense of $53.8 million in fiscal year 2017 on a pre-tax income of $315.0 million, yielding an effective tax provision rate of 17.1 percent. Our effective tax rate was lower than the then current U.S. statutory rate of 35 percent, primarily due to income earned in jurisdictions with a lower statutory tax rate, excess tax benefits from stock based compensation due to the early adoption of the ASU 2016-09 accounting standard, and research and development tax credits in the U.S.
We recorded income tax expense of $52.4 million in fiscal year 2016 on a pre-tax income of $176.0 million, yielding an effective tax provision rate of 29.8 percent. Our effective tax rate was lower than the then current U.S. statutory rate of 35 percent, primarily due to research and development tax credits in the U.S. and the impact of earnings in jurisdictions with a lower statutory tax rate.
Outlook
Cirrus Logic made meaningful progress in fiscal year 2018 with numerous strategic initiatives that we believe position the Company to return to growth in the coming years. We expanded our portfolio of smart codecs and boosted amplifiers, and moved into new applications with haptics and voice biometrics products, while broadening our customer base. We believe our extensive roadmap targeting the smartphone, digital headset and smart home markets will enable Cirrus Logic to offer a differentiated and consistent audio and voice experience and contribute to the Company’s future success. For fiscal year 2019, we expect revenue to be down approximately 10 percent year over year and anticipate a return to year-over-year revenue growth in fiscal year 2020.
Liquidity and Capital Resources
In fiscal year 2018, cash flow from operations was $318.7 million. Operating cash flow during fiscal year 2018 was related to the cash components of our net income and a $29.1 million favorable change in working capital. The favorable change in working capital was driven primarily by a decrease in accounts receivable and an increase in income taxes payable, partially offset by an increase in inventories. In fiscal year 2017, cash flow from operations was $369.8 million. Operating cash flow during fiscal year 2017 was related to the cash components of our net income, offset by a $24.9 million unfavorable change in working capital. The unfavorable change in working capital was driven primarily by an increase in accounts receivable and inventories during the period. In fiscal year 2016, cash flow from operations was $149.0 million. Operating cash flow during fiscal year 2016 was related to the cash components of our net income, offset by a $108.7 million unfavorable change in working capital. The unfavorable change in working capital was driven primarily by an increase in inventories and a decrease in accounts payable during the period.
In fiscal year 2018, the Company used $184.7 million in cash for investing activities primarily related to $100.2 million in net purchases of marketable securities, and capital expenditures and technology investments of $59.3 million. In addition, the Company purchased certain tangible and intangible assets for $25.2 million as part of a technology acquisition. In fiscal
28

Table of Contents
year 2017, the Company used approximately $69.9 million in cash for investing activities principally related to $18.6 million in net purchases of marketable securities, and capital expenditures and technology investments of $51.3 million. In fiscal year 2016, the Company received approximately $20.2 million in cash provided by investing activities, principally due to the net maturities and sales of marketable securities of $103.1 million, partially offset by $46.1 million in capital expenditures and technology investments, and acquisitions of $36.8 million.
In fiscal year 2018, the Company used $249.6 million related to financing activities. In fiscal year 2017, the Company used $117.5 million in financing activities. In fiscal year 2016, the Company used $76.9 million in financing activities. Payments against revolver balances in fiscal years 2018, 2017 and 2016 were $60.0 million, $100.4 million and $20.0 million, respectively. See Note 7 and Revolving Credit Facility below for more information relating to debt agreements and terms that existed during the periods. Beginning in fiscal year 2017 with the adoption of ASU 2016-09, excess tax benefits or shortfalls are not shown separately as a financing activity, as the income tax effects of employee stock-based compensation are shown as a component of net income as an operating activity. Excess tax benefits related to employee stock-based compensation generated $3.9 million in fiscal years 2016. Additionally, in fiscal years 2018, 2017, and 2016, the Company utilized approximately $175.8 million, $15.4 million, and $60.5 million, respectively, in cash to repurchase and retire portions of its outstanding common stock. See Note 12 for a description of our Share Repurchase Program.
Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our expected future cash earnings, existing cash, cash equivalents, investment balances, and available borrowings under our Amended Facility will be sufficient to meet our capital requirements both domestically and internationally, through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time.
Revolving Credit Facility
On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto, for the purpose of refinancing an existing credit facility and providing ongoing working capital. The Amended Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Amended Facility”). The Amended Facility matures on July 12, 2021. Cirrus Logic must repay the outstanding principal amount of all borrowings, together with all accrued but unpaid interest thereon, on the maturity date. The Amended Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Amended Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.
Borrowings under the Amended Facility may, at our election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR rate plus the applicable margin (“LIBOR Rate Loans”). The applicable margin ranges from 0% to 0.50% per annum for Base Rate Loans and 1.25% to 2.00% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below). A commitment fee accrues at a rate per annum ranging from 0.20% to 0.30% (based on the Leverage Ratio) on the average daily unused portion of the commitment of the lenders. The Amended Credit Agreement contains certain financial covenants providing that (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four fiscal quarters must not be greater than 3.00 to 1.00 (the “Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive fiscal quarters to consolidated fixed charges (including amounts paid in cash for consolidated interest expenses, capital expenditures, scheduled principal payments of indebtedness, and income taxes) for the prior four consecutive fiscal quarters must not be less than 1.25 to 1.00 as of the end of each fiscal quarter. The Amended Credit Agreement also contains negative covenants limiting the Company’s or any Subsidiary’s ability to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.
As of March 31, 2018, the Company had no amounts outstanding under the Amended Facility and was in compliance with all covenants under the Amended Credit Agreement.
See also Note 7 — Revolving Credit Facility.
Off Balance Sheet Arrangements
As of March 31, 2018, the Company did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, that were reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
29

Table of Contents
Contractual Obligations
In our business activities, we incur certain commitments to make future payments under contracts such as debt agreements, purchase orders, operating leases and other long-term contracts. Maturities under these contracts are set forth in the following table as of March 31, 2018:

|  | Payment due by period (in thousands)
|  | < 1 year |  | 1-3 years |  | 3-5 years |  | > 5 years |  | Total
Facilities leases, net |  | $ | 13,074 |  |  | $ | 26,105 |  |  | $ | 23,838 |  |  | $ | 43,215 |  |  | $ | 106,232 |
Equipment and other commitments |  | 151 |  |  | 290 |  |  | 266 |  |  | 363 |  |  | 1,070 |
Wafer purchase commitments |  | 80,225 |  |  | — |  |  | — |  |  | — |  |  | 80,225 |
Assembly purchase commitments |  | 3,208 |  |  | — |  |  | — |  |  | — |  |  | 3,208 |
Outside test purchase commitments |  | 11,534 |  |  | — |  |  | — |  |  | — |  |  | 11,534 |
Other purchase commitments |  | 31,894 |  |  | 27,765 |  |  | — |  |  | — |  |  | 59,659 |
Interest on revolving line of credit (1) |  | 608 |  |  | 1,393 |  |  | — |  |  | — |  |  | 2,001 |
Total |  | $ | 140,694 |  |  | $ | 55,553 |  |  | $ | 24,104 |  |  | $ | 43,578 |  |  | $ | 263,929 |

(1) | Our debt is subject to a variable interest rate based on LIBOR. The interest included in the table above is based on forecasted commitment fees.

Certain of our operating lease obligations include escalation clauses. These escalating payment requirements are reflected in the table.
We are unable to make a reasonably reliable estimate as to when or if a cash settlement with taxing authorities will occur related to our unrecognized tax benefits. Therefore, our liability of $55.2 million for unrecognized tax benefits is not included in the table above. See Note 14 — Income Taxes, to the Consolidated Financial Statements for additional information.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks associated with interest rates on our debt and marketable securities, and to currency movements on non-U.S. dollar denominated assets and liabilities. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. All of the potential changes noted below are based on sensitivity analyses as of March 31, 2018. Actual results may differ materially.
Interest Rate Risk
Our primary financial instruments include cash equivalents, marketable securities, accounts receivable, pension plan assets / liabilities, accounts payable, and accrued liabilities. The Company’s investments are managed by outside professional managers within investment guidelines set by the Company. These guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities. The Company does not currently use derivative financial instruments in its investment portfolio. Due to the short-term nature of our investment portfolio and the current low interest rate environment, our downside exposure to interest rate risk is minimal.
To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, the Company performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curve. Based on investment positions as of March 31, 2018 and March 25, 2017, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $3.2 million and $0.9 million decline in the fair market value of the portfolio, respectively. The larger hypothetical decline in fair value at the end of fiscal year 2018 was due to the larger balance in total marketable securities, when compared to fiscal year 2017. Such losses would only be realized if the Company sold the investments prior to maturity.
Foreign Currency Exchange Risk
Our revenue and spending is transacted primarily in U.S. dollars; however, in fiscal years 2018, 2017, and 2016, we entered into routine transactions in other currencies to fund the operating needs of certain legal entities outside of the U.S. As of March 31, 2018 and March 25, 2017, a ten percent change in the value of the related currencies would not have a material impact on our results of operations and financial position. During fiscal years 2018, 2017, and 2016 we did not enter into any foreign currency hedging contracts.
30

Table of Contents
ITEM 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm... | 32
Consolidated Balance Sheets as of March 31, 2018 and March 25, 2017 | 34
Consolidated Statements of Income for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016 | 35
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2018, March 25, 2017, March 26, 2016 | 36
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016 | 37
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended March 31, 2018, March 25, 2017, and March 26, 2016 | 38
Notes to Consolidated Financial Statements | 39

31

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Cirrus Logic, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cirrus Logic, Inc. as of March 31, 2018 and March 25, 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three fiscal years in the period ended March 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2018 and March 25, 2017, and the results of its operations and its cash flows for each of the three fiscal years in the period ended March 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 30, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1984.
Austin, Texas
May 30, 2018
32

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Cirrus Logic, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Cirrus Logic, Inc.’s internal control over financial reporting as of March 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cirrus Logic, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2018 and March 25, 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three fiscal years in the period ended March 31, 2018, and the related notes and our report dated May 30, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Austin, Texas
May 30, 2018
33

Table of Contents
CIRRUS LOGIC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

|  | March 31, 2018 |  | March 25, 2017
Assets |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 235,604 |  |  | $ | 351,166 |
Marketable securities |  | 26,397 |  |  | 99,813 |
Accounts receivable, net |  | 100,801 |  |  | 119,974 |
Inventories |  | 205,760 |  |  | 167,895 |
Prepaid assets |  | 31,235 |  |  | 24,987 |
Other current assets |  | 13,877 |  |  | 12,093 |
Total current assets |  | 613,674 |  |  | 775,928 |
Long-term marketable securities |  | 172,499 |  |  | — |
Property and equipment, net |  | 191,154 |  |  | 168,139 |
Intangibles, net |  | 111,547 |  |  | 135,188 |
Goodwill |  | 288,718 |  |  | 286,767 |
Deferred tax assets |  | 14,716 |  |  | 32,841 |
Other assets |  | 37,809 |  |  | 14,607 |
Total assets |  | $ | 1,430,117 |  |  | $ | 1,413,470 |
Liabilities and Stockholders’ Equity |  |  |  |
Current liabilities: |  |  |  |
Accounts payable |  | $ | 69,850 |  |  | $ | 73,811 |
Accrued salaries and benefits |  | 35,721 |  |  | 40,190 |
Software license agreements |  | 21,981 |  |  | 14,990 |
Other accrued liabilities |  | 12,657 |  |  | 15,084 |
Total current liabilities |  | 140,209 |  |  | 144,075 |
Long-term liabilities: |  |  |  |
Debt |  | — |  |  | 60,000 |
Software license agreements |  | 27,765 |  |  | 3,146 |
Non-current income taxes |  | 92,753 |  |  | 50,876 |
Other long-term liabilities |  | 7,662 |  |  | 3,681 |
Total long-term liabilities |  | 128,180 |  |  | 117,703 |
Stockholders’ equity: |  |  |  |
Preferred stock, 5.0 million shares authorized but unissued |  | — |  |  | — |
Common stock, $0.001 par value, 280,000 shares authorized, 61,960 shares and 64,295 shares issued and outstanding at March 31, 2018 and March 25, 2017, respectively |  | 62 |  |  | 64 |
Additional paid-in capital |  | 1,312,372 |  |  | 1,259,215 |
Accumulated deficit |  | (139,345 | ) |  | (107,014 | )
Accumulated other comprehensive loss |  | (11,361 | ) |  | (573 | )
Total stockholders’ equity |  | 1,161,728 |  |  | 1,151,692 |
Total liabilities and stockholders’ equity |  | $ | 1,430,117 |  |  | $ | 1,413,470 |

The accompanying notes are an integral part of these financial statements.
34

Table of Contents
CIRRUS LOGIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Net sales |  | $ | 1,532,186 |  |  | $ | 1,538,940 |  |  | $ | 1,169,251 |
Cost of sales |  | 771,470 |  |  | 781,125 |  |  | 614,411 |
Gross profit |  | 760,716 |  |  | 757,815 |  |  | 554,840 |
Operating expenses |  |  |  |  |  |
Research and development |  | 366,444 |  |  | 303,658 |  |  | 269,217 |
Selling, general and administrative |  | 131,811 |  |  | 127,265 |  |  | 117,082 |
Asset impairment |  | — |  |  | 9,842 |  |  | — |
Patent agreement and other |  | — |  |  | — |  |  | (11,670 | )
Total operating expenses |  | 498,255 |  |  | 440,765 |  |  | 374,629 |
Income from operations |  | 262,461 |  |  | 317,050 |  |  | 180,211 |
Interest income |  | 4,762 |  |  | 1,676 |  |  | 877 |
Interest expense |  | (1,153 | ) |  | (3,600 | ) |  | (3,308 | )
Other expense |  | (971 | ) |  | (79 | ) |  | (1,791 | )
Income before income taxes |  | 265,099 |  |  | 315,047 |  |  | 175,989 |
Provision for income taxes |  | 103,104 |  |  | 53,838 |  |  | 52,359 |
Net income |  | 161,995 |  |  | 261,209 |  |  | 123,630 |
Basic earnings per share |  | $ | 2.55 |  |  | $ | 4.12 |  |  | $ | 1.96 |
Diluted earnings per share |  | $ | 2.46 |  |  | $ | 3.92 |  |  | $ | 1.87 |
Basic weighted average common shares outstanding |  | 63,407 |  |  | 63,329 |  |  | 63,197 |
Diluted weighted average common shares outstanding |  | 65,951 |  |  | 66,561 |  |  | 65,993 |

The accompanying notes are an integral part of these financial statements.
35

Table of Contents
CIRRUS LOGIC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Net income |  | $ | 161,995 |  |  | $ | 261,209 |  |  | $ | 123,630 |
Other comprehensive income (loss), before tax |  |  |  |  |  |
Foreign currency translation gain (loss) |  | 2,791 |  |  | (826 | ) |  | 294 |
Unrealized gain (loss) on marketable securities |  | (2,380 | ) |  | 47 |  |  | (24 | )
Actuarial gain (loss) on defined benefit pension plan |  | (14,729 | ) |  | (79 | ) |  | 2,660 |
Reclassification of actuarial (gain) loss to net income |  | — |  |  | (89 | ) |  | 49 |
Benefit (provision) for income taxes |  | 3,530 |  |  | 42 |  |  | (537 | )
Comprehensive income |  | $ | 151,207 |  |  | $ | 260,304 |  |  | $ | 126,072 |

The accompanying notes are an integral part of these financial statements.
36

Table of Contents
CIRRUS LOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|  | Year Months Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Cash flows from operating activities: |  |  |  |  |  |
Net income |  | $ | 161,995 |  |  | $ | 261,209 |  |  | $ | 123,630 |
Adjustments to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 81,399 |  |  | 63,433 |  |  | 58,060 |
Stock compensation expense |  | 48,741 |  |  | 39,593 |  |  | 33,506 |
Deferred income taxes |  | 11,646 |  |  | 10,885 |  |  | 23,202 |
Loss on retirement or write-off of long-lived assets |  | 626 |  |  | 10,387 |  |  | 2,753 |
(Payments) charges for defined benefit pension plan |  | (10,929 | ) |  | 116 |  |  | 729 |
Excess tax benefit from employee stock awards |  | — |  |  | — |  |  | (3,850 | )
Other non-cash charges |  | (3,864 | ) |  | 8,980 |  |  | 19,702 |
Net change in operating assets and liabilities: |  |  |  |  |  |
Accounts receivable, net |  | 19,173 |  |  | (31,442 | ) |  | 24,156 |
Inventories |  | (37,865 | ) |  | (25,880 | ) |  | (57,819 | )
Other assets |  | 16,824 |  |  | 575 |  |  | (1,522 | )
Accounts payable |  | 143 |  |  | 1,772 |  |  | (41,456 | )
Accrued salaries and benefits |  | (4,469 | ) |  | 18,951 |  |  | (2,993 | )
Deferred income |  | — |  |  | — |  |  | (6,105 | )
Income taxes payable |  | 22,983 |  |  | 10,969 |  |  | (11,807 | )
Other accrued liabilities |  | 12,308 |  |  | 203 |  |  | (11,140 | )
Net cash provided by operating activities |  | 318,711 |  |  | 369,751 |  |  | 149,046 |
Cash flows from investing activities: |  |  |  |  |  |
Maturities and sales of available-for-sale marketable securities |  | 138,221 |  |  | 212,863 |  |  | 125,660 |
Purchases of available-for-sale marketable securities |  | (238,434 | ) |  | (231,432 | ) |  | (22,570 | )
Purchases of property, equipment and software |  | (55,180 | ) |  | (41,849 | ) |  | (41,569 | )
Investments in technology |  | (29,323 | ) |  | (9,447 | ) |  | (4,519 | )
Acquisition of businesses, net of cash obtained |  | — |  |  | — |  |  | (36,759 | )
Net cash (used in) provided by investing activities |  | (184,716 | ) |  | (69,865 | ) |  | 20,243 |
Cash flows from financing activities: |  |  |  |  |  |
Principal payments on long-term revolver |  | (60,000 | ) |  | (100,439 | ) |  | (20,000 | )
Debt issuance costs |  | — |  |  | (2,152 | ) |  | — |
Payments on capital lease agreements |  | — |  |  | (699 | ) |  | — |
Issuance of common stock, net of shares withheld for taxes |  | 4,417 |  |  | 16,518 |  |  | 6,617 |
Repurchase of stock to satisfy employee tax withholding obligations |  | (17,806 | ) |  | (14,089 | ) |  | (6,861 | )
Repurchase and retirement of common stock |  | (175,776 | ) |  | (15,439 | ) |  | (60,503 | )
Excess tax benefit from employee stock awards |  | — |  |  | — |  |  | 3,850 |
Contingent consideration payments |  | (392 | ) |  | (1,213 | ) |  | — |
Net cash used in financing activities |  | (249,557 | ) |  | (117,513 | ) |  | (76,897 | )
Net (decrease) increase in cash and cash equivalents |  | (115,562 | ) |  | 182,373 |  |  | 92,392 |
Cash and cash equivalents at beginning of period |  | 351,166 |  |  | 168,793 |  |  | 76,401 |
Cash and cash equivalents at end of period |  | $ | 235,604 |  |  | $ | 351,166 |  |  | $ | 168,793 |
Supplemental disclosures of cash flow information |  |  |  |  |  |
Cash payments during the year for: |  |  |  |  |  |
Income taxes |  | $ | 34,385 |  |  | $ | 8,001 |  |  | $ | 23,785 |
Interest |  | 835 |  |  | 2,947 |  |  | 3,318 |

The accompanying notes are an integral part of these financial statements.
37

Table of Contents
CIRRUS LOGIC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

|  | Common Stock |  | Additional Paid-In Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income / (Loss) |  | Total
|  | Shares |  | Amount |
Balance, March 28, 2015 |  | 63,085 |  |  | $ | 63 |  |  | $ | 1,159,431 |  |  | $ | (400,613 | ) |  | $ | (2,110 | ) |  | $ | 756,771 |
Net income |  | — |  |  | — |  |  | — |  |  | 123,630 |  |  | — |  |  | 123,630 |
Change in unrealized gain (loss) on marketable securities, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | (15 | ) |  | (15 | )
Change in defined benefit pension plan liability, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,163 |  |  | 2,163 |
Change in foreign currency translation adjustments |  | — |  |  | — |  |  | — |  |  | — |  |  | 294 |  |  | 294 |
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes |  | 1,552 |  |  | 2 |  |  | 6,617 |  |  | (6,861 | ) |  | — |  |  | (242 | )
Repurchase and retirement of common stock |  | (2,007 | ) |  | (2 | ) |  | — |  |  | (60,501 | ) |  | — |  |  | (60,503 | )
Amortization of deferred stock compensation |  | — |  |  | — |  |  | 33,535 |  |  | — |  |  | — |  |  | 33,535 |
Excess tax benefit from employee stock awards |  | — |  |  | — |  |  | 3,850 |  |  | — |  |  | — |  |  | 3,850 |
Balance, March 26, 2016 |  | 62,630 |  |  | 63 |  |  | 1,203,433 |  |  | (344,345 | ) |  | 332 |  |  | 859,483 |
Net income |  | — |  |  | — |  |  | — |  |  | 261,209 |  |  | — |  |  | 261,209 |
Change in unrealized gain (loss) on marketable securities, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | 31 |  |  | 31 |
Change in defined benefit pension plan liability, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | (110 | ) |  | (110 | )
Change in foreign currency translation adjustments |  | — |  |  | — |  |  | — |  |  | — |  |  | (826 | ) |  | (826 | )
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes |  | 2,145 |  |  | 2 |  |  | 16,516 |  |  | (14,089 | ) |  | — |  |  | 2,429 |
Cumulative effect of adoption of ASU 2016-09 |  | — |  |  | — |  |  | — |  |  | 5,649 |  |  | — |  |  | 5,649 |
Repurchase and retirement of common stock |  | (480 | ) |  | (1 | ) |  | — |  |  | (15,438 | ) |  | — |  |  | (15,439 | )
Amortization of deferred stock compensation |  | — |  |  | — |  |  | 39,593 |  |  | — |  |  | — |  |  | 39,593 |
Excess tax benefit from employee stock awards |  | — |  |  | — |  |  | (327 | ) |  | — |  |  | — |  |  | (327 | )
Balance, March 25, 2017 |  | 64,295 |  |  | 64 |  |  | 1,259,215 |  |  | (107,014 | ) |  | (573 | ) |  | 1,151,692 |
Net income |  | — |  |  | — |  |  | — |  |  | 161,995 |  |  | — |  |  | 161,995 |
Change in unrealized gain (loss) on marketable securities, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,630 | ) |  | (1,630 | )
Change in defined benefit pension plan liability, net of tax |  | — |  |  | — |  |  | — |  |  | — |  |  | (11,949 | ) |  | (11,949 | )
Change in foreign currency translation adjustments |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,791 |  |  | 2,791 |
Issuance of stock under stock option plans and other, net of shares withheld for employee taxes |  | 1,054 |  |  | 1 |  |  | 4,416 |  |  | (17,806 | ) |  | — |  |  | (13,389 | )
Cumulative effect of adoption of ASU 2016-16 |  | — |  |  | — |  |  |  |  |  | (747 | ) |  | — |  |  | (747 | )
Repurchase and retirement of common stock |  | (3,389 | ) |  | (3 | ) |  | — |  |  | (175,773 | ) |  | — |  |  | (175,776 | )
Amortization of deferred stock compensation |  | — |  |  | — |  |  | 48,741 |  |  | — |  |  | — |  |  | 48,741 |
Balance, March 31, 2018 |  | 61,960 |  |  | $ | 62 |  |  | $ | 1,312,372 |  |  | $ | (139,345 | ) |  | $ | (11,361 | ) |  | $ | 1,161,728 |

The accompanying notes are an integral part of these financial statements.
38

Table of Contents
CIRRUS LOGIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Description of Business
Cirrus Logic, Inc. (“Cirrus Logic,” “We,” “Us,” “Our,” or the “Company”) is a leader in high performance, low-power integrated circuits (“ICs”) for audio and voice signal processing applications. Cirrus Logic’s products span the entire audio signal chain, from capture to playback, providing innovative products for the world’s top smartphones, tablets, digital headsets, wearables and emerging smart home applications.
We were incorporated in California in 1984, became a public company in 1989, and were reincorporated in the State of Delaware in February 1999. Our primary facility housing engineering, sales and marketing, and administration functions is located in Austin, Texas. We also have offices in various other locations in the United States, United Kingdom, Sweden, Spain, Australia and Asia, including the People’s Republic of China, Hong Kong, South Korea, Japan, Singapore, and Taiwan. Our common stock, which has been publicly traded since 1989, is listed on the NASDAQ's Global Select Market under the symbol CRUS.
Basis of Presentation
We prepare financial statements on a 52- or 53-week year that ends on the last Saturday in March. Fiscal years 2017 and 2016 were 52-week years. Fiscal year 2018 was a 53-week year.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles (U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation of financial information.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the use of management estimates. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of money market funds, commercial paper, and U.S. Government Treasury and Agency instruments with original maturities of three months or less at the date of purchase.
Inventories
We use the lower of cost or net realizable value to value our inventories, with cost being determined on a first-in, first-out basis. One of the factors we consistently evaluate in the application of this method is the extent to which products are accepted into the marketplace. By policy, we evaluate market acceptance based on known business factors and conditions by comparing forecasted customer unit demand for our products over a specific future period, or demand horizon, to quantities on hand at the end of each accounting period.
On a quarterly and annual basis, we analyze inventories on a part-by-part basis. Product life cycles and the competitive nature of the industry are factors considered in the evaluation of customer unit demand at the end of each quarterly accounting period. Inventory on-hand in excess of forecasted demand is considered to have reduced market value and, therefore, the cost basis is adjusted to the lower of cost or net realizable value. Typically, market values for excess or obsolete inventories are considered to be zero. Inventory charges recorded for excess and obsolete inventory, including scrapped inventory, were $9.7
39

Table of Contents
million and $6.7 million, in fiscal year 2018 and 2017, respectively. Inventory charges in fiscal year 2018 and 2017 related to a combination of quality issues and inventory exceeding demand.
Inventories were comprised of the following (in thousands):

| March 31, 2018 |  | March 25, 2017
Work in process | $ | 97,138 |  |  | $ | 83,332 |
Finished goods | 108,622 |  |  | 84,563 |
| $ | 205,760 |  |  | $ | 167,895 |

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

| March 31, 2018 |  | March 25, 2017
Land | $ | 26,379 |  |  | $ | 26,379 |
Buildings | 71,354 |  |  | 74,266 |
Furniture and fixtures | 22,138 |  |  | 14,231 |
Leasehold improvements | 35,569 |  |  | 4,355 |
Machinery and equipment | 143,509 |  |  | 123,054 |
Capitalized software | 25,949 |  |  | 24,839 |
Construction in progress | 6,086 |  |  | 22,972 |
Total property, plant and equipment | 330,984 |  |  | 290,096 |
Less: Accumulated depreciation and amortization | (139,830 | ) |  | (121,957 | )
Property, plant and equipment, net | $ | 191,154 |  |  | $ | 168,139 |

Depreciation and amortization expense on property, plant, and equipment for fiscal years 2018, 2017, and 2016 was $27.7 million, $26.1 million, and $22.3 million, respectively.
Goodwill and Intangibles, net
Intangible assets include purchased technology licenses and patents that are reported at cost and are amortized on a straight-line basis over their useful lives, generally ranging from 1 to 10 years. Acquired intangibles include existing technology, core technology or patents, license agreements, in-process research & development, trademarks, tradenames, customer relationships, non-compete agreements, and backlog. These assets are amortized on a straight-line basis over lives ranging from one to fifteen years.
Goodwill is recorded at the time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. The Company tests goodwill and indefinite lived intangibles for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management’s assessment of qualitative factors to determine whether it is more likely than not that goodwill and other intangible assets are impaired. If management concludes from its assessment of qualitative factors that it is more likely than not that impairment exists, then a quantitative impairment test will be performed involving management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in these evaluations. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could
40

Table of Contents
incur additional impairment charges in a future period. The Company has recorded no goodwill impairments in fiscal years 2018, 2017, and 2016. There were no material intangible asset impairments in fiscal years 2018, 2017, or 2016.
Long-Lived Assets
We test for impairment losses on long-lived assets and definite-lived intangibles used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. We measure any impairment loss by comparing the fair value of the asset to its carrying amount. We estimate fair value based on discounted future cash flows, quoted market prices, or independent appraisals.
Foreign Currency Translation
Some of the Company's subsidiaries utilize the local currency as the functional currency. The Company’s main entities, including the entities that generate the majority of sales and employ the majority of employees, are US dollar functional.
Defined Benefit Pension Plan
Defined benefit pension plans are accounted for based upon the provisions of ASC Topic 715, “Compensation — Retirement Benefits.”
The funded status of the plan is recognized in the Consolidated Balance Sheet. Prior to the buy-in transaction discussed in Note 8, any re-measurement of plan assets and benefit obligations deemed necessary in an interim period, would be reflected in the Consolidated Balance Sheet in the subsequent interim period to reflect the overfunded or underfunded status of the plan.
The Company engages external actuaries on at least an annual basis to provide a valuation of the plan’s assets and projected benefit obligation and is used to record the net periodic pension cost. On a quarterly basis, the Company evaluated current information available to determine whether the plan’s assets and projected benefit obligation should be re-measured.
Concentration of Credit Risk
Financial instruments that potentially subject us to material concentrations of credit risk consist primarily of cash equivalents, marketable securities, long-term marketable securities, and trade accounts receivable. We are exposed to credit risk to the extent of the amounts recorded on the balance sheet. By policy, our cash equivalents, marketable securities, and long-term marketable securities are subject to certain nationally recognized credit standards, issuer concentrations, sovereign risk, and marketability or liquidity considerations.
In evaluating our trade receivables, we perform credit evaluations of our major customers’ financial condition and monitor closely all of our receivables to limit our financial exposure by limiting the length of time and amount of credit extended. In certain situations, we may require payment in advance or utilize letters of credit to reduce credit risk. By policy, we establish a reserve for trade accounts receivable based on the type of business in which a customer is engaged, the length of time a trade account receivable is outstanding, and other knowledge that we may possess relating to the probability that a trade receivable is at risk for non-payment.
We had three contract manufacturers, Pegatron, Jabil Circuits, and Hongfujin Precision who represented 24 percent, 18 percent, and 11 percent, respectively of our consolidated gross trade accounts receivable as of the end of fiscal year 2018. Hongfujin Precision, Protek and Jabil Circuits represented 20 percent, 15 percent, and 13 percent, respectively of our consolidated gross trade accounts receivable as of the end of fiscal year 2017. No other distributor or customer had receivable balances that represented more than 10 percent of consolidated gross trade accounts receivable as of the end of fiscal year 2018 and 2017.
Since the components we produce are largely proprietary and generally not available from second sources, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, from a distributor, or through a third-party manufacturer contracted to produce their end product. For fiscal years 2018, 2017, and 2016, our ten largest end customers represented approximately 92 percent, 92 percent, and 89 percent, of our sales, respectively. For fiscal years 2018, 2017, and 2016, we had one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 81 percent, 79 percent, and 66 percent, of the Company’s total sales, respectively. Samsung Electronics represented 15 percent of the Company’s total sales in fiscal year 2016. No other customer or distributor represented more than 10 percent of net sales in fiscal years 2018, 2017, or 2016.
Revenue Recognition
We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Prior to the fourth quarter of fiscal year 2016, we had a number of arrangements with distributors whereby we deferred revenue at the time of shipment of our products to those distributors. As part of those arrangements, when a distributor resold those products to an
41

Table of Contents
end customer, the Company would credit the distributor the difference between (1) the original distributor price and the distributor’s agreed upon margin and (2) the final sales price to the end customer (known as the “Ship and Debit Arrangement”). For those transactions, revenue was deferred until the product was resold by the distributor and we determined that the final sales price to the distributor was fixed or determinable. For certain of our smaller distributors, we did not have similar Ship and Debit Arrangements and the distributors were billed at a fixed upfront price. For those transactions, revenue was recognized upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company determined that the revenue recognition criteria were met.
In light of the fact that the distributor program had been declining as a portion of the overall business for several years, in fiscal year 2016 the Company performed a review of all distributor arrangements in an effort to streamline our distribution program and reduce overhead costs. Based upon this review, the Company terminated its Ship and Debit Arrangements with Distributors during the fourth quarter of fiscal year 2016. Subsequent to the termination of the Ship and Debit Arrangements, the Company began recognizing revenue for all distributors upon delivery to the distributor based upon the distributor’s individual shipping terms, less an allowance for estimated returns, as the Company’s final sales price to the distributor was fixed and determinable and the Company determined that all four criteria for revenue recognition were met.
Although the Company terminated its Ship and Debit Arrangements with all distributors along with certain ancillary agreements related to the Ship and Debit Arrangements, the Company continues to grant varying levels of stock rotation and price protection rights based on individual distributor agreements. To the extent these rights are implicated in any transaction with a distributor, we continue to evaluate their effect on when the revenue recognition criteria have been met.
Warranty Expense
We warrant our products and maintain a provision for warranty repair or replacement of shipped products. The accrual represents management’s estimate of probable returns. Our estimate is based on an analysis of our overall sales volume and historical claims experience. The estimate is re-evaluated periodically for accuracy.
Shipping Costs
Our shipping and handling costs are included in cost of sales for all periods presented in the Consolidated Statements of Income.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $1.4 million, $1.7 million, and $1.6 million, in fiscal years 2018, 2017, and 2016, respectively.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards and is recognized as an expense, on a ratable basis, over the vesting period, which is generally between 0 and 4 years. Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of stock options and performance awards (also called market stock units). The Company calculates the grant-date fair value for stock options and market stock units using the Black-Scholes valuation model and the Monte Carlo simulation, respectively. The use of valuation models requires the Company to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates. The grant-date fair value of restricted stock units is the market value at grant date multiplied by the number of units.
Income Taxes
We are required to calculate income taxes in each of the jurisdictions in which we operate. This process involves calculating the actual current tax liability as well as assessing temporary differences in the recognition of income or loss for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company evaluates the ability to realize its deferred tax assets based on all the facts and circumstances, including projections of future taxable income and expiration dates of carryover tax attributes.
The calculation of our tax liabilities involves assessing uncertainties with respect to the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. We recognize liabilities for uncertain tax positions based on the required two-step process. The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to,
42

Table of Contents
changes in facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. A change in the recognition step or measurement step would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.
Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, we cannot assure that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material effect on our income tax provision and net income in the period or periods for which that determination is made. We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been made for all periods.
Net Income Per Share
Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. These potentially dilutive items consist primarily of outstanding stock options and restricted stock grants.
The following table details the calculation of basic and diluted earnings per share for fiscal years 2018, 2017, and 2016, (in thousands, except per share amounts):

| Fiscal Years Ended
| March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Numerator: |  |  |  |  |
Net income | 161,995 |  |  | $ | 261,209 |  |  | $ | 123,630 |
Denominator: |  |  |  |  |
Weighted average shares outstanding | 63,407 |  |  | 63,329 |  |  | 63,197 |
Effect of dilutive securities | 2,544 |  |  | 3,232 |  |  | 2,796 |
Weighted average diluted shares | 65,951 |  |  | 66,561 |  |  | 65,993 |
Basic earnings per share | $ | 2.55 |  |  | $ | 4.12 |  |  | $ | 1.96 |
Diluted earnings per share | $ | 2.46 |  |  | $ | 3.92 |  |  | $ | 1.87 |

The weighted outstanding shares excluded from our diluted calculation for the years ended March 31, 2018, March 25, 2017, and March 26, 2016 were 326 thousand, 389 thousand, and 468 thousand, respectively, as the exercise price of certain outstanding stock options exceeded the average market price during the period.
Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments, unrealized gains and losses on investments classified as available-for-sale and actuarial gains and losses on our defined benefit pension plan assets. See Note 13 — Accumulated Other Comprehensive Loss for additional discussion.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The purpose of this ASU is to converge revenue recognition requirements per GAAP and International Financial Reporting Standards (IFRS). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date after public comment supported a proposal to delay the effective date of this ASU to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company has completed the process of reviewing our customers’ contracts in respect of performance obligation identification and satisfaction, pricing, warranties, and return rights, among other considerations. Through this process, the Company currently expects an immaterial balance sheet impact to its first quarter fiscal year 2019 financials, upon adoption of this ASU. The standard may be adopted by full retrospective method, which applies retrospectively to each prior period presented, or by modified retrospective method
43

Table of Contents
with the cumulative effect adjustment recognized in beginning retained earnings as of the date of adoption. We anticipate using the modified retrospective adoption method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key leasing arrangement details. Lessees would recognize operating leases on the balance sheet under this ASU — with the future lease payments recognized as a liability, measured at present value, and the right-of-use asset recognized for the lease term. A single lease cost would be recognized over the lease term. For terms less than twelve months, a lessee would be permitted to make an accounting policy election to recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The modified retrospective approach is the only allowed adoption method. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon adoption, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption of this ASU.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires credit losses on available-for-sale debt securities to be presented as an allowance rather than a write-down. Unlike current U.S. GAAP, the credit losses could be reversed with changes in estimates, and recognized in current year earnings. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods. The Company is currently evaluating the impact of this ASU with no expected material impact.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU relates to income tax consequences of non-inventory intercompany asset transfers. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, as of the beginning of an annual reporting period. The guidance requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to beginning retained earnings in the period of adoption. The Company early adopted this ASU in the first quarter of fiscal year 2018 with a $0.7 million impact to beginning retained earnings.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The update states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business, and should be treated as an asset acquisition instead. This ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted under specific circumstances, including in an interim period, with prospective application on or after the effective date. The Company adopted this ASU and applied the related guidance to an asset acquisition in the first quarter of fiscal year 2018.
In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates step two of the goodwill impairment test. An impairment charge is to be recognized for the amount by which the current value exceeds the fair value. This ASU is effective for annual periods beginning after December 15, 2019, including interim periods. Early adoption is permitted, for interim or annual goodwill impairment tests performed after January 1, 2017, and should be applied prospectively. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. The Company is currently evaluating the impact of this ASU with no expected material impact.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU applies to any company that changes the terms or conditions of a share-based award, considered a modification. Modification accounting would be applied unless certain conditions were met related to the fair value of the award, the vesting conditions and the classification of the modified award. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. The standard should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the financial statement impact of this ASU with no expected material impact.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows for the classification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) from accumulated other comprehensive income to retained earnings. This ASU is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The standard should be applied in the period of adoption or retrospectively to each period (or periods) in which the
44

Table of Contents
effect of the change in tax rate is recognized. The Company is currently evaluating the potential financial statement impact of this ASU.
3. Marketable Securities
The Company’s investments have been classified as available-for-sale securities in accordance with U.S. GAAP. Marketable securities are categorized on the Consolidated Balance Sheet as “Marketable securities” within the short-term or long-term classification, as appropriate.
The following table is a summary of available-for-sale securities (in thousands):

As of March 31, 2018 | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value (Net Carrying Amount)
Corporate debt securities | $ | 185,636 |  |  | $ | 4 |  |  | $ | (2,318 | ) |  | $ | 183,322 |
Non-US government securities | 14,730 |  |  | — |  |  | (111 | ) |  | 14,619 |
Certificates of deposit | 500 |  |  | — |  |  | — |  |  | 500 |
Agency discount notes | 459 |  |  | — |  |  | (4 | ) |  | 455 |
Total securities | $ | 201,325 |  |  | $ | 4 |  |  | $ | (2,433 | ) |  | $ | 198,896 |

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

As of March 25, 2017 | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value (Net Carrying Amount)
Corporate debt securities | $ | 33,350 |  |  | $ | — |  |  | $ | (20 | ) |  | $ | 33,330 |
Commercial paper | 66,518 |  |  | — |  |  | (35 | ) |  | 66,483 |
Total securities | $ | 99,868 |  |  | $ | — |  |  | $ | (55 | ) |  | $ | 99,813 |

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

| March 31, 2018 |  | March 25, 2017
| Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
Within 1 year | $ | 26,560 |  |  | $ | 26,397 |  |  | $ | 99,868 |  |  | $ | 99,813 |
After 1 year | 174,765 |  |  | 172,499 |  |  | — |  |  | — |
Total | $ | 201,325 |  |  | $ | 198,896 |  |  | $ | 99,868 |  |  | $ | 99,813 |

45

Table of Contents
4. Fair Value of Financial Instruments
The Company has determined that the only assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s cash equivalents, investment portfolio, pension plan assets/liabilities and contingent consideration. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

▪ | Level 1 — Quoted prices in active markets for identical assets or liabilities.

▪ | Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

▪ | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and investment portfolio assets consist of corporate debt securities, money market funds, non-U.S government securities, securities of U.S. government-sponsored enterprises, commercial paper and certificates of deposit and are reflected on our Consolidated Balance Sheet under the headings cash and cash equivalents, marketable securities, and long-term marketable securities. The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party pricing providers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.
In connection with one of the Company’s second quarter fiscal year 2016 acquisitions, the Company reported contingent consideration based upon achievement of certain milestones. This liability was classified as Level 3 and was valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow included discount rate estimates and cash flow amounts. The final payment related to the contingent consideration was made in the fourth quarter of fiscal year 2018 and no further liability remains at March 31, 2018.
The Company’s long-term revolving facility, described in Note 7, bears interest at a base rate plus applicable margin or LIBOR plus applicable margin. As of March 31, 2018, there are no amounts drawn under the facility and the fair value is zero.
As of March 31, 2018 and March 25, 2017, the Company classified all investment portfolio assets and pension plan assets (discussed in Note 8) as Level 1 or Level 2 assets and liabilities. The only Level 3 liability was the contingent consideration described above and below. The Company has no Level 3 assets. There were no transfers between Level 1, Level 2, or Level 3 measurements for the years ending March 31, 2018 and March 25, 2017.
The following summarizes the fair value of our financial instruments, exclusive of pension plan assets detailed in Note 8, at March 31, 2018 (in thousands):

| Quoted Prices in Active Markets for Identical Assets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |
Money market funds | $ | 211,891 |  |  | $ | — |  |  | $ | — |  |  | $ | 211,891 |
Available-for-sale securities |  |  |  |  |  |  |
Corporate debt securities | $ | — |  |  | $ | 183,322 |  |  | $ | — |  |  | $ | 183,322 |
Non-US government securities | — |  |  | 14,619 |  |  | — |  |  | 14,619 |
Certificates of deposit | — |  |  | 500 |  |  | — |  |  | 500 |
Agency discount notes | — |  |  | 455 |  |  | — |  |  | 455 |
| $ | — |  |  | $ | 198,896 |  |  | $ | — |  |  | $ | 198,896 |

46

Table of Contents
The following summarizes the fair value of our financial instruments at March 25, 2017 (in thousands):

| Quoted Prices in Active Markets for Identical Assets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |
Money market funds | $ | 313,982 |  |  | $ | — |  |  | $ | — |  |  | $ | 313,982 |
Available-for-sale securities |  |  |  |  |  |  |
Corporate debt securities | $ | — |  |  | $ | 33,330 |  |  | $ | — |  |  | $ | 33,330 |
Commercial paper | — |  |  | 66,483 |  |  | — |  |  | 66,483 |
| $ | — |  |  | $ | 99,813 |  |  | $ | — |  |  | $ | 99,813 |
Liabilities: |  |  |  |  |  |  |
Other accrued liabilities |  |  |  |  |  |  |
Contingent consideration — short-term | $ | — |  |  | $ | — |  |  | $ | 4,695 |  |  | $ | 4,695 |

Contingent consideration
The following summarizes the fair value of the contingent consideration at March 31, 2018:

| Maximum Value if Milestones Achieved (in thousands) |  | Estimated Discount Rate (%) |  | Fair Value (in thousands)
Tranche A — 18 month earn out period | 5,000 |  |  | 7.0 |  | — |
Tranche B — 30 month earn out period | 5,000 |  |  | 7.7 |  | — |

|  | Fiscal Year Ended
|  | March 31, 2018 |  | March 25, 2017
|  | (in thousands)
Beginning balance |  | $ | 4,695 |  |  | $ | 9,068 |
Adjustment to estimates (research and development expense) |  | (4,328 | ) |  | (3,579 | )
Payout of Tranche A contingent consideration |  | — |  |  | (1,213 | )
Payout of Tranche B contingent consideration |  | (392 | ) |  | — |
Fair value charge recognized in earnings (research and development expense) |  | 25 |  |  | 419 |
Ending balance |  | $ | — |  |  | $ | 4,695 |

The valuation of contingent consideration was based on a weighted-average discounted cash flows model. The fair value was reviewed and estimated on a quarterly basis based on the probability of achieving defined milestones and current interest rates. Changes in any of the unobservable inputs used in the fair value measurement of contingent consideration resulted in a lower or higher fair value. A change in projected outcomes if milestones were achieved was accompanied by a directionally similar change in fair value. A change in discount rate was accompanied by a directionally opposite change in fair value. Changes to the fair value due to changes in assumptions were reported in research and development expense in the Consolidated Statements of Income. In the second quarter of fiscal year 2017, changes in the probability of achieving certain milestones associated with Tranche A of the earn-out were determined following a review of product shipment forecasts within the earn-out period. The revised estimates reduced the fair value of the liability prior to the pay out in the fourth quarter of fiscal year 2017. In the first quarter of the current fiscal year, changes in the probability of achieving certain milestones associated with Tranche B of the earn-out were determined following a review of product shipment forecasts within the earn-out period. The revised estimates reduced the fair value of the liability prior to the pay out in the fourth quarter of fiscal year 2018.
5. Accounts Receivable, net
The following are the components of accounts receivable, net (in thousands):
47

Table of Contents

|  | March 31, 2018 |  | March 25, 2017
Gross accounts receivable |  | $ | 101,004 |  |  | $ | 120,408 |
Allowance for doubtful accounts |  | (203 | ) |  | (434 | )
Accounts receivable, net |  | $ | 100,801 |  |  | $ | 119,974 |

The following table summarizes the changes in the allowance for doubtful accounts (in thousands):

Balance, March 28, 2015 | $ | (356 | )
Bad debt expense, net of recoveries | (119 | )
Balance, March 26, 2016 | (475 | )
Adjustment to bad debt | 41 |
Balance, March 25, 2017 | (434 | )
Adjustment to bad debt | 231 |
Balance, March 31, 2018 | $ | (203 | )

Recoveries on bad debt were immaterial for the three years presented above.
6. Intangibles, net and Goodwill
The intangibles, net balance included on the Consolidated Balance Sheet was $111.5 million and $135.2 million at March 31, 2018 and March 25, 2017, respectively.
The following information details the gross carrying amount and accumulated amortization of our intangible assets (in thousands):

|  | March 31, 2018 |  | March 25, 2017
Intangible Category / Weighted-Average Amortization period (in years) |  | Gross Amount |  | Accumulated Amortization |  | Gross Amount |  | Accumulated Amortization
Core technology (a) |  | $ | 1,390 |  |  | $ | (1,390 | ) |  | $ | 1,390 |  |  | $ | (1,390 | )
License agreement (a) |  | 440 |  |  | (440 | ) |  | 440 |  |  | (440 | )
Existing technology (6.1) |  | 117,976 |  |  | (75,048 | ) |  | 117,975 |  |  | (53,960 | )
In-process research & development (“IPR&D”) (5.8) |  | 97,972 |  |  | (49,556 | ) |  | 72,750 |  |  | (24,245 | )
Trademarks and tradename (10.0) |  | 3,037 |  |  | (2,333 | ) |  | 3,037 |  |  | (2,208 | )
Customer relationships (10.0) |  | 15,381 |  |  | (5,732 | ) |  | 15,381 |  |  | (4,191 | )
Backlog (a) |  | 220 |  |  | (220 | ) |  | 220 |  |  | (220 | )
Non-compete agreements (a) |  | 470 |  |  | (470 | ) |  | 470 |  |  | (470 | )
Technology licenses (3.0) |  | 28,063 |  |  | (18,213 | ) |  | 24,540 |  |  | (13,891 | )
Total |  | $ | 264,949 |  |  | $ | (153,402 | ) |  | $ | 236,203 |  |  | $ | (101,015 | )

(a) | Intangible assets are fully amortized.

Amortization expense for intangibles in fiscal years 2018, 2017, and 2016 was $53.7 million, $37.4 million, and $35.7 million, respectively. The following table details the estimated aggregate amortization expense for all intangibles owned as of March 31, 2018, for each of the five succeeding fiscal years and in the aggregate thereafter (in thousands):
48

Table of Contents

For the year ended March 30, 2019 | $ | 46,867 |
For the year ended March 28, 2020 | $ | 27,540 |
For the year ended March 27, 2021 | $ | 16,094 |
For the year ended March 26, 2022 | $ | 12,145 |
For the year ended March 25, 2023 | $ | 6,663 |
Thereafter | $ | 2,238 |

The goodwill balance included on the Consolidated Balance Sheet is $288.7 million and $286.8 million at March 31, 2018 and March 25, 2017, respectively.
7. Revolving Credit Facility
On July 12, 2016, Cirrus Logic entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto, for the purpose of refinancing an existing credit facility and providing ongoing working capital. The Amended Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Amended Facility”). The Amended Facility matures on July 12, 2021. The Amended Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The Amended Facility is secured by substantially all of the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.
Borrowings under the Amended Facility may, at Cirrus Logic’s election, bear interest at either (a) a base rate plus the applicable margin (“Base Rate Loans”) or (b) a LIBOR Rate plus the applicable margin (“LIBOR Rate Loans”). The applicable margin ranges from 0% to 0.50% per annum for Base Rate Loans and 1.25% to 2.00% per annum for LIBOR Rate Loans based on the Leverage Ratio (as defined below). A commitment fee accrues at a rate per annum ranging from 0.20% to 0.30% (based on the Leverage Ratio) on the average daily unused portion of the commitment of the lenders. The Amended Credit Agreement contains certain financial covenants providing that (a) the ratio of consolidated funded indebtedness to consolidated EBITDA for the prior four consecutive quarters must not be greater than 3.00 to 1.00 (the “Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive fiscal quarters to consolidated fixed charges (including amounts paid in cash for consolidated interest expenses, capital expenditures, scheduled principal payments of indebtedness, and income taxes) for the prior four consecutive fiscal quarters must not be less than 1.25 to 1.00 as of the end of each fiscal quarter. The Amended Credit Agreement also contains negative covenants limiting the Company’s or any Subsidiary’s ability to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments.
As of March 31, 2018, the Company had no amounts outstanding under the Amended Facility and was in compliance with all covenants under the Amended Credit Facility.
8. Postretirement Benefit Plans
Defined Benefit Pension Plan
As a result of our acquisition of Wolfson in fiscal year 2015, the Company now fully funds a defined benefit pension scheme (“the Scheme”), for some of the employees in the United Kingdom. The Scheme was closed to new participants as of July 2, 2002. As of April 30, 2011, the participants in the Scheme no longer accrue benefits and therefore the Company will not be required to pay contributions in respect of future accrual.
The Scheme is a trustee-administered fund that is legally separate from the Company, which holds the pension plan assets to meet long-term pension liabilities. The pension fund trustees were comprised of one employee and one employer representative and an independent chairman until November 1, 2017, when an independent corporate trustee was appointed sole trustee. The trustees are required by law to act in the best interests of the Scheme’s beneficiaries and the trustees are responsible, in consultation with the Company, for setting certain policies (including the investment policies and strategies) of the fund.
The Company initiated an Enhanced Transfer Value (ETV) offer to 49 Scheme participants in fiscal year 2017. The ETV offer expired on December 23, 2016, and 9 participants accepted. As a result, the Company paid the required ETV contribution of $0.5 million and recorded the associated pension expense of $0.4 million.
49

Table of Contents
During fiscal year 2018, the Company authorized the termination of the Scheme under which 60 participants had accrued benefits. On March 16, 2018, the Scheme completed a buy-in transaction whereby the assets of the Scheme, together with a final contribution from the Company of $11.0 million, were invested in a bulk purchase annuity contract that fully insures the benefits payable to the members of the Scheme. As the buy-in transaction has resulted in the defined benefit obligations being fully insured, the Company has no further material contributions to make.
The bulk purchase annuity contract is structured to enable the Scheme to move to full buy-out (following which the insurance company would become directly responsible for the pension payments) and the intention is to proceed on this basis. When the buy-out is complete, a settlement loss will be recognized which will include any unamortized loss currently recorded within Other Comprehensive Income.
The following tables set forth the benefit obligation, the fair value of plan assets, and the funded status of the Scheme (in thousands):

|  | March 31, 2018 |  | March 25, 2017
Change in benefit obligation: |  |  |  |
Beginning balance |  | $ | 21,123 |  |  | $ | 23,968 |
Interest cost |  | 651 |  |  | 759 |
Plan settlements |  | — |  |  | (4,517 | )
Benefits paid and expenses |  | (312 | ) |  | (264 | )
Change in foreign currency exchange rate |  | 2,869 |  |  | (2,763 | )
Actuarial (gain) / loss |  | 16,270 |  |  | 3,940 |
Total benefit obligation ending balance |  | 40,601 |  |  | 21,123 |
Change in plan assets: |  |  |  |
Beginning balance |  | 22,143 |  |  | 25,688 |
Actual return on plan assets |  | 2,700 |  |  | 3,933 |
Employer contributions |  | 12,877 |  |  | 990 |
Plan settlements |  | — |  |  | (5,243 | )
Change in foreign currency exchange rate |  | 3,193 |  |  | (2,961 | )
Benefits paid and expenses |  | (312 | ) |  | (264 | )
Fair value of plan assets ending balance |  | 40,601 |  |  | 22,143 |
Funded status of Scheme at end of year |  | $ | — |  |  | $ | 1,020 |

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

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Expenses |  | $ | — |  |  | $ | — |  |  | $ | 15 |
Interest cost |  | 651 |  |  | 759 |  |  | 821 |
Expected return on plan assets |  | (1,159 | ) |  | (1,126 | ) |  | (1,212 | )
Settlement (gain) loss |  | — |  |  | 1,063 |  |  | — |
Amortization of actuarial (gain) loss |  | — |  |  | (89 | ) |  | 49 |
|  | $ | (508 | ) |  | $ | 607 |  |  | $ | (327 | )

The following weighted-average assumptions were used to determine net periodic benefit costs for the year ended March 31, 2018, March 25, 2017 and March 26, 2016:
50

Table of Contents

|  | 2018 |  | 2017 |  | 2016
Discount rate |  | 2.70 | % |  | 3.60 | % |  | 3.20 | %
Expected long-term return on plan assets |  | 4.23 | % |  | 4.93 | % |  | 4.65 | %

We report and measure the plan assets of our defined benefit pension at fair value. The Company’s pension plan assets consist of insurance contracts, cash, equity securities, corporate debt securities, and diversified growth funds. The fair value of the pension plan assets as of March 31, 2018 is based on the price of the bulk purchase annuity contract. In previous years, the fair value of the pension plan assets was determined through an external actuarial valuation, following a similar process of obtaining inputs as described above.
The table below sets forth the fair value of our plan assets as of March 31, 2018, using the same three-level hierarchy of fair-value inputs described in Note 4 (in thousands):

|  | Quoted Prices in Active Markets for Identical Assets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3 |  | Total
Plan Assets: |  |  |  |  |  |  |  |
Insurance contracts |  | $ | — |  |  | $ | 40,601 |  |  | $ | — |  |  | $ | 40,601 |

The table below sets forth the fair value of our plan assets as of March 25, 2017, (in thousands):

|  | Quoted Prices in Active Markets for Identical Assets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3 |  | Total
Plan Assets: |  |  |  |  |  |  |  |
Cash |  | $ | 160 |  |  | $ | — |  |  | $ | — |  |  | $ | 160 |
Pension funds |  | — |  |  | 21,983 |  |  | — |  |  | 21,983 |
|  | $ | 160 |  |  | $ | 21,983 |  |  | $ | — |  |  | $ | 22,143 |

Amounts recognized in accumulated other comprehensive loss for the period that have not yet been recognized as components of net periodic benefit cost consist of (in thousands):

| Fiscal Year
| 2018
Net actuarial loss | $ | (14,729 | )
Accumulated other comprehensive loss, before tax | $ | (14,729 | )

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

|  | Actual Allocation
|  | 2018 |  | 2017
Equity securities |  | — | % |  | 33 | %
Corporate bonds |  | — | % |  | 48 | %
Diversified growth |  | — | % |  | 19 | %
Insurance contracts |  | 100 | % |  | — | %
Total |  | 100 | % |  | 100 | %

51

Table of Contents
See the related fair value of the assets above.
The Scheme previously exposed the Company to actuarial risks such as investment (market) risk, interest rate risk, mortality risk, longevity risk and currency risk. A decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to the Scheme liabilities and may give rise to increased benefit expenses in future periods. Caps on inflationary increases are currently in place to protect the Scheme against extreme inflation, however. Following the purchase of the bulk purchase annuity contract, the Scheme is fully insured and not exposed to these risks.
Defined Contribution Plans
We have Defined Contribution Plans (“the Plans”) covering all of our qualifying employees. Under the Plans, employees may elect to contribute any percentage of their annual compensation up to the annual regulatory limits. The Company made matching employee contributions of $6.7 million, $5.5 million, and $4.3 million during fiscal years 2018, 2017, and 2016, respectively.
9. Equity Compensation
The Company is currently granting equity awards from the 2006 Stock Incentive Plan (the “Plan”), which was approved by stockholders in July 2006. The Plan provides for granting of stock options, restricted stock awards, performance awards, phantom stock awards, and bonus stock awards, or any combination of the foregoing. To date, the Company has granted stock options, restricted stock awards, phantom stock awards (also called restricted stock units), and performance awards (also called market stock units) under the Plan. Each stock option granted reduces the total shares available for grant under the Plan by one share. Each full value award granted (including restricted stock awards, restricted stock units and market stock units) reduces the total shares available for grant under the Plan by 1.5 shares. Stock options generally vest between zero and four years, and are exercisable for a period of ten years from the date of grant. Restricted stock units are generally subject to vesting from zero to three years, depending upon the terms of the grant. Market stock units are subject to a vesting schedule of three years.
The following table summarizes the activity in total shares available for grant (in thousands):

| Shares
| Available for
| Grant
Balance, March 28, 2015 | 3,896 |
Shares added | 4,900 |
Granted | (2,676 | )
Forfeited | 167 |
Balance, March 26, 2016 | 6,287 |
Shares added | — |
Granted | (1,719 | )
Forfeited | 124 |
Balance, March 25, 2017 | 4,692 |
Shares added | — |
Granted | (1,755 | )
Forfeited | 128 |
Balance, March 31, 2018 | 3,065 |

As of March 31, 2018, approximately 11.9 million shares of common stock were reserved for issuance under the Plan.
Stock Compensation Expense
The following table summarizes the effects of stock-based compensation on cost of goods sold, research and development, sales, general and administrative, pre-tax income, and net income after taxes for shares granted under the Plan (in thousands, except per share amounts):
52

Table of Contents

|  | Fiscal Year
|  | 2018 |  | 2017 |  | 2016
Cost of sales |  | $ | 1,474 |  |  | $ | 1,071 |  |  | $ | 1,145 |
Research and development |  | 26,137 |  |  | 21,186 |  |  | 17,173 |
Sales, general and administrative |  | 21,130 |  |  | 17,336 |  |  | 15,188 |
Effect on pre-tax income |  | 48,741 |  |  | 39,593 |  |  | 33,506 |
Income Tax Benefit |  | (5,953 | ) |  | (12,482 | ) |  | (10,306 | )
Total share-based compensation expense (net of taxes) |  | 42,788 |  |  | 27,111 |  |  | 23,200 |
Share-based compensation effects on basic earnings per share |  | $ | 0.67 |  |  | $ | 0.43 |  |  | $ | 0.37 |
Share-based compensation effects on diluted earnings per share |  | 0.65 |  |  | 0.41 |  |  | 0.35 |

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

|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Expected stock price volatility |  | 37.36 | % |  | 47.66 | % |  | 40.13 - 45.07%
Risk-free interest rate |  | 1.67 | % |  | 1.13 | % |  | 0.94 - 1.05%
Expected term (in years) |  | 3.03 |  |  | 2.79 |  |  | 2.72 - 2.97

The Black-Scholes valuation calculation requires us to estimate key assumptions such as stock price volatility, expected term, risk-free interest rate and dividend yield. The expected stock price volatility is based upon implied volatility from traded options on our stock in the marketplace. The expected term of options granted is derived from an analysis of historical exercises and remaining contractual life of stock options, and represents the period of time that options granted are expected to be outstanding after becoming vested. The risk-free interest rate reflects the yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption. Finally, we have never paid cash dividends, do not currently intend to pay cash dividends, and thus have assumed a zero percent dividend yield.
Using the Black-Scholes option valuation model, the weighted average estimated fair values of employee stock options granted in fiscal years 2018, 2017, and 2016, were $19.87, $22.84, and $12.58, respectively.
During fiscal years 2018, 2017, and 2016, we received a net $4.4 million, $16.4 million, $6.5 million, respectively, from the exercise of 0.2 million, 1.4 million, and 0.8 million, respectively, stock options granted under the Company’s Stock Plan.
The total intrinsic value of stock options exercised during fiscal year 2018, 2017, and 2016, was $9.8 million, $52.2 million, and $19.7 million, respectively. Intrinsic value represents the difference between the market value of the Company’s common stock at the time of exercise and the strike price of the stock option.
Additional information with respect to stock option activity is as follows (in thousands, except per share amounts):
53

Table of Contents

|  | Outstanding Options
|  | Number |  | Weighted Average Exercise Price
Balance, March 28, 2015 |  | 3,333 |  |  | $ | 14.31 |
Options granted |  | 387 |  |  | 31.39 |
Options exercised |  | (773 | ) |  | 8.46 |
Options forfeited |  | — |  |  | — |
Options expired |  | (22 | ) |  | 35.41 |
Balance, March 26, 2016 |  | 2,925 |  |  | $ | 17.96 |
Options granted |  | 215 |  |  | 54.65 |
Options exercised |  | (1,382 | ) |  | 11.87 |
Options forfeited |  | — |  |  | — |
Options expired |  | — |  |  | — |
Balance, March 25, 2017 |  | 1,758 |  |  | $ | 27.25 |
Options granted |  | 216 |  |  | 55.72 |
Options exercised |  | (234 | ) |  | 18.84 |
Options forfeited |  | — |  |  | — |
Options expired |  | — |  |  | — |
Balance, March 31, 2018 |  | 1,740 |  |  | $ | 31.91 |

Additional information with regards to outstanding options that are vesting, expected to vest, or exercisable as of March 31, 2018 is as follows (in thousands, except years and per share amounts):

|  | Number of Options |  | Weighted Average Exercise price |  | Weighted Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value
Vested and expected to vest |  | 1,738 |  |  | $ | 31.89 |  |  | 6.11 |  | $ | 21,446 |
Exercisable |  | 1,182 |  |  | $ | 25.20 |  |  | 4.96 |  | $ | 19,243 |

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

|  | Options Outstanding |  | Options Exercisable
|  |  |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise |  | Number |  | Weighted Average
Range of Exercise Prices |  | Number |  | (years) |  | Price |  | Exercisable |  | Exercise Price
$2.90 - $16.25 |  | 403 |  |  | 2.58 |  | $ | 13.09 |  |  | 403 |  |  | $ | 13.09 |
$16.28 - $23.34 |  | 354 |  |  | 5.87 |  | 21.78 |  |  | 320 |  |  | 21.91 |
$23.80 - $23.80 |  | 3 |  |  | 5.43 |  | 23.80 |  |  | 3 |  |  | 23.80 |
$31.25 - $31.25 |  | 321 |  |  | 7.60 |  | 31.25 |  |  | 170 |  |  | 31.25 |
$32.29 - $54.65 |  | 443 |  |  | 6.74 |  | 46.06 |  |  | 286 |  |  | 42.37 |
$55.72 - $55.72 |  | 216 |  |  | 9.59 |  | 55.72 |  |  | — |  |  | — |
|  | 1,740 |  |  | 6.11 |  | $ | 31.91 |  |  | 1,182 |  |  | $ | 25.20 |

As of March 31, 2018 and March 25, 2017, the number of options exercisable was 1.2 million and 1.1 million, respectively.
54

Table of Contents
Restricted Stock Units
Commencing in fiscal year 2011, the Company began granting restricted stock units (“RSU’s”) to select employees. These awards are valued as of the grant date and amortized over the requisite vesting period. Generally, RSU’s vest 100 percent on the first to third anniversary of the grant date depending on the vesting specifications. A summary of the activity for RSU’s in fiscal year 2018, 2017, and 2016 is presented below (in thousands, except year and per share amounts):

|  | Shares |  | Weighted Average Fair Value
March 28, 2015 |  | 2,821 |  |  | $ | 25.57 |
Granted |  | 1,437 |  |  | 31.51 |
Vested |  | (992 | ) |  | 32.48 |
Forfeited |  | (103 | ) |  | 24.75 |
March 26, 2016 |  | 3,163 |  |  | 26.14 |
Granted |  | 947 |  |  | 52.40 |
Vested |  | (1,032 | ) |  | 24.67 |
Forfeited |  | (83 | ) |  | 28.40 |
March 25, 2017 |  | 2,995 |  |  | 34.91 |
Granted |  | 936 |  |  | 55.79 |
Vested |  | (1,077 | ) |  | 24.79 |
Forfeited |  | (85 | ) |  | 41.09 |
March 31, 2018 |  | 2,769 |  |  | $ | 45.70 |

The aggregate intrinsic value of RSU’s outstanding as of March 31, 2018 was $112.5 million. Additional information with regards to outstanding restricted stock units that are expected to vest as of March 31, 2018, is as follows (in thousands, except year and per share amounts):

|  | Shares |  | Weighted Average Fair Value |  | Weighted Average Remaining Contractual Term (years)
Expected to vest |  | 2,682 |  |  | $ | 45.53 |  |  | 1.42

RSU’s outstanding that are expected to vest are presented net of estimated future forfeitures, which are estimated as compensation costs are recognized. RSU’s with a fair value of $26.7 million and $25.5 million became vested during fiscal years 2018 and 2017, respectively. The majority of RSUs that vested in 2018 and 2017 were net settled such that the Company withheld a portion of the shares at fair value to satisfy tax withholding requirements. In fiscal years 2018 and 2017, the vesting of RSU’s reduced the authorized and unissued share balance by approximately 1.1 million and 1.0 million, respectively. Total shares withheld and subsequently retired out of the Plan were approximately 0.3 million and 0.3 million, and total payments for the employees’ tax obligations to taxing authorities were $17.8 million and $14.1 million for fiscal years 2018 and 2017, respectively.
Market Stock Units
In fiscal year 2015, the Company began granting market stock units (“MSU’s”) to select employees. MSU’s vest based upon the relative total shareholder return (“TSR”) of the Company as compared to that of the Philadelphia Semiconductor Index (“the Index”). The requisite service period for these MSU’s is also the vesting period, which is three years. The fair value of each MSU granted was determined on the date of grant using the Monte Carlo simulation, which calculates the present value of the potential outcomes of future stock prices of the Company and the Index over the requisite service period. The fair value is based on the risk-free rate of return, the volatilities of the stock price of the Company and the Index, the correlation of the stock price of the Company with the Index, and the dividend yield.
The fair values estimated from the Monte Carlo simulation were calculated using a dividend yield of zero and the following additional assumptions:
55

Table of Contents

|  | Year Ended
|  | March 31, 2018 |  | March 25, 2017
Expected stock price volatility |  | 37.36 | % |  | 47.66 | %
Risk-free interest rate |  | 1.74 | % |  | 0.98 | %
Expected term (in years) |  | 3.00 |  |  | 3.00 |

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

|  | Shares |  | Weighted Average Fair Value
March 28, 2015 |  | 35 |  |  | $ | 22.00 |
Granted |  | 90 |  |  | 39.86 |
Vested |  | — |  |  | — |
Forfeited |  | — |  |  | — |
March 26, 2016 |  | 125 |  |  | $ | 34.85 |
Granted |  | 55 |  |  | 75.58 |
Vested |  | — |  |  | — |
Forfeited |  | — |  |  | — |
March 25, 2017 |  | 180 |  |  | $ | 47.30 |
Granted |  | 89 |  |  | 47.26 |
Vested |  | (70 | ) |  | 22.00 |
Forfeited |  | — |  |  | — |
March 31, 2018 |  | 199 |  |  | $ | 56.16 |

The aggregate intrinsic value of MSU’s outstanding as of March 31, 2018 was $8.1 million. Additional information with regard to outstanding MSU’s that are expected to vest as of March 31, 2018 is as follows (in thousands, except year and per share amounts):

|  | Shares |  | Weighted Average Fair Value |  | Weighted Average Remaining Contractual Term (years)
Expected to vest |  | 193 |  |  | $ | 55.95 |  |  | 1.40

MSU's with a fair value of $1.5 million became vested during fiscal year 2018. No MSU’s became vested in fiscal year 2017 and 2016.
10. Commitments and Contingencies
Facilities and Equipment Under Operating and Capital Lease Agreements
We currently own our corporate headquarters and select surrounding properties, and a UK office building. We lease certain of our other facilities and certain equipment under operating lease agreements, some of which have renewal options. Certain of these arrangements provide for lease payment increases based upon future fair market rates. As of March 31, 2018, our principal facilities are located in Austin, Texas and Edinburgh, Scotland, United Kingdom.
Total rent expense under operating leases was approximately $11.5 million, $8.2 million, and $5.2 million, for fiscal years 2018, 2017, and 2016, respectively. Sublease rental income was $0.3 million, $0.4 million, and $0.3 million, for fiscal years 2018, 2017, and 2016, respectively.
56

Table of Contents
The aggregate minimum future rental commitments under all operating leases, net of sublease income for the following fiscal years are (in thousands):

|  | Facilities |  | Subleases |  | Net Facilities Commitments |  | Equipment and Other Commitments |  | Total Commitments
2019 |  | $ | 13,315 |  |  | $ | 241 |  |  | $ | 13,074 |  |  | $ | 151 |  |  | $ | 13,225 |
2020 |  | 13,631 |  |  | 240 |  |  | 13,391 |  |  | 145 |  |  | 13,536 |
2021 |  | 12,959 |  |  | 245 |  |  | 12,714 |  |  | 145 |  |  | 12,859 |
2022 |  | 12,558 |  |  | 251 |  |  | 12,307 |  |  | 143 |  |  | 12,450 |
2023 |  | 11,788 |  |  | 257 |  |  | 11,531 |  |  | 123 |  |  | 11,654 |
Thereafter |  | 43,817 |  |  | 602 |  |  | 43,215 |  |  | 363 |  |  | 43,578 |
Total minimum lease payment |  | $ | 108,068 |  |  | $ | 1,836 |  |  | $ | 106,232 |  |  | $ | 1,070 |  |  | $ | 107,302 |

Wafer, Assembly, Test and Other Purchase Commitments
We rely primarily on third-party foundries for our wafer manufacturing needs. Generally, our foundry agreements do not have volume purchase commitments and primarily provide for purchase commitments based on purchase orders, with the exception of a few “take or pay” clauses included in vendor contracts that are immaterial at March 31, 2018. Cancellation fees or other charges may apply and are generally dependent upon whether wafers have been started or the stage of the manufacturing process at which the notice of cancellation is given. As of March 31, 2018, we had foundry commitments of $80.2 million.
In addition to our wafer supply arrangements, we contract with third-party assembly vendors to package the wafer die into finished products. Assembly vendors provide fixed-cost-per-unit pricing, as is common in the semiconductor industry. We had non-cancelable assembly purchase orders with numerous vendors totaling $3.2 million at March 31, 2018.
Test vendors provide fixed-cost-per-unit pricing, as is common in the semiconductor industry. Our total non-cancelable commitment for outside test services as of March 31, 2018 was $11.5 million.
Other purchase commitments primarily relate to multi-year tool commitments, and were $59.7 million at March 31, 2018.
11. Legal Matters
From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities. We regularly evaluate the status of legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred and to determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made.
12. Stockholders' Equity
Share Repurchase Program
As of March 31, 2018, all of the Company's common stock authorized for repurchase under its October 2015 $200 million program was repurchased. Of this total, 3.4 million shares were purchased in fiscal year 2018 at a cost of $175.8 million, or an average cost of $51.86 per share. All of these shares were repurchased in the open market and were funded from existing cash. All shares of our common stock that were repurchased were retired as of March 31, 2018. In January 2018, the Board of Directors authorized the repurchase of up to an additional $200 million of the Company’s common stock. No shares have been repurchased under the new plan as of March 31, 2018.
Preferred Stock
We have 5.0 million shares of Preferred Stock authorized. As of March 31, 2018, we have not issued any of the authorized shares.
57

Table of Contents
13. Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments, unrealized gains and losses on investments classified as available-for-sale, and actuarial gains and losses on our defined benefit pension plan assets.
The following table summarizes the changes in the components of accumulated other comprehensive loss, net of tax (in thousands):

|  | Foreign Currency |  | Unrealized Gains (Losses) on Securities |  | Actuarial Gains (Losses) on Defined Benefit Pension Plan |  | Total
Balance, March 26, 2016 |  | $ | (476 | ) |  | $ | (62 | ) |  | $ | 870 |  |  | $ | 332 |
Current period foreign exchange translation |  | (826 | ) |  | — |  |  | — |  |  | (826 | )
Current period marketable securities activity |  | — |  |  | 47 |  |  | — |  |  | 47 |
Current period actuarial gain/loss activity |  | — |  |  | — |  |  | (79 | ) |  | (79 | )
Current period amortization of actuarial (gain) loss |  | — |  |  | — |  |  | (89 | ) |  | (89 | )
Tax effect |  | — |  |  | (16 | ) |  | 58 |  |  | 42 |
Balance, March 25, 2017 |  | (1,302 | ) |  | (31 | ) |  | 760 |  |  | (573 | )
Current period foreign exchange translation |  | 2,791 |  |  | — |  |  | — |  |  | 2,791 |
Current period marketable securities activity |  | — |  |  | (2,380 | ) |  | — |  |  | (2,380 | )
Current period actuarial gain/loss activity |  | — |  |  | — |  |  | (14,729 | ) |  | (14,729 | )
Current period amortization of actuarial (gain) loss |  | — |  |  | — |  |  | — |  |  | — |
Tax effect |  | — |  |  | 750 |  |  | 2,780 |  |  | 3,530 |
Balance, March 31, 2018 |  | $ | 1,489 |  |  | $ | (1,661 | ) |  | $ | (11,189 | ) |  | $ | (11,361 | )

14. Income Taxes
Income before income taxes consisted of (in thousands):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
U.S. |  | $ | 91,220 |  |  | $ | 137,654 |  |  | $ | 108,133 |
Non-U.S. |  | 173,879 |  |  | 177,393 |  |  | 67,856 |
|  | $ | 265,099 |  |  | $ | 315,047 |  |  | $ | 175,989 |

The provision (benefit) for income taxes consists of (in thousands):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Current: |  |  |  |  |  |
U.S. |  | $ | 66,082 |  |  | $ | 28,940 |  |  | $ | 28,313 |
Non-U.S. |  | 21,812 |  |  | 7,234 |  |  | 703 |
Total current tax provision |  | $ | 87,894 |  |  | $ | 36,174 |  |  | $ | 29,016 |
Deferred: |  |  |  |  |  |
U.S. |  | 19,309 |  |  | 2,576 |  |  | 18,242 |
Non-U.S. |  | (4,099 | ) |  | 15,088 |  |  | 5,101 |
Total deferred tax provision |  | 15,210 |  |  | 17,664 |  |  | 23,343 |
Total tax provision |  | $ | 103,104 |  |  | $ | 53,838 |  |  | $ | 52,359 |

58

Table of Contents
The effective income tax rates differ from the rates computed by applying the statutory federal rate to pretax income as follows (in percentages):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
U.S. federal statutory rate |  | 31.6 |  |  | 35.0 |  |  | 35.0 |
Foreign income taxed at different rates |  | (8.9 | ) |  | (8.6 | ) |  | (0.6 | )
Transition tax on deferred foreign income |  | 20.3 |  |  | — |  |  | — |
Remeasurement of U.S. deferred tax balance |  | 2.3 |  |  | — |  |  | — |
Research and development tax credits |  | (2.5 | ) |  | (1.8 | ) |  | (5.6 | )
Stock based compensation |  | (4.5 | ) |  | (7.3 | ) |  | — |
Other |  | 0.6 |  |  | (0.2 | ) |  | 1.0 |
Effective tax rate |  | 38.9 |  |  | 17.1 |  |  | 29.8 |

The Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act reduces the US federal corporate tax rate from 35% to 21% as of January 1, 2018, resulting in a blended U.S. federal statutory rate of 31.6% for fiscal year 2018. The Tax Act restricts the deductibility of certain business expenses, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax-deferred and creates new taxes on certain foreign sourced earnings, among other provisions. As of March 31, 2018, we have not completed our accounting for the income tax effects of the Tax Act. We have made a reasonable estimate of the one-time transition tax liability and the remeasurement of our existing deferred tax balances. We recognized a provisional amount of $60.1 million which is included as a discrete component of income tax expense. We will continue to refine our calculations as additional analysis is completed. Our estimates may also be affected as we gain a more thorough understanding of the tax law.
Provisional Amounts
We remeasured certain deferred tax assets and liabilities based on the rate at which they are expected to reverse in the future, which is generally 21%. The provisional amount recorded as a discrete component of income tax expense related to the remeasurement of our deferred tax balances was $6.1 million of tax expense. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts.
We recorded a provisional amount of $53.9 million for the one-time transition tax liability as a discrete component of income tax expense. The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") that were previously deferred from U.S. income taxes, and is based in part on the amount of those earnings held in cash and other specified assets. The amount may change when we finalize the calculation of E&P and finalize the amounts held in cash or other specified assets on the applicable measurement date.
As of March 31, 2018, unremitted earnings from our foreign subsidiaries that have been included in our computation of the transition tax are not expected to be indefinitely reinvested. No taxes have been accrued for foreign withholding and distribution taxes on these earnings as these amounts are not material. We have not provided additional income taxes for any other outside basis differences inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any other outside basis differences in these entities is not practicable at this time.
Significant components of our deferred tax assets and liabilities as of March 31, 2018 and March 25, 2017 are (in thousands):
59

Table of Contents

|  | March 31, 2018 |  | March 25, 2017
Deferred tax assets: |  |  |  |
Accrued expenses and allowances |  | $ | 5,793 |  |  | $ | 9,002 |
Net operating loss carryforwards |  | 3,646 |  |  | 6,294 |
Research and development tax credit carryforwards |  | 12,701 |  |  | 13,977 |
Stock based compensation |  | 14,156 |  |  | 17,356 |
Other |  | 2,402 |  |  | 9,141 |
Total deferred tax assets |  | $ | 38,698 |  |  | $ | 55,770 |
Valuation allowance for deferred tax assets |  | (14,671 | ) |  | (12,570 | )
Net deferred tax assets |  | $ | 24,027 |  |  | $ | 43,200 |
Deferred tax liabilities: |  |  |  |
Depreciation and amortization |  | $ | 9,184 |  |  | $ | 13,837 |
Acquisition intangibles |  | 13,427 |  |  | 16,301 |
Total deferred tax liabilities |  | $ | 22,611 |  |  | $ | 30,138 |
Total net deferred tax assets |  | $ | 1,416 |  |  | $ | 13,062 |

Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. The valuation allowance increased by $2.1 million in fiscal year 2018 with no material impact to income tax expense. The Company continued to record a valuation allowance on various state net operating losses and tax credits due to the likelihood that they will expire or go unutilized because the Company does not expect to recognize sufficient income in the jurisdictions in which the tax attributes were created. Management believes that the Company’s results from future operations will generate sufficient taxable income in the appropriate jurisdictions and of the appropriate character such that it is more likely than not that the remaining deferred tax assets will be realized.
At March 31, 2018, the Company had gross federal net operating loss carryforwards of $9.7 million, all of which related to acquired companies and are, therefore, subject to certain limitations under Section 382 of the Internal Revenue Code. The federal net operating loss carryforwards expire in fiscal years 2019 through 2031.
At March 31, 2018, the Company had gross state net operating loss carryforwards of $35.8 million. The state net operating loss carryforwards expire in fiscal years 2019 through 2034. In addition, the Company had $12.7 million of state research and development tax credit carryforwards. Certain of these state tax credits will expire in fiscal years 2021 through 2033. The remaining state tax credit carryforwards do not expire.
The following table summarizes the changes in the unrecognized tax benefits (in thousands):

|  | March 31, 2018 |  | March 25, 2017
Beginning balance |  | $ | 30,858 |  |  | $ | 18,796 |
Additions based on tax positions related to the current year |  | 26,602 |  |  | 12,127 |
Reductions based on tax positions related to the prior years |  | (2,296 | ) |  | (65 | )
Ending balance |  | $ | 55,164 |  |  | $ | 30,858 |

The Company records unrecognized tax benefits for the estimated risk associated with tax positions taken on tax returns. At March 31, 2018, the Company had gross unrecognized tax benefits of $55.2 million, all of which would impact the effective tax rate if recognized. During fiscal year 2018, the Company had gross increases of $26.6 million related to current year unrecognized tax benefits, as well as gross decreases of $2.3 million. The Company’s unrecognized tax benefits are classified as “Non-current income taxes” in the Consolidated Balance Sheet.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. During fiscal years 2018 and 2017 we recognized interest expense, net of tax, of approximately $0.8 million and $0.2 million, respectively.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. Fiscal years 2015 through 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject, although carry forward attributes that were generated in tax years prior to fiscal year 2015 may be adjusted upon examination by the tax authorities if they have been, or will be, used in a future period. The Company's United Kingdom subsidiaries are currently under a limited scope tax audit for certain income tax matters related to fiscal year 2016. The
60

Table of Contents
Company believes it has accrued adequate reserves related to the matters under examination. The Company is not under an income tax audit in any other major taxing jurisdiction.
15. Segment Information
We determine our operating segments in accordance with Financial Accounting Standards Board (“FASB”) guidelines. Our Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker under these guidelines.
The Company operates and tracks its results in one reportable segment, but reports revenue performance in two product lines, which currently are portable audio and non-portable audio and other. Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level. Additionally, our product lines have similar characteristics and customers. They share operations support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative functions of human resources, legal, finance and information technology. Therefore, there is no complete, discrete financial information maintained for these product lines. Revenue from our product lines are as follows (in thousands):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
Portable Audio Products |  | $ | 1,363,876 |  |  | $ | 1,373,848 |  |  | $ | 989,101 |
Non-Portable Audio and Other Products |  | 168,310 |  |  | 165,092 |  |  | 180,150 |
|  | $ | 1,532,186 |  |  | $ | 1,538,940 |  |  | $ | 1,169,251 |

Geographic Area
The following illustrates sales by geographic locations based on the sales office location (in thousands):

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017 |  | March 26, 2016
United States |  | $ | 33,732 |  |  | $ | 36,024 |  |  | $ | 73,889 |
European Union (excluding United Kingdom) |  | 7,972 |  |  | 9,809 |  |  | 12,745 |
United Kingdom |  | 7,823 |  |  | 5,741 |  |  | 5,687 |
China |  | 1,264,000 |  |  | 1,249,325 |  |  | 823,843 |
Hong Kong |  | 162,652 |  |  | 181,283 |  |  | 10,647 |
Japan |  | 12,131 |  |  | 11,819 |  |  | 27,898 |
South Korea |  | 1,711 |  |  | 2,403 |  |  | 193,388 |
Taiwan |  | 13,224 |  |  | 14,426 |  |  | 9,249 |
Other Asia |  | 17,996 |  |  | 16,585 |  |  | 8,657 |
Other non-U.S. countries |  | 10,945 |  |  | 11,525 |  |  | 3,248 |
Total consolidated sales |  | $ | 1,532,186 |  |  | $ | 1,538,940 |  |  | $ | 1,169,251 |

The following illustrates property, plant and equipment, net, by geographic locations, based on physical location (in thousands):
61

Table of Contents

|  | Fiscal Years Ended
|  | March 31, 2018 |  | March 25, 2017
United States |  | $ | 134,648 |  |  | $ | 120,212 |
European Union (excluding United Kingdom) |  | 717 |  |  | 793 |
United Kingdom |  | 53,855 |  |  | 44,981 |
China |  | 594 |  |  | 565 |
Hong Kong |  | 3 |  |  | 5 |
Japan |  | 115 |  |  | 243 |
South Korea |  | 185 |  |  | 202 |
Taiwan |  | 337 |  |  | 231 |
Other Asia |  | 96 |  |  | 50 |
Other non-U.S. countries |  | 604 |  |  | 857 |
Total consolidated property, plant and equipment, net |  | $ | 191,154 |  |  | $ | 168,139 |

16. Quarterly Results (Unaudited)
The following quarterly results have been derived from our audited annual consolidated financial statements. In the opinion of management, this unaudited quarterly information has been prepared on the same basis as the annual consolidated financial statements and includes all adjustments, including normal recurring adjustments, necessary for a fair presentation of this quarterly information. This information should be read along with the financial statements and related notes. The operating results for any quarter are not necessarily indicative of results to be expected for any future period.
The unaudited quarterly statement of operations data for each quarter of fiscal years 2018 and 2017 were as follows (in thousands, except per share data):

|  | Fiscal Year 2018
|  | 1st Quarter |  | 2nd Quarter |  | 3rd Quarter |  | 4th Quarter
Net sales |  | $ | 320,735 |  |  | $ | 425,537 |  |  | $ | 482,741 |  |  | $ | 303,173 |
Gross profit |  | 161,716 |  |  | 211,282 |  |  | 235,088 |  |  | 152,630 |
Net income |  | 42,912 |  |  | 73,300 |  |  | 33,779 |  |  | 12,004 |
Basic income per share |  | $ | 0.67 |  |  | $ | 1.16 |  |  | $ | 0.53 |  |  | $ | 0.19 |
Diluted income per share |  | 0.64 |  |  | 1.10 |  |  | 0.52 |  |  | 0.19 |

|  | Fiscal Year 2017
|  | 1st Quarter |  | 2nd Quarter |  | 3rd Quarter |  | 4th Quarter
Net sales |  | $ | 259,428 |  |  | $ | 428,619 |  |  | $ | 523,029 |  |  | $ | 327,864 |
Gross profit |  | 126,685 |  |  | 211,699 |  |  | 255,152 |  |  | 164,279 |
Net income |  | 18,071 |  |  | 86,039 |  |  | 122,041 |  |  | 35,058 |
Basic income per share |  | $ | 0.29 |  |  | $ | 1.37 |  |  | $ | 1.91 |  |  | $ | 0.55 |
Diluted income per share |  | 0.27 |  |  | 1.30 |  |  | 1.83 |  |  | 0.52 |

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(e) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our chief executive officer (CEO) and chief financial officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(b) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Our disclosure controls and
62

Table of Contents
procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based upon the evaluation, our management, including our CEO and CFO, has concluded that our disclosure controls and procedures were effective as of March 31, 2018.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Because of its inherent limitation, internal control over financial reporting may not prevent or detect all errors and all fraud. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Based on its assessment of internal control over financial reporting, management has concluded that our internal control over financial reporting was effective as of March 31, 2018, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on management’s assessment of our internal control over financial reporting as of March 31, 2018, included in Item 8 of this report.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information set forth in the proxy statement to be delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on August 3, 2018 (the “Proxy Statement”) under the headings Corporate Governance — Board Meetings and Committees, Corporate Governance — Audit Committee, Proposals to be Voted on — Proposal No. 1 — Election of Directors is incorporated herein by reference.
ITEM 11. Executive Compensation
The information set forth in the Proxy Statement under the headings Director Compensation Arrangements, Compensation Discussion and Analysis, Compensation Committee Report, and Proposals to be Voted on — Proposal No. 3 — Advisory Vote to Approve Executive Compensation and Proposal No. 4 — Approval of the Company's 2018 Long Term Incentive Plan are incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information set forth in the Proxy Statement under the headings Equity Compensation Plan Information and Security Ownership of Certain Beneficial Owners and Management is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information set forth in the Proxy Statement under the headings Certain Relationships and Related Transactions and Corporate Governance is incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services
The information set forth in the Proxy Statement under the headings Audit and Non-Audit Fees and Services and Proposal No. 2 — Ratification of Appointment of Independent Registered Public Accounting Firm is incorporated herein by reference.
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
63

Table of Contents

(a) | The following documents are filed as part of this Report:

1. | Consolidated Financial Statements

▪ | Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm.

▪ | Consolidated Balance Sheets as of March 31, 2018 and March 25, 2017.

▪ | Consolidated Statements of Income for the fiscal years ended March 31, 2018, March 25, 2017, and March 26, 2016.

▪ | Consolidated Statements of Comprehensive Income for the fiscal years ended March 31, 2018, March 25, 2017, and March 26, 2016.

▪ | Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2018, March 25, 2017, and March 26, 2016.

▪ | Consolidated Statements of Stockholders’ Equity for the fiscal years ended March 31, 2018, March 25, 2017, and March 26, 2016.

▪ | Notes to Consolidated Financial Statements.

2. | Financial Statement Schedules

All schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto.

3. | Exhibits

The following exhibits are files as part of or incorporated by reference into this Annual Report on Form 10-K.
64

Table of Contents

Number |  | Description
2.1 |  | Cooperation Agreement dated April 29, 2014 between the Company and Wolfson Microelectronics plc. (1)
3.1 |  | Certificate of Incorporation of Registrant, filed with the Delaware Secretary of State on August 26, 1998. (2)
3.2 |  | Amended and Restated Bylaws of Registrant. (3)
10.1+ |  | Cirrus Logic, Inc. 2006 Stock Incentive Plan, amended and restated as of May 26, 2015. (7)
10.2+ |  | Form of Stock Option Agreement for options granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (4)
10.3+ |  | Form of Stock Option Agreement for options for U.K. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (12)
10.4+ |  | Form of Notice of Grant of Stock Option for options granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (4)
10.5+ |  | Form of Stock Option Agreement for Outside Directors under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (6)
10.6+ |  | Form of Restricted Stock Unit Agreement for U.S. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (5)
10.7+ |  | Form of Restricted Stock Unit Agreement for U.K. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (10)
10.8+ |  | Form of Notice of Grant of Restricted Stock Units granted under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (5)
10.9+ |  | Form of Performance Award Agreement for U.S. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (9)
10.10+ |  | Form of Notice of Performance Award Agreement for U.S. Employees under the Cirrus Logic Inc. 2006 Stock Incentive Plan (10)
10.11+ |  | Form of Performance Award Agreement for U.K. Employees under the Cirrus Logic, Inc. 2006 Stock Incentive Plan. (12)
10.12+* |  | Executive Severance and Change of Control Plan, effective as of October 1, 2007, as amended and restated on April 1, 2018.
10.13+ |  | 2007 Management and Key Individual Contributor Incentive Plan, as amended on May 20, 2016. (12)
10.14 |  | Credit Agreement dated April 29, 2014 among the Company, Wells Fargo Bank and National Association, as Administrative Agent and Lender. (1)
10.15 |  | Credit Agreement dated August 29, 2014 among Registrant, Wells Fargo Bank and National Association, as Administrative Agent and Initial Issuing Lender. (8)
10.16 |  | First Amendment to Credit Agreement among Cirrus Logic, Inc., the Lenders party thereto and Wells Fargo Bank, National Association, as Lender and Administrative Agent. (11)
10.17 |  | Amended and Restated Credit Agreement among the Company, Wells Fargo Bank, National Association, as Administrative Agent and Initial Issuing Lender, and Bank of America, N.A., as Syndication Agent. (13)
14.1 |  | Code of Conduct, dated March 24, 2015. (10)
21.1* |  | List of Subsidiaries.
23.1* |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1* |  | Power of Attorney (see signature page).
31.1* |  | Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* |  | Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* |  | Certification of Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* |  | Certification of Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* |  | XBRL Instance Document
101.SCH* |  | XBRL Taxonomy Extension Schema Document
101.CAL* |  | XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB* |  | XBRL Taxonomy Extension Label Linkbase Document
101.PRE* |  | XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF* |  | XBRL Taxonomy Extension Definition Linkbase Document

65

Table of Contents
+ Indicates a management contract or compensatory plan or arrangement.
* Filed with this Form 10-K.

(1 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on April 29, 2014 (Registration No. 000-17795).
(2 | ) | Incorporated by reference from Registrant’s Report on Form 10-K for the fiscal year ended March 31, 2001, filed with the SEC on June 22, 2001 (Registration No. 000-17795).
(3 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on September 20, 2013.
(4 | ) | Incorporated by reference from Registration’s Statement on Form S-8 filed with the SEC on August 1, 2006 (Registration No. 000-17795).
(5 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on October 7, 2010.
(6 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on August 1, 2007.
(7 | ) | Incorporated by reference to Exhibit A of the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the SEC on June 2, 2015.
(8 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on September 3, 2014.
(9 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on September 22, 2014.
(10 | ) | Incorporated by reference from Registrant’s Report on Form 10-K filed with the SEC on May 27, 2015 (Registration No. 000-17795).
(11 | ) | Incorporated by reference from Registrant’s Report on Form 8-K filed with the SEC on June 26, 2015.
(12 | ) | Incorporated by reference from Registrant’s Report on Form 10-K filed with the SEC on May 25, 2016 (Registration No. 000-17795).
(13 | ) | Incorporated by reference from Registrant’s Report on Form 8-K with the SEC on July 15, 2016 (Registration No. 000-17795).

66

Table of Contents
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized.

| CIRRUS LOGIC, INC.
| By: | /S/ T HURMAN K. C ASE
|  | Thurman K. Case
|  | Vice President, Chief Financial Officer and Chief Accounting Officer
|  | May 30, 2018

KNOW BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Thurman K. Case, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of the attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant, in the capacities and on the dates indicated have signed this report below:

Signature |  | Title |  | Date
/s/ J ASON P. R HODE |  | President and Chief Executive Officer |  | May 30, 2018
Jason P. Rhode |  |  |  |
/S/ T HURMAN K. C ASE |  | Vice President, Chief Financial Officer and Chief Accounting Officer |  | May 30, 2018
Thurman K. Case |  |  |  |
/S/ J OHN C. C ARTER |  | Director |  | May 30, 2018
John C. Carter |  |  |  |
/S/ A LEX D AVERN |  | Director |  | May 30, 2018
Alex Davern |  |  |  |
/S/ T IMOTHY R. D EHNE |  | Director |  | May 30, 2018
Timothy R. Dehne |  |  |  |
/S/ C HRISTINE K ING |  | Director |  | May 30, 2018
Christine King |  |  |  |
/S/ A LAN R. S CHUELE |  | Director |  | May 30, 2018
Alan R. Schuele |  |  |  |
/S/ W ILLIAM D. S HERMAN |  | Director |  | May 30, 2018
William D. Sherman |  |  |  |
/S/ D AVID J. T UPMAN |  | Director |  | May 30, 2018
David J. Tupman |  |  |  |

67