XML 30 R13.htm IDEA: XBRL DOCUMENT

Employee Stock-Based Compensation

12 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Employee Stock-Based Compensation As of March 31, 2023, the Company offers the 2006 Employee Share Purchase Plan (Non-U.S.), as amended and restated ("2006 ESPP)", the 1996 Employee Share Purchase Plan (U.S.), as amended and restated ("1996 ESPP"), and the 2006 Stock Incentive Plan ("2006 Plan") as amended and restated. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.

Under the 1996 ESPP and 2006 ESPP plans, eligible employees may purchase shares at the lower of 85% of the fair market value at the beginning or the end of each offering period, which is generally six months. Subject to continued participation in these plans, purchase agreements are automatically executed at the end of each offering period. An aggregate of 29.0 million shares were reserved for issuance under the 1996 and 2006 ESPP plans. As of March 31, 2023, a total of 3.6 million shares were available for new awards under these plans.

The 2006 Plan provides for the grant to eligible employees and non-employee directors of stock options, stock appreciation rights, and restricted stock units. Awards under the 2006 Plan may be conditioned on continued employment, the passage of time or the satisfaction of performance and market vesting criteria. The 2006 Plan, as amended, has no expiration date. On June 29, 2022, the Board authorized 3.3 million additional shares for issuance under the 2006 Plan. An aggregate of 33.8 million shares were reserved for issuance under the 2006 Plan. As of March 31, 2023, a total of 8.4 million shares were available for new awards under this plan.

Stock options granted to employees under the 2006 Plan have terms not exceeding ten years and are issued at exercise prices not less than the fair market value on the date of grant.

Service-based restricted stock units ("RSUs") granted to employees under the 2006 Plan generally vest in four equal annual installments on the grant date anniversary. RSUs granted to non-executive board members under the 2006 Plan vest on the grant date anniversary, or if earlier and only if the non-executive board member is not re-elected as a director at such annual general meeting, the date of the next annual general meeting following the grant date.

Restricted stock units with certain market- and performance-based conditions ("PSUs") granted to employees under the 2006 Plan vest at the end of the three-year performance period upon meeting predetermined financial metrics over three years, with the number of shares to be received upon vesting determined based on weighted average constant currency revenue growth rate and the Company's total shareholder return ("TSR") relative to the performance of companies in the Russell 3000 Index over the same three years period.

The following table summarizes share-based compensation expense and total income tax benefit recognized for fiscal years 2023, 2022 and 2021 (in thousands):


	Years Ended March 31,
	2023		2022		2021
Cost of goods sold	$	5,635	$	6,695	$	6,438
Marketing and selling	34,707		37,796		36,788
Research and development	15,292		18,356		14,179
General and administrative	15,148		30,632		28,614
Total share-based compensation expense	70,782		93,479		86,019

Income tax benefit	(9,750)		(26,987)		(19,472)
Total share-based compensation expense, net of income tax benefit	$	61,032	$	66,492	$	66,547

Share-based compensation costs capitalized as part of inventory were $5.6 million, $5.2 million, and $4.3 million for the fiscal year ended March 31, 2023, 2022 and 2021, respectively.

As of March 31, 2023, there was $125.2 million of total future stock-based compensation cost to be recognized over a weighted-average period of 2.4 years.

The estimates of share-based compensation expense require a number of complex and subjective assumptions including stock price volatility, employee exercise patterns, probability of achievement of the set performance condition, dividend yield, related tax effects and the selection of an appropriate fair value model.

The grant date fair value of the stock options and ESPP using the Black-Scholes-Merton option-pricing valuation model and the grant date fair value of the PSUs using the Monte-Carlo simulation method are determined with the following assumptions and values:


	Stock Options(1)				Employee Stock Purchase Plans
	Year Ended March 31,				Years Ended March 31,
		2022				2023			2022			2021
Expected dividend rate		1.18		%		1.78		%	1.03		%	1.04		%
Risk-free interest rate		1.99		%		3.86		%	0.27		%	0.10		%
Expected volatility		34		%		46		%	35		%	47		%
Expected term (years)		6.2				0.5			0.5			0.5
Weighted average grant date fair value per share		$	25.88			$	16.32		$	23.55		$	24.67

(1) No stock options were granted for fiscal years 2023 and 2021.


PSUs	Years Ended March 31,
	2023		2022		2021
Expected dividend rate	1.46	%	0.78	%	1.24	%
Risk-free interest rate	2.78	%	0.31	%	0.21	%
Expected volatility	39	%	37	%	31	%
Expected term (years)	3.0		3.0		3.0

The expected dividend rate assumption is based on the Company's history and future expectations of dividend payouts. The unvested PSUs or unexercised options are not eligible for these dividends. The expected term is based on the purchase offerings periods expected to remain outstanding for employee stock purchase plan or the performance period for PSUs. The expected term for stock options represents the estimated period of time until option exercise. Since the Company has limited historical stock option exercise experience, the Company used the simplified method in estimating the expected term, which is calculated as the average of the sum of the vesting term and the original contractual term of the stock options. Expected volatility is based on historical volatility using the Company's daily closing prices, or including the volatility of components of the Russell 3000 Index for PSUs, over the expected term. The Company considers the historical price volatility of its shares as most representative of future volatility. The risk-free interest rate assumptions are based upon the implied yield of U.S. Treasury zero-coupon issues appropriate for the expected term of the Company's share-based awards.

For PSUs, the Company estimates the probability and timing of the achievement of the set performance condition at the time of the grant based on the historical financial performance and the financial forecast in the remaining performance period and reassesses the probability in subsequent periods when actual results or new information become available.

A summary of the Company's stock option activities under all stock plans for fiscal years 2023, 2022 and 2021 is as follows:


	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)			(Years)	(In thousands)
Outstanding, March 31, 2020	1,969

Exercised	(1,347)				$	68,596

Outstanding, March 31, 2021	622
Granted	842
Exercised	(71)				$	5,573

Outstanding, March 31, 2022	1,393	$	62	8.3	$	21,830

Exercised	(155)	$	21		$	6,482
Forfeited	(118)	$	80
Outstanding, March 31, 2023	1,120	$	66	7.6	$	7,491
Vested and exercisable, March 31, 2023	396	$	39	5.2	$	7,491

The tax benefit realized for the tax deduction from options exercised during fiscal years 2023, 2022 and 2021 was $0.1 million, $1.2 million and $0.6 million, respectively.

A summary of the Company's RSU and PSU activities for fiscal years 2023, 2022 and 2021 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value		Aggregate Fair Value
	(In thousands)			(In thousands)
Outstanding, March 31, 2020	3,951	$	36
Granted—RSUs	1,046	$	60
Granted—PSUs	303	$	67
Vested	(1,444)			$	168,816
Forfeited	(213)
Outstanding, March 31, 2021	3,643	$	45
Granted—RSUs	868	$	103
Granted—PSUs	203	$	124
Vested	(1,463)			$	133,977
Forfeited	(205)
Outstanding, March 31, 2022	3,046	$	68
Granted—RSUs	1,584	$	53
Granted—PSUs	407	$	69
Vested	(1,143)	$	48	$	85,152
Forfeited	(438)	$	68
Outstanding, March 31, 2023	3,456	$	66

The shares outstanding as of March 31, 2023 above include 0.8 million shares of PSUs. The Company presents the number of PSUs at 100 percent of the performance target; however, the aggregate fair value of shares vested during the year is based on the actual number of stock units vested based on the achievement of the financial metrics over the performance period.

The tax benefit realized for the tax deduction from RSUs and PSUs that vested during fiscal years 2023, 2022 and 2021 was $11.1 million, $25.2 million and $16.3 million, respectively.

Employee Benefit Plans

Defined Benefit Plans

Certain of the Company's subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees' years of service and earnings, or in accordance with applicable employee benefit regulations. The Company's practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations.

The Company recognizes the overfunded or underfunded status of defined benefit pension plans and non-retirement post-employment benefit obligations as an asset or liability in its consolidated balance sheets and recognizes changes in the funded status of defined benefit pension plans in the year in which the changes occur through accumulated other comprehensive income (loss), which is a component of shareholders' equity. Each plan's assets and benefit obligations are generally remeasured as of March 31 each year.

The net periodic benefit cost of the defined benefit pension plans and the non-retirement post-employment benefit obligations for fiscal years 2023, 2022 and 2021 was as follows (in thousands):


	Years Ended March 31,
	2023		2022		2021
Service costs	$	13,195	$	14,693	$	12,121
Interest costs	2,408		920		1,047
Expected return on plan assets	(3,754)		(2,930)		(2,535)
Amortization:

Net prior service credit recognized	(458)		(465)		(467)
Net actuarial loss (gain) recognized	(3,047)		(2,158)		2,144
Curtailment gain	(4,225)		—		—
Settlement gain	(339)		—		—
Total net periodic benefit cost	$	3,780	$	10,060	$	12,310

The components of net periodic benefit cost other than the service costs component are included in other income (expense), net in the consolidated statements of operations.

The changes in projected benefit obligations for fiscal years 2023 and 2022 were as follows (in thousands):


	Years Ended March 31,
	2023		2022
Projected benefit obligations, beginning of the year	$	207,551	$	202,348
Service costs	13,195		14,693
Interest costs	2,408		920
Plan participant contributions	6,870		6,092
Actuarial gain	(22,965)		(31,198)
Benefits paid	(2,646)		(3,904)
Transfer of prior vested benefits	11,579		14,963

Settlement	(15,348)		—
Curtailment	(3,923)		—
Administrative expense paid	(147)		(130)
Currency exchange rate changes	(1,238)		3,767
Projected benefit obligations, end of the year	$	195,336	$	207,551

The accumulated benefit obligation for all defined benefit pension plans as of March 31, 2023 and 2022 was $170.3 million and $178.5 million, respectively.

Actuarial gains related to the change in the benefit obligation for the Company's pension plans for fiscal years 2023 and 2022 were primarily due to an increase in discount rate.

The following table presents the changes in the fair value of defined benefit pension plan assets for fiscal years 2023 and 2022 (in thousands):


	Years Ended March 31,
	2023		2022
Fair value of plan assets, beginning of the year	$	156,118	$	128,061
Actual return on plan assets	(6,008)		(2,156)
Employer contributions	11,645		10,877
Plan participant contributions	6,870		6,092
Benefits paid	(2,646)		(3,904)
Transfer of prior vested benefits	11,579		14,963
Settlement	(15,348)		—
Administrative expenses paid	(147)		(130)
Currency exchange rate changes	536		2,315
Fair value of plan assets, end of the year	$	162,599	$	156,118

The Company's investment objectives are to ensure that the assets of its defined benefit plans are invested to provide an optimal rate of investment return on the total investment portfolio, consistent with the assumption of a reasonable risk level, and to ensure that pension funds are available to meet the plans' benefit obligations as they become due. The Company believes that a well-diversified investment portfolio will result in the highest attainable investment return with an acceptable level of overall risk. Investment strategies and allocation decisions are also governed by applicable governmental regulatory agencies. The Company's investment strategy with respect to its largest defined benefit plan, which is available only to Swiss employees, is to invest per the following allocation: 33% in equities, 28% in bonds, 28% in real estate, 4% in cash and cash equivalents and the remaining in other investments. The Company can invest in real estate funds, commodity funds, and hedge funds depending upon economic conditions.

The following tables present the fair value of the defined benefit pension plan assets by major categories and by levels within the fair value hierarchy as of March 31, 2023 and 2022 (in thousands):


	March 31,
	2023				2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash and cash equivalents	$	7,071	$	—	$	7,071	$	16,317	$	—	$	16,317
Equity securities	51,963		—		51,963		48,591		—		48,591
Debt securities	43,493		—		43,493		38,513		—		38,513
Real estate funds	21,197		23,710		44,907		25,146		13,077		38,223
Hedge funds	606		7,907		8,513		—		8,076		8,076

Other	6,248		404		6,652		6,034		364		6,398
Total fair value of plan assets	$	130,578	$	32,021	$	162,599	$	134,601	$	21,517	$	156,118

The funded status of the plans was as follows (in thousands):


	Years Ended March 31,
	2023		2022
Fair value of plan assets	$	162,599	$	156,118
Less: projected benefit obligations	195,336		207,551
Underfunded status	$	(32,737)	$	(51,433)

Amounts recognized on the balance sheets for the plans were as follows (in thousands):


	March 31,
	2023		2022
Current liabilities	$	1,407	$	1,677
Non-current liabilities	31,330		49,756
Total liabilities	$	32,737	$	51,433

Amounts recognized in accumulated other comprehensive income (loss) related to defined benefit pension plans were as follows (in thousands):


	March 31,
	2023		2022
Net prior service credits	$	2,201	$	2,883
Net actuarial gain (loss)	5,690		(4,304)
Accumulated other comprehensive income (loss)	7,891		(1,421)
Deferred taxes	(3,366)		(2,074)
Accumulated other comprehensive income (loss), net of tax	$	4,525	$	(3,495)

The actuarial assumptions for the defined benefit plans were as follows:


	Years Ended March 31,
	2023	2022
Benefit Obligations:
Discount rate	1.00% - 7.25%	1.00% - 6.75%
Estimated rate of compensation increase	2.25% - 10.00%	2.00% - 10.00%
Cash balance interest credit rate	0.00% - 1.75%	0.00% - 1.75%


	Years Ended March 31,
	2023	2022	2021
Net Periodic Costs:
Discount rate	0.50% - 6.75%	0.25% - 6.00%	0.50% - 6.75%
Estimated rate of compensation increase	2.00% - 10.00%	2.00% - 10.00%	2.25% - 10.00%
Expected average rate of return on plan assets	1.00% - 2.50%	1.00% - 2.25%	1.00% - 2.50%
Cash balance interest credit rate	0.00% - 1.75%	0.00% - 1.75%	0.00% - 1.75%

The discount rate is estimated based on corporate bond yields or securities of similar quality in the respective country, with a duration approximating the period over which the benefit obligations are expected to be paid. The Company bases the compensation increase assumptions on historical experience and future expectations. The expected average rate of return for the Company's defined benefit pension plans represents the average rate of return expected to be earned on plan assets over the period that the benefit obligations are expected to be paid, based on government bond notes in the respective country, adjusted for corporate risk premiums as appropriate.

The following table reflects the benefit payments that the Company expects the plans to pay in the periods noted (in thousands):


Years Ending March 31,
2024	$	26,765
2025	11,728
2026	12,046
2027	14,440
2028	12,772
Next five fiscal years	66,302
Total expected benefit payments by the plan	$	144,053

The Company expects to contribute $9.4 million to its defined benefit pension plans during fiscal year 2024.

Defined Contribution Plans

Certain of the Company's subsidiaries have defined contribution employee benefit plans covering all or a portion of their employees. Contributions to these plans are discretionary for certain plans and are based on specified or statutory requirements for others. The charges to expense for these plans for fiscal years 2023, 2022 and 2021, were $14.4 million, $13.9 million and $10.6 million, respectively.

Deferred Compensation Plan

One of the Company's subsidiaries offers a deferred compensation plan that permits eligible employees to make 100% vested salary and incentive compensation deferrals within established limits. The Company does not make contributions to the plan.

The deferred compensation plan's assets consist of marketable securities and are included in other assets on the consolidated balance sheets. The marketable securities were recorded at a fair value of $28.2 million and $28.4 million as of March 31, 2023 and 2022, respectively, based on quoted market prices (see Note 9). The Company also had deferred compensation liability of $28.2 million and $28.4 million, which are included in other non-current liabilities on the consolidated balance sheets as of March 31, 2023 and 2022, respectively. Earnings, gains and losses on deferred compensation investments are included in other income (expense), net and corresponding changes in deferred compensation liability are included in operating expenses and cost of goods sold in the consolidated statements of operations (see Note 6).