10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2016

or

☐ 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 000-26124

IXYS CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	77-0140882
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1590 BUCKEYE DRIVE

MILPITAS, CALIFORNIA 95035-7418

(Address of principal executive offices and Zip Code)

(408) 457-9000

(Registrant’s telephone number, including area code)

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  ☒    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  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of January 26, 2017 was 31,611,390.

IXYS CORPORATION

FORM 10-Q

December  31, 2016

INDEX

	Page
PART I – Financial Information		3
Item 1. Financial Statements		3
Unaudited Condensed Consolidated Balance Sheets		3
Unaudited Condensed Consolidated Statements of Operations		4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)		5
Unaudited Condensed Consolidated Statements of Cash Flows		6
Notes to Unaudited Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		32
PART II – Other Information		33
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3. Defaults upon Senior Securities		46
Item 4. Mine Safety Disclosures		46
Item 5. Other Information		46
Item 6. Exhibits		46

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

IXYS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,			March 31,
	2016			2016
ASSETS
Current assets:
Cash and cash equivalents	$	158,493		$	155,806
Restricted cash		1,309			277
Accounts receivable, net		36,715			38,440
Inventories		87,118			89,604
Prepaid expenses and other current assets		5,996			4,203
Total current assets		289,631			288,330
Property, plant and equipment, net		41,738			42,623
Intangible assets, net		3,578			7,607
Goodwill		42,193			42,355
Deferred income taxes		27,774			28,024
Other assets		17,167			13,762
Total assets	$	422,081		$	422,701
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of loans payable	$	976		$	1,804
Accounts payable		11,214			11,416
Accrued expenses and other current liabilities		25,208			21,290
Total current liabilities		37,398			34,510
Long term loans, net of current portion		76,997			85,253
Pension liabilities		14,348			16,307
Other long term liabilities		7,143			7,336
Total liabilities		135,886			143,406
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized: 5,000,000 shares; none issued and outstanding		—			—
Common stock, $0.01 par value:
Authorized: 80,000,000 shares; 38,326,329 issued and 31,597,792 outstanding at December 31, 2016 and 38,214,158 issued and 31,375,524 outstanding at March 31, 2016		383			382
Additional paid-in capital		217,578			214,045
Treasury stock, at cost: 6,728,537 common shares at December 31, 2016 and 6,838,634 common shares at March 31, 2016		(60,849	)		(61,845	)
Retained earnings		157,717			146,979
Accumulated other comprehensive income (loss)		(28,634	)		(20,266	)
Total stockholders’ equity		286,195			279,295
Total liabilities and stockholders’ equity	$	422,081		$	422,701

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

IXYS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2016			2015			2016			2015
Net revenues	$	79,484		$	75,133		$	238,751		$	237,437
Cost of goods sold		52,545			51,104			162,363			161,794
Gross profit		26,939			24,029			76,388			75,643
Operating expenses:
Research, development and engineering		6,703			7,280			22,461			22,767
Selling, general and administrative		10,276			9,158			30,454			29,595
Amortization of acquisition-related intangible assets		750			1,329			2,463			4,282
Impairment of acquisition-related intangible assets		1,391			—			1,391			—
Total operating expenses		19,120			17,767			56,769			56,644
Operating income		7,819			6,262			19,619			18,999
Other income (expense):
Interest income		81			54			196			140
Interest expense		(646	)		(432	)		(1,896	)		(1,030	)
Other income (expense), net		(110	)		290			1,291			(1,510	)
Income before income tax provision		7,144			6,174			19,210			16,599
Provision for income tax		(2,044	)		(3,888	)		(7,156	)		(8,055	)
Net income	$	5,100		$	2,286		$	12,054		$	8,544
Net income per share:
Basic	$	0.16		$	0.07		$	0.38		$	0.27
Diluted	$	0.16		$	0.07		$	0.38		$	0.26
Cash dividends per common share	$	—		$	0.040		$	0.040		$	0.115
Weighted average shares used in per share calculation:
Basic		31,558			31,487			31,484			31,626
Diluted		32,209			32,343			32,119			32,483

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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IXYS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015			2016			2015
Net income	$	5,100		$	2,286		$	12,054		$	8,544
Foreign currency translation adjustments		(6,015	)		(3,027	)		(8,403	)		534
Changes in market value of investments:
Changes in unrealized gains (losses), net of income taxes of $(44) and $32 for the three and nine months ended December 31, 2016, respectively, and net of income taxes of $(24) and $(226) for the three and nine months ended December 31, 2015, respectively		(66	)		(35	)		66			(337	)
Reclassification adjustment for net losses (gains) realized in net income, net of income taxes of $0 and $(19) for the three and nine months ended December 31, 2016, respectively, and net of income taxes of $3 and $185 for the three and nine months ended December 31, 2015, respectively		—			4			(31	)		276
Net change in market value of investments		(66	)		(31	)		35			(61	)
Total comprehensive income (loss)	$	(981	)	$	(772	)	$	3,686		$	9,017

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

IXYS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine Months Ended
	December 31,
	2016			2015
Cash flows from operating activities:
Net income	$	12,054		$	8,544
Adjustments to reconcile net income to net cash provided by operating activities, net of assets acquired and liabilities assumed:
Depreciation and amortization		8,273			10,478
Provision for receivable allowances		7,518			4,811
Net change in inventory provision		1,433			640
Stock-based compensation		2,551			2,529
Loss (gain) on investments		(811	)		635
Deferred income taxes		—			2,257
Foreign currency adjustments on intercompany amounts and other non-cash items		1,059			505
Impairment of acquisition-related intangible assets		1,391			—
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable		(6,716	)		1,667
Inventories		(3,152	)		(7,778	)
Prepaid expenses and other assets		(2,186	)		(1,065	)
Accounts payable		(149	)		1,715
Accrued expenses and other liabilities		4,222			(338	)
Pension liabilities		(608	)		(938	)
Net cash provided by operating activities		24,879			23,662
Cash flows from investing activities:
Purchase of businesses, net of cash and cash equivalents acquired and installment payments		—			(14,472	)
Purchases of investments		(3,540	)		(629	)
Purchases of plant and equipment		(6,202	)		(5,265	)
Proceeds from sale of investments		805			26
Net cash used in investing activities		(8,937	)		(20,340	)
Cash flows from financing activities:
Principal payments on capital lease obligations		—			(454	)
Repayments of loans and notes payable		(8,804	)		(46,247	)
Proceeds from loans		—			82,967
Proceeds from employee equity plans		1,921			4,251
Purchases of treasury stock		—			(6,440	)
Payment of cash dividends to stockholders		(1,258	)		(3,635	)
Net cash provided by (used in) financing activities		(8,141	)		30,442
Effect of exchange rate fluctuations on cash and cash equivalents		(4,082	)		(234	)
Net increase in cash and cash equivalents		3,719			33,530
Cash and cash equivalents and restricted cash at beginning of period (1)		156,083			121,430
Cash and cash equivalents and restricted cash at end of period (2)	$	159,802		$	154,960

(1) Includes restricted cash of $277,000 and $266,000 as of March 31, 2016 and 2015, respectively.

(2) Includes restricted cash of $1.3 million and $722,000 as of December 31, 2016 and 2015, respectively.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Unaudited Condensed Consolidated Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of IXYS Corporation and its wholly-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Some of the accounting estimates that require significant judgments by management include, but are not limited to, revenue reserves, inventory valuation, accounting for income taxes and allocation of purchase price in business combinations. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. The condensed consolidated balance sheet as of March 31, 2016 has been derived from our audited consolidated balance sheet as of that date. It is recommended that the interim financial statements be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2016, or fiscal 2016, contained in our Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year. Our fiscal year end is March 31. References to any numerically identified year preceded by the word “fiscal” are references to the year ending on March 31 of such numerically identified year.

2. Recent Accounting Pronouncements and Accounting Changes

In May 2014, Financial Accounting Standards Board, or FASB, issued a new standard on the recognition of revenue from contracts with customers, which includes a single set of rules and criteria for revenue recognition to be used across all industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when or as the entity satisfies a performance obligation. For public companies, this standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods during the annual period. Early adoption is permitted for annual periods commencing after December 15, 2016. Two different transition methods are available: full retrospective method and a modified retrospective approach. We are currently evaluating the impact of the adoption of the standard on our consolidated financial statements including selection of the transition method.

In July 2015, FASB issued an amendment to modify the inventory measurement guidance in Topic 330, Inventory, for inventory that is measured using the methods other than last-in, first-out, or LIFO, and the retail inventory method. It requires that an entity measure inventory within the scope of this update at the lower of cost and net realizable value. It eliminated the guidance in Topic 330 that required a reporting entity measuring inventory at the lower of cost or market to consider the replacement cost of inventory and the net realizable value of inventory less an approximately normal profit margin along with net realizable value in determining the market value. The guidance will be effective for annual reporting periods beginning after December 15, 2016, and interim periods during the annual period. The new standard is required to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not expect this change to have a significant impact on our consolidated financial statements.

In January 2016, FASB issued authoritative guidance that modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under Accounting Standards Codification, Fair Value Measurements, or ASC 820, and as such these investments may be measured at cost. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We are currently evaluating the impact of this standard on our consolidated financial statements.

In February 2016, FASB issued amended guidance for lease arrangements, which requires lessees to recognize the following for all leases with terms longer than 12 months: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The amendment is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

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In March 2016, FASB issued amended guidance to simplify the transition to the equity method of accounting. This standard eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements as if the equity method had been used during all previous periods. Additionally, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings at the point an investment qualifies for the equity method. The amended guidance is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. It should be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In March 2016, FASB issued amended guidance which simplifies several aspects of the accounting for employee share-based payment awards, including forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies. The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance. We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In October 2016, FASB issued amended guidance which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a third party or otherwise recovered through use. The guidance will be effective for the Company for fiscal years beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted in the first interim period only. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are in the process of evaluating the impacts of the adoption of this amendment.

In November 2016, FASB issued amended guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, and will be applied on a retrospective basis. We have adopted the guidance on a retrospective basis from the quarter ended December 31, 2016. In our unaudited condensed consolidated statements of cash flow statements for the nine month periods ended December 31, 2016 and 2015, the beginning balances of cash and cash equivalents included restricted cash of $277,000 and $266,000 in the respective periods and the ending balances of cash and cash equivalents included restricted cash of $1.3 million and $722,000 in the respective periods. If we had not adopted the amended guidance, our unaudited condensed consolidated statements of cash flows for the nine month periods ended December 31, 2016 and 2015 would have shown a decrease of $1.0 million and $357,000, respectively, in the change in restricted cash under cash flows from investing activities.

3. Business Combinations

RadioPulse, Inc.

On May 1, 2015, we acquired RadioPulse, Inc., or RadioPulse, for a total consideration of $15.7 million. Based in South Korea, RadioPulse is a fabless semiconductor company that develops, manufactures and sells wireless network technology solutions based on the ZigBee® protocol, which combines microcontrollers and radio frequency devices. RadioPulse’s solutions are designed to enable a broad range of power-sensitive applications in the industrial, medical, consumer, smart grid and Internet of Things, or IoT, markets. RadioPulse offers a product portfolio complementary to our product lines. The consideration included cash consideration paid at closing of $14.7 million and $1.0 million related to an adjustment to eliminate debt owed to us for funds advanced prior to closing. The acquisition also included potential earnout payments aggregating up to $6.0 million payable over three years based on certain financial thresholds related to net revenues, gross profit and net income in calendar years 2015, 2016 and 2017. Based on our valuation, the fair value of the liability for the earnout payment was estimated to be nil as of December 31, 2016 and March 31, 2016. In connection with the acquisition, we incurred and expensed $248,000 in legal and consulting costs and $249,000 in acquisition-related compensation costs during fiscal 2016.

8

The following table summarizes the values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Consideration Allocation
Cash, restricted cash and cash equivalents	$	196
Accounts receivable		1,497
Inventories		534
Property, plant and equipment		24
Prepaid expenses and other current assets		547
Identifiable intangible assets		2,867
Short-term borrowings		(2,354	)
Accounts payable		(614	)
Accruals and other liabilities		(1,926	)
Total identifiable net assets		771
Goodwill		14,887
Total purchase consideration	$	15,658

Identified intangible assets resulting from the RadioPulse acquisition consisted of the following (in thousands):

	Fair Value (In thousands)		Amortization Method		Estimated Useful Life (In months)
	(unaudited)
Developed intellectual property	$	1,005		Accelerated		60
In-process research and development expenses (1)		1,188		Straight-line		60
Customer relationships		500		Accelerated		36
Contract backlog		174		Straight-line		6
Total	$	2,867

(1) Amortization started in the quarter ended December 31, 2016 upon the completion of the research and development activities of the corresponding projects.

The value reflected in the table represents the purchase price allocation. The valuation of the acquired intangibles was classified as a level 3 measurement under the fair value measurement guidance because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. We did not recognize any liability with respect to the contingent consideration based upon our analysis.

In determining the fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach was used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, in-process research and development expenses, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of RadioPulse and to the workforce acquired in the transaction. The goodwill is not deductible for tax purposes.

The results of operations and financial position of RadioPulse were immaterial compared to our financial statements and therefore pro-forma financial statements have not been separately presented.

4. Fair Value

We account for certain assets and liabilities at fair value. In determining fair value, we consider its principal or most advantageous market and the assumptions that market participants would use when pricing, such as inherent risk, restrictions on sale and risk of non-performance. The fair value hierarchy is based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

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Level 2	—	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
Level 3	—	Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

Fair Value Measurements on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, consisted of the following types of instruments as of December 31, 2016 and March 31, 2016 (in thousands):

	December 31, 2016 (1)						March 31, 2016 (1)
			Fair Value Measured at						Fair Value Measured at
			Reporting Date Using						Reporting Date Using
Description	Total		Level 1		Level 2		Total		Level 1		Level 2
	(unaudited)						(unaudited)
Money market funds (2)	$	82,566	$	82,566	$	—	$	115,974	$	115,974	$	—
Marketable equity securities (3)		2,046		2,046		—		1,749		1,749		—
Auction rate preferred securities (3)		350		—		350		350		—		350
Total assets measured at fair value	$	84,962	$	84,612	$	350	$	118,073	$	117,723	$	350

(1) We did not have any recurring fair value measurements of assets or liabilities whose fair value was measured using significant unobservable inputs.

(2) Included in “Cash and cash equivalents” on our unaudited condensed consolidated balance sheets.

(3) Included in “Other assets” on our unaudited condensed consolidated balance sheets.

We measure our marketable securities and derivative contracts at fair value. Marketable securities are valued using the quoted market prices and are therefore classified as Level 1 estimates. See Note 6, “Other Assets” for a discussion of marketable securities.

Auction rate preferred securities, or ARPS, are stated at par value based upon observable inputs, including historical redemptions received from the ARPS issuers, and are therefore categorized as Level 2 estimates.

Cash and cash equivalents are recognized and measured at amounts that approximate fair value in our unaudited condensed consolidated financial statements. Accounts receivable and prepaid expenses and other current assets are financial assets with carrying values that approximate fair value. Accounts payable and accrued expenses and other current liabilities are financial liabilities with carrying values that approximate fair value. We held no derivative instruments at December 31, 2016 and March 31, 2016.

Our debt, which primarily consists of loans from banks, approximated fair value as the interest rates either adjusted according to the market rates or the interest rates approximated the market rates. The estimated fair value of our debt was approximately $78.0 million and $87.1 million as of December 31, 2016 and March 31, 2016, respectively. Our pension liabilities, net of plan assets, approximated fair value. See Note 11, “Pension Plans” for a discussion of pension liabilities.

The fair value of contingent consideration for a business acquisition is classified as a Level 3 estimate. See Note 3, “Business Combinations” for a discussion of fair value of contingent consideration.

5. Accounts Receivable

Accounts receivable consisted of the following (in thousands):

	December 31, 2016			March 31, 2016
	(unaudited)
Accounts receivable, gross	$	40,276		$	41,219
Allowances		(3,561	)		(2,779	)
Accounts receivable, net	$	36,715		$	38,440

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6. Other Assets

Other assets consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Marketable equity securities	$	2,046	$	1,749
Auction rate preferred securities		350		350
Long-term equity method investments		11,554		10,977
Other items, including cost method investments		3,217		686
Total	$	17,167	$	13,762

Available-for-Sale Investments

Marketable equity securities and auction rate preferred securities are designated as available-for-sale that are reported at fair value with unrealized gains and losses, net of income taxes, recorded in other comprehensive income (loss). Realized gains and losses (calculated as proceeds less specifically identified costs) and declines in value of these investments judged by management to be other than temporary, if any, are included in other income (expense), net.

We review any impairment to determine whether it is other than temporarily impaired. This review is based on factors such as length of time of impairment, extent to which the fair value is below the cost basis, financial conditions of the issuer of the security, our expectations of future recoveries and our ability and intent to hold or sell the securities. Based on our review, we recognized an impairment loss of $0 and $151,000 in marketable equity securities during the three and nine months ended December 31, 2016, respectively, and $0 and $454,000 during both the three and nine months ended December 31, 2015.

Equity Method Investments

We have equity interests in Powersem GmbH, or Powersem, a semiconductor manufacturer based in Germany, EB Tech Ltd., or EB Tech, a radiation services provider based in South Korea and Automated Technology, Inc., or ATEC, an assembly and test services provider in the Philippines. These investments are accounted for using the equity method. For the three and nine months ended December 31, 2016, we recorded an immaterial amount of our proportionate share of the affiliates’ gains and losses under the equity method of accounting. The carrying values of our investments in Powersem, EB Tech and ATEC at December 31, 2016 were $2.5 million, $2.7 million and $6.4 million, respectively. The carrying values of our investments in Powersem, EB Tech and ATEC at March 31, 2016 were $2.5 million, $2.7 million and $5.7 million, respectively.

Cost Method Investments

During the nine months ended December 31, 2016, we made investments in privately-held companies. Those investments are accounted for under the cost method as they do not qualify for the fair value or another accounting method. As of December 31, 2016, the carrying value of those investments was $1.9 million. We do not estimate the fair value of those cost method investments because determining the fair value is not practicable.

No impairment losses on the investments accounted for under the equity method or the cost method were recognized as of December 31, 2016, as there have not been any events or changes in circumstances that we believe would have had a significant adverse effect on the fair value of those investments.

7. Inventories

Inventories consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Raw materials	$	18,952	$	18,269
Work in process		42,476		41,549
Finished goods		25,690		29,786
Total	$	87,118	$	89,604

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8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Uninvoiced goods and services	$	9,783	$	8,824
Compensation and benefits		5,212		7,540
Income taxes		5,896		2,066
Commissions, royalties and other		4,317		2,860
Total	$	25,208	$	21,290

9. Intangible Assets

Identified intangible assets of our company consisted of the following as of December 31, 2016 (in thousands):

	December 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,197	$	265	$	13,481	$	3,451
Customer relationships		13,464		123		13,341		—
In-process research and development expenses		1,056		1,003		53		—
Contract backlog		7,310		—		7,310		—
Other intangible assets		1,588		—		1,461		127
Total identifiable intangible assets	$	40,615	$	1,391	$	35,646	$	3,578

Identified intangible assets of our company consisted of the following as of March 31, 2016 (in thousands):

	March 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,309	$	—	$	11,639	$	5,670
Customer relationships		13,520		—		12,961		559
In-process research and development expenses		1,188		—		—		1,188
Contract backlog		7,329		—		7,329		—
Other intangible assets		1,599		—		1,409		190
Total identifiable intangible assets	$	40,945	$	—	$	33,338	$	7,607

We review our intangible assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable, based upon estimated undiscounted future cash flows. When we are required to determine the fair value of intangible assets other than goodwill, we use the income approach. We start with a forecast of all the expected net cash flows associated with the asset and then we apply an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows on the projections and the selection of a long-term growth rate and the discount rate. Based on our review, the intangible assets resulting from the RadioPulse acquisition were determined to be fully impaired and an impairment charge of $1.4 million was recognized during the quarter ended December 31, 2016.

10. Borrowing Arrangements

Revolving Credit Agreement

On November 20, 2015, we entered into a Revolving Credit Agreement with a syndicate of banks for a line of credit of $125.0 million. The agent for the banks is Bank of the West, or BOTW. The obligations are guaranteed by four of our subsidiaries. The loan is collateralized pursuant to a Contingent Collateral Agreement, under which the assets of the parent company and the four subsidiaries could be subject to security interests for the benefit of the banks in the event of a loan default.

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The credit agreement provides different interest rate alternatives under which we may borrow funds. We may elect to borrow based on LIBOR plus a margin or an alternative base rate plus a margin. The margin can range from 0.75% to 2.5%, depending on interest rate alternatives and on our leverage of liabilities to effective tangible net worth. The applicable interest rate as of December 31, 2016 was 2.79%. An unused commitment fee is also payable. It ranges from 0.25% to 0.625% annually, depending on leverage.

The terms of the facility impose restrictions on our ability to undertake certain transactions, to create liens on assets and to incur subsidiary indebtedness. In addition, the credit agreement is subject to a set of financial covenants, including minimum effective tangible net worth, the ratio of cash, cash equivalents and accounts receivable to current liabilities, profitability, a leverage ratio and a minimum amount of U.S. domestic cash on hand.

In December 2016, we entered into an amendment to the Revolving Credit Agreement with the lenders under which the contractual term of the revolving loan was extended to November 20, 2019. The leverage ratio was increased to 2.50 to 1.00 from 2.00 to 1.00. No other terms of the Revolving Credit Agreement were affected by the amendment. At December 31, 2016, we complied with all of the financial covenants, including the leverage ratio.

In relation to the Revolving Credit Agreement and the amendment to the Revolving Credit Agreement, we incurred loan costs that were deferred and reduced our “Long term loans, net of current portion” on our unaudited consolidated balance sheets. Those costs are being amortized over the new life of the credit agreement. The unamortized balance at December 31, 2016 and March 31, 2016 was $437,000 and $304,000, respectively.

At December 31, 2016 and March 31, 2016, the outstanding principal balances under the credit agreement were $73.0 million and $80.0 million, respectively.

The Revolving Credit Agreement also includes a $10.0 million letter of credit subfacility. See Note 17, “Commitments and Contingencies” for further information regarding the terms of the subfacility.

IKB Deutsche Industriebank

In April 2015, we entered into a loan with IKB Deutsche Industriebank, or IKB. Under the agreement, we borrowed €6.5 million, or about $7.2 million at the time. The loan has a term ending March 31, 2022 and bears a fixed annual interest rate of 1.75%. Each fiscal quarter, a principal payment of €232,000, or about $244,000, and a payment of accrued interest are required. Financial covenants for a ratio of indebtedness to cash flow, a ratio of equity to total assets and a minimum stockholders’ equity for the German subsidiary must be satisfied for the loan to remain in good standing. Compliance with these covenants is required annually at March 31. We complied with all of these financial covenants at March 31, 2016. The loan may be prepaid in whole or in part with a modest penalty. The loan is also collateralized by a security interest in the facility in Lampertheim, Germany, and a security deposit of €1.0 million. The security deposit will mature on December 31, 2017, so long as compliance occurs through that date. At December 31, 2016, the outstanding principal balance was €4.9 million, or about $5.1 million. At March 31, 2016, the outstanding principal balance was €5.6 million, or about $6.3 million at that time.

Loans Assumed from Business Acquisitions

Our outstanding balances relating to loans assumed upon business acquisitions at December 31, 2016 and March 31, 2016 were $283,000 and $1.1 million, respectively. These loans consisted of certain short-term facilities from financial institutions and loans from government agencies to support research and development activities.

11. Pension Plans

We maintain three defined benefit pension plans: one for United Kingdom employees, one for German employees and one for Philippine employees. We deposit funds for the United Kingdom and Philippine plans with financial institutions and make payments to former German employees directly. We accrue for the unfunded portion of the obligations. The measurement date for projected benefit obligations and plan assets is March 31. As of December 31, 2016, the German defined benefit plan was completely unfunded and we accrued for its obligations. The United Kingdom and German plans have been curtailed. As such, the plans are closed to new entrants and no credit is provided for additional periods of service. We expect to contribute approximately $1.1 million to the United Kingdom and the Philippines plans in the fiscal year ending March 31, 2017.

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Net Period Pension Cost

The net periodic pension expense includes the following components (in thousands):

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Service cost	$	27		$	25		$	83		$	76
Interest cost on projected benefit obligation		313			364			991			1,103
Expected return on plan assets		(282	)		(432	)		(901	)		(1,312	)
Recognized actuarial loss		41			44			133			134
Net periodic pension expense	$	99		$	1		$	306		$	1

Information on Plan Assets

We report and measure the plan assets of our defined benefit pension plans at fair value. The table below sets forth the fair value of our plan assets as of December 31, 2016 and March 31, 2016, using the same three-level hierarchy of fair-value inputs described in Note 4, “Fair Value” (in thousands):

	December 31, 2016						March 31, 2016
Description	Level 1		Level 2		Total		Level 1		Level 2		Total
	(unaudited)						(unaudited)
Cash and cash funds	$	103	$	—	$	103	$	121	$	—	$	121
Equity		305		—		305		351		—		351
Fixed interest		1,211		58		1,269		1,225		96		1,321
Mutual funds		12,891		12,751		25,642		13,527		13,394		26,921
Total	$	14,510	$	12,809	$	27,319	$	15,224	$	13,490	$	28,714

12. Employee Equity Incentive Plans

Stock Purchase and Stock Option Plans

Equity Incentive Plans

On September 10, 2009, our stockholders approved the 2009 Equity Incentive Plan, or the 2009 Plan, under which 900,000 shares of our common stock were reserved for the grant of stock options and other equity incentives. On September 16, 2011, our stockholders approved the 2011 Equity Incentive Plan, or the 2011 Plan, under which 600,000 shares of our common stock were reserved for the grant of stock options and other equity incentives. On August 30, 2013, our stockholders approved the 2013 Equity Incentive Plan, or the 2013 Plan, under which 2,000,000 shares of our common stock were reserved for the grant of stock options and other equity incentives. On August 26, 2016, our stockholders approved the 2016 Equity Incentive Plan, or the 2016 Plan, under which 2,000,000 shares of the common stock were reserved for the grant of stock options and other equity incentives. The 2009 Plan, the 2011 Plan, the 2013 Plan and the 2016 Plan are referred to as the Plans.

Stock Options

Under the Plans, nonqualified and incentive stock options may be granted to employees, consultants and non-employee directors. Generally, the per share exercise price shall not be less than 100% of the fair market value of a share on the grant date. The Board of Directors has the full power to determine the provisions of each option issued under the Plans. While we may grant options that become exercisable at different times or within different periods, we have primarily granted options that vest over four years. The options, once granted, expire ten years from the date of grant.

Stock Awards

Stock awards, denominated restricted stock under the 2009 Plan and the 2011 Plan, may be granted to any employee, director or consultant under the Plans. Pursuant to a stock award, we will issue shares of common stock. Shares that are subject to the restriction will be released from restriction if certain requirements, including continued performance of services, are met.

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Stock Appreciation Rights

Awards of stock appreciation rights, or SARs, may be granted to employees, consultants and non-employee directors pursuant to the Plans. A SAR is payable on the difference between the market price at the time of exercise and the exercise price at the date of grant. In any event, the exercise price of a SAR shall not be less than 100% of the fair market value of a share on the grant date and shall expire no later than ten years from the grant date. Upon exercise, the holder of a SAR shall be entitled to receive payment either in cash or a number of shares by dividing such cash amount by the fair market value of a share on the exercise date.

Restricted Stock Units

Restricted stock units, denominated performance units in the 2009 Plan, may be granted to employees, consultants and non-employee directors under the Plan. Each restricted stock unit shall have a value equal to the fair market value of one share. After the applicable performance period has ended, the holder will be entitled to receive a payment, either in cash or in the form of shares, based on the number of restricted stock units earned over the performance period, to be determined as a function of the extent to which the corresponding performance goals or other vesting provisions have been achieved.

Employee Stock Purchase Plan

The Board of Directors has approved the Amended and Restated 1999 Employee Stock Purchase Plan, or the Purchase Plan, and reserved a total of 1,550,000 shares of common stock for issuance under the Purchase Plan. Under the Purchase Plan, all eligible employees may purchase our common stock at a price equal to 85% of the lower of the fair market value at the beginning of the offer period or the semi-annual purchase date. Stock purchases are limited to 15% of an employee’s eligible compensation. During the nine months ended December 31, 2016, there were 112,171 shares purchased under the Purchase Plan, leaving approximately 128,070 shares available for purchase under the Purchase Plan in the future.

Stock-Based Compensation

The following table summarizes the effects of stock-based compensation charges (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
Statement of Operations Classifications	2016		2015		2016		2015
	(unaudited)				(unaudited)
Cost of goods sold	$	80	$	125	$	276	$	371
Research, development and engineering (1)		254		242		840		1,032
Selling, general and administrative		488		471		1,435		1,374
Stock-based compensation effect in income before income tax provision		822		838		2,551		2,777
Provision for income tax (2)		329		293		1,021		972
Net stock-based compensation effects in net income	$	493	$	545	$	1,530	$	1,805

(1) Includes acquisition related compensation expenses of $249,000 during the nine months ended December 31, 2015.

(2) Calculated at the U.S. statutory income tax rate of 40% in fiscal 2017 and 35% in fiscal 2016.

During the nine months ended December 31, 2016, the unaudited condensed consolidated statements of operations and cash flows do not reflect any tax benefit for the tax deduction from option exercises and other awards. As of December 31, 2016, approximately $7.4 million in stock-based compensation is to be recognized for unvested stock options granted under our equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.8 years.

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The Black-Scholes option pricing model is used to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. The weighted average estimated fair values of employee stock option grants and rights granted under the Purchase Plan, as well as the weighted average assumptions that were used in calculating such values during the three and nine months ended December 31, 2016 and 2015, were based on estimates at the date of grant as follows:

	Stock Options (1)											Purchase Plan (2)
	Three Months Ended December 31,					Nine Months Ended December 31,						Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015		2016			2015			2016			2015			2016			2015
	(unaudited)					(unaudited)						(unaudited)						(unaudited)
Weighted average estimated fair value of grant per share	$	4.45		$	na	$	4.42		$	4.83		$	2.63		$	3.54		$	3.28		$	3.33
Risk-free interest rate		1.7	%		na		1.5	%		1.8	%		0.5	%		0.1	%		0.4	%		0.1	%
Expected term in years		6.41			na		6.41			6.45			0.50			0.50			0.50			0.50
Volatility		39.8	%		na		40.7	%		44.9	%		32.3	%		48.2	%		37.5	%		39.8	%
Dividend yield (3)		—			na		0.4	%		1.2	%		0.0	%		1.2	%		0.7	%		1.1	%

(1) No stock options were granted during the quarter ended December 31, 2015.

(2) Under the stock purchase plan, rights to purchase shares are only granted during the first and third quarters of each fiscal year.

(3) No dividends were declared for the quarters ended September 30, 2016 and December 31, 2016.

Activity with respect to outstanding stock options for the nine months ended December 31, 2016 was as follows:

	Number of Shares			Weighted Average Exercise Price Per Share		Intrinsic Value (1)
				(unaudited)		(000)
Balance at March 31, 2016		5,234,397		$	10.40
Options granted		704,000		$	10.95
Options exercised		(110,097	)	$	8.00	$	384
Options cancelled		(7,500	)	$	13.37
Options expired		(27,500	)	$	11.81
Balance at December 31, 2016		5,793,300		$	10.50
Exercisable at December 31, 2016		3,924,050		$	10.11
Exercisable at March 31, 2016		3,619,563		$	9.93

(1) Represents the difference between the exercise price and the value of our common stock at the time of exercise.

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13. Accumulated Other Comprehensive Income (Loss)

The components and the changes in accumulated other comprehensive income (loss), net of income taxes, for the nine months ended December 31, 2016 and 2015 were as follows (in thousands):

	Nine Months Ended December 31, 2016
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2016	$	(10,639	)	$	(82	)	$	(9,545	)	$	(20,266	)
Other comprehensive income (loss) before reclassifications		(8,403	)		66			—			(8,337	)
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		—			(31	)		—			(31	)
Net current period other comprehensive income (loss)		(8,403	)		35			—			(8,368	)
Balance as of December 31, 2016	$	(19,042	)	$	(47	)	$	(9,545	)	$	(28,634	)

	Nine Months Ended December 31, 2015
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2015	$	(13,577	)	$	7		$	(9,518	)	$	(23,088	)
Other comprehensive income (loss) before reclassifications		534			(337	)		—			197
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		—			276			—			276
Net current period other comprehensive income (loss)		534			(61	)		—			473
Balance as of December 31, 2015	$	(13,043	)	$	(54	)	$	(9,518	)	$	(22,615	)

The amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended December 31, 2016 and 2015 were as follows (in thousands):

Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)											Impacted Line Item on Unaudited Condensed Consolidated Income Statements
	Three Months Ended December 31,					Nine Months Ended December 31,
	2016		2015			2016			2015
	(unaudited)					(unaudited)
Net gain (loss) on investments	$	—	$	(7	)	$	201		$	(7	)	Other income (expense), net
Impairment of marketable securities		—		—			(151	)		(454	)	Other income (expense), net
Subtotal		—		(7	)		50			(461	)	Income before income tax provision
Tax impact		—		3			(19	)		185		Provision for income tax
Total reclassifications for the period	$	—	$	(4	)	$	31		$	(276	)	Net income

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14. Computation of Earnings per Share

Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Net income	$	5,100	$	2,286	$	12,054	$	8,544
Weighted average shares - basic		31,558		31,487		31,484		31,626
Weighted average shares - diluted		32,209		32,343		32,119		32,483
Net income per share - basic	$	0.16	$	0.07	$	0.38	$	0.27
Net income per share - diluted	$	0.16	$	0.07	$	0.38	$	0.26

Diluted weighted average shares included approximately 651,000 and 856,000 common equivalent shares from stock options for the three months ended December 31, 2016 and 2015, respectively, and approximately 635,000 and 857,000 common equivalent shares from stock options for the nine months ended December 31, 2016 and 2015, respectively.

Basic net income available per common share is computed using net income and the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed using net income and the weighted average number of common shares outstanding, assuming dilution, which includes potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of stock options using the treasury stock method. During the three and nine months ended December 31, 2016, there were outstanding options to purchase 3,299,065 and 3,108,615 shares, respectively, that were not included in the computation of diluted net income per share since the exercise prices of the options exceeded the market price of the common stock and thus their inclusion would be anti-dilutive. During the three and nine months ended December 31, 2015, there were outstanding weighted average options to purchase 2,047,000 and 1,620,807 shares, respectively, that were not included in the computation of diluted net income per share since the exercise prices of the options exceeded the market price of the common stock and thus their inclusion would be anti-dilutive. These options could dilute earnings per share in future periods if the market price of the common stock increases.

15. Segment and Geographic Information

We have a single operating segment and reportable segment. We design, develop, manufacture and market high performance semiconductor products. Our two Chief Executive Officers, one of whom is also the Chief Financial Officer, together, have been identified as the chief operating decision makers. Our chief operating decision makers review financial information presented as one operating segment for the purpose of making decisions, allocating resources and assessing financial performance.

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Our net revenues by major geographic area (based on destination) were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
United States	$	20,605	$	18,334	$	60,291	$	57,784
Europe and the Middle East
France		1,901		2,382		7,472		6,724
Germany		9,253		7,201		26,812		24,123
Russia		353		2,196		941		2,914
Netherlands		1,241		761		3,322		2,298
United Kingdom		3,565		3,686		10,401		10,400
Other		6,646		6,217		19,431		21,281
Asia Pacific
China		20,690		19,090		64,548		60,378
Japan		1,663		1,451		5,089		7,175
Korea		4,268		5,360		13,316		17,585
Malaysia		1,300		689		3,392		3,253
Singapore		3,751		3,112		10,335		9,249
Other		2,020		2,527		7,021		7,655
Rest of the World
India		1,209		1,095		3,316		3,136
Other		1,019		1,032		3,064		3,482
Total	$	79,484	$	75,133	$	238,751	$	237,437

The following table sets forth net revenues for each of our product groups for the three and nine months ended December 31, 2016 and 2015 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Power semiconductors	$	54,647	$	51,196	$	164,663	$	159,607
Integrated circuits		20,032		18,749		60,967		63,257
Systems and RF power semiconductors		4,805		5,188		13,121		14,573
Total	$	79,484	$	75,133	$	238,751	$	237,437

For the three and nine months ended December 31, 2016, one distributor accounted for 11.7% and 13.1% of our net revenues in each period, respectively, and another distributor accounted for 11.2% and 10.9% of our net revenues, respectively. For the three and nine months ended December 31, 2015, the first distributor referenced above accounted for 13.9% and 12.0% of our net revenues, respectively.

16. Income Taxes

For the three and nine months ended December 31, 2016, we recorded income tax provisions of $2.0 million and $7.2 million, reflecting effective tax rates of 28.6% and 37.3%, respectively. For the three and nine months ended December 31, 2015, we recorded income tax provisions of $3.9 million and $8.1 million, reflecting effective tax rates of 63.0% and 48.5%, respectively. Our effective tax rates for the three and nine months ended December 31, 2016 were affected by valuation allowances against net operating losses generated in certain foreign jurisdictions and by a release of tax reserves resulting from the lapse of the statutes of limitations.

During the three and nine months ended December 31, 2015, we recorded out-of-period adjustments that increased the income tax provision by a net amount of $1.4 million. We recorded a reversal of a deferred tax asset that was overstated in the amount of $2.3 million in the financial statements for the fiscal year ended March 31, 2012, as well as the balance sheets for the fiscal years thereafter and the interim periods within those years and through September 30, 2015. This adjustment was partially offset by a reduction of $893,000 of tax expense relating to an overstatement in income tax reserves for the financial statements for the fiscal year ended March 31, 2015 and the balance sheets of the interim periods in the fiscal 2016 year through September 30, 2015. The out-of-period adjustments did not have any impact on our cash flow statements in any of the reporting periods. We believe that these out-of-period adjustments are not material to our financial statements for the relevant years. Additionally, for the three and nine months ended December 31, 2015, the effective tax rates were also affected by losses that could not be offset against other profits in certain jurisdictions with lower tax rates and by estimates of annual income in domestic and foreign jurisdictions.

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17. Commitments and Contingencies

Revolving Credit Agreement

See Note 10, “Borrowing Arrangements” for information regarding the terms of the credit agreement.

Other Commitments and Contingencies

On occasion, we provide limited indemnification to customers against intellectual property infringement claims related to our products. To date, we have not experienced significant activity or claims related to such indemnifications. We also provide in the normal course of business indemnification to our officers, directors and selected parties. We are unable to estimate any potential future liability, if any. Therefore, no liability for these indemnification agreements has been recorded as of December 31, 2016 and March 31, 2016.

We make strategic investments in other companies from time to time. These investments include commitments in certain instances to provide additional financing up to the contracted amount. These commitments are insignificant individually or in aggregate.

We have ongoing income tax audits of our subsidiary in the Philippines for the fiscal years ended March 31, 2010 and 2011. The Philippine Bureau of Internal Revenue, or BIR, has made an assessment for a deficiency of income taxes, inclusive of interest and penalties, of approximately $2.5 million and $156,000, respectively, for the fiscal years 2010 and 2011. We are vigorously contesting the assessments of both years. While there are no assurances that we will prevail, we believe that we have a valid legal reason to challenge the BIR’s decision and that our appeals will merit a favorable resolution. Accordingly, we have not accrued any amount for this matter.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion contains forward-looking statements, which are subject to certain risks and uncertainties, including, without limitation, those described elsewhere in this Form 10-Q and, in particular, in Item 1A of Part II hereof. Actual results may differ materially from the results discussed in the forward-looking statements. For a discussion of risks that could affect future results, see “Item 1A. Risk Factors.” All forward-looking statements included in this document are made as of the date hereof, based on the information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement, except as may be required by law.

Overview

We are a multi-market integrated semiconductor company. Our three principal product groups are: power semiconductors; integrated circuits, or ICs; and systems and radio frequency, or RF, power semiconductors.

Our power semiconductors improve system efficiency and reliability by converting electricity at relatively high voltage and current levels into the finely regulated power required by electronic products. We focus on the market for power semiconductors that are capable of processing greater than 200 watts of power.

We also design, manufacture and sell integrated circuits for a variety of applications. Our microcontrollers provide application-specific, embedded system-on-chip, or SoC, solutions for the industrial and consumer markets. Our analog and mixed-signal ICs are principally used in telecommunications applications. Our mixed-signal application-specific ICs, or ASICs, address the requirements of the medical imaging equipment and display markets. Our power management and control ICs are used in conjunction with our power semiconductors.

Our systems include laser diode drivers, high voltage pulse generators and modulators, and high power subsystems, sometimes known as stacks, that are principally based on our high power semiconductor devices. Our RF power semiconductors enable circuitry that amplifies or receives radio frequencies in wireless and other microwave communication applications, medical imaging applications and defense and space applications.

Over the past three quarters, our net revenues have changed modestly from quarter to quarter in no significant pattern. Our net revenues from sales of power semiconductors and systems and RF power semiconductors increased in the quarter ended December 31, 2016 compared to the quarter ended September 30, 2016 while our net revenues from sales of ICs decreased. Comparing the same periods, sales to major application markets increased, except for the consumer products market. Geographically, sales to the North America region and the Europe and Middle East region increased while sales to the Asia Pacific region decreased. Our net revenues through distribution and our net revenues from original equipment manufacturers, or OEMs, both increased. Our selling, general and administrative expenses, or SG&A expenses, were fairly consistent in terms of dollar amount and as a percentage of net revenues in the quarter ended December 31, 2016 when compared to the quarter ended September 30, 2016. In future periods, we expect our SG&A expenses to remain fairly consistent, except to the extent that selling expenses vary with changing revenues. Comparing the same periods, our research, development and engineering expenses, or R&D expenses, decreased in dollar amount and as a percentage of net revenues due to the timing of project-related purchases. We expect our R&D expenses to return to historical levels in the upcoming quarters.

Critical Accounting Policies and Significant Management Estimates

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the reasonableness of its estimates. Management bases its estimates on historical experience and on various assumptions that are believed 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 available from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies require that we make significant judgments and estimates in preparing our consolidated financial statements.

Revenue recognition. Revenue is recognized when there is persuasive evidence that an arrangement exists, when delivery has occurred, when the price to the buyer is fixed or determinable and when collectability of the receivable is reasonably assured. These elements are typically met when title to the products is passed to the buyer, which is generally when product is shipped to the customer with sale terms ex-works, or when product is delivered to the customer with sales terms delivered duty paid.

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We sell to distributors and original equipment manufacturers. Approximately 58.2% of our net revenues in the nine months ended December 31, 2016 and 56.9% of our net revenues in the nine months ended December 31, 2015 were from distributors. We provide some of our distributors with the following programs: stock rotation and ship and debit.

Reserves for sales returns and allowances, including allowances for so called “ship and debit” transactions, are recorded at the time of shipment, and are based on historical levels of returns and current economic trends and changes in customer demand.

Accounts receivable from distributors are recognized and inventory is relieved when title to inventories transfer, typically upon shipment from us, at which point we have a legally enforceable right to collection under normal payment terms. Under certain circumstances, where we are not able to reasonably and reliably estimate the actual returns, revenues and costs relating to distributor sales are deferred until products are sold by the distributors to the distributors’ end customers. Deferred amounts are presented net and included under “Accrued expenses and other liabilities.”

We state our revenues net of any taxes collected from customers that are required to be remitted to various government agencies. The amount of taxes collected from customers and payable to governmental entities is included under “Accrued expenses and other liabilities.”

Allowance for sales returns. We maintain an allowance for sales returns based on estimated product returns by our customers. We estimate our allowance for sales returns based on our historical return experience, current economic trends, changes in customer demand, known returns we have not received and other assumptions. If we were to make different judgments or utilize different estimates, the amount and timing of our revenue could be materially different. Given that our revenues consist of a high volume of relatively similar products, to date our actual returns and allowances have not fluctuated significantly from period to period, and our returns provisions have historically been reasonably accurate. This allowance is included as part of “Accounts receivable, net” on the balance sheet and as a reduction of revenues in the statement of operations.

Allowance for stock rotation. We also provide “stock rotation” to select distributors. The rotation allows distributors to return a percentage of the previous six months’ sales in exchange for orders of an equal or greater amount. Under the program, approximately $1,205,000 and $1,168,000 of products were returned to us in the nine months ended December 31, 2016 and 2015, respectively. We establish the allowance for sales to distributors except in cases where the revenue recognition is deferred and recognized upon sale by the distributor of products to the end-customer. The allowance, which is management’s best estimate of future returns, is based upon the historical experience of returns and inventory levels at the distributors. This allowance is included as part of “Accounts receivable, net” on the balance sheet and as a reduction of revenues in the statement of operations. Should distributors increase stock rotations beyond our estimates, these statements would be adversely affected.

Allowance for ship and debit. Ship and debit is a program designed to assist distributors in meeting competitive prices in the marketplace on sales to their end-customers. Ship and debit requires a request from the distributor for a pricing adjustment for a specific part for a customer sale to be shipped from the distributor’s stock. We have no obligation to accept this request. However, it is our historical practice to allow some companies to obtain pricing adjustments for inventory held. We receive periodic statements regarding our products held by our distributors. Ship and debit authorizations may cover current and future distributor activity for a specific part for sale to a distributor’s customer. At the time we record sales to distributors, we provide an allowance for the estimated future distributor activity related to such sales since it is probable that such sales to distributors will result in ship and debit activity. The sales allowance requirement is based on sales during the period, credits issued to distributors, distributor inventory levels, historical trends, market conditions, pricing trends we see in our direct sales activity with original equipment manufacturers and other customers, and input from sales, marketing and other key management. We believe that the analysis of these inputs enables us to make reliable estimates of future credits under the ship and debit program. This analysis requires the exercise of significant judgments. Our actual results to date have approximated our estimates. At the time the distributor ships the part from stock, the distributor debits us for the authorized pricing adjustment. This allowance is included as part of “Accounts receivable, net” on the balance sheet and as a reduction of revenues in the statement of operations. If competitive pricing were to decrease sharply and unexpectedly, our estimates might be insufficient, which could significantly adversely affect our operating results.

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Additions to the ship and debit allowance are estimates of the amount of expected future ship and debit activity related to sales during the period. Additions to the allowance reduce revenues and gross profit in the period. The following table sets forth the beginning and ending balances of, additions to, and deductions from, our allowance for ship and debit during the nine months ended December 31, 2016 (in thousands):

	(unaudited)
Balance at March 31, 2016	$	866
Additions		1,493
Deductions		(1,273	)
Balance at June 30, 2016		1,086
Additions		2,020
Deductions		(1,660	)
Balance at September 30, 2016	$	1,446
Additions		1,862
Deductions		(1,976	)
Balance at December 31, 2016	$	1,332

Trade accounts receivable and allowance for doubtful accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in the existing accounts receivable. We determine the allowance based on the aging of our accounts receivable, the financial condition of our customers and their payment history, our historical write-off experience and other assumptions. Past due balances and other specified accounts as necessary are reviewed individually. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Actual write-offs may be in excess of the recorded allowance. This allowance is reported on the balance sheet as part of “Accounts receivable, net” and is included on the statement of operations as part of SG&A expenses.

Inventories. Inventories are recorded at the lower of standard cost, which approximates actual cost on a first-in-first-out basis, or market value. Our accounting for inventory costing is based on the applicable expenditure incurred, directly or indirectly, in bringing the inventory to its existing condition. Such expenditures include acquisition costs, production costs and other costs incurred to bring the inventory to its use. As it is impractical to track inventory from the time of purchase to the time of sale for the purpose of specifically identifying inventory cost, our inventory is, therefore, valued based on a standard cost, given that the materials purchased are identical and interchangeable at various production processes. We review our standard costs on an as-needed basis but in any event at least once a year, and update them as appropriate to approximate actual costs. The authoritative guidance provided by Financial Accounting Standards Board, or FASB, requires certain abnormal expenditures to be recognized as expenses in the current period instead of capitalized in inventory. It also requires that the amount of fixed production overhead allocated to inventory be based on the normal capacity of the production facilities.

We typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. The value of our inventories is dependent on our estimate of future demand as it relates to historical sales. If our projected demand is overestimated, we may be required to reduce the valuation of our inventories below cost. We regularly review inventory quantities on hand and record an estimated provision for excess inventory based primarily on our historical sales and expectations for future use. We also recognize a reserve based on known technological obsolescence, when appropriate. Actual demand and market conditions may be different from those projected by our management. This could have a material effect on our operating results and financial position. If we were to make different judgments or utilize different estimates, the amount and timing of our write-down of inventories could be materially different.

Excess inventory frequently remains saleable. When excess inventory is sold, it yields a gross profit margin of up to 100%. Sales of excess inventory have the effect of increasing the gross profit margin beyond that which would otherwise occur, because of previous write-downs. Once we have written down inventory below cost, we do not write it up when it is subsequently utilized, sold or scrapped. We do not physically segregate excess inventory nor do we assign unique tracking numbers to it in our accounting systems. Consequently, we cannot isolate the sales prices of excess inventory from the sales prices of non-excess inventory. Therefore, we are unable to report the amount of gross profit resulting from the sale of excess inventory or quantify the favorable impact of such gross profit on our gross profit margin.

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The following table provides information on our excess and obsolete inventory reserve charged against inventory at cost (in thousands):

	(unaudited)
Balance at March 31, 2016	$	21,380
Utilization or sale		(1,040	)
Scrap		(867	)
Additional accrual		1,363
Foreign currency translation adjustments		(173	)
Balance at June 30, 2016		20,663
Utilization or sale		(1,060	)
Scrap		(609	)
Additional accrual		1,233
Foreign currency translation adjustments		11
Balance at September 30, 2016		20,238
Utilization or sale		(898	)
Scrap		(1,233	)
Additional accrual		1,951
Foreign currency translation adjustments		(355	)
Balance at December 31, 2016	$	19,703

The practical efficiencies of wafer fabrication require the manufacture of semiconductor wafers in minimum lot sizes. Often, when manufactured, we do not know whether or when all the semiconductors resulting from a lot of wafers will sell. With more than 10,000 different part numbers for semiconductors, excess inventory resulting from the manufacture of some of those semiconductors will be continual and ordinary. Because the cost of storage is minimal when compared to the potential value and because our products do not quickly become obsolete, we expect to hold excess inventory for potential future sale for years. Consequently, we have no set time line for the utilization, sale or scrapping of excess inventory.

In addition, our inventory is also being written down to the lower of cost or market. We review our inventory listing on a quarterly basis for an indication of losses being sustained for costs that exceed selling prices less direct costs to sell. When it is evident that our selling price is lower than current cost, inventory is marked down accordingly. Our lower of cost or market reserves were $274,000 and $409,000, respectively, as of December 31, 2016 and March 31, 2016.

Furthermore, we perform an annual inventory count and at certain locations periodic cycle counts for specific parts that have a high turnover. We also periodically identify any inventory that is no longer usable and write it off.

Valuation of Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired. The costs of acquired intangible assets are recorded at fair value at acquisition. Intangible assets with finite lives are amortized using the straight-line method or accelerated method over their estimated useful lives and evaluated for impairment in accordance with the authoritative guidance provided by FASB.

Goodwill and intangible assets with indefinite lives are reviewed at least annually for impairment charges during the quarter ending March 31, or more frequently if events and circumstances indicate that the asset might be impaired, in accordance with the authoritative guidance provided by FASB. We first assess qualitative factors to determine whether it is necessary to perform the two-step fair value-based impairment test described below. If we believe that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required.

Under the quantitative approach, there are two steps in the determination of the impairment of goodwill. The first step compares the carrying amount of the net assets to the fair value of the reporting unit. The second step, if necessary, recognizes an impairment loss to the extent the carrying value of the reporting unit’s net assets exceeds the implied fair value of goodwill. An impairment loss would be recognized to the extent that the carrying amount exceeds the fair value of the reporting unit. We operate our business as one reporting unit.

We assess the recoverability of the finite-lived intangible assets by examining the occurrences of certain events or changes of circumstances that indicate that the carrying amounts may not be recoverable. After our initial assessment, if it is necessary, we perform the impairment test by determining whether the estimated undiscounted cash flows attributable to the assets in question are less than their carrying values. Impairment losses, if any, are measured as the amount by which the carrying values of the assets exceed their fair value and are recognized in operating results. If a useful life is determined to be shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. During the quarter ended December 31, 2016, the intangible assets resulting from the RadioPulse acquisition were determined to be fully impaired and an impairment charge of $1.4 million was recognized.

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Income tax. In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our unaudited condensed consolidated balance sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. A valuation allowance reduces our deferred tax assets to the amount that management estimates is more likely than not to be realized. In determining the amount of the valuation allowance, we consider income over recent years, estimated future taxable income, feasible tax planning strategies and other factors in each taxing jurisdiction in which we operate. If we determine that it is more likely than not that we will not realize all or a portion of our remaining deferred tax assets, then we will increase our valuation allowance with a charge to income tax expense. Conversely, if we determine that it is likely that we will ultimately be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, then the related portion of the valuation allowance will reduce income tax expense. Significant management judgment is required in determining our provision for income taxes and potential tax exposures, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish a valuation allowance, which could materially impact our financial position and results of operations. Our ability to utilize our deferred tax assets and the need for a related valuation allowance are monitored on an ongoing basis.

Furthermore, computation of our tax liabilities involves examining uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on the two-step process as prescribed by the authoritative guidance provided by FASB. The first step is to evaluate the tax position to determine whether there is sufficient available evidence to indicate if 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 and determine the approximate amount of the tax benefit at the largest amount that is more than 50% likely of being realized upon ultimate settlement with the tax authorities. It is inherently difficult and requires significant judgment to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We reexamine these uncertain tax positions on a quarterly basis. This reassessment is based on various factors during the period including, but not limited to, changes in worldwide tax laws and treaties, changes in facts or circumstances, effectively settled issues under audit and any new audit activity. A change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our unaudited condensed consolidated financial statements, see Note 2, “Recent Accounting Pronouncements and Accounting Changes” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.

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Results of Operations — Three and Nine Months Ended December 31, 2016 and 2015

The following table sets forth selected consolidated statements of operations data for the fiscal periods indicated and the percentage change in such data from period to period. These historical operating results may not be indicative of the results for any future periods.

	Three Months Ended							Nine Months Ended
	December 31,							December 31,
	2016		% change			2015		2016		% change			2015
	(unaudited)							(unaudited)
	(000)					(000)		(000)					(000)
Net revenues	$	79,484		5.8		$	75,133	$	238,751		0.6		$	237,437
Cost of goods sold		52,545		2.8			51,104		162,363		0.4			161,794
Gross profit	$	26,939		12.1		$	24,029	$	76,388		1.0		$	75,643
Operating expenses:
Research, development and engineering	$	6,703		(7.9	)	$	7,280	$	22,461		(1.3	)	$	22,767
Selling, general and administrative		10,276		12.2			9,158		30,454		2.9			29,595
Amortization of acquisition-related intangible assets		750		(43.6	)		1,329		2,463		(42.5	)		4,282
Impairment of acquisition-related intangible assets		1,391		nm			—		1,391		nm			—
Total operating expenses	$	19,120		7.6		$	17,767	$	56,769		0.2		$	56,644

The following table sets forth selected statements of operations data as a percentage of net revenues for the fiscal periods indicated. These historical operating results may not be indicative of the results for any future periods.

	% of Net Revenues Three Months Ended December 31,						% of Net Revenues Nine Months Ended December 31,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Net revenues		100.0			100.0			100.0			100.0
Cost of goods sold		66.1			68.0			68.0			68.1
Gross profit		33.9			32.0			32.0			31.9
Operating expenses:
Research, development and engineering		8.4			9.7			9.4			9.6
Selling, general and administrative		12.9			12.2			12.8			12.5
Amortization of acquisition-related intangible assets		1.0			1.8			1.0			1.8
Impairment of acquisition-related intangible assets		1.8			—			0.6			—
Total operating expenses		24.1			23.7			23.8			23.9
Operating income		9.8			8.3			8.2			8.0
Other income (expense), net		(0.8	)		(0.1	)		(0.2	)		(1.0	)
Income before income tax provision		9.0			8.2			8.0			7.0
Provision for income tax		(2.6	)		(5.2	)		(3.0	)		(3.4	)
Net income		6.4			3.0			5.0			3.6

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Revenues

The following table sets forth the net revenues for each of our product groups for the fiscal periods indicated:

Net Revenues (1)

	Three Months Ended December 31,							Nine Months Ended December 31,
	2016		% change			2015		2016		% change			2015
	(unaudited)							(unaudited)
	(000)					(000)		(000)					(000)
Power semiconductors	$	54,647		6.7		$	51,196	$	164,663		3.2		$	159,607
Integrated circuits		20,032		6.8			18,749		60,967		(3.6	)		63,257
Systems and RF power semiconductors		4,805		(7.4	)		5,188		13,121		(10.0	)		14,573
Total	$	79,484		5.8		$	75,133	$	238,751		0.6		$	237,437

(1) Net revenues include $59,000 and $309,000 of intellectual property revenues in integrated circuits during the three and nine months ended December 31, 2016, respectively, as compared to $139,000 and $666,000 for the three and nine months ended December 31, 2015, respectively. Intellectual property revenues are not included in average selling prices.

The following tables set forth the average selling prices, or ASPs, and units for the fiscal periods indicated:

Average Selling Prices

	Three Months Ended December 31,							Nine Months Ended December 31,
	2016		% change			2015		2016		% change			2015
	(unaudited)							(unaudited)
Power semiconductors	$	1.79		(12.7	)	$	2.05	$	1.76		(7.9	)	$	1.91
Integrated circuits	$	0.46		—		$	0.46	$	0.45		2.3		$	0.44
Systems and RF power semiconductors	$	57.89		(38.6	)	$	94.33	$	31.77		(26.5	)	$	43.24

Units

	Three Months Ended December 31,						Nine Months Ended December 31,
	2016		% change		2015		2016		% change			2015
	(unaudited)						(unaudited)
	(000)				(000)		(000)					(000)
Power semiconductors		30,547		22.3		24,983		93,760		12.4			83,414
Integrated circuits		43,112		7.3		40,169		133,450		(6.6	)		142,822
Systems and RF power semiconductors		83		50.9		55		413		22.6			337
Total		73,742		13.1		65,207		227,623		0.5			226,573

The following table sets forth the net revenue by geographic region for the fiscal periods indicated:

	Three Months Ended December 31,								Nine Months Ended December 31,
	2016				2015				2016				2015
	Net Revenues		% of Net Revenues		Net Revenues		% of Net Revenues		Net Revenues		% of Net Revenues		Net Revenues		% of Net Revenues
	(unaudited)								(unaudited)
	(000)				(000)				(000)				(000)
Europe and Middle East	$	22,959		28.9	$	22,443		29.9		68,379		28.6	$	67,740		28.5
Asia Pacific		33,692		42.4		32,229		42.9		103,701		43.4		105,295		44.3
Rest of world		2,228		2.8		2,127		2.8		6,380		2.7		6,618		2.9
International revenues	$	58,879		74.1	$	56,799		75.6		178,460		74.7	$	179,653		75.7
USA		20,605		25.9		18,334		24.4		60,291		25.3		57,784		24.3
Total	$	79,484		100.0	$	75,133		100.0		238,751		100.0	$	237,437		100.0

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The 5.8% increase in net revenues in the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 reflected an increase of $3.5 million, or 6.7%, in the sale of power semiconductors and an increase of $1.3 million, or 6.8%, in the sale of ICs, offset by a decrease of $383,000, or 7.4%, in the sale of systems and RF power semiconductors. The increase in the net revenues from power semiconductors was largely the result of a $2.1 million increase in the sale of metal-oxide-silicon, or MOS, products primarily to the communication infrastructure market and a $1.6 million increase in sale of bipolar devices principally to the medical market and the industrial and commercial market. The increase in the net revenues from ICs was mainly due to a $1.8 million increase in the sale of solid-state relays, or SSRs, primarily to the industrial and commercial market, partially offset by a decrease in the sale of microcontrollers principally to the consumer products market. The decrease in revenues from the sale of systems and RF power semiconductor devices was primarily due to a decrease of $1.4 million in the sale of subassemblies primarily to the automotive and traction market, partially offset by an increase of $1.1 million in the sale of RF power semiconductor products primarily to the military and aerospace industry.

Our net revenues, which increased by 0.6% in the nine months ended December 31, 2016 as compared to the nine months ended December 31, 2015, reflected an increase of $5.1 million, or 3.2%, in the sale of power semiconductors, offset by a decrease of $2.3 million, or 3.6%, in the sale of ICs and a decrease of $1.5 million, or 10.0%, in the sale of systems and RF power semiconductors. The increase in the net revenues from power semiconductors was largely the result of a $5.8 million increase in the sale of MOS products primarily to the consumer market and the communication infrastructure market, partially offset by a decrease in sale of bipolar devices primarily to the industrial and commercial market. The decrease in the net revenues from ICs was mainly due to a $4.6 million decrease in the sale of microcontrollers to the consumer products market, partially offset by a $3.4 million increase in the sale of SSRs primarily to the industrial and commercial market. The decrease in revenues from the sale of systems and RF power semiconductor devices was due to a decrease of $3.7 million in the sale of subassemblies primarily to the automotive and traction and the industrial and commercial markets, partially offset by an increase of $2.2 million in the sale of RF power semiconductor products to the military and aerospace industry and the communication infrastructure market.

For the three and nine months ended December 31, 2016 as compared to the same periods of the previous fiscal year, the decreases in the ASPs of power semiconductors were primarily due to a decrease in the ASPs of bipolar devices. The decreases in the ASPs for bipolar products were caused by a shift in product mix as we shipped higher quantities of lower-priced products. For the three months ended December 31, 2016 as compared to the same period of the previous fiscal year, the ASPs of ICs remained consistent. The increase in the ASPs of ICs in the nine months ended December 31, 2016 as compared to the same period of the prior year was mainly due to shifts in product mix toward higher-priced ICs. The decrease in the ASPs of systems and RF power semiconductors in the three months ended December 31, 2016 as compared to the same period of the prior year was due to a decrease in the ASPs of RF power semiconductors, partially offset by an increase in the ASPs of subassemblies. The decrease in the ASPs of systems and RF power semiconductors in the nine months ended December 31, 2016 as compared to the same period of the prior year was due to a decrease in the ASPs of subassemblies, partially offset by an increase in the ASPs of RF power semiconductors.

For the three and nine months ended December 31, 2016 as compared to the three and nine months ended December 31, 2015, the increases in unit shipments of our power semiconductors were caused by more MOS products and bipolar devices being shipped because of a shift in product mix as we sold more lower-priced products. The increase in IC units in the three months ended December 31, 2016 as compared to the same period of the prior year was principally caused by higher shipments of SSRs and ASICs. The decrease in IC units in the nine months ended December 31, 2016 as compared to the same period of the prior year was principally caused by lower shipments of microcontrollers, partially offset by higher shipments of SSRs and ASICs. The increase in systems and RF power semiconductor units in the three months ended December 31, 2016 as compared to the same period in the prior year was caused by higher shipments of RF power semiconductors, partially offset by lower shipments of subassemblies. The increase in systems and RF power semiconductor units in the nine months ended December 31, 2016 as compared to the same period in the prior year was caused by higher shipments of RF power semiconductors and subassemblies.

For the three months ended December 31, 2016 as compared to the same period in the prior year, our sales increased in North America region, Europe and the Middle East region and the Asia Pacific region. For the nine months ended December 31, 2016 as compared to the same period in the prior year, our sales to the North America region and Europe and the Middle East region increased while our sales to the Asia Pacific region decreased.

For the three and nine months ended December 31, 2016, one distributor accounted for 11.7% and 13.1% of our net revenues in each period, respectively, and another distributor accounted for 11.2% and 10.9% of our net revenues, respectively. For the three and nine months ended December 31, 2015, the first distributor referenced above accounted for 13.9% and 12.0% of our net revenues, respectively.

Our net revenues were reduced by allowances for sales returns, stock rotations and ship and debit. See “Critical Accounting Policies and Significant Management Estimates” elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Gross Profit

Gross profit increased by $2.9 million in the three months ended December 31, 2016 as compared to the three months ended December 31, 2015. Gross profit margin was 33.9% in the three months ended December 31, 2016 as compared to 32.0% in the three months ended December 31, 2015. The gross profit margin improved in the three month period as compared to the same period in the prior year due to a shift in product mix towards higher-margin products, offset by higher manufacturing variances.

Gross profit increased by $745,000 in the nine months ended December 31, 2016 as compared to the same period ended December 31, 2015. Gross profit margin was 32.0% in the nine months ended December 31, 2016 as compared to 31.9% in the nine months ended December 31, 2015. The gross profit margin in the nine month period was fairly consistent with that of the same period in the prior year.

Our gross profit and gross profit margin were positively affected by the sale or utilization of excess inventories, which had previously been written down. See “Critical Accounting Policies and Significant Management Estimates - Inventories” elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Research, Development and Engineering

R&D expenses typically consist of internal engineering efforts for product design, process improvement and development. As a percentage of net revenues, our R&D expenses for the three and nine months ended December 31, 2016 were 8.4% and 9.4%, respectively, as compared to 9.7% and 9.6% for the three and nine months ended December 31, 2015, respectively. For the three months ended December 31, 2016 as compared to the same period of the prior year, the decrease in the percentage resulted from higher net revenues and lower development expenses primarily due to the timing of project-related purchases. For the nine months ended December 31, 2016, R&D expenses were fairly consistent with the same period ended December 31, 2015.

Expressed in dollars, for the three and nine months ended December 31, 2016 as compared to the same periods of the prior year, our R&D expenses decreased by approximately $577,000 and $306,000, respectively.

Selling, General and Administrative

As a percentage of net revenues, our SG&A expenses for the three and nine months ended December 31, 2016 were 12.9% and 12.8% as compared to 12.2% and 12.5% for the three and nine months ended December 31, 2015, respectively. Expressed in dollars, for the three months ended December 31, 2016 as compared to the same period of the prior year, our SG&A expenses increased by approximately $1.1 million because of an increase in finance and administration expenses and a recovery of bad debt in the three months ended December 31, 2015, which had the effect of reducing SG&A expenses by $460,000. Our SG&A expenses in the nine months ended December 31, 2016 increased by approximately $859,000 due to a $1.2 million recovery of bad debt in the nine months ended December 31, 2015, partially offset by a decrease in selling expenses.

Amortization of Acquisition-Related Intangible Assets

For the three and nine months ended December 31, 2016, we recorded amortization expenses on acquired intangible assets of $750,000 and $2.5 million as compared to the amortization expenses of $1.3 million and $4.3 million, respectively, for the same periods in fiscal 2016.

Impairment of Acquisition-Related Intangible Assets

During the quarter ended December 31, 2016, the intangible assets resulting from the RadioPulse acquisition were determined to be fully impaired. Accordingly, we recorded an impairment charge of $1.4 million during the quarter ended December 31, 2016. See Note 9, “Intangible Assets” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding the impairment charge.

Interest Expense

During the three and nine months ended December 31, 2016, our interest expenses were $646,000 and $1.9 million, respectively, as compared to $432,000 and $1.0 million, respectively, for the three and nine months ended December 31, 2015. For both periods, the interest expenses increased due to additional borrowing under the revolving loan.

Other Income (Expense)

In the three months ended December 31, 2016, other expense, net, was $110,000, as compared to other income, net, of $290,000 in the three months ended December 31, 2015. In the nine months ended December 31, 2016, other income, net, was $1.3 million, as compared to other expense, net, of $1.5 million in the nine months ended December 31, 2015. The shift from other income, net, in the three month period ended December 31, 2015 to other expense, net, in the comparable period of fiscal 2017 was primarily caused by losses associated with changes in exchange rates for foreign currency transactions. The shift from other expense, net, in the nine month periods ended December 31, 2015 to other income, net, in the comparable period of fiscal 2017 was primarily caused by gains associated with changes in exchange rates for foreign currency transactions during the two quarters ended September 30, 2016 and gains from equity method investments.

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Provision for Income Tax

For the three and nine months ended December 31, 2016, we recorded income tax provisions of $2.0 million and $7.2 million, reflecting effective tax rates of 28.6% and 37.3%, respectively. For the three and nine months ended December 31, 2015, we recorded income tax provisions of $3.9 million and $8.1 million, reflecting effective tax rates of 63.0% and 48.5%, respectively. Our effective tax rates for the three and nine months ended December 31, 2016 were affected by valuation allowances against net operating losses generated in certain foreign jurisdictions and by a release of tax reserves resulting from the lapse of the statutes of limitations.

During the three and nine months ended December 31, 2015, we recorded out-of-period adjustments that increased the income tax provision by a net amount of $1.4 million. See Note 16, “Income Taxes” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding the adjustment. We believe that these out-of-period adjustments are not material to our financial statements for the relevant years. Additionally, for the three and nine months ended December 31, 2015, the effective tax rates were also affected by losses that could not be offset against other profits in certain jurisdictions with lower tax rates and by estimates of annual income in domestic and foreign jurisdictions.

Liquidity and Capital Resources

At December 31, 2016, cash and cash equivalents and restricted cash were $159.8 million as compared to $156.1 million at March 31, 2016.

Our cash provided by operating activities for the nine months ended December 31, 2016 was $24.9 million, an increase of approximately $1.2 million as compared to the $23.7 million of cash provided by operating activities in the comparable period of the prior year.

The increase in cash provided by operating activities was principally caused by an increase in cash received from our customers related to the increase in net revenues, an increase in the balance of accrued liabilities and a reduction in the balance of inventory, partially offset by an increase in the balance of accounts receivable.

Our net cash used in investing activities for the nine months ended December 31, 2016 was $8.9 million as compared to net cash used in investing activities of $20.3 million during the nine months ended December 31, 2015. During the nine months ended December 31, 2016, we spent $6.2 million on the purchase of property and equipment and $3.5 million on the purchase of investments. During the nine months ended December 31, 2015, we spent $14.5 million, net of cash and cash equivalents and restricted cash on an acquisition and $5.3 million on the purchase of property and equipment.

For the nine months ended December 31, 2016, net cash used in financing activities was $8.1 million as compared to net cash provided by financing activities of $30.4 million in the nine months ended December 31, 2015. During the nine months ended December 31, 2016, we used $8.8 million for principal repayments on loan obligations and $1.3 million for cash dividends, offset by proceeds from employee equity plans of $1.9 million. During the nine months ended December 31, 2015, we received proceeds of $83.0 million from loans and $4.3 million from employee equity plans, offset by $46.7 million of principal repayments on capital lease and loan obligations, $6.4 million to repurchase our common stock and $3.6 million of cash dividends.

At December 31, 2016, loans payable totalled $78.4 million, consisting of an outstanding loan balance of $5.1 million from IKB Deutsche Industriebank, or IKB, a revolving loan of $73.0 million under a Revolving Credit Agreement, and $283,000 of loans assumed upon business acquisitions. Of the loans payable, $976,000 is classified as a short-term loan and included in “Current portion of loans payable” in our unaudited consolidated balance sheet as of December 31, 2016. The loans payable of $78.4 million represented 49.1% of our cash and cash equivalents and restricted cash and 27.4% of our stockholders’ equity.

In April 2015, we borrowed €6.5 million, or about $7.2 million at the time, from IKB. The loan has a term ending March 31, 2022 and bears a fixed annual interest rate of 1.75%. Each fiscal quarter, a principal payment of €232,000, or about $244,000, and a payment of accrued interest are required. See Note 10, “Borrowing Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding the loan.

On November 20, 2015, we entered into a Revolving Credit Agreement with a syndicate of banks for a line of credit of $125.0 million. In December 2016, the term of the loan was extended to November 20, 2019. As of December 31, 2016, the outstanding principal balance was $73.0 million. See Note 10, “Borrowing Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding the credit agreement. The credit agreement also includes a $10.0 million letter of credit subfacility. See Note 17, “Commitments and Contingencies” and Note 10, “Borrowing Arrangements” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding the terms of our credit arrangements.

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During the nine months ended December 31, 2016, we paid $1.3 million in cash dividends, consisting of a dividend of $0.04 per share for the first quarter ended June 30, 2016. No dividends were declared for the two quarters ended December 31, 2016. The quarterly dividend is at the discretion of the Board of Directors.

Additionally, we maintain three defined benefit pension plans: one in the United Kingdom, one in Germany and one in the Philippines. Benefits are based on years of service and the employees’ compensation. We either deposit funds for these plans with financial institutions, consistent with the requirements of local law, or accrue for the unfunded portion of the obligations. The United Kingdom and German plans have been curtailed. As such, the plans are closed to new entrants and no credit is provided for additional periods of service. The total pension liability accrued for the three plans at December 31, 2016 was $14.3 million.

We believe that our cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our anticipated cash requirements for the next 12 months. Our liquidity could be negatively affected by a decline in demand for our products, increases in the cost of materials or labor, investments in new product development, one or more acquisitions, or the inability to renew or replace our revolving line of credit in whole or in part. From time to time, we use derivative contracts in the normal course of business to manage our foreign currency exchange and interest rate risks. We did not have any open derivative contracts at December 31, 2016. There can be no assurance that additional debt or equity financing will be available when required or, if available, can be secured on terms satisfactory to us.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our market risk has not changed materially from the market risk disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2016.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Based on their evaluation as of December 31, 2016, our Chief Executive Officers, one of whom is also the Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations. Furthermore, these controls and procedures were also effective to ensure that information required to be disclosed by us in this Quarterly Report on Form 10-Q was accumulated and communicated to our management, including our Chief Executive Officers, to allow timely decisions regarding required disclosures.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officers, does not expect that our procedures or our internal controls will prevent or detect all errors and all fraud. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of our controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, have been detected.

Changes in Internal Controls over Financial Reporting

During the quarter ended December 31, 2016, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We currently are involved in a variety of legal matters that arise in the normal course of business. Based on information currently available, management does not believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition, results of operations and cash flows. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations of the period in which the ruling occurs.

Item 1A. Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, the following risk factors should be considered carefully in evaluating our business and us. Additional risks not presently known to us or that we currently believe are not serious may also impair our business and its financial condition.

Our operating results fluctuate significantly because of a number of factors, many of which are beyond our control.

Given the nature of the markets in which we participate, as well as macroeconomic uncertainties, we cannot reliably predict future revenues and profitability and unexpected changes may cause us to adjust our operations. Large portions of our costs are fixed, due in part to our significant sales, research and development and manufacturing costs. Thus, small declines in revenues could seriously negatively affect our operating results in any given quarter. Our operating results may fluctuate significantly from quarter-to-quarter and year-to-year. For example, from fiscal 2008 to fiscal 2009, net income in one year shifted to net loss in the next year. Some of the factors that may affect our quarterly and annual results are:

• changes in business and economic conditions, including a downturn in demand or decrease in the rate of growth in demand, whether in the global economy, a regional economy or the semiconductor industry;

• changes in market conditions, potentially including changes in the credit markets, currency exchange rates, expectations for inflation or energy prices;

• the reduction, rescheduling or cancellation of orders by customers;

• fluctuations in timing and amount of customer requests for product shipments;

• changes in the mix of products that our customers purchase;

• changes in the level of customers’ component inventories;

• loss of key customers or employees;

• the availability of production capacity, whether internally or from external suppliers;

• the cyclical nature of the semiconductor industry;

• competitive pressures on selling prices;

• strategic actions taken by our competitors;

• market acceptance of our products and the products of our customers;

• fluctuations in our manufacturing yields and significant yield losses;

• difficulties in forecasting demand for our products and the planning and managing of inventory levels;

• the availability of raw materials, supplies and manufacturing services from third parties;

• the amount and timing of investments in research and development;

• damage awards or injunctions as the result of litigation;

• changes in our product distribution channels and the timeliness of receipt of distributor resale information;

• the impact of vacation schedules and holidays, largely during the second and third quarters of our fiscal year; and

• the amount and timing of costs associated with product returns.

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As a result of these factors, many of which are difficult to control or predict, as well as the other risk factors discussed in this Quarterly Report on Form 10-Q, we may experience materially adverse fluctuations in our future operating results on a quarterly or annual basis. Changes in demand for our products and in our customers’ product needs could have a variety of negative effects on our competitive position and our financial results, and, in certain cases, may reduce our revenues, increase our costs, lower our gross margin percentage or require us to recognize impairments of our assets. If product demand declines, our manufacturing or assembly and test capacity could be underutilized and we may be required to record an impairment on our long-lived assets, including facilities and equipment as well as intangible assets and goodwill, which would increase our expenses. Factory planning decisions may also shorten the useful lives of long-lived assets, including facilities and equipment, and cause us to accelerate depreciation. In addition, if product demand declines or we fail to forecast demand accurately, we could be required to write off inventory or record underutilization charges, which would have a negative impact on our gross margin.

We may not be successful in our acquisitions.

We have in the past made, and may in the future make, acquisitions of other technologies and companies. These acquisitions involve numerous risks, including:

• failure to retain key personnel of the acquired business;

• diversion of management’s attention during the acquisition process;

• disruption of our ongoing business;

• the potential strain on our financial and managerial controls and reporting systems and procedures;

• unanticipated expenses and potential delays related to integration of an acquired business;

• the risk that we will be unable to develop or exploit acquired technologies;

• the engineering risks inherent in transferring products from one wafer fabrication facility to another;

• failure to successfully integrate the operations of an acquired business with our own;

• the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions;

• the risk that our markets do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets;

• the risks of entering new markets in which we have limited experience;

• difficulties in expanding our information technology systems or integrating disparate information technology systems to accommodate the acquired businesses;

• the challenges inherent in managing an increased number of employees and facilities and the need to implement appropriate policies, benefits and compliance programs;

• customer dissatisfaction or performance problems with an acquired company’s products or personnel or with altered sales terms or a changed distribution channel;

• adverse effects on our relationships with suppliers;

• the reduction in financial stability associated with the incurrence of debt or the use of a substantial portion of our available cash;

• the costs associated with acquisitions, including amortization expenses related to intangible assets, and the integration of acquired operations;

• assumption of known or unknown liabilities or other unanticipated events or circumstances; and

• failure or fraud in pre-acquisition due diligence.

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We cannot assure that we will be able to successfully acquire other businesses or product lines or integrate them into our operations without substantial expense, delay in implementation or other operational or financial problems.

As a result of an acquisition, our financial results may differ from the investment community’s expectations in a given quarter. Further, if one or more of the foregoing risks materialize or market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions. If we do not realize the expected benefits or synergies of such transactions, our consolidated financial position, results of operations, cash flows or stock price could be negatively impacted.

Our backlog may not result in future revenues.

Customer orders typically can be cancelled or rescheduled by the customer without penalty to the customer. Cancellations or reschedulings are common in periods of decreasing demand. Further, in periods of increasing demand, particularly when production is allocated or delivery delayed, customers of semiconductor companies have on occasion placed orders without expectation of accepting delivery to increase their share of allocated product or in an effort to improve the timeliness of delivery. While we are attuned to the potential for such behavior and attempt to identify such orders, we could accept orders of this nature and subsequently experience order cancellation unexpectedly.

Our backlog at any particular date is not necessarily indicative of actual revenues for any succeeding period. A reduction of backlog during any particular period, or the failure of our backlog to result in future revenues, could harm our results of operations.

Fluctuations in the mix of products sold may adversely affect our financial results.

Changes in the mix and types of products sold may have a substantial impact on our revenues and gross profit margins. In addition, more recently introduced products tend to have higher associated costs because of initial overall development costs and higher start-up costs. Fluctuations in the mix and types of our products may also affect the extent to which we are able to recover our fixed costs and investments that are associated with a particular product or wafer foundry, and, as a result, can negatively impact our financial results.

Our international operations expose us to material risks.

For the nine months ended December 31, 2016, our net revenues by region were approximately 25.3% in the United States, approximately 28.6% in Europe and the Middle East, approximately 43.4% in the Asia Pacific region and approximately 2.7% in India and the rest of the world. We expect net revenues from foreign markets to continue to represent a majority of total net revenues. We maintain significant business operations in Germany, the United Kingdom, the Philippines and South Korea and work with subcontractors, suppliers and manufacturers in South Korea, Japan, the Philippines and elsewhere in Europe and the Asia Pacific region. Some of the risks inherent in doing business internationally are:

• foreign currency fluctuations, particularly in the Euro and the British pound;

• longer payment cycles;

• challenges in collecting accounts receivable;

• changes in the laws, regulations or policies of the countries in which we manufacture or sell our products, including the impact of the vote in the United Kingdom to leave the European Union;

• trade restrictions, tariffs, customs, sanctions, embargoes and other barriers to importing/exporting materials and products in a cost effective and timely manner, or changes in applicable tariffs or custom rules;

• cultural and language differences;

• employment regulations;

• limited infrastructure in emerging markets;

• transportation delays;

• seasonal reduction in business activities;

• work stoppages;

• labor and union disputes;

• electrical outages;

• terrorist attack or war; and

• economic or political instability.

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Our sales of products manufactured in our Lampertheim, Germany facility and our costs at that facility are primarily denominated in Euros, and sales of products manufactured in our Chippenham, U.K. facility and our costs at that facility are primarily denominated in British pounds. Fluctuations in the value of the Euro and the British pound against the U.S. dollar could have a significant adverse impact on our balance sheet and results of operations. “Brexit,” the expected exit by the United Kingdom from the European Union, has, and in the future may, affect the value of the British pound and the Euro relative to one another and the U.S. dollar. We generally do not enter into foreign currency hedging transactions to control or minimize currency fluctuation risks. Reductions in the value of the Euro or British pound would reduce our revenues recognized in U.S. dollars, all other things being equal. Changes in the value of the Euro or the British pound could cause or increase losses associated with foreign currency transactions. Fluctuations in currency exchange rates could cause our products to become more expensive to customers in a particular country, leading to a reduction in sales or profitability in that country. Alternatively, fluctuations in currency exchange rates in the face of competitive pricing pressures could lead to lower gross profit margins, as customer prices in one currency fall relative to costs of production experienced in a different currency. If we expand our international operations or change our pricing practices to denominate prices in other foreign currencies, we could be exposed to even greater risks of currency fluctuations.

Our financial performance is dependent on economic stability and credit availability in international markets. Actions by governments to address deficits or sovereign or bank debt issues, particularly in Europe, could adversely affect gross domestic product or currency exchange rates in countries where we operate, which in turn could adversely affect our financial results. If our customers or suppliers are unable to obtain the credit necessary to fund their operations, we could experience increased bad debts, reduced product orders and interruptions in supplier deliveries leading to delays or stoppages in our production. Alternatively, governmental actions in China or other emerging markets to address economic problems, such as inflation, asset or other “bubbles” or the transfer of capital out of the country, could also adversely affect gross domestic product or the growth thereof and result in reduced product orders or increased bad debt expense for us. Brexit may result in additional tariffs on our products manufactured in the United Kingdom and sold elsewhere, resulting in competitive pricing pressures that may adversely affect our results of operations.

In addition, the laws and courts of certain foreign countries may not protect our products or intellectual property rights to the same extent as do U.S. laws and courts. Therefore, the risk of piracy of our technology and products may be greater when we manufacture or sell our products in certain foreign countries.

The semiconductor industry is cyclical, and an industry downturn could adversely affect our operating results.

Business conditions in the semiconductor industry may rapidly change from periods of strong demand and insufficient production to periods of weakened demand and overcapacity. The industry in general is characterized by:

• changes in product mix in response to changes in demand;

• alternating periods of overcapacity and production shortages, including shortages of raw materials supplies and manufacturing services;

• cyclical demand for semiconductors;

• significant price erosion;

• variations in manufacturing costs and yields;

• rapid technological change and the introduction of new products; and

• significant expenditures for capital equipment and product development.

These factors could harm our business and cause our operating results to suffer.

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Our dependence on subcontractors to assemble and test our products subjects us to a number of risks, including an inadequate supply of products and higher materials costs.

We depend on subcontractors for the assembly and testing of our products. The substantial majority of our products are assembled by subcontractors located outside of the United States. Assembly subcontractors generally work on narrow margins and have limited capital. We have encountered assembly subcontractors who have ceased or reduced production because of financial problems. We engage assembly subcontractors who operate while in insolvency proceedings or whose financial stability is uncertain. The unexpected cessation of production or reduction in production by one or more of our assembly subcontractors could adversely affect our production, our customer relations, our revenues and our financial condition. Our reliance on these subcontractors also involves the following significant risks:

• reduced control over delivery schedules and quality;

• the potential lack of adequate capacity during periods of excess demand;

• difficulties selecting and integrating new subcontractors;

• limited or no warranties by subcontractors or other vendors on products supplied to us;

• potential increases in prices due to capacity shortages and other factors;

• potential misappropriation of our intellectual property; and

• economic or political instability in foreign countries.

These risks may lead to delayed product delivery or increased costs, which would harm our profitability and customer relationships.

Further, we use only a limited number of subcontractors to assemble most of our products. If one or more of these key subcontractors experience financial, operational, production or quality assurance difficulties, we could experience a significant reduction or interruption in supply. Although we believe alternative subcontractors are available, our operating results could temporarily suffer until we engage one or more of those alternative subcontractors. Moreover, in engaging alternative subcontractors in exigent circumstances, our production costs could increase markedly.

We depend on external foundries to manufacture many of our products.

Of our net revenues for the nine months ended, December 31, 2016, 48.2% came from wafers manufactured for us by a number of external foundries. In particular, the wafers for all of our microcontrollers are fabricated at external foundries. Our dependence on external foundries may grow.

Our relationships with our external foundries do not guarantee prices, delivery or lead times or wafer or product quantities sufficient to satisfy current or expected demand. Generally, these foundries manufacture our products on a purchase order basis. We provide these foundries with rolling forecasts of our production requirements. However, the ability of each foundry to provide wafers to us is limited by the foundry’s available capacity. At any given time, these foundries could choose to prioritize capacity for their own use or other customers or reduce or eliminate deliveries to us. If growth in demand for our products occurs, our external foundries may be unable or unwilling to allocate additional capacity to our needs, thereby limiting our revenue growth. Accordingly, we cannot be certain that these foundries will allocate sufficient capacity to satisfy our requirements. In addition, we cannot be certain that we will continue to do business with these or other foundries on terms as favorable as our current terms. If we are not able to obtain foundry capacity as required, our relationships with our customers could be harmed, we could be unable to fulfill contractual requirements and our revenues could be reduced or our growth limited. Moreover, even if we are able to secure foundry capacity, we may be required, either contractually or as a practical business matter, to utilize all of that capacity or incur penalties or an adverse effect to the business relationship. The costs related to maintaining foundry capacity could be expensive and could harm our operating results. Other risks associated with our reliance on external foundries include:

• the lack of control over delivery schedules;

• the unavailability of, or delays in obtaining access to, key process technologies;

• limited control over quality assurance, manufacturing yields and production costs; and

• potential misappropriation of our intellectual property.

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Our requirements typically represent a small portion of the total production of the external foundries that manufacture our wafers and products. One or more of these external foundries may not continue to produce wafers for us or continue to advance the process design technologies on which the manufacturing of our products is based. If we are required to transition production from one foundry to another, we may make large last-time buys of product at the foundry that we are exiting, which could eventually result in substantial inventory write-offs if semiconductors are not sold or utilized. These circumstances could harm our ability to deliver our products or increase our costs.

Our gross margin is dependent on a number of factors, including our level of capacity utilization.

Semiconductor manufacturing requires significant capital investment, leading to high fixed costs, including depreciation expense. We are limited in our ability to reduce fixed costs quickly in response to any shortfall in revenues. If we are unable to utilize our manufacturing, assembly and testing facilities at a high level, the fixed costs associated with these facilities will not be fully absorbed, resulting in lower gross margins. Increased competition and other factors may lead to price erosion, lower revenues and lower gross margins for us in the future.

Our success depends on our ability to manufacture our products efficiently.

We manufacture our products in facilities that are owned and operated by us, as well as in external wafer foundries and subcontract assembly facilities. The fabrication of semiconductors is a highly complex and precise process, and a substantial percentage of wafers could be rejected or numerous dies on each wafer could be nonfunctional as a result of, among other factors:

• contaminants in the manufacturing environment;

• defects in the masks used to print circuits on a wafer;

• manufacturing equipment failure; or

• wafer breakage.

For these and other reasons, we could experience a decrease in manufacturing yields. Additionally, if we increase our manufacturing output, the additional demands placed on existing equipment and personnel or the addition of new equipment or personnel may lead to a decrease in manufacturing yields. As a result, we may not be able to cost-effectively expand our production capacity in a timely manner.

We order materials and commence production in advance of anticipated customer demand. Therefore, revenue shortfalls may also result in inventory write-downs.

We typically plan our production and inventory levels based on our own expectations for customer demand. Actual customer demand, however, can be highly unpredictable and can fluctuate significantly. In response to anticipated long lead times to obtain inventory and materials, we order materials and production in advance of customer demand. This advance ordering and production may result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize.

If our goodwill, acquired intangible assets or long-lived assets become impaired, we may be required to record a significant charge to earnings.

Under generally accepted accounting principles, goodwill is required to be tested for impairment at least annually and we review our acquired intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, acquired intangible assets or long-lived assets may not be recoverable include a decline in stock price and market capitalization, reduced future cash flows and slower growth rates in our industry. From time to time, we have recorded impairment charges and written down the value of goodwill or acquired intangible assets. For example, in the quarter ended December 31, 2016, we recorded a $1.4 million impairment charge relating to intangible assets acquired in the acquisition of RadioPulse.

Costs related to product defects and errata may harm our results of operations and business.

Costs associated with unexpected product defects and errata (deviations from published specifications) due to, for example, unanticipated problems in our manufacturing processes, include the costs of:

• writing off the value of inventory of defective products;

• disposing of defective products;

• recalling defective products that have been shipped to customers;

• providing product replacements for, or modifications to, defective products; and/or

• defending against litigation related to defective products.

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These costs could be substantial and may, therefore, increase our expenses and lower our gross margin. In addition, our reputation with our customers or users of our products could be damaged as a result of such product defects and errata, and the demand for our products could be reduced. These factors could harm our financial results and the prospects for our business.

Semiconductors for inclusion in consumer products have shorter product life cycles.

We believe that consumer products are subject to shorter product life cycles, because of technological change, consumer preferences, trendiness and other factors, than other types of products sold by our customers. Shorter product life cycles result in more frequent design competitions for the inclusion of semiconductors in next generation consumer products, which may not result in design wins for us. Shorter product life cycles may lead to more frequent circumstances where sales of existing products are reduced or ended.

Uncertain global macroeconomic conditions could adversely affect our results of operations and financial condition.

Uncertain global macroeconomic conditions that affect the economy and the economic outlook of the United States, Europe, China and other parts of the world could adversely affect our customers and vendors, which could adversely affect our results of operations and financial condition. These uncertainties, including, among other things, the impact of “Brexit” on the United Kingdom and the European Union, sovereign and foreign bank debt levels, the inability of national or international political institutions to effectively resolve economic or budgetary crises or issues, trade disputes or changes in trading rules and tariffs between nations, consumer confidence, unemployment levels, interest rates, availability of capital, fuel and energy costs, tax rates, and the threat or outbreak of terrorism or public unrest, could adversely impact our customers and vendors, which could adversely affect us. Recessionary conditions and depressed levels of consumer and commercial spending may cause customers to reduce, modify, delay or cancel plans to purchase our products and may cause vendors to reduce their output or change their terms of sales. We generally sell products to customers with credit payment terms. If customers’ cash flow or operating or financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, they may not be able to pay, or may delay payment to us. Likewise, for similar reasons vendors may restrict credit or impose different payment terms. Any inability of current or potential customers to pay us for our products or any demands by vendors for different payment terms may adversely affect our results of operations and financial condition.

Economic conditions and regulatory changes leading up to and following the United Kingdom’s likely exit from the European Union could have a material adverse effect on our business and results of operations.

Following a referendum in which voters in the United Kingdom, or U.K., approved an exit from the European Union, it is expected that the U.K. government will initiate a process to leave the European Union and begin negotiating the terms of the U.K.’s future relationship with the European Union. We face uncertainty regarding the impact of the likely exit of the U.K. from the European Union. Adverse consequences such as deterioration in global economic conditions, stability in global financial markets, volatility in currency exchange rates, new or increased tariffs or adverse changes in regulation of the cross-border agreements could have a negative impact on our operations, financial condition and results of operations.

Our debt agreements contain certain restrictions that may limit our ability to operate our business.

The agreements governing our debt contain, and any other future debt agreement we enter into may contain, restrictive covenants that limit our ability to operate our business, including, in each case subject to certain exceptions, restrictions on our ability to:

• incur additional indebtedness;

• grant liens;

• consolidate, merge or sell our assets, unless specified conditions are met;

• acquire other business organizations;

• make investments;

• redeem or repurchase our stock; and

• change the nature of our business.

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In addition, our debt agreements contain financial covenants and additional affirmative and negative covenants. Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. If we are not able to comply with all of these covenants for any reason, some or all of our outstanding debt could become immediately due and payable and the incurrence of additional debt under the credit facilities provided by the debt agreements would not be allowed. If our cash is utilized to repay any outstanding debt, depending on the amount of debt outstanding, we could experience an immediate and significant reduction in working capital available to operate our business. Related to these risks, our lenders waived a default under our existing Revolving Credit Agreement caused by the leverage ratio, which compared total funded indebtedness as of March 31, 2016 to EBITDA for the four fiscal quarters ended March 31, 2016. The leverage ratio minimally exceeded the contractually agreed ratio that was effective at the time. As of December 31, 2016, we complied with all of the financial covenants.

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us, such as strategic acquisitions or joint ventures.

If we default on our Revolving Credit Agreement, most of our assets may become subject to security interests, which could lead to our lenders taking possession, selling or otherwise disposing of such assets, or to bankruptcy to forestall such actions.

We estimate tax liabilities, the final determination of which is subject to review by domestic and international taxation authorities.

We are subject to income taxes and other taxes in both the United States and foreign jurisdictions in which we currently operate or have historically operated. We are also subject to review and audit by both domestic and foreign taxation authorities. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires significant judgment and estimation. The provision for income taxes can be adversely affected by a variety of factors, including but not limited to changes in tax laws, regulations and accounting principles, including accounting for uncertain tax positions, or interpretation of those changes. Significant judgment is required to determine the recognition and measurement attributes prescribed in the authoritative guidance issued by FASB in connection with accounting for income taxes. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our consolidated financial statements and may materially affect our income tax provision, net income, goodwill or cash flows in the period or periods for which such determination is made.

Our intellectual property revenues are uncertain and unpredictable in timing and amount.

We are unable to discern a pattern in or otherwise predict the amount of any payments for the sale or licensing of intellectual property that we may receive. Consequently, we are unable to plan on the timing of intellectual property revenues and our results of operations may be adversely affected by a reduction in future estimated intellectual property revenues.

Our markets are subject to technological change and our success depends on our ability to develop and introduce new products.

The markets for our products are characterized by:

• changing technologies;

• changing customer needs;

• frequent new product introductions and enhancements;

• increased integration with other functions; and

• product obsolescence.

To develop new products for our target markets, we must develop, gain access to and use leading technologies in a cost-effective and timely manner and continue to expand our technical and design expertise. Failure to do so could cause us to lose our competitive position and seriously impact our future revenues.

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Products or technologies developed by others may render our products or technologies obsolete or non-competitive. A fundamental shift in technologies in our product markets would have a material adverse effect on our competitive position within the industry.

Our revenues are dependent upon our products being designed into our customers’ products.

Many of our products are incorporated into customers’ products or systems at the design stage. The value of any design win largely depends upon the customer’s decision to manufacture the designed product in production quantities, the commercial success of the customer’s product and the extent to which the design of the customer’s electronic system also accommodates incorporation of components manufactured by our competitors. In addition, our customers could subsequently redesign their products or systems so that they no longer require our products. The development of the next generation of products by our customers generally results in new design competitions for semiconductors, which may not result in design wins for us, potentially leading to reduced revenues and profitability. We may not achieve design wins or our design wins may not result in future revenues.

We could be harmed by intellectual property litigation.

As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. We have been sued for purported patent infringement and have been accused of infringing the intellectual property rights of third parties. We also have certain indemnification obligations to customers and suppliers with respect to the infringement of third party intellectual property rights by our products. We could incur substantial costs defending ourselves and our customers and suppliers from any such claim. Infringement claims or claims for indemnification, whether or not proven to be true, may divert the efforts and attention of our management and technical personnel from our core business operations and could otherwise harm our business. For example, in June 2000, we were sued for patent infringement by International Rectifier Corporation. The case was ultimately resolved in our favor, but not until October 2008. In the interim, the U.S. District Court entered multimillion dollar judgments against us on two different occasions, each of which was subsequently vacated.

In the event of an adverse outcome in any intellectual property litigation, we could be required to pay substantial damages, cease the development, manufacturing, use and sale of infringing products, discontinue the use of certain processes or obtain a license from the third party claiming infringement with royalty payment obligations upon us. An adverse outcome in an infringement action could materially and adversely affect our financial condition, results of operations and cash flows.

We may not be able to protect our intellectual property rights adequately.

Our ability to compete is affected by our ability to protect our intellectual property rights. We rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual property rights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will be adequate to prevent misappropriation of our technology, or that our competitors will not independently develop technology that is substantially similar or superior to our technology. More specifically, we cannot assure that our pending patent applications or any future applications will be approved, or that any issued patents will provide us with competitive advantages or will not be challenged by third parties. Nor can we assure that, if challenged, our patents will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on our ability to do business. We may also become subject to or initiate patentability or interference proceedings in the U.S. Patent and Trademark Office, which can demand significant financial and management resources and could harm our financial results. Also, others may independently develop similar products or processes, duplicate our products or processes or design their products around any patents that may be issued to us.

Because our products typically have lengthy sales cycles, we may experience substantial delays between incurring expenses related to research and development and the generation of revenues.

The time from initiation of design to volume production of new semiconductors often takes 18 months or longer. We first work with customers to achieve a design win, which may take nine months or longer. Our customers then complete the design, testing and evaluation process and begin to ramp up production, a period that may last an additional nine months or longer. As a result, a significant period of time may elapse between our research and development efforts and our realization of revenues, if any, from volume purchasing of our products by our customers.

The markets in which we participate are intensely competitive.

Many of our target markets are intensely competitive. Our ability to compete successfully in our target markets depends on the following factors:

• proper new product definition;

• product quality, reliability and performance;

• product features;

• price;

• timely delivery of products;

• technical support and service;

• design and introduction of new products;

• market acceptance of our products and those of our customers; and

• breadth of product line.

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In addition, our competitors or customers may offer new products based on new technologies, industry standards or end-user or customer requirements, including products that have the potential to replace our products or provide lower cost or higher performance alternatives to our products. The introduction of new products by our competitors or customers could render our existing and future products obsolete or unmarketable.

Our primary power semiconductor competitors include Fuji, Hitachi, Infineon, Microsemi, Mitsubishi, On Semiconductor, Powerex, Renesas Electronics, Semikron International, STMicroelectronics, Toshiba and Vishay Intertechnology. Our IC products compete principally with those of Cypress Semiconductor, NXP Semiconductors, Microchip Technology, NEC, Renesas Electronics and Silicon Labs. Our RF power semiconductor competitors include Microsemi and Qorvo. Many of our competitors have greater financial, technical, marketing and management resources than we have. Some of these competitors may be able to sell their products at prices at which it would be unprofitable for us to sell our products or benefit from established customer relationships that provide them with a competitive advantage. We cannot assure that we will be able to compete successfully in the future against existing or new competitors or that our operating results will not be adversely affected by increased price competition.

We rely on our distributors and sales representatives to sell many of our products.

Most of our products are sold to distributors or through sales representatives. Our distributors and sales representatives could reduce or discontinue sales of our products. They may not devote the resources necessary to sell our products in the volumes and within the time frames that we expect. In addition, we depend upon the continued viability and financial resources of these distributors and sales representatives, some of which are small organizations with limited working capital. These distributors and sales representatives, in turn, depend substantially on general economic conditions and conditions within the semiconductor industry. We believe that our success will continue to depend upon these distributors and sales representatives. Foreign distributors are typically granted longer payment terms, resulting in higher accounts receivable balances for a given level of sales than domestic distributors. Our risk of loss from the financial insolvency of distributors is, therefore, disproportionally weighted to foreign distributors. If any significant distributor or sales representative experiences financial difficulties, or otherwise becomes unable or unwilling to promote and sell our products, our business could be harmed. For example, All American Semiconductor, Inc., one of our former distributors, filed for bankruptcy in April 2007.

Our future success depends on the continued service of management and key engineering personnel and our ability to identify, hire and retain additional personnel.

Our success depends upon our ability to attract and retain highly skilled technical, managerial, marketing and finance personnel, and, to a significant extent, upon the efforts and abilities of Nathan Zommer, Ph.D. and Uzi Sasson, our Chief Executive Officers, and other members of senior management. The loss of the services of one or more of our senior management or other key employees could adversely affect our business. We do not maintain key person life insurance on any of our officers, employees or consultants. There is intense competition for qualified employees in the semiconductor industry, particularly for highly skilled design, application and test engineers. We may not be able to continue to attract and retain engineers or other qualified personnel necessary for the development of our business or to replace engineers or other qualified individuals who could leave us at any time in the future. If we grow, we expect increased demands on our resources, and growth would likely require the addition of new management and engineering staff as well as the development of additional expertise by existing management. If we lose the services of or fail to recruit key engineers or other technical and management personnel, our business could be harmed.

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Acquisitions, expansion, technological and administrative changes and software conversions and updates place a significant strain on our information systems.

Presently, because of our acquisitions, we are operating a number of different information systems that are not integrated, some of which are no longer supported by software vendors. As a consequence, we use spreadsheets, which are prepared by individuals rather than automated systems, in our accounting. We perform many manual reconciliations and other manual steps, which result in a high risk of errors. Manual steps also increase the possibility of control deficiencies and material weaknesses.

If we do not adequately manage and evolve our financial reporting and managerial systems and processes, our ability to manage or grow our business may be harmed. Our ability to successfully implement our goals and comply with regulations requires an effective planning and management system and process. We will need to continue to improve existing, and implement new, operational and financial systems, procedures and controls to manage our business effectively in the future.

In improving, consolidating, changing or updating our operational and financial systems, procedures and controls, we would expect to periodically implement new or different software and other systems that will affect our internal operations regionally or globally. The conversion process from one system to another is complex and could require, among other things, that data from the existing system be made compatible with the upgraded or different system.

In connection with any of the foregoing, we could experience errors, interruptions, delays, cessations of service and other inefficiencies, which could adversely affect our business. Any error, delay, disruption, interruption or cessation, including with respect to any new or different systems, software programs, procedures or controls, could harm our ability to forecast sales demand, manage our supply chain, achieve accuracy in the conversion of electronic data and record and report financial and management information on a timely and accurate basis. In addition, as we add or change functionality, transition or convert to different systems or programs or integrate additional data in connection with an acquisition, problems could arise that we have not foreseen. Such problems could adversely impact our ability to do the following in a timely manner: provide quotes; take customer orders; ship products; provide services and support to our customers; bill and track our customers; fulfill contractual obligations; and otherwise run our business. Failure to properly or adequately address these issues could result in the diversion of management’s attention and resources, adversely affect our ability to manage our business, increase expenses, or adversely affect our results of operations, cash flows, stock price or reputation.

System security risks, data protection breaches and cyber-attacks could disrupt our operations and any such disruption could reduce our expected revenues, increase our expenses, damage our reputation or adversely affect our stock price.

Computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our intellectual property or other 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 products or otherwise exploit any security vulnerabilities of our 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 proprietary information and sensitive or confidential data relating to our business and the businesses of third parties. Breaches 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 partners or customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us, our partners and customers to a risk of loss or misuse of this information; result in regulatory investigations, fines, litigation and potential liability for us; damage our brand and reputation; or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection measures could be significant. Delayed sales, lower margins or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

Regulations related to conflict minerals create additional compliance risks and force us to incur additional expenses.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo, or DRC, and adjoining countries. As a result, the SEC established annual disclosure and reporting requirements for those companies who use “conflict” minerals mined from the DRC and adjoining countries in their products. These requirements could affect the sourcing and availability of minerals used in the manufacture of our products. As a result, we cannot ensure that we will be able to obtain minerals at competitive prices. Moreover, there are additional costs associated with complying with the extensive due diligence and audit procedures required by the SEC. In addition, we may face reputational challenges with our customers and other stakeholders as we have in the past and may in the future be unable to sufficiently verify the origins of all minerals used in our products. Finally, these rules bring implementation challenges. We may not successfully implement effective procedures to timely or adequately comply with these rules.

We depend on a limited number of suppliers for our substrates, most of whom we do not have long term agreements with.

We purchase the bulk of our silicon substrates from a limited number of vendors, most of whom we do not have long term supply agreements with. Any of these suppliers could reduce or terminate our supply of silicon substrates at any time. Our reliance on a limited number of suppliers involves several risks, including potential inability to obtain an adequate supply of silicon substrates and reduced control over the price, timely delivery, reliability and quality of the silicon substrates. We cannot assure that problems will not occur in the future with suppliers.

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Increasing raw material prices could impact our profitability.

Our products use large amounts of silicon, metals and other materials. From time to time, we have experienced price increases for many of these items. If we are unable to pass price increases for raw materials onto our customers, our gross margins and profitability could be adversely affected.

We may not be able to increase production capacity to meet the present and future demand for our products.

The semiconductor industry has been characterized by periodic limitations on production capacity. These limitations may result in longer lead times for product delivery than desired by many of our customers. If we are unable to increase our production capacity to meet future demand, some of our customers may seek other sources of supply, our future growth may be limited or our results of operations may be adversely affected.

We face the risk of financial exposure to product liability claims alleging that the use of products that incorporate our semiconductors resulted in adverse effects.

Approximately 10.2% of our net revenues for the nine months ended December 31, 2016 were derived from sales of products used in medical devices, such as defibrillators. Product liability risks may exist even for those medical devices that have received regulatory approval for commercial sale. We cannot be sure that the insurance that we maintain against product liability will be adequate to cover our losses. Any defects in our semiconductors used in these devices, or in any other product, could result in significant product liability costs to us.

Our results of operations could vary as a result of the methods, estimates, and judgments that we use in applying our accounting policies.

The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on our results of operations (see “Critical Accounting Policies and Significant Management Estimates” in Part I, Item 2 of this Form 10-Q). Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates, and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations.

We are exposed to various risks related to the regulatory environment.

We are subject to various risks related to new, different, inconsistent or even conflicting laws, rules and regulations that may be enacted by legislative bodies and/or regulatory agencies in the countries in which we operate; disagreements or disputes between national or regional regulatory agencies; and the interpretation and application of laws, rules and regulations. If we are found by a court or regulatory agency not to be in compliance with applicable laws, rules or regulations, our business, financial condition and results of operations could be materially and adversely affected.

In addition, approximately 10.2% of our net revenues for the nine months ended December 31, 2016 were derived from the sale of products included in medical devices that are subject to extensive regulation by numerous governmental authorities in the United States and internationally, including the U.S. Food and Drug Administration, or FDA. The FDA and certain foreign regulatory authorities impose numerous requirements for medical device manufacturers to meet, including adherence to Good Manufacturing Practices, or GMP, regulations and similar regulations in other countries, which include testing, control and documentation requirements. Ongoing compliance with GMP and other applicable regulatory requirements is monitored through periodic inspections by federal and state agencies, including the FDA, and by comparable agencies in other countries. Our failure to comply with applicable regulatory requirements could prevent our products from being included in approved medical devices or result in damages or other compensation payable to medical device manufacturers.

Our business could also be harmed by delays in receiving or the failure to receive required approvals or clearances, the loss of obtained approvals or clearances or the failure to comply with existing or future regulatory requirements.

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We invest in companies for strategic reasons and may need to record impairments in the value of the investments.

We make investments in companies to further our strategic objectives and support our key business initiatives. Such investments include investments in equity securities of public companies and investments in non-marketable equity securities of private companies, which range from early-stage companies that are often still defining their strategic direction to more mature companies whose products or technologies may directly support a product or initiative. The success of these companies is dependent on product development, market acceptance, operational efficiency and other key business success factors. The private companies in which we invest may fail for operational reasons or because they may not be able to secure additional funding, obtain favorable investment terms for future financings or take advantage of liquidity events such as initial public offerings, mergers and private sales. If any of these private companies fail, we could lose all or part of our investment in that company. If we determine that an other-than-temporary decline in the fair value exists for the equity securities of the public and private companies in which we invest, we write down the investment to its fair value and recognize the related write-down as an investment loss. Furthermore, when the strategic objectives of an investment have been achieved, or if the investment or business diverges from our strategic objectives, we may decide to dispose of the investment, even at a loss. Our investments in non-marketable equity securities of private companies are not liquid, and we may not be able to dispose of these investments on favorable terms or at all. The occurrence of any of these events could negatively affect our results of operations.

Our ability to access capital markets could be limited.

From time to time, we may need to access the capital markets to obtain long-term financing. Although we believe that we can continue to access the capital markets on acceptable terms and conditions, our flexibility with regard to long-term financing activity could be limited by our existing capital structure, our credit ratings and the health of the semiconductor industry. In addition, many of the factors that affect our ability to access the capital markets, such as the liquidity of the overall capital markets and the current state of the economy, are outside of our control. There can be no assurance that we will continue to have access to the capital markets on favorable terms.

Geopolitical instability, war, terrorist attacks and terrorist threats, and government responses thereto, may negatively affect many aspects of our operations, revenues, costs and stock price.

Any such event may disrupt our operations or those of our customers or suppliers. Our markets currently include South Korea, Taiwan, Russia and Israel, which are currently experiencing political instability. Additionally, we have accounting and administrative operations in the Philippines, an external foundry and some of our design and sales operations are located in South Korea and assembly subcontractors are located in Indonesia, the Philippines and South Korea.

Business interruptions may damage our facilities or those of our suppliers.

Our operations and those of our suppliers are vulnerable to interruption by fire, earthquake, flood and other natural disasters, as well as power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan and do not have backup generators. Our facilities in California are located near major earthquake fault lines and have experienced earthquakes in the past. Globally, for example, the March 2011 earthquake in Japan adversely affected the operations of some of our Japanese suppliers, which limited the availability of certain production inputs to us for a period of time. If a natural disaster occurs, our ability to conduct our operations could be seriously impaired, which could harm our business, financial condition and results of operations and cash flows. We cannot be sure that the insurance we maintain against general business interruptions will be adequate to cover all our losses.

We may be affected by environmental laws and regulations.

We are subject to a variety of laws, rules and regulations related to the use, storage, handling, discharge and disposal of certain chemicals and gases used in our manufacturing process. Any of those regulations could require us to acquire expensive equipment or to incur substantial other expenses to comply with them. If we incur substantial additional expenses, product costs could significantly increase. Failure to comply with present or future environmental laws, rules and regulations could result in fines, suspension of production or cessation of operations.

Nathan Zommer, Ph.D. owns a significant interest in our common stock.

Nathan Zommer, Ph.D., Chief Executive Officer, beneficially owned, as of January 26, 2017, approximately 21.2% of the outstanding shares of our common stock. As a result, Dr. Zommer can exercise significant control over all matters requiring stockholder approval, including the election of the Board of Directors. His holdings could result in a delay of, or serve as a deterrent to, any change in control of our company, which may reduce the market price of our common stock.

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Our stock price is volatile.

The market price of our common stock has fluctuated significantly to date. The future market price of our common stock may also fluctuate significantly in the event of:

• variations in our actual or expected quarterly operating results;

• announcements or introductions of new products;

• technological innovations by our competitors or development setbacks by us;

• conditions in semiconductor markets;

• the commencement or adverse outcome of litigation;

• changes in analysts’ estimates of our performance or changes in analysts’ forecasts regarding our industry, competitors or customers;

• announcements of merger or acquisition transactions or a failure to achieve the expected benefits of an acquisition as rapidly or to the extent anticipated by participants in the stock market;

• terrorist attack or war;

• sales of our common stock by one or more members of management, including Nathan Zommer, Ph.D., Chief Executive Officer; or

• general economic and market conditions.

In addition, the stock market in recent years has experienced extreme price and volume fluctuations that have affected the market prices of many high technology companies, including semiconductor companies. These fluctuations have often been unrelated or disproportionate to the operating performance of companies in our industry, and could harm the market price of our common stock.

The anti-takeover provisions of our certificate of incorporation and of the Delaware General Corporation Law may delay, defer or prevent a change of control.

Our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control because the terms of any issued preferred stock could potentially prohibit our consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or other extraordinary corporate transaction, without the approval of the holders of the outstanding shares of preferred stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders.

Our stockholders must give substantial advance notice prior to the relevant meeting to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action. The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it more difficult for us to be acquired without the consent of our Board of Directors and management.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On February 3, 2017, the Compensation Committee of the Board of Directors approved the elimination of any payment to Dr. Nathan Zommer, Chief Executive Officer, under the cash performance program for the fiscal year ended March 31, 2017.

Item 6. Exhibits

See the Index to Exhibits, which is incorporated by reference herein.

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SIGNATURES

Pursuant to the requirements 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.

IXYS CORPORATION
By:	/s/ Uzi Sasson
Uzi Sasson, President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Date: February 7, 2017

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Amendment Number One to Revolving Credit Agreement dated as of February 26, 2016 among IXYS Corporation, Bank of the West (as a Lender and as Administrative Agent), KeyBank National Association (as a Lender and as Syndication Agent), MUFG Union Bank, N.A. and Comerica Bank. (Filed on December 21, 2016 as Exhibit 10.1 to the Current Report on Form 8-K (No. 000-26124) and incorporated herein by reference).
10.2	Amendment Number Two to Revolving Credit Agreement dated as of December 14, 2016 among IXYS Corporation, Bank of the West (as a Lender and as Administrative Agent), KeyBank National Association (as a Lender and as Syndication Agent), MUFG Union Bank, N.A. and Comerica Bank. (Filed on December 21, 2016 as Exhibit 10.2 to the Current Report on Form 8-K (No. 000-26124) and incorporated herein by reference).
31.1	Certificate of Chief Executive Officer required under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certificate of Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification required under Section 906 of the Sarbanes-Oxley Act of 2002. (1)
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1) This exhibit is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1933, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities and Exchange Act of 1993, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Nathan Zommer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IXYS Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 7, 2017

/s/ Nathan Zommer

Nathan Zommer

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Uzi Sasson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IXYS Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 7, 2017

/s/ Uzi Sasson

Uzi Sasson

President, Chief Executive Officer and

Chief Financial Officer (Principal Executive Officer

and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to 18 U.S.C. 1350, Nathan Zommer, the Chief Executive Officer of IXYS Corporation (the “Company”), and Uzi Sasson, the Chief Executive Officer and Chief Financial Officer of the Company, each hereby certifies that, to his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2016 to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the periods covered by the Periodic Report and the results of operations of the Company for the periods covered by the Periodic Report.

Dated: February 7, 2017

/s/ Nathan Zommer

Nathan Zommer

Chief Executive Officer

/s/ Uzi Sasson

Uzi Sasson

Chief Executive Officer and Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Dec. 31, 2016	Jan. 26, 2017
Document Information [Line Items]
Entity Registrant Name	IXYS CORP /DE/
Entity Central Index Key	0000945699
Trading Symbol	ixys
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		31,611,390
Document Type	10-Q
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Current assets:
Cash and cash equivalents	$ 158,493	$ 155,806
Restricted cash	1,309	277
Accounts receivable, net	36,715	38,440
Inventories	87,118	89,604
Prepaid expenses and other current assets	5,996	4,203
Total current assets	289,631	288,330
Property, plant and equipment, net	41,738	42,623
Intangible assets, net	3,578	7,607
Goodwill	42,193	42,355
Deferred income taxes	27,774	28,024
Other assets	17,167	13,762
Total assets	422,081	422,701
Current liabilities:
Current portion of loans payable	976	1,804
Accounts payable	11,214	11,416
Accrued expenses and other current liabilities	25,208	21,290
Total current liabilities	37,398	34,510
Long term loans, net of current portion	76,997	85,253
Pension liabilities	14,348	16,307
Other long term liabilities	7,143	7,336
Total liabilities	135,886	143,406
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $0.01 par value:Authorized: 5,000,000 shares; none issued and outstanding
Common stock, $0.01 par value: Authorized: 80,000,000 shares; 38,326,329 issued and 31,597,792 outstanding at December 31, 2016 and 38,214,158 issued and 31,375,524 outstanding at March 31, 2016	383	382
Additional paid-in capital	217,578	214,045
Treasury stock, at cost: 6,728,537 common shares at December 31, 2016 and 6,838,634 common shares at March 31, 2016	(60,849)	(61,845)
Retained earnings	157,717	146,979
Accumulated other comprehensive income (loss)	(28,634)	(20,266)
Total stockholders' equity	286,195	279,295
Total liabilities and stockholders' equity	$ 422,081	$ 422,701

XML

Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2016	Mar. 31, 2016
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	80,000,000	80,000,000
Common stock, shares issued (in shares)	38,326,329	38,214,158
Common stock, shares outstanding (in shares)	31,597,792	31,375,524
Treasury stock, shares (in shares)	6,728,537	6,838,634

XML

Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Net revenues	$ 79,484	$ 75,133	$ 238,751	$ 237,437
Cost of goods sold	52,545	51,104	162,363	161,794
Gross profit	26,939	24,029	76,388	75,643
Operating expenses:
Research, development and engineering	6,703	7,280	22,461	22,767
Selling, general and administrative	10,276	9,158	30,454	29,595
Amortization of acquisition-related intangible assets	750	1,329	2,463	4,282
Impairment of acquisition-related intangible assets	1,391		1,391
Total operating expenses	19,120	17,767	56,769	56,644
Operating income	7,819	6,262	19,619	18,999
Other income (expense):
Interest income	81	54	196	140
Interest expense	(646)	(432)	(1,896)	(1,030)
Other income (expense), net	(110)	290	1,291	(1,510)
Income before income tax provision	7,144	6,174	19,210	16,599
Provision for income tax	(2,044)	(3,888)	(7,156)	(8,055)
Net income	$ 5,100	$ 2,286	$ 12,054	$ 8,544
Net income per share:
Basic (in dollars per share)	$ 0.16	$ 0.07	$ 0.38	$ 0.27
Diluted (in dollars per share)	0.16	0.07	0.38	0.26
Cash dividends per common share (in dollars per share)		$ 0.04	$ 0.04	$ 0.115
Weighted average shares used in per share calculation:
Basic (in shares)	31,558	31,487	31,484	31,626
Diluted (in shares)	32,209	32,343	32,119	32,483

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Net income	$ 5,100	$ 2,286	$ 12,054	$ 8,544
Foreign currency translation adjustments	(6,015)	(3,027)	(8,403)	534
Changes in market value of investments:
Changes in unrealized gains (losses), net of income taxes of $(44) and $32 for the three and nine months ended December 31, 2016, respectively, and net of income taxes of $(24) and $(226) for the three and nine months ended December 31, 2015, respectively	(66)	(35)	66	(337)
Reclassification adjustment for net losses (gains) realized in net income, net of income taxes of $0 and $(19) for the three and nine months ended December 31, 2016, respectively, and net of income taxes of $3 and $185 for the three and nine months ended December 31, 2015, respectively		4	(31)	276
Net change in market value of investments	(66)	(31)	35	(61)
Total comprehensive income (loss)	$ (981)	$ (772)	$ 3,686	$ 9,017

XML

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Taxes (benefits) on changes in unrealized gain (loss)	$ (44)	$ (24)	$ 32	$ (226)
Taxes on reclassification adjustment for sales of securities included in net income	$ 0	$ 3	$ (19)	$ 185

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands		9 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income		$ 12,054	$ 8,544
Adjustments to reconcile net income to net cash provided by operating activities, net of assets acquired and liabilities assumed:
Depreciation and amortization		8,273	10,478
Provision for receivable allowances		7,518	4,811
Net change in inventory provision		1,433	640
Stock-based compensation		2,551	2,529
Loss (gain) on investments		(811)	635
Deferred income taxes			2,257
Foreign currency adjustments on intercompany amounts and other non-cash items		1,059	505
Impairment of acquisition-related intangible assets		1,391
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable		(6,716)	1,667
Inventories		(3,152)	(7,778)
Prepaid expenses and other assets		(2,186)	(1,065)
Accounts payable		(149)	1,715
Accrued expenses and other liabilities		4,222	(338)
Pension liabilities		(608)	(938)
Net cash provided by operating activities		24,879	23,662
Cash flows from investing activities:
Purchase of businesses, net of cash and cash equivalents acquired and installment payments			(14,472)
Purchases of investments		(3,540)	(629)
Purchases of plant and equipment		(6,202)	(5,265)
Proceeds from sale of investments		805	26
Net cash used in investing activities		(8,937)	(20,340)
Cash flows from financing activities:
Principal payments on capital lease obligations			(454)
Repayments of loans and notes payable		(8,804)	(46,247)
Proceeds from loans			82,967
Proceeds from employee equity plans		1,921	4,251
Purchases of treasury stock			(6,440)
Payment of cash dividends to stockholders		(1,258)	(3,635)
Net cash provided by (used in) financing activities		(8,141)	30,442
Effect of exchange rate fluctuations on cash and cash equivalents		(4,082)	(234)
Net increase in cash and cash equivalents		3,719	33,530
Cash and cash equivalents and restricted cash at beginning of period (1)	[1]	156,083	121,430
Cash and cash equivalents and restricted cash at end of period (2)	[2]	$ 159,802	$ 154,960

[1] Includes restricted cash of $277,000 and $266,000 as of March 31, 2016 and 2015, respectively.

[2] Includes restricted cash of $1.3 million and $722,000 as of December 31, 2016 and 2015, respectively.

XML

Unaudited Condensed Consolidated Statements of Cash Flows (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Restricted cash	$ 1,300	$ 277	$ 722	$ 266

XML

Note 1 - Unaudited Condensed Consolidated Financial Statements

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Basis of Accounting [Text Block]

1

. Unaudited Condensed Consolidated Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form

10

-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of IXYS Corporation and its wholly-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Some of the accounting estimates that require significant judgments by management include, but are not limited to, revenue reserves, inventory valuation, accounting for income taxes and allocation of purchase price in business combinations. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. The condensed consolidated balance sheet as of

March

31,

2016

has been derived from our audited consolidated balance sheet as of that date. It is recommended that the interim financial statements be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended

March

31,

2016,

or fiscal

2016,

contained in our Annual Report on Form

10

-K. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year. Our fiscal year end is

March

31.

References to any numerically identified year preceded by the word “fiscal” are references to the year ending on

March

31

of such numerically identified year.

XML

Note 2 - Recent Accounting Pronouncements and Accounting Changes

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

2.

Recent Accounting Pronouncements and Accounting Changes

In

May

2014,

Financial Accounting Standards Board, or FASB, issued a new standard on the recognition of revenue from contracts with customers, which includes a single set of rules and criteria for revenue recognition to be used across all industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires

five

basic steps: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when or as the entity satisfies a performance obligation. For public companies, this standard is effective for annual reporting periods beginning after

December

 

15,

2017,

including interim periods during the annual period. Early adoption is permitted for annual periods commencing after

December

15,

2016.

Two d

ifferent transition methods are available:

full retrospective method and a modified retrospective

approach. We are currently evaluating the impact of the adoption of the standard on our consolidated financial statements including selection of the transition method.

In

July

2015,

FASB issued an amendment to modify the inventory measurement guidance in Topic

330,

Inventory

, for inventory that is measured using the methods other than last-in,

first

-out, or LIFO, and the retail inventory method. It requires that an entity measure inventory within the scope of this update at the lower of cost and net realizable value. It eliminated the guidance in Topic

330

that required a reporting entity measuring inventory at the lower of cost or market to consider the replacement cost of inventory and the net realizable value of inventory less an approximately normal profit margin along with net realizable value in determining the market value. The guidance will be effective for annual reporting periods beginning after

December

 

15,

2016,

and interim periods during the annual period. The new standard is required to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not expect this change to have a significant impact on our consolidated financial statements.

In

January

2016,

FASB issued authoritative guidance that modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under Accounting Standards Codification,

Fair Value Measurements

, or ASC

820,

and as such these investments

may

be measured at cost. This guidance is effective for financial statements issued for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years. We are currently evaluating the impact of this standard on our consolidated financial statements.

In

February

2016,

FASB issued amended guidance for lease arrangements, which requires lessees to recognize the following

for all leases with terms longer than

12

months: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The amendment is effective for financial statements issued for fiscal years beginning after

December

 

15,

2018,

and interim periods within those fiscal years. Early adoption is permitted.

We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In

March

2016,

FASB issued amended guidance to simplify the transition to the equity method of accounting. This standard eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements as if the equity method had been used during all previous periods. Additionally, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings at the point an investment qualifies for the equity method. The amended guidance is effective for financial statements issued for

fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2016.

It should be applied prospectively. Early adoption

is permitted. We are currently evaluating the impact of

this amended guidance on our consolidated financial statements.

In

March

2016,

FASB issued amended guidance which simplifies several aspects of the accounting for

employee share-based payment awards, including

forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies.

The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The guidance is effective for financial statements issued for fiscal years beginning after

December

15,

2016,

and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance.

We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In

October

2016,

FASB issued amended guidance which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a

third

party or otherwise recovered through use. The guidance will be effective for the Company for fiscal years beginning after

December

15,

2017,

including interim reporting periods within those annual reporting periods. Early adoption is permitted in the

first

interim period only. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

 We are in the process of evaluating the impacts of the adoption of this amendment.

In

November

2016,

FASB issued amended guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years, and will be applied on a retrospective basis. We have adopted the guidance on a retrospective basis from the quarter ended

December

31,

2016.

In our unaudited condensed consolidated statements of cash flow statements for the

nine

month periods ended

December

31,

2016

and

2015,

the beginning balances of cash and cash equivalents included restricted cash of

$277,000

and

$266,000

in the respective periods and the ending balances of cash and cash equivalents included restricted cash of

$1.3

million and

$722,000

in the respective periods. If we had not adopted the amended guidance, our unaudited condensed consolidated statements of cash flows for the

nine

month periods ended

December

31,

2016

and

2015

would have shown a decrease of

$1.0

million and

$357,000,

respectively, in the change in restricted cash under cash flows from investing activities.

XML

Note 3 - Business Combinations

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

3.

Business Combinations

 

RadioPulse, Inc.

On

May

1,

2015,

we acquired RadioPulse, Inc., or RadioPulse, for a total consideration of

$15.7

million.

Based in South Korea, RadioPulse is a fabless semiconductor company that develops, manufactures and sells wireless network technology solutions based on the ZigBee® protocol, which combines microcontrollers and radio frequency devices. RadioPulse’s solutions are designed to enable a broad range of power-sensitive applications in the industrial, medical, consumer, smart grid and Internet of Things, or IoT, markets. RadioPulse offers a product portfolio complementary to our product lines. The consideration included cash consideration paid at closing of

$14.7

million and

$1.0

million related to an adjustment to eliminate debt owed to us for funds advanced prior to closing. The acquisition also included potential earnout payments aggregating up to

$6.0

million payable over

three

years based on certain financial thresholds related to net revenues, gross profit and net income in calendar years

2015,

2016

and

2017.

Based on our valuation, the fair value of the liability for the earnout payment was estimated to be

nil

as of

December

31,

2016

and

March

31,

2016.

In connection with the acquisition, we incurred and expensed

$248,000

in legal and consulting costs and

$249,000

in acquisition-related compensation costs during fiscal

2016.

The following table summarizes the values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Consideration Allocation
Cash, restricted cash and cash equivalents	$	196
Accounts receivable		1,497
Inventories		534
Property, plant and equipment		24
Prepaid expenses and other current assets		547
Identifiable intangible assets		2,867
Short-term borrowings		(2,354	)
Accounts payable		(614	)
Accruals and other liabilities		(1,926	)
Total identifiable net assets		771
Goodwill		14,887
Total purchase consideration	$	15,658

Identified intangible assets resulting from the RadioPulse acquisition consisted of the following (in thousands):

				Estimated
	Fair Value		Amortization	Useful Life
	(In thousands)		Method	(In months)
	(unaudited)
Developed intellectual property	$	1,005	Accelerated		60
In-process research and development expenses (1)		1,188	Straight-line		60
Customer relationships		500	Accelerated		36
Contract backlog		174	Straight-line		6
Total	$	2,867

(1) Amortization started in the quarter ended December 31, 2016 upon the completion of the research and development activities of the corresponding projects.

The value reflected in the table represents the purchase price allocation. The valuation of the acquired intangibles was classified as a level

3

measurement under the fair value measurement guidance because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. We did not recognize any liability with respect to the contingent consideration based upon our analysis.

In determining the fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach was used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, in-process research and development expenses, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of RadioPulse and to the workforce acquired in the transaction. The goodwill is not deductible for tax purposes.

The results of operations and financial position of RadioPulse were immaterial compared to our financial statements and therefore pro-forma financial statements have not been separately presented.

XML

Note 4 - Fair Value

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

4

. Fair Value

We account for certain assets and liabilities at fair value. In determining fair value, we consider its principal or most advantageous market and the assumptions that market participants would use when pricing, such as inherent risk, restrictions on sale and risk of non-performance. The fair value hierarchy is based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 

1

 — Quoted prices for identical instruments in active markets.

Level 

2

 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 

3

 — Model-derived valuations in which

one

or more significant inputs or significant value-drivers are unobservable.

Fair Value Measurements on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, consisted of the following types of instruments as of

December

31,

2016

and

March

31,

2016

(in thousands):

	December 31, 2016 (1)						March 31, 2016 (1)
			Fair Value Measured at						Fair Value Measured at
			Reporting Date Using						Reporting Date Using
Description	Total		Level 1		Level 2		Total		Level 1		Level 2
	(unaudited)						(unaudited)
Money market funds (2)	$	82,566	$	82,566	$	-	$	115,974	$	115,974	$	-
Marketable equity securities (3)		2,046		2,046		-		1,749		1,749		-
Auction rate preferred securities (3)		350		-		350		350		-		350
Total Assets Measured at Fair Value	$	84,962	$	84,612	$	350	$	118,073	$	117,723	$	350

(1) We did not have any recurring fair value measurements of assets or liabilities whose fair value was measured using significant unobservable inputs.

(2) Included in "Cash and cash equivalents" on our unaudited condensed consolidated balance sheets.

(3) Included in "Other assets" on our unaudited condensed consolidated balance sheets.

We measure our marketable securities and derivative contracts at fair value. Marketable securities are valued using the quoted market prices and are therefore classified as Level

1

estimates. See Note

6,

“Other Assets” for a discussion of marketable securities

.

Auction rate preferred securities, or ARPS, are stated at par value based upon observable inputs, including historical redemptions received from the ARPS issuers, and are therefore categorized as Level

2

estimates.

Cash and cash equivalents are recognized and measured at amounts that approximate fair value in our unaudited condensed consolidated financial statements. Accounts receivable and prepaid expenses and other current assets are financial assets with carrying values that approximate fair value. Accounts payable and accrued expenses and other current liabilities are financial liabilities with carrying values that approximate fair value. We held

no

derivative instruments at

December

31,

2016

and

March

31,

2016

.

Our debt, which primarily consists of loans from banks, approximated fair value as the interest rates either adjusted according to the market rates or the interest rates approximated the market rates. The estimated fair value of our debt was approximately

$78.0

million and

$87.1

million as of

December

31,

2016

and

March

31,

2016,

respectively. Our pension liabilities, net of plan assets, approximated fair value. See Note

11,

“Pension Plans” for a discussion of pension liabilities.

The fair value of contingent consideration for a business acquisition is classified as a Level

3

estimate. See Note

3,

“Business Combinations” for a discussion of fair value of contingent consideration.

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Note 5 - Accounts Receivable

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5

. Accounts Receivable

Accounts receivable consisted of the following (in thousands):

	December 31, 2016			March 31, 2016
	(unaudited)
Accounts receivable, gross	$	40,276		$	41,219
Allowances		(3,561	)		(2,779	)
Accounts receivable, net	$	36,715		$	38,440

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Note 6 - Other Assets

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Other Assets Disclosure [Text Block]

6.

Other Assets

Other assets consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Marketable equity securities	$	2,046	$	1,749
Auction rate preferred securities		350		350
Long-term equity method investments		11,554		10,977
Other items, including cost method investments		3,217		686
Total	$	17,167	$	13,762

Available-for-Sale Investments

Marketable equity securities and auction rate preferred securities are designated as available-for-sale that are reported at fair value with unrealized gains and losses, net of income taxes, recorded in other comprehensive income (loss). Realized gains and losses (calculated as proceeds less specifically identified costs) and declines in value of these investments judged by management to be other than temporary, if any, are included in other income (expense), net.

We review any impairment to determine whether it is other than temporarily impaired. This review is based on factors such as length of time of impairment, extent to which the fair value is below the cost basis, financial conditions of the issuer of the security, our expectations of future recoveries and our ability and intent to hold or sell the securities. Based on our review, we recognized an impairment loss of

$0

and

$151,000

in marketable equity securities during the

three

and

nine

months ended

December

31,

2016,

respectively, and

$0

and

$454,000

during both the

three

and

nine

months ended

December

31,

2015.

Equity Method Investments

We have equity interests in Powersem GmbH, or Powersem, a semiconductor manufacturer based in Germany, EB Tech Ltd., or EB Tech, a radiation services provider based in South Korea and Automated Technology, Inc., or ATEC, an assembly and test services provider in the Philippines. These investments are accounted for using the equity method.

For the

three

and

nine

months ended

December

31,

2016,

we recorded an immaterial amount of our proportionate share of the affiliates’ gains and losses under the equity method of accounting. 

The carrying values of our investments in Powersem, EB Tech and ATEC at

December

31,

2016

were

$2.5

million,

$2.7

million and

$6.4

million, respectively. The carrying values of our investments in Powersem, EB Tech and ATEC at

March

31,

2016

were

$2.5

million,

$2.7

million and

$5.7

million, respectively.

Cost Method Investments

During the

nine

months ended

December

31,

2016,

we made investments in privately-held companies. Those investments are accounted for under the cost method as they do not qualify for the fair value or another accounting method. As of

December

31,

2016,

the carrying value of those investments was

$1.9

million. We do not estimate the fair value of those cost method investments because determining the fair value is not practicable.

No

impairment losses on the investments accounted for under the equity method or the cost method were recognized as of

December

31,

2016,

as there have not been any events or changes in circumstances that we believe would have had a significant adverse effect on the fair value of those investments.

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Note 7 - Inventories

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Inventory Disclosure [Text Block]

7.

Inventories

Inventories consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Raw materials	$	18,952	$	18,269
Work in process		42,476		41,549
Finished goods		25,690		29,786
Total	$	87,118	$	89,604

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Note 8 - Accrued Expenses and Other Current Liabilities

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Accrued Expenses and Other Current Liabilities Disclosure [Text Block]

8.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	December 31,		March 31,
	2016		2016
	(unaudited)
Uninvoiced goods and services	$	9,783	$	8,824
Compensation and benefits		5,212		7,540
Income taxes		5,896		2,066
Commissions, royalties and other		4,317		2,860
Total	$	25,208	$	21,290

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Note 9 - Intangible Assets

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

9

.

Intangible Assets

Identified intangible assets of our company consisted of the following as of

December

31,

2016

(in thousands):

	December 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,197	$	265	$	13,481	$	3,451
Customer relationships		13,464		123		13,341		-
In-process research and development expenses		1,056		1,003		53		-
Contract backlog		7,310		-		7,310		-
Other intangible assets		1,588		-		1,461		127
Total identifiable intangible assets	$	40,615	$	1,391	$	35,646	$	3,578

Identified intangible assets of our company consisted of the following as of

March

31,

2016

(in thousands):

	March 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,309	$	-	$	11,639	$	5,670
Customer relationships		13,520		-		12,961		559
In-process research and development expenses		1,188		-		-		1,188
Contract backlog		7,329		-		7,329		-
Other intangible assets		1,599		-		1,409		190
Total identifiable intangible assets	$	40,945	$	-	$	33,338	$	7,607

We review our intangible assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable, based upon estimated undiscounted future cash flows. When we are required to determine the fair value of intangible assets other than goodwill, we use the income approach. We start with a forecast of all the expected net cash flows associated with the asset and then we apply an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows on the projections and the selection of a long-term growth rate and the discount rate. Based on our review, the intangible assets resulting from the RadioPulse acquisition were determined to be fully impaired and an impairment charge of

$1.4

million was recognized during the quarter ended

December

31,

2016.

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Note 10 - Borrowing Arrangements

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

10.

Borrowing Arrangements

Revolving Credit Agreement

On 

November

20,

2015

,

we entered into a Revolving Credit Agreement with a syndicate of banks for a line of credit of

$125.0

million. The agent for the banks is Bank of the West, or BOTW.

The obligations are guaranteed by

four

of our subsidiaries.

The loan is collateralized pursuant to a Contingent Collateral Agreement, under which the assets of the parent company and the

four

subsidiaries could be subject to security interests for the benefit of the banks in the event of a loan default.

The credit agreement provides different interest rate alternatives under which we

may

borrow funds. We

may

elect to borrow based on LIBOR plus a margin or an alternative base rate plus a margin. The margin can range from

0.75%

to

2.5%,

depending on interest rate alternatives and on our leverage of liabilities to effective tangible net worth. The applicable interest rate as of

December

31,

2016

was

2.79%.

An unused commitment fee is also payable. It ranges from

0.25%

to

0.625%

annually, depending on leverage.

The terms of the facility impose restrictions on our ability to undertake certain transactions, to create liens on assets and to incur subsidiary indebtedness. In addition,

the credit agreement is subject to a set of financial covenants, including minimum effective tangible net worth, the ratio of cash, cash equivalents and accounts receivable to current liabilities, profitability, a leverage ratio and a minimum amount of U.S. domestic cash on hand.

In

December

2016,

we entered into an amendment to the Revolving Credit Agreement with the lenders under which the contractual term of the revolving loan was extended to

November

20,

2019

.

The leverage ratio was increased to

2.50

to

1.00

from

2.00

to

1.00.

No other terms of the Revolving Credit Agreement were affected by the amendment. At

December

31,

2016,

we complied with all of the financial covenants, including the leverage ratio.

In relation to the Revolving Credit Agreement and the amendment to the Revolving Credit Agreement, we incurred loan costs that were deferred and reduced our “Long term loans, net of current portion” on our unaudited consolidated balance sheets. Those costs are being amortized over the new life of the credit agreement. The unamortized balance at

December

31,

2016

and

March

31,

2016

was

$437,000

and

$304,000,

respectively.

At

December

31,

2016

and

March

31,

2016,

the outstanding principal balances under the credit agreement were

$73.0

million and

$80.0

million, respectively.

The Revolving Credit Agreement also includes a

$10.0

million letter of credit subfacility. See Note

17,

“Commitments and Contingencies” for further information regarding the terms of the subfacility.

IKB Deutsche Industriebank

In

April

2015,

we entered into a loan with IKB Deutsche Industriebank, or IKB. Under the agreement, we borrowed

€6.5

million, or about

$7.2

million at the time. The loan has a term ending

March

31,

2022

and bears a fixed annual interest rate of

1.75%.

Each fiscal quarter, a principal payment of

€232,000,

or about

$244,000,

and a payment of accrued interest are required. Financial covenants for a ratio of indebtedness to cash flow, a ratio of equity to total assets and a minimum stockholders’ equity for the German subsidiary must be satisfied for the loan to remain in good standing. Compliance with these covenants is required annually at

March

31.

We complied with all of these financial covenants at

March

31,

2016.

The loan

may

be prepaid in whole or in part with a modest penalty. The loan is also collateralized by a security interest in the facility in Lampertheim, Germany, and a security deposit of

€1.0

million. The security deposit will mature on

December

31,

2017

,

so long as compliance occurs through that date. At

December

31,

2016,

the outstanding principal balance was

€4.9

million, or about

$5.1

million. At

March

31,

2016,

the outstanding principal balance was

€5.6

million, or about

$6.3

million at that time.

Loans Assumed from Business Acquisitions

Our outstanding balances relating to loans assumed upon business acquisitions at

December

31,

2016

and

March

31,

2016

were

$283,000

and

$1.1

million, respectively. These loans consisted of certain short-term facilities from financial institutions and loans from government agencies to support research and development activities.

XML

Note 11 - Pension Plans

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

11.

Pension Plans

We maintain

three

defined benefit pension plans:

one

for United Kingdom employees,

one

for German employees and

one

for Philippine employees. We deposit funds for the United Kingdom and Philippine plans with financial institutions and make payments to former German employees directly. We accrue for the unfunded portion of the obligations. The measurement date for projected benefit obligations and plan assets is

March

31.

As of

December

31,

2016,

the German defined benefit plan was completely unfunded and we accrued for its obligations. The United Kingdom and German plans have been curtailed. As such, the plans are closed to new entrants and no credit is provided for additional periods of service. We expect to contribute approximately

$1.1

million to the United Kingdom and the Philippines plans in the fiscal year ending

March

31,

2017.

Net Period Pension Cost

The net periodic pension expense includes the following components (in thousands):

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Service cost	$	27		$	25		$	83		$	76
Interest cost on projected benefit obligation		313			364			991			1,103
Expected return on plan assets		(282	)		(432	)		(901	)		(1,312	)
Recognized actuarial loss		41			44			133			134
Net periodic pension expense	$	99		$	1		$	306		$	1

Information on Plan Assets

We report and measure the plan assets of our defined benefit pension plans at fair value. The table below sets forth the fair value of our plan assets as of

December

31,

2016

and

March

31,

2016,

using the same

three

-level hierarchy of fair-value inputs described in Note

4,

“Fair Value” (in thousands):

	December 31, 2016						March 31, 2016
Description	Level 1		Level 2		Total		Level 1		Level 2		Total
	(unaudited)						(unaudited)
Cash and cash funds	$	103	$	-	$	103	$	121	$	-	$	121
Equity		305		-		305		351		-		351
Fixed interest		1,211		58		1,269		1,225		96		1,321
Mutual funds		12,891		12,751		25,642		13,527		13,394		26,921
Total	$	14,510	$	12,809	$	27,319	$	15,224	$	13,490	$	28,714

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Note 12 - Employee Equity Incentive Plans

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

12.

Employee Equity Incentive Plans

Stock Purchase and Stock Option Plans

Equity Incentive Plans

On

September

10,

2009,

our stockholders approved the

2009

Equity Incentive Plan, or the

2009

Plan, under which

900,000

shares of our common stock were reserved for the grant of stock options and other equity incentives. On

September

16,

2011,

our stockholders approved the

2011

Equity Incentive Plan, or the

2011

Plan, under which

600,000

shares of our common stock were reserved for the grant of stock options and other equity incentives. On

August

30,

2013,

our stockholders approved the

2013

Equity Incentive Plan, or the

2013

Plan, under which

2,000,000

shares of our common stock were reserved for the grant of stock options and other equity incentives. On

August

26,

2016,

our stockholders approved the

2016

Equity Incentive Plan, or the

2016

Plan, under which

2,000,000

shares of the common stock were reserved for the grant of stock options and other equity incentives. The

2009

Plan, the

2011

Plan, the

2013

Plan and the

2016

Plan are referred to as the Plans.

Stock Options

Under the Plans, nonqualified and incentive stock options

may

be granted to employees, consultants and non-employee directors. Generally, the per share exercise price shall not be less than

100%

of the fair market value of a share on the grant date. The Board of Directors has the full power to determine the provisions of each option issued under the Plans. While we

may

grant options that become exercisable at different times or within different periods, we have primarily granted options that vest over

four

years. The options, once granted, expire

ten

years from the date of grant.

Stock Awards

Stock awards, denominated restricted stock under the

2009

Plan and the

2011

Plan,

may

be granted to any employee, director or consultant under the Plans. Pursuant to a stock award, we will issue shares of common stock. Shares that are subject to the restriction will be released from restriction if certain requirements, including continued performance of services, are met.

Stock Appreciation Rights

Awards of stock appreciation rights, or SARs,

may

be granted to employees, consultants and non-employee directors pursuant to the Plans. A SAR is payable on the difference between the market price at the time of exercise and the exercise price at the date of grant. In any event, the exercise price of a SAR shall not be less than

100%

of the fair market value of a share on the grant date and shall expire no later than

ten

years from the grant date. Upon exercise, the holder of a SAR shall be entitled to receive payment either in cash or a number of shares by dividing such cash amount by the fair market value of a share on the exercise date.

Restricted Stock Units

Restricted stock units, denominated performance units in the

2009

Plan,

may

be granted to employees, consultants and non-employee directors under the Plan. Each restricted stock unit shall have a value equal to the fair market value of

one

share. After the applicable performance period has ended, the holder will be entitled to receive a payment, either in cash or in the form of shares, based on the number of restricted stock units earned over the performance period, to be determined as a function of the extent to which the corresponding performance goals or other vesting provisions have been achieved.

Employee Stock Purchase Plan

The Board of Directors has approved the Amended and Restated

1999

Employee Stock Purchase Plan, or the Purchase Plan, and reserved a total of

1,550,000

shares of common stock for issuance under the Purchase Plan. Under the Purchase Plan, all eligible employees

may

purchase our common stock at a price equal to

85%

of the lower of the fair market value at the beginning of the offer period or the semi-annual purchase date. Stock purchases are limited to

15%

of an employee’s eligible compensation. During the

nine

months ended

December

31,

2016,

there were

112,171

shares purchased under the Purchase Plan, leaving approximately

128,070

shares available for purchase under the Purchase Plan in the future.

Stock-Based Compensation

The following table summarizes the effects of stock-based compensation charges (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
Statement of Operations Classifications	2016		2015		2016		2015
	(unaudited)				(unaudited)
Cost of goods sold	$	80	$	125	$	276	$	371
Research, development and engineering (1)		254		242		840		1,032
Selling, general and administrative		488		471		1,435		1,374
Stock-based compensation effect in income before income tax provision		822		838		2,551		2,777
Provision for income tax (2)		329		293		1,021		972
Net stock-based compensation effects in net income	$	493	$	545	$	1,530	$	1,805

(1) Includes acquisition related compensation expenses of $249,000 during the nine months ended December 31, 2015.

(2) Calculated at the U.S. statutory income tax rate of 40% in fiscal 2017 and 35% in fiscal 2016.

During the

nine

months ended

December

31,

2016,

the unaudited condensed consolidated statements of operations and cash flows do not reflect any tax benefit for the tax deduction from option exercises and other awards. As of

December

31,

2016,

approximately

$7.4

million in stock-based compensation is to be recognized for unvested stock options granted under our equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of

2.8

years.

The Black-Scholes option pricing model is used to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. The weighted average estimated fair values of employee stock option grants and rights granted under the Purchase Plan, as well as the weighted average assumptions that were used in calculating such values during the

three

and

nine

months ended

December

31,

2016

and

2015,

were based on estimates at the date of grant as follows:

	Stock Options (1)											Purchase Plan (2)
	Three Months Ended December 31,					Nine Months Ended December 31,						Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015		2016			2015			2016			2015			2016			2015
	(unaudited)					(unaudited)						(unaudited)						(unaudited)
Weighted average estimated fair value of grant per share	$	4.45			na	$	4.42		$	4.83		$	2.63		$	3.54		$	3.28		$	3.33
Risk-free interest rate		1.7	%		na		1.5	%		1.8	%		0.5	%		0.1	%		0.4	%		0.1	%
Expected term in years		6.41			na		6.41			6.45			0.50			0.50			0.50			0.50
Volatility		39.8	%		na		40.7	%		44.9	%		32.3	%		48.2	%		37.5	%		39.8	%
Dividend yield (3)		-			na		0.4	%		1.2	%		0.0	%		1.2	%		0.7	%		1.1	%

(1) No stock options were granted during the quarter ended December 31, 2015.

(2) Under the stock purchase plan, rights to purchase shares are only granted during the first and third quarters of each fiscal year.

(3) No dividends were declared for the quarters ended September 30, 2016 and December 31, 2016.

Activity with respect to outstanding stock options for the

nine

months ended

December

31,

2016

was as follows:

				Weighted Average
	Number of			Exercise Price		Intrinsic
	Shares			Per Share		Value (1)
				(unaudited)		(000)
Balance at March 31, 2016		5,234,397		$	10.40
Options granted		704,000		$	10.95
Options exercised		(110,097	)	$	8.00	$	384
Options cancelled		(7,500	)	$	13.37
Options expired		(27,500	)	$	11.81
Balance at December 31, 2016		5,793,300		$	10.50
Exercisable at December 31, 2016		3,924,050		$	10.11
Exercisable at March 31, 2016		3,619,563		$	9.93

(1) Represents the difference between the exercise price and the value of our common stock at the time of exercise.

XML

Note 13 - Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

13.

Accumulated Other

Comprehensive Income (Loss)

The components and the changes in accumulated other comprehensive income (loss), net of income taxes, for the

nine

months ended

December

31,

2016

and

2015

were as follows (in thousands):

	Nine Months Ended December 31, 2016
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2016	$	(10,639	)	$	(82	)	$	(9,545	)	$	(20,266	)
Other comprehensive income (loss) before reclassifications		(8,403	)		66			-			(8,337	)
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		-			(31	)		-			(31	)
Net current period other comprehensive income (loss)		(8,403	)		35			-			(8,368	)
Balance as of December 31, 2016	$	(19,042	)	$	(47	)	$	(9,545	)	$	(28,634	)

	Nine Months Ended December 31, 2015
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2015	$	(13,577	)	$	7		$	(9,518	)	$	(23,088	)
Other comprehensive income (loss) before reclassifications		534			(337	)		-			197
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		-			276			-			276
Net current period other comprehensive income (loss)		534			(61	)		-			473
Balance as of December 31, 2015	$	(13,043	)	$	(54	)	$	(9,518	)	$	(22,615	)

The amounts reclassified out of accumulated other comprehensive income (loss) for the

three

and

nine

months ended

December

31,

2016

and

2015

were as follows (in thousands):

Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)											Impacted Line Item on Unaudited Condensed Consolidated Income Statements
	Three Months Ended December 31,					Nine Months Ended December 31,
	2016		2015			2016			2015
	(unaudited)					(unaudited)
Net gain (loss) on investments	$	-	$	(7	)	$	201		$	(7	)	Other income (expense), net
Impairment of marketable securities		-		-			(151	)		(454	)	Other income (expense), net
Subtotal		-		(7	)		50			(461	)	Income before income tax provision
Tax impact		-		3			(19	)		185		Provision for income tax
Total reclassifications for the period	$	-	$	(4	)	$	31		$	(276	)	Net income

XML

Note 14 - Computation of Earnings Per Share

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

14

. Computation of Earnings per Share

Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Net income	$	5,100	$	2,286	$	12,054	$	8,544
Weighted average shares - basic		31,558		31,487		31,484		31,626
Weighted average shares - diluted		32,209		32,343		32,119		32,483
Net income per share - basic	$	0.16	$	0.07	$	0.38	$	0.27
Net income per share - diluted	$	0.16	$	0.07	$	0.38	$	0.26

Diluted weighted average shares included approximately

651,000

and

856,000

common equivalent shares from stock options for the

three

months ended

December

31,

2016

and

2015,

respectively, and approximately

635,000

and

857,000

common equivalent shares from stock options for the

nine

months ended

December

31,

2016

and

2015,

respectively.

Basic net income available per common share is computed using net income and the weighted average number of common shares outstanding

during the period. Diluted net income per common share is computed using net income and the weighted average number of common shares outstanding, assuming dilution, which includes potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include the assumed exercise of stock options using the treasury stock method. During the

three

and

nine

months ended

December

31,

2016,

there were outstanding options to purchase

3,299,065

and

3,108,615

shares, respectively, that were not included in the computation of diluted net income per share since the exercise prices of the options exceeded the market price of the common stock and thus their inclusion would be anti-dilutive. During the

three

and

nine

months ended

December

31,

2015,

there were outstanding weighted average options to purchase

2,047,000

and

1,620,807

shares, respectively, that were not included in the computation of diluted net income per share since the exercise prices of the options exceeded the market price of the common stock and thus their inclusion would be anti-dilutive.

These options could dilute earnings per share in future periods if the market price of the common stock increases.

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Note 15 - Segment and Geographic Information

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

15.

Segment and Geographic Information

We have a

single

operating segment and reportable segment. We design, develop, manufacture and market high performance semiconductor products. Our

two

Chief Executive Officers,

one

of whom is also the Chief Financial Officer, together, have been identified as the chief operating decision makers. Our chief operating decision makers review financial information presented as

one

operating segment for the purpose of making decisions, allocating resources and assessing financial performance.

Our net revenues by major geographic area (based on destination) were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
United States	$	20,605	$	18,334	$	60,291	$	57,784
Europe and the Middle East
France		1,901		2,382		7,472		6,724
Germany		9,253		7,201		26,812		24,123
Russia		353		2,196		941		2,914
Netherlands		1,241		761		3,322		2,298
United Kingdom		3,565		3,686		10,401		10,400
Other		6,646		6,217		19,431		21,281
Asia Pacific
China		20,690		19,090		64,548		60,378
Japan		1,663		1,451		5,089		7,175
Korea		4,268		5,360		13,316		17,585
Malaysia		1,300		689		3,392		3,253
Singapore		3,751		3,112		10,335		9,249
Other		2,020		2,527		7,021		7,655
Rest of the World
India		1,209		1,095		3,316		3,136
Other		1,019		1,032		3,064		3,482
Total	$	79,484	$	75,133	$	238,751	$	237,437

The following table sets forth net revenues for each of our product groups for the

three

and

nine

months ended

December

31,

2016

and

2015

(in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Power semiconductors	$	54,647	$	51,196	$	164,663	$	159,607
Integrated circuits		20,032		18,749		60,967		63,257
Systems and RF power semiconductors		4,805		5,188		13,121		14,573
Total	$	79,484	$	75,133	$	238,751	$	237,437

For the

three

and

nine

months ended

December

31,

2016,

one

distributor accounted for

11.7%

and

13.1%

of our net revenues in each period, respectively, and

another

distributor accounted for

11.2%

and

10.9%

of our net revenues, respectively. For the

three

and

nine

months ended

December

31,

2015,

the

first

distributor referenced above accounted for

13.9%

and

12.0%

of our net revenues, respectively.

XML

Note 16 - Income Taxes

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

16.

Income Taxes

For the

three

and

nine

months ended

December

31,

2016,

we recorded income tax provisions of

$2.0

million and

$7.2

million, reflecting effective tax rates of

28.6%

and

37.3%,

respectively. For the

three

and

nine

months ended

December

31,

2015,

we recorded income tax provisions of

$3.9

million and

$8.1

million, reflecting effective tax rates of

63.0%

and

48.5%,

respectively. Our effective tax rates for the

three

and

nine

months ended

December

31,

2016

were affected by valuation allowances against net operating losses generated in certain foreign jurisdictions and by a release of tax reserves resulting from the lapse of the statutes of limitations.

During the

three

and

nine

months ended

December

 

31,

2015,

we recorded out-of-period adjustments that increased the income tax provision by a net amount of

$

1.4

million. We recorded a reversal of a deferred tax asset that was overstated in the amount of

$

2.3

million in the financial statements for the fiscal year ended

March

 

31,

2012,

as well as the balance sheets for the fiscal years thereafter and the interim periods within those years and through

September

 

30,

2015.

This adjustment was partially offset by a reduction of

$

893,000

of tax expense relating to an overstatement in income tax reserves for the financial statements for the fiscal year ended

March

 

31,

2015

and the balance sheets of the interim periods in the fiscal

2016

year through

September

 

30,

2015.

The out-of-period adjustments did not have any impact on our cash flow statements in any of the reporting periods. We believe that these out-of-period adjustments are not material to our financial statements for the relevant years. Additionally, for the

three

and

nine

months ended

December

 

31,

2015,

the effective tax rates were also affected by losses that could not be offset against other profits in certain jurisdictions with lower tax rates and by estimates of annual income in domestic and foreign jurisdictions.

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Note 17 - Commitments and Contingencies

9 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

17.

Commitments and Contingencies

Revolving Credit Agreement

See Note

10,

“Borrowing Arrangements” for information regarding the terms of the credit agreement.

Other Commitments and Contingencies

On occasion, we provide limited indemnification to customers against intellectual property infringement claims related to our products. To date, we have not experienced significant activity or claims related to such indemnifications. We also provide in the normal course of business indemnification to our officers, directors and selected parties. We are unable to estimate any potential future liability, if any. Therefore, no liability for these indemnification agreements has been recorded as of

December

31,

2016

and

March

31,

2016.

We make strategic investments in other companies from time to time. These investments include commitments in certain instances to provide additional financing up to the contracted amount. These commitments are insignificant individually or in aggregate.

We have ongoing income tax audits of our subsidiary in the Philippines for the fiscal years ended

March

31,

2010

and

2011.

The Philippine Bureau of Internal Revenue, or BIR, has made an assessment for a deficiency of income taxes, inclusive of interest and penalties, of approximately

$2.5

million and

$156,000,

respectively, for the fiscal years

2010

and

2011.

We are vigorously contesting the assessments of both years. While there are no assurances that we will prevail, we believe that we have a valid legal reason to challenge the BIR’s decision and that our appeals will merit a favorable resolution. Accordingly, we have not accrued any amount for this matter.

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Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form

10

-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of IXYS Corporation and its wholly-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Some of the accounting estimates that require significant judgments by management include, but are not limited to, revenue reserves, inventory valuation, accounting for income taxes and allocation of purchase price in business combinations. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. The condensed consolidated balance sheet as of

March

31,

2016

has been derived from our audited consolidated balance sheet as of that date. It is recommended that the interim financial statements be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended

March

31,

2016,

or fiscal

2016,

contained in our Annual Report on Form

10

-K. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year. Our fiscal year end is

March

31.

References to any numerically identified year preceded by the word “fiscal” are references to the year ending on

March

31

of such numerically identified year.

New Accounting Pronouncements, Policy [Policy Text Block]

In

May

2014,

Financial Accounting Standards Board, or FASB, issued a new standard on the recognition of revenue from contracts with customers, which includes a single set of rules and criteria for revenue recognition to be used across all industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires

five

basic steps: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when or as the entity satisfies a performance obligation. For public companies, this standard is effective for annual reporting periods beginning after

December

 

15,

2017,

including interim periods during the annual period. Early adoption is permitted for annual periods commencing after

December

15,

2016.

Two d

ifferent transition methods are available:

full retrospective method and a modified retrospective

approach. We are currently evaluating the impact of the adoption of the standard on our consolidated financial statements including selection of the transition method.

In

July

2015,

FASB issued an amendment to modify the inventory measurement guidance in Topic

330,

Inventory

, for inventory that is measured using the methods other than last-in,

first

-out, or LIFO, and the retail inventory method. It requires that an entity measure inventory within the scope of this update at the lower of cost and net realizable value. It eliminated the guidance in Topic

330

that required a reporting entity measuring inventory at the lower of cost or market to consider the replacement cost of inventory and the net realizable value of inventory less an approximately normal profit margin along with net realizable value in determining the market value. The guidance will be effective for annual reporting periods beginning after

December

 

15,

2016,

and interim periods during the annual period. The new standard is required to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We do not expect this change to have a significant impact on our consolidated financial statements.

In

January

2016,

FASB issued authoritative guidance that modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under Accounting Standards Codification,

Fair Value Measurements

, or ASC

820,

and as such these investments

may

be measured at cost. This guidance is effective for financial statements issued for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years. We are currently evaluating the impact of this standard on our consolidated financial statements.

In

February

2016,

FASB issued amended guidance for lease arrangements, which requires lessees to recognize the following

for all leases with terms longer than

12

months: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The amendment is effective for financial statements issued for fiscal years beginning after

December

 

15,

2018,

and interim periods within those fiscal years. Early adoption is permitted.

We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In

March

2016,

FASB issued amended guidance to simplify the transition to the equity method of accounting. This standard eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements as if the equity method had been used during all previous periods. Additionally, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings at the point an investment qualifies for the equity method. The amended guidance is effective for financial statements issued for

fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2016.

It should be applied prospectively. Early adoption

is permitted. We are currently evaluating the impact of

this amended guidance on our consolidated financial statements.

In

March

2016,

FASB issued amended guidance which simplifies several aspects of the accounting for

employee share-based payment awards, including

forfeitures, employer tax withholding on share-based compensation and excess tax benefits or deficiencies.

The amended guidance also clarifies the statement of cash flows presentation for share-based awards. The guidance is effective for financial statements issued for fiscal years beginning after

December

15,

2016,

and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance.

We are currently evaluating the impact of this amended guidance on our consolidated financial statements.

In

October

2016,

FASB issued amended guidance which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a

third

party or otherwise recovered through use. The guidance will be effective for the Company for fiscal years beginning after

December

15,

2017,

including interim reporting periods within those annual reporting periods. Early adoption is permitted in the

first

interim period only. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.

 We are in the process of evaluating the impacts of the adoption of this amendment.

In

November

2016,

FASB issued amended guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years, and will be applied on a retrospective basis. We have adopted the guidance on a retrospective basis from the quarter ended

December

31,

2016.

In our unaudited condensed consolidated statements of cash flow statements for the

nine

month periods ended

December

31,

2016

and

2015,

the beginning balances of cash and cash equivalents included restricted cash of

$277,000

and

$266,000

in the respective periods and the ending balances of cash and cash equivalents included restricted cash of

$1.3

million and

$722,000

in the respective periods. If we had not adopted the amended guidance, our unaudited condensed consolidated statements of cash flows for the

nine

month periods ended

December

31,

2016

and

2015

would have shown a decrease of

$1.0

million and

$357,000,

respectively, in the change in restricted cash under cash flows from investing activities.

XML

Note 3 - Business Combinations (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	Purchase Consideration Allocation
Cash, restricted cash and cash equivalents	$	196
Accounts receivable		1,497
Inventories		534
Property, plant and equipment		24
Prepaid expenses and other current assets		547
Identifiable intangible assets		2,867
Short-term borrowings		(2,354	)
Accounts payable		(614	)
Accruals and other liabilities		(1,926	)
Total identifiable net assets		771
Goodwill		14,887
Total purchase consideration	$	15,658

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

				Estimated
	Fair Value		Amortization	Useful Life
	(In thousands)		Method	(In months)
	(unaudited)
Developed intellectual property	$	1,005	Accelerated		60
In-process research and development expenses (1)		1,188	Straight-line		60
Customer relationships		500	Accelerated		36
Contract backlog		174	Straight-line		6
Total	$	2,867

XML

Note 4 - Fair Value (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	December 31, 2016 (1)						March 31, 2016 (1)
			Fair Value Measured at						Fair Value Measured at
			Reporting Date Using						Reporting Date Using
Description	Total		Level 1		Level 2		Total		Level 1		Level 2
	(unaudited)						(unaudited)
Money market funds (2)	$	82,566	$	82,566	$	-	$	115,974	$	115,974	$	-
Marketable equity securities (3)		2,046		2,046		-		1,749		1,749		-
Auction rate preferred securities (3)		350		-		350		350		-		350
Total Assets Measured at Fair Value	$	84,962	$	84,612	$	350	$	118,073	$	117,723	$	350

XML

Note 5 - Accounts Receivable (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	December 31, 2016			March 31, 2016
	(unaudited)
Accounts receivable, gross	$	40,276		$	41,219
Allowances		(3,561	)		(2,779	)
Accounts receivable, net	$	36,715		$	38,440

XML

Note 6 - Other Assets (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Other Assets, Noncurrent [Table Text Block]

	December 31,		March 31,
	2016		2016
	(unaudited)
Marketable equity securities	$	2,046	$	1,749
Auction rate preferred securities		350		350
Long-term equity method investments		11,554		10,977
Other items, including cost method investments		3,217		686
Total	$	17,167	$	13,762

XML

Note 7 - Inventories (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	December 31,		March 31,
	2016		2016
	(unaudited)
Raw materials	$	18,952	$	18,269
Work in process		42,476		41,549
Finished goods		25,690		29,786
Total	$	87,118	$	89,604

XML

Note 8 - Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accrued Expenses and Other Current Liabilities [Table Text Block]

	December 31,		March 31,
	2016		2016
	(unaudited)
Uninvoiced goods and services	$	9,783	$	8,824
Compensation and benefits		5,212		7,540
Income taxes		5,896		2,066
Commissions, royalties and other		4,317		2,860
Total	$	25,208	$	21,290

XML

Note 9 - Intangible Assets (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	December 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,197	$	265	$	13,481	$	3,451
Customer relationships		13,464		123		13,341		-
In-process research and development expenses		1,056		1,003		53		-
Contract backlog		7,310		-		7,310		-
Other intangible assets		1,588		-		1,461		127
Total identifiable intangible assets	$	40,615	$	1,391	$	35,646	$	3,578

	March 31, 2016
	Gross Intangible Assets		Accumulated Impairment		Accumulated Amortization		Net Intangible Assets
	(unaudited)
Developed intellectual property	$	17,309	$	-	$	11,639	$	5,670
Customer relationships		13,520		-		12,961		559
In-process research and development expenses		1,188		-		-		1,188
Contract backlog		7,329		-		7,329		-
Other intangible assets		1,599		-		1,409		190
Total identifiable intangible assets	$	40,945	$	-	$	33,338	$	7,607

XML

Note 11 - Pension Plans (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Service cost	$	27		$	25		$	83		$	76
Interest cost on projected benefit obligation		313			364			991			1,103
Expected return on plan assets		(282	)		(432	)		(901	)		(1,312	)
Recognized actuarial loss		41			44			133			134
Net periodic pension expense	$	99		$	1		$	306		$	1

Defined Benefit Plan Plan Assets Fair Value [Table Text Block]

	December 31, 2016						March 31, 2016
Description	Level 1		Level 2		Total		Level 1		Level 2		Total
	(unaudited)						(unaudited)
Cash and cash funds	$	103	$	-	$	103	$	121	$	-	$	121
Equity		305		-		305		351		-		351
Fixed interest		1,211		58		1,269		1,225		96		1,321
Mutual funds		12,891		12,751		25,642		13,527		13,394		26,921
Total	$	14,510	$	12,809	$	27,319	$	15,224	$	13,490	$	28,714

XML

Note 12 - Employee Equity Incentive Plans (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
Statement of Operations Classifications	2016		2015		2016		2015
	(unaudited)				(unaudited)
Cost of goods sold	$	80	$	125	$	276	$	371
Research, development and engineering (1)		254		242		840		1,032
Selling, general and administrative		488		471		1,435		1,374
Stock-based compensation effect in income before income tax provision		822		838		2,551		2,777
Provision for income tax (2)		329		293		1,021		972
Net stock-based compensation effects in net income	$	493	$	545	$	1,530	$	1,805

Schedule of Employee Service Share Based Compensation Fair Value Assumptions and Methodology [Table Text Block]

	Stock Options (1)											Purchase Plan (2)
	Three Months Ended December 31,					Nine Months Ended December 31,						Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015		2016			2015			2016			2015			2016			2015
	(unaudited)					(unaudited)						(unaudited)						(unaudited)
Weighted average estimated fair value of grant per share	$	4.45			na	$	4.42		$	4.83		$	2.63		$	3.54		$	3.28		$	3.33
Risk-free interest rate		1.7	%		na		1.5	%		1.8	%		0.5	%		0.1	%		0.4	%		0.1	%
Expected term in years		6.41			na		6.41			6.45			0.50			0.50			0.50			0.50
Volatility		39.8	%		na		40.7	%		44.9	%		32.3	%		48.2	%		37.5	%		39.8	%
Dividend yield (3)		-			na		0.4	%		1.2	%		0.0	%		1.2	%		0.7	%		1.1	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

				Weighted Average
	Number of			Exercise Price		Intrinsic
	Shares			Per Share		Value (1)
				(unaudited)		(000)
Balance at March 31, 2016		5,234,397		$	10.40
Options granted		704,000		$	10.95
Options exercised		(110,097	)	$	8.00	$	384
Options cancelled		(7,500	)	$	13.37
Options expired		(27,500	)	$	11.81
Balance at December 31, 2016		5,793,300		$	10.50
Exercisable at December 31, 2016		3,924,050		$	10.11
Exercisable at March 31, 2016		3,619,563		$	9.93

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Note 13 - Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Nine Months Ended December 31, 2016
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2016	$	(10,639	)	$	(82	)	$	(9,545	)	$	(20,266	)
Other comprehensive income (loss) before reclassifications		(8,403	)		66			-			(8,337	)
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		-			(31	)		-			(31	)
Net current period other comprehensive income (loss)		(8,403	)		35			-			(8,368	)
Balance as of December 31, 2016	$	(19,042	)	$	(47	)	$	(9,545	)	$	(28,634	)

	Nine Months Ended December 31, 2015
	Foreign Currency			Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
				(unaudited)
Balance as of March 31, 2015	$	(13,577	)	$	7		$	(9,518	)	$	(23,088	)
Other comprehensive income (loss) before reclassifications		534			(337	)		-			197
Net (gain) loss reclassified from accumulated other comprehensive income (loss)		-			276			-			276
Net current period other comprehensive income (loss)		534			(61	)		-			473
Balance as of December 31, 2015	$	(13,043	)	$	(54	)	$	(9,518	)	$	(22,615	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)											Impacted Line Item on Unaudited Condensed Consolidated Income Statements
	Three Months Ended December 31,					Nine Months Ended December 31,
	2016		2015			2016			2015
	(unaudited)					(unaudited)
Net gain (loss) on investments	$	-	$	(7	)	$	201		$	(7	)	Other income (expense), net
Impairment of marketable securities		-		-			(151	)		(454	)	Other income (expense), net
Subtotal		-		(7	)		50			(461	)	Income before income tax provision
Tax impact		-		3			(19	)		185		Provision for income tax
Total reclassifications for the period	$	-	$	(4	)	$	31		$	(276	)	Net income

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Note 14 - Computation of Earnings Per Share (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Net income	$	5,100	$	2,286	$	12,054	$	8,544
Weighted average shares - basic		31,558		31,487		31,484		31,626
Weighted average shares - diluted		32,209		32,343		32,119		32,483
Net income per share - basic	$	0.16	$	0.07	$	0.38	$	0.27
Net income per share - diluted	$	0.16	$	0.07	$	0.38	$	0.26

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Note 15 - Segment and Geographic Information (Tables)

9 Months Ended

Dec. 31, 2016

Notes Tables

Revenue from External Customers by Geographic Areas [Table Text Block]

	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
United States	$	20,605	$	18,334	$	60,291	$	57,784
Europe and the Middle East
France		1,901		2,382		7,472		6,724
Germany		9,253		7,201		26,812		24,123
Russia		353		2,196		941		2,914
Netherlands		1,241		761		3,322		2,298
United Kingdom		3,565		3,686		10,401		10,400
Other		6,646		6,217		19,431		21,281
Asia Pacific
China		20,690		19,090		64,548		60,378
Japan		1,663		1,451		5,089		7,175
Korea		4,268		5,360		13,316		17,585
Malaysia		1,300		689		3,392		3,253
Singapore		3,751		3,112		10,335		9,249
Other		2,020		2,527		7,021		7,655
Rest of the World
India		1,209		1,095		3,316		3,136
Other		1,019		1,032		3,064		3,482
Total	$	79,484	$	75,133	$	238,751	$	237,437

Revenue from External Customers by Products and Services [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Power semiconductors	$	54,647	$	51,196	$	164,663	$	159,607
Integrated circuits		20,032		18,749		60,967		63,257
Systems and RF power semiconductors		4,805		5,188		13,121		14,573
Total	$	79,484	$	75,133	$	238,751	$	237,437

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Note 2 - Recent Accounting Pronouncements and Accounting Changes (Details Textual) - USD ($)	9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Restricted cash	$ 1,300,000	$ 722,000	$ 277,000	$ 266,000
New Accounting Pronouncement, Early Adoption, Effect [Member] | Pro Forma [Member]
Increase (Decrease) in Restricted Cash	$ (1,000,000)	$ (357,000)

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Note 3 - Business Combinations (Details Textual) - RadioPulse [Member] - USD ($)		9 Months Ended	12 Months Ended
	May 01, 2015	Dec. 31, 2015	Mar. 31, 2016	Dec. 31, 2016
Business Combination, Consideration Transferred	$ 15,700,000
Payments to Acquire Businesses, Gross	14,700,000
Business Combination, Consideration Transferred, Other	1,000,000
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 6,000,000
Business Combination, Contingent Consideration Arrangements, Earnout Payment Period	3 years
Business Combination, Contingent Consideration, Liability			$ 0	$ 0
Business Acquisition, Transaction Costs	$ 248,000
Employee Service Share-based Compensation, Cash Flow Effect, Cash Used to Settle Awards		$ 249,000	$ 249,000

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Note 3 - Business Combinations - Purchase Price Allocation (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016	May 01, 2015
Goodwill	$ 42,193	$ 42,355
RadioPulse [Member]
Cash, restricted cash and cash equivalents			$ 196
Accounts receivable			1,497
Inventories			534
Property, plant and equipment			24
Prepaid expenses and other current assets			547
Identifiable intangible assets			2,867
Short-term borrowings			(2,354)
Accounts payable			(614)
Accruals and other liabilities			(1,926)
Total identifiable net assets			771
Goodwill			14,887
Total purchase consideration			$ 15,658

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Note 3 - Business Combinations - Acquired Finite-lived Intangible Assets (Details) $ in Thousands	May 01, 2015 USD ($)
Fair Value	$ 2,867
Developed Technology Rights [Member]
Fair Value	$ 1,005
Finite-Lived Intangible Assets, Amortization Method	Accelerated
Acquired Finite-Lived Intangible Assets, Estimated Useful Life	5 years
In Process Research and Development [Member]
Fair Value	$ 1,188	[1]
Finite-Lived Intangible Assets, Amortization Method	Straight-line	[1]
Acquired Finite-Lived Intangible Assets, Estimated Useful Life	5 years	[1]
Customer Relationships [Member]
Fair Value	$ 500
Finite-Lived Intangible Assets, Amortization Method	Accelerated
Acquired Finite-Lived Intangible Assets, Estimated Useful Life	3 years
Order or Production Backlog [Member]
Fair Value	$ 174
Finite-Lived Intangible Assets, Amortization Method	Straight-line
Acquired Finite-Lived Intangible Assets, Estimated Useful Life	180 days

[1] Amortization started in the quarter ended December 31, 2016 upon the completion of the research and development activities of the corresponding projects.

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Note 4 - Fair Value (Details Textual) xbrli-pure in Thousands, $ in Thousands	Dec. 31, 2016 USD ($)	Mar. 31, 2016 USD ($)
Derivative, Number of Instruments Held	0	0
Debt, Long-term and Short-term, Combined Amount	$ 78,000	$ 87,100
Fair Value, Inputs, Level 3 [Member]
Assets, Fair Value Disclosure, Recurring	0	0
Liabilities, Fair Value Disclosure, Recurring	$ 0	$ 0

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Note 4 - Fair Value - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands		Dec. 31, 2016	Mar. 31, 2016
Marketable equity securities		$ 2,046	$ 1,749
Auction rate preferred securities		350	350
Fair Value, Measurements, Recurring [Member]
Money market funds	[1],[2]	82,566	115,974
Marketable equity securities	[2],[3]	2,046	1,749
Auction rate preferred securities	[2],[3]	350	350
Total Assets Measured at Fair Value	[2]	84,962	118,073
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Money market funds	[1],[2]	82,566	115,974
Marketable equity securities	[2],[3]	2,046	1,749
Auction rate preferred securities	[2],[3]
Total Assets Measured at Fair Value	[2]	84,612	117,723
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Money market funds	[1],[2]
Marketable equity securities	[2],[3]
Auction rate preferred securities	[2],[3]	350	350
Total Assets Measured at Fair Value	[2]	$ 350	$ 350

[1] Included in "Cash and cash equivalents" on our unaudited condensed consolidated balance sheets.

[2] We did not have any recurring fair value measurements of assets or liabilities whose fair value was measured using significant unobservable inputs.

[3] Included in "Other assets" on our unaudited condensed consolidated balance sheets.

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Note 5 - Accounts Receivable - Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Accounts receivable, gross	$ 40,276	$ 41,219
Allowances	(3,561)	(2,779)
Accounts receivable, net	$ 36,715	$ 38,440

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Note 6 - Other Assets (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Mar. 31, 2016
Other than Temporary Impairment Losses, Investments	$ 0	$ 0	$ 151,000	$ 454,000
Equity Method Investments	11,554,000		11,554,000		$ 10,977,000
Cost Method Investments	1,900,000		1,900,000
Equity Method Investment, Other than Temporary Impairment			0
Cost-method Investments, Other than Temporary Impairment			0
Powersem GmbH [Member]
Equity Method Investments	2,500,000		2,500,000		2,500,000
EB Tech Ltd [Member]
Equity Method Investments	2,700,000		2,700,000		2,700,000
ATEC [Member]
Equity Method Investments	$ 6,400,000		$ 6,400,000		$ 5,700,000

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Note 6 - Other Assets - Other Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Marketable equity securities	$ 2,046	$ 1,749
Auction rate preferred securities	350	350
Long-term equity method investments	11,554	10,977
Other items, including cost method investments	3,217	686
Total	$ 17,167	$ 13,762

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Note 7 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Raw materials	$ 18,952	$ 18,269
Work in process	42,476	41,549
Finished goods	25,690	29,786
Total	$ 87,118	$ 89,604

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Note 8 - Accrued Expenses and Other Current Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Uninvoiced goods and services	$ 9,783	$ 8,824
Compensation and benefits	5,212	7,540
Income taxes	5,896	2,066
Commissions, royalties and other	4,317	2,860
Total	$ 25,208	$ 21,290

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Note 9 - Intangible Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Impairment of Intangible Assets, Finite-lived	$ 1,391		$ 1,391

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Note 9 - Intangible Assets - Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Gross Intangible Assets	$ 40,615	$ 40,945
Accumulated Impairment	1,391
Accumulated Amortization	35,646	33,338
Net Intangible Assets	3,578	7,607
Developed Technology Rights [Member]
Gross Intangible Assets	17,197	17,309
Accumulated Impairment	265
Accumulated Amortization	13,481	11,639
Net Intangible Assets	3,451	5,670
Customer Relationships [Member]
Gross Intangible Assets	13,464	13,520
Accumulated Impairment	123
Accumulated Amortization	13,341	12,961
Net Intangible Assets		559
In Process Research and Development [Member]
Gross Intangible Assets	1,056	1,188
Accumulated Impairment	1,003
Accumulated Amortization	53
Net Intangible Assets		1,188
Order or Production Backlog [Member]
Gross Intangible Assets	7,310	7,329
Accumulated Impairment
Accumulated Amortization	7,310	7,329
Net Intangible Assets
Other Intangible Assets [Member]
Gross Intangible Assets	1,588	1,599
Accumulated Impairment
Accumulated Amortization	1,461	1,409
Net Intangible Assets	$ 127	$ 190

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Note 10 - Borrowing Arrangements (Details Textual)		1 Months Ended		3 Months Ended		8 Months Ended	9 Months Ended
	Nov. 20, 2015 USD ($)	Dec. 31, 2016 USD ($)	Apr. 30, 2015 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 EUR (€)	Nov. 30, 2016	Dec. 31, 2016 USD ($)	Dec. 31, 2016 EUR (€)	Mar. 31, 2016 USD ($)	Mar. 31, 2016 EUR (€)	Apr. 30, 2015 EUR (€)
Restricted Cash and Cash Equivalents, Current		$ 1,309,000		$ 1,309,000			$ 1,309,000		$ 277,000
April 2015 IKB Deutsche Industriebank Loan Payable [Member]
Debt Instrument, Face Amount			$ 7,200,000								€ 6,500,000
Debt Instrument, Maturity Date			Mar. 31, 2022
Debt Instrument, Interest Rate, Stated Percentage			1.75%								1.75%
Debt Instrument, Periodic Payment, Principal				$ 244,000	€ 232,000
Restricted Cash and Cash Equivalents, Current | €								€ 1,000,000
Security Deposit, Maturity Date				Dec. 31, 2017	Dec. 31, 2017
Long-term Debt, Gross		5,100,000		$ 5,100,000			5,100,000	€ 4,900,000	6,300,000	€ 5,600,000
Notes Payable, Other Payables [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Long-term Debt		$ 283,000		$ 283,000			$ 283,000		1,100,000
Bank of West Amended and Restated Credit Agreement November 20, 2015 [Member]
Line of Credit Facility, Initiation Date	Nov. 20, 2015
Line of Credit Facility, Maximum Borrowing Capacity	$ 125,000,000
Line of Credit, Leverage Ratio						2
Debt Issuance Costs, Net									304,000
Long-term Line of Credit									$ 80,000,000
Bank of West Amended and Restated Credit Agreement December, 2016 [Member]
Line of Credit Facility, Interest Rate at Period End		2.79%		2.79%			2.79%	2.79%
Line of Credit Facility, Expiration Date		Nov. 20, 2019
Line of Credit, Leverage Ratio		2.5
Debt Issuance Costs, Net		$ 437,000		$ 437,000			$ 437,000
Long-term Line of Credit		73,000,000		73,000,000			73,000,000
Available Credit Line for Letter of Credit		$ 10,000,000		$ 10,000,000			$ 10,000,000
Bank of West Amended and Restated Credit Agreement December, 2016 [Member] | Minimum [Member]
Line of Credit Facility Basis Spread on Variable Rate		0.75%		0.75%			0.75%	0.75%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage							0.25%
Bank of West Amended and Restated Credit Agreement December, 2016 [Member] | Maximum [Member]
Line of Credit Facility Basis Spread on Variable Rate		2.50%		2.50%			2.50%	2.50%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage							0.625%

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Note 11 - Pension Plans (Details Textual) $ in Millions	12 Months Ended
	Mar. 31, 2017 USD ($)	Dec. 31, 2016
Number of Defined Benefit Plans		3
United Kingdom and the Philippines Plans [Member] | Scenario, Forecast [Member]
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year	$ 1.1

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Note 11 - Pension Plans - Net Periodic Pension Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Service cost	$ 27	$ 25	$ 83	$ 76
Interest cost on projected benefit obligation	313	364	991	1,103
Expected return on plan assets	(282)	(432)	(901)	(1,312)
Recognized actuarial loss	41	44	133	134
Net periodic pension expense	$ 99	$ 1	$ 306	$ 1

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Note 11 - Pension Plans - Information on Plan Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Mar. 31, 2016
Defined Benefit Plan, Fair Value of Plan Assets	$ 27,319	$ 28,714
Cash and Cash Equivalents [Member]
Defined Benefit Plan, Fair Value of Plan Assets	103	121
Equity Securities [Member]
Defined Benefit Plan, Fair Value of Plan Assets	305	351
Fixed Income Funds [Member]
Defined Benefit Plan, Fair Value of Plan Assets	1,269	1,321
Mutual Fund [Member]
Defined Benefit Plan, Fair Value of Plan Assets	25,642	26,921
Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan, Fair Value of Plan Assets	14,510	15,224
Fair Value, Inputs, Level 1 [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan, Fair Value of Plan Assets	103	121
Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Defined Benefit Plan, Fair Value of Plan Assets	305	351
Fair Value, Inputs, Level 1 [Member] | Fixed Income Funds [Member]
Defined Benefit Plan, Fair Value of Plan Assets	1,211	1,225
Fair Value, Inputs, Level 1 [Member] | Mutual Fund [Member]
Defined Benefit Plan, Fair Value of Plan Assets	12,891	13,527
Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan, Fair Value of Plan Assets	12,809	13,490
Fair Value, Inputs, Level 2 [Member] | Cash and Cash Equivalents [Member]
Defined Benefit Plan, Fair Value of Plan Assets
Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Defined Benefit Plan, Fair Value of Plan Assets
Fair Value, Inputs, Level 2 [Member] | Fixed Income Funds [Member]
Defined Benefit Plan, Fair Value of Plan Assets	58	96
Fair Value, Inputs, Level 2 [Member] | Mutual Fund [Member]
Defined Benefit Plan, Fair Value of Plan Assets	$ 12,751	$ 13,394

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Note 12 - Employee Equity Incentive Plans (Details Textual) - USD ($)	9 Months Ended		12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Mar. 31, 2016	Aug. 26, 2016	Aug. 30, 2013	Sep. 16, 2011	Sep. 10, 2009
Estimated Statutory Income Tax Rate	40.00%	35.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 7,400,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 292 days
RadioPulse [Member]
Employee Service Share-based Compensation, Cash Flow Effect, Cash Used to Settle Awards		$ 249,000	$ 249,000
Plan 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized							900,000
Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized						600,000
Plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					2,000,000
Plan 2016 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				2,000,000
Stock Options of Plans Two Thousand and Nine Two Thousand and Eleven Two Thousand and Thirteen and Two Thousand and Sixteen [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Stock Options of Plans Two Thousand and Nine Two Thousand and Eleven Two Thousand and Thirteen and Two Thousand and Sixteen [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	100.00%
Stock Appreciation Rights of Plans Two Thousand and Nine Two Thousand and Eleven Two Thousand and Thirteen and Two Thousand and Sixteen [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	100.00%
Stock Appreciation Rights of Plans Two Thousand and Nine Two Thousand and Eleven Two Thousand and Thirteen and Two Thousand and Sixteen [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Employee Stock Purchase Plan 1999 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,550,000
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent	85.00%
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	15.00%
Stock Issued During Period, Shares, Employee Stock Purchase Plans	112,171
Common Stock, Capital Shares Reserved for Future Issuance	128,070

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Note 12 - Employee Equity Incentive Plans - Stock-based Compensation in Income Tax Provision (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Stock-based Compensation Effect in Income before Taxes		$ 822	$ 838	$ 2,551	$ 2,777
Provision for income tax	[1]	329	293	1,021	972
Net stock-based compensation effects in net income		493	545	1,530	1,805
Cost of Sales [Member]
Stock-based Compensation Effect in Income before Taxes		80	125	276	371
Research and Development Expense [Member]
Stock-based Compensation Effect in Income before Taxes		254	242	840	1,032	[2]
Selling, General and Administrative Expenses [Member]
Stock-based Compensation Effect in Income before Taxes		$ 488	$ 471	$ 1,435	$ 1,374

[1] Calculated at the U.S. statutory income tax rate of 40% in fiscal 2017 and 35% in fiscal 2016.

[2] Includes acquisition related compensation expenses of $249,000 during the nine months ended December 31, 2015.

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Note 12 - Employee Equity Incentive Plans - Fair Value and Assumptions (Details) - $ / shares		3 Months Ended				9 Months Ended
		Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2016		Dec. 31, 2015
Employee Stock Option [Member]
Weighted average estimated fair value of grant per share (in dollars per share)		$ 4.45			[1]	$ 4.42		$ 4.83
Risk-free interest rate		1.70%			[1]	1.50%		1.80%
Expected term in years		6 years 149 days			[1]	6 years 149 days		6 years 164 days
Volatility		39.80%			[1]	40.70%		44.90%
Dividend yield			[2]		[1]	0.40%	[2]	1.20%
Employee Stock Purchase Plan 1999 [Member]
Weighted average estimated fair value of grant per share (in dollars per share)	[3]	$ 2.63		$ 3.54		$ 3.28		$ 3.33
Risk-free interest rate	[3]	0.50%		0.10%		0.40%		0.10%
Expected term in years	[3]	182 days		182 days		182 days		182 days
Volatility	[3]	32.30%		48.20%		37.50%		39.80%
Dividend yield	[3]	0.00%	[2]	1.20%		0.70%	[2]	1.10%

[1] No stock options were granted during the quarter ended December 31, 2015.

[2] No dividends were declared for the quarters ended September 30, 2016 and December 31, 2016.

[3] Under the stock purchase plan, rights to purchase shares are only granted during the first and third quarters of each fiscal year.

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Note 12 - Employee Equity Incentive Plans - Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
		Dec. 31, 2016	Mar. 31, 2016
Options outstanding, beginning of period (in shares)		5,234,397
Weighted average exercise price per share, beginning balance (in dollars per share)		$ 10.40
Options oustanding, Options granted (in shares)		704,000
Weighted average exercise price per share, Options granted (in dollars per share)		$ 10.95
Options oustanding, Options exercised (in shares)		(110,097)
Weighted average exercise price per share, Options exercised (in dollars per share)		$ 8
Options exercised, Intrinsic Value	[1]	$ 384
Options oustanding, Options cancelled (in shares)		(7,500)
Weighted average exercise price per share, Options cancelled (in dollars per share)		$ 13.37
Options oustanding, Options expired (in shares)		(27,500)
Weighted average exercise price per share, Options expired (in dollars per share)		$ 11.81
Options oustanding, ending balance (in shares)		5,793,300
Weighted average exercise price per share, ending balance (in dollars per share)		$ 10.50
Options exercisable (in shares)		3,924,050	3,619,563
Weighted average exercise price per share, exercisable (in dollars per share)		$ 10.11	$ 9.93

[1] Represents the difference between the exercise price and the value of our common stock at the time of exercise.

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Note 13 - Accumulated Other Comprehensive Income (Loss) - AOCI Change (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) Net Of Tax, Beginning of Period	$ (20,266)
Accumulated Other Comprehensive Income (Loss) Net Of Tax, End of Period	(28,634)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) Net Of Tax, Beginning of Period	(10,639)	$ (13,577)
Other comprehensive income (loss) before reclassifications	(8,403)	534
Net (gain) loss reclassified from accumulated other comprehensive income (loss)
Net current period other comprehensive income (loss)	(8,403)	534
Accumulated Other Comprehensive Income (Loss) Net Of Tax, End of Period	(19,042)	(13,043)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) Net Of Tax, Beginning of Period	(82)	7
Other comprehensive income (loss) before reclassifications	66	(337)
Net (gain) loss reclassified from accumulated other comprehensive income (loss)	(31)	276
Net current period other comprehensive income (loss)	35	(61)
Accumulated Other Comprehensive Income (Loss) Net Of Tax, End of Period	(47)	(54)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) Net Of Tax, Beginning of Period	(9,545)	(9,518)
Other comprehensive income (loss) before reclassifications
Net (gain) loss reclassified from accumulated other comprehensive income (loss)
Net current period other comprehensive income (loss)
Accumulated Other Comprehensive Income (Loss) Net Of Tax, End of Period	(9,545)	(9,518)
AOCI Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) Net Of Tax, Beginning of Period	(20,266)	(23,088)
Other comprehensive income (loss) before reclassifications	(8,337)	197
Net (gain) loss reclassified from accumulated other comprehensive income (loss)	(31)	276
Net current period other comprehensive income (loss)	(8,368)	473
Accumulated Other Comprehensive Income (Loss) Net Of Tax, End of Period	$ (28,634)	$ (22,615)

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Note 13 - Accumulated Other Comprehensive (Loss) - AOCI Reclass (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Other income (expense), net	$ (110)	$ 290	$ 1,291	$ (1,510)
Income before Income Tax Provision	7,144	6,174	19,210	16,599
Tax impact	(2,044)	(3,888)	(7,156)	(8,055)
Total reclassifications for the period	5,100	2,286	12,054	8,544
Reclassification out of Accumulated Other Comprehensive Income [Member]
Income before Income Tax Provision		(7)	50	(461)
Tax impact		3	(19)	185
Total reclassifications for the period		(4)	31	(276)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Other income (expense), net		(7)	201	(7)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Other-than-Temporary Impairment Attributable to Parent [Member]
Other income (expense), net			$ (151)	$ (454)

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Note 14 - Computation of Earnings Per Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Weighted Average Number Diluted Shares Outstanding Adjustment	651,000	856,000	635,000	857,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,299,065	2,047,000	3,108,615	1,620,807

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Note 14 - Computation of Earnings Per Share - Computation of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Net income	$ 5,100	$ 2,286	$ 12,054	$ 8,544
Weighted average shares - basic (in shares)	31,558	31,487	31,484	31,626
Weighted average shares - diluted (in shares)	32,209	32,343	32,119	32,483
Net income per share - basic (in dollars per share)	$ 0.16	$ 0.07	$ 0.38	$ 0.27
Net income per share - diluted (in dollars per share)	$ 0.16	$ 0.07	$ 0.38	$ 0.26

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Note 15 - Segment and Geographic Information (Details Textual)	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Number of Reportable Segments	1	1	1	1
Number of Operating Segments	1	1	1	1
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Distributor 1 [Member]
Number of Entity Wide Revenue Major Customers	1	1	1	1
Concentration Risk, Percentage	11.70%	13.90%	13.10%	12.00%
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Distributor 2 [Member]
Number of Entity Wide Revenue Major Customers	1		1
Concentration Risk, Percentage	11.20%		10.90%

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Note 15 - Segment and Geographic Information - Segment and Geographic Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Net Revenues	$ 79,484	$ 75,133	$ 238,751	$ 237,437
UNITED STATES
Net Revenues	20,605	18,334	60,291	57,784
FRANCE
Net Revenues	1,901	2,382	7,472	6,724
GERMANY
Net Revenues	9,253	7,201	26,812	24,123
RUSSIAN FEDERATION
Net Revenues	353	2,196	941	2,914
NETHERLANDS
Net Revenues	1,241	761	3,322	2,298
UNITED KINGDOM
Net Revenues	3,565	3,686	10,401	10,400
Other Europe and the Middle East Regions [Member]
Net Revenues	6,646	6,217	19,431	21,281
CHINA
Net Revenues	20,690	19,090	64,548	60,378
JAPAN
Net Revenues	1,663	1,451	5,089	7,175
KOREA, REPUBLIC OF
Net Revenues	4,268	5,360	13,316	17,585
MALAYSIA [Member]
Net Revenues	1,300	689	3,392	3,253
SINGAPORE
Net Revenues	3,751	3,112	10,335	9,249
Other Asia Pacific Regions [Member]
Net Revenues	2,020	2,527	7,021	7,655
INDIA
Net Revenues	1,209	1,095	3,316	3,136
Other Rest of the World [Member]
Net Revenues	$ 1,019	$ 1,032	$ 3,064	$ 3,482

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Note 15 - Segment and Geographic Information - Revenue by Product Line (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Net Revenues	$ 79,484	$ 75,133	$ 238,751	$ 237,437
Power Semiconductors [Member]
Net Revenues	54,647	51,196	164,663	159,607
Integrated Circuits [Member]
Net Revenues	20,032	18,749	60,967	63,257
Systems and RF Power Semiconductors [Member]
Net Revenues	$ 4,805	$ 5,188	$ 13,121	$ 14,573

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Note 16 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Income Tax Expense (Benefit)	$ 2,044,000	$ 3,888,000	$ 7,156,000	$ 8,055,000
Effective Income Tax Rate Reconciliation, Percent	28.60%	63.00%	37.30%	48.50%
Tax Adjustments, Settlements, and Unusual Provisions		$ 1,400,000		$ 1,400,000
Reversal of Overstated Deferred Tax Asset [Member]
Tax Adjustments, Settlements, and Unusual Provisions		2,300,000		2,300,000
Reduction in Tax Reserves that was Overstated [Member]
Tax Adjustments, Settlements, and Unusual Provisions		$ (893,000)		$ (893,000)

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Note 17 - Commitments and Contingencies (Details Textual) - Foreign Tax Authority [Member] - Bureau of Internal Revenue [Member]	Dec. 31, 2016 USD ($)
Tax Year 2010 [Member]
Loss Contingency, Estimate of Possible Loss	$ 2,500,000
Tax Year 2011 [Member]
Loss Contingency, Estimate of Possible Loss	$ 156,000