RAMP 10-K Fiscal year ended March 31, 2016

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10‑K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 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 0‑13163
ACXIOM CORPORATION (Exact name of registrant as specified in its charter)
DELAWARE (State or Other Jurisdiction of Incorporation or Organization)	71‑0581897 (I.R.S. Employer Identification No.)
P.O. Box 8190, 601 E. Third Street, Little Rock, Arkansas (Address of Principal Executive Offices)	72203 (Zip Code)
(501) 342‑1000 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Common Stock, $.10 Par Value	The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
	Yes [X]	No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
	Yes [ ]	No [X]

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 [X]		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 [X]		No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]
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 [X]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [ ]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
	Yes [ ]		No [X]
The aggregate market value of the voting stock held by non‑affiliates of the registrant, based upon the closing sale price of the registrant's Common Stock, $.10 par value per share, as of the last business day of the registrant's most recently completed second fiscal quarter as reported on the NASDAQ Global Select Market was approximately $1,270,092,972.  (For purposes of determination of the above stated amount only, all directors, executive officers and 10% or more shareholders of the registrant are presumed to be affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as of May 20, 2016, was 77,524,614.

Table of Contents			Page
Documents Incorporated by Reference			5
Part I
Availability of SEC Filings and Corporate Governance Information; Cautionary Statements			5
Item 1. Business			7
Item 1A.  Risk Factors			19
Item 1B.  Unresolved Staff Comments			28
Item 2. Properties			29
Item 3. Legal Proceedings			31
Item 4.    Mine Safety Disclosures			31
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			32
Item 6. Selected Financial Data			34
I tem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations			34
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk			34
Item 8. Financial Statements and Supplementary Data			35
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			35
Item 9A.  Controls and Procedures			35
I tem 9B.  Other Information			35
Part III
Item 10.  Directors, Executive Officers and Corporate Governance			36
Item 11.  Executive Compensation			36
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			36
Item 13.  Certain Relationships and Related Transactions, and Director Independence			37
Item 14.  Principal Accountant Fees and Services			37

Part IV
Item 15.  Exhibits and Financial Statement Schedules			38
Signatures			42
Financial Supplement			F-1 – F-72

Location	Held	Use	Business Segment
United States:
Conway, Arkansas	Eleven facilities held in fee	Data center; office space	Marketing Services, Audience Solutions, Connectivity
Little Rock, Arkansas	Two buildings held in fee	Data center; office space	Marketing Services, Audience Solutions, Connectivity
Redwood City, California	Lease	Office space	Marketing Services, Audience Solutions, Connectivity
San Francisco, California Downers Grove, Illinois	Lease Lease	Office space Data center; office space	Connectivity Marketing Services, Audience Solutions
New York, New York	Lease	Office space	Marketing Services, Audience Solutions, Connectivity
Nashville, Tennessee Austin, Texas	Lease Lease	Office space Office space	Marketing Services Marketing Services, Audience Solutions

	Location		Held	Use	Business Segment
Europe:
London, England			Lease	Office space	Marketing Services, Audience Solutions, Connectivity
Normanton, England			Lease	Data center; office space	Audience Solutions
Paris, France			Lease	Data center; office space	Marketing Services, Audience Solutions, Connectivity
Frankfurt, Germany			Lease	Office space	Audience Solutions
Munich, Germany			Lease	Office space	Audience Solutions
Gdansk, Poland			Lease	Office space	Marketing Services, Audience Solutions
Warsaw, Poland			Lease	Office space	Marketing Services, Audience Solutions
Australia:
Sydney, Australia			Lease	Office space	Marketing Services, Audience Solutions Connectivity
China:
Shanghai, China			Lease	Office space	Marketing Services, Audience Solutions, Connectivity
Nantong, China			Lease	Data center; office space	Marketing Services, Audience Solutions, Connectivity

Fiscal 2016		High				Low
Fourth Quarter		$	22.22			$	17.32
Third Quarter			23.42				19.32
Second Quarter			21.47				16.67
First Quarter			19.46				15.78

Fiscal 2015		High				Low
Fourth Quarter		$	20.53			$	17.72
Third Quarter			21.25				16.04
Second Quarter			22.32				16.53
First Quarter			35.74				20.30

Period		Total Number of Shares Purchased				Average Price Paid Per Share					Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
1/1/16 – 1/31/16			0				n/a					0			$	60,021,560
2/1/16 – 2/29/16			168,402				20.01					168,402				56,651,656
3/1/16 – 3/31/16			562,918				21.07					562,918				44,792,367
Total			0				n/a					0			$	44,792,367

Plan category				Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted-average exercise price of outstanding options, warrants and rights				Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a))
				(a)				(b)				(c)
Equity compensation plans approved by shareholders					3,398,882	1		$	14.57				5,369,264
Equity compensation plans not approved by shareholders					221,106	2			13.74				47,500
Total					3,619,988			$	14.52				5,416,764
		1		This figure represents stock options issued under shareholder-approved stock option plans, of which 665,255 options were assumed in connection with our acquisition of LiveRamp in fiscal 2016.
		2		Issued pursuant to the Company's 2011 Nonqualified Equity Compensation Plan described below, which does not require shareholder approval under the exception provided for in NASDAQ Marketplace Rule 5635(c)(4).

ACXIOM CORPORATION

INDEX TO FINANCIAL SUPPLEMENT

TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED MARCH 31, 2016

ACXIOM CORPORATION

SELECTED FINANCIAL DATA

(In thousands, except per share data)

The selected financial data for the periods reported above has been derived from the consolidated financial statements and, unless otherwise indicated, reflect the Company's continuing operations.  Refer to Note 4 – Discontinued Operations for additional information regarding discontinued operations.

This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes contained in this report.  Previously reported amounts have been reclassified to conform to the presentation in the current year.  The historical results are not necessarily indicative of results to be expected in any future period.

Management's Discussion and Analysis of Financial Condition and Results of Operations

We begin Management's Discussion and Analysis of Financial Condition and Results of Operations with an overview of our operating segments and summary results and notable events. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Unless otherwise indicated, we refer to captions such as earnings (loss), and earnings (loss) per share from continuing operations attributable to the Company simply as "earnings (loss)", and "earnings (loss) per share" throughout this Management's Discussion and Analysis.  Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated.

Introduction and Overview

Acxiom Corporation is a global technology and enablement services company with a vision to power a world where all marketing is relevant. We provide the data foundation for the world's best marketers. By making it safe and easy to activate, validate, enhance, and unify data, we provide marketers with the ability to deliver relevant messages at scale and tie those messages back to actual results. Our products and services enable people-based marketing, allowing our clients to generate higher return on investment and drive better omni-channel customer experiences.

Acxiom is a Delaware corporation founded in 1969 in Conway, Arkansas. Our common stock is listed on the NASDAQ Global Select Market under the symbol "ACXM." We serve a global client base from locations in the United States, Europe, and the Asia-Pacific ("APAC") region. Our client list includes more than 3,000 of the world's largest and best known brands across most major industry verticals, including but not limited to financial, insurance and investment services, automotive, retail, telecommunications, high tech, healthcare, travel, entertainment, non-profit, and government.

Operating Segments

During the first quarter of fiscal 2016, the Company realigned its organizational structure to better reflect its business strategy. As a result of the sale of the IT Infrastructure Management business ("ITO") and the organizational realignment, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Thus, beginning in fiscal year 2016, the Company began reporting its financial performance based on new segments: Marketing Services and Audience Solutions, and Connectivity. During the third quarter of fiscal 2016, the operational and financial activities to separate Marketing Services and Audience Solutions were completed and are now reported as separate operating segments.

Our segments provide management with a comprehensive view of our key businesses based on how we manage our operations and measure results. Additional information related to our operating segments and geographic information is contained in Note 17 – Segment Information of the Notes to Consolidated Financial Statements.

Marketing Services

Our Marketing Services segment helps clients unify data at the individual level in a privacy-safe environment, so they can execute people-based marketing campaigns, tie back to real results, and drive a continual cycle of optimization. We help architect the foundation for data-driven marketing by delivering solutions that integrate customer and prospect data across the enterprise, thereby enabling our clients to establish a single view of the customer. We also support our clients in navigating the complexities of consumer privacy regulation, making it easy and safe for them to use innovative technology, maintain choice in channels and media, and stay agile in this competitive era of the consumer. These services allow our clients to generate higher return on marketing investments and, at the same time, drive better, more relevant customer experiences.

The Marketing Services segment includes the following service offerings: Marketing Database Services, Strategy and Analytics, and Impact Email Platform and Services.

·

Marketing Database Services. Our Marketing Database offering provides solutions that unify consumer data across an enterprise, enabling clients to execute relevant, people-based marketing and activate data across the marketing ecosystem. Our consumer marketing databases, which we design, build, and manage for our clients, make it possible for our clients to collect and analyze information from all sources, thereby increasing customer acquisition, retention, and loyalty. Through our growing partner network, clients are able to integrate their data with best-of-breed marketing solutions while respecting and protecting consumer privacy.

Marketing Database services are generally provided under long-term contracts. Our revenue consists primarily of recurring monthly billings, and to a lesser extent, other volume and variable based billings.

·

Strategy and Analytics . Our Strategy and Analytics group consists of marketing strategists and data scientists who leverage industry knowledge and advanced analytics to assist our clients with identifying growth opportunities, addressing marketing data and technology needs, and adopting best practices. In addition, we help our clients identify and address their data privacy and governance requirements.

Strategy and Analytics revenue consists primarily of project-based fees.

·	Impact Email Platform and Services. Acxiom Impact™ provides email and cross-channel data-driven marketing solutions for enterprise marketers, including a proprietary marketing platform and agency services.

Acxiom Impact revenue consists of (1) volume-based fees for the use of the Impact email platform and (2) project-based and retainer-based fees for associated agency services.

Audience Solutions

Our Audience Solutions segment helps clients validate the accuracy of their data, enhance it with additional insight, and keep it up to date, enabling clients to reach desired audiences with highly relevant messages. Leveraging our recognition and data assets, clients can identify, segment, and differentiate their audiences for more effective marketing and superior customer experiences. Audience Solutions' offerings include InfoBase, our large consumer data store that serves as the basis for Acxiom's consumer demographics products, and AbiliTec, our patented identity resolution technology that assists our clients in reconciling and managing variations of customer identity over time and across multiple channels.

·

InfoBase. With more than 1,500 demographic, socio-economic and lifestyle data elements and several thousand predictive models, our InfoBase products provide marketers with the ability to identify and reach the right audience with the right message across both traditional and digital channels. Through partnerships with a wide range of online publishers and digital marketing platforms, including Facebook, Twitter, 4INFO, AOL, eBay, MSN, and Yahoo!, marketers can use InfoBase data to create and target specific audiences. For example, using InfoBase data available inside of Facebook's Custom Audiences tool, a local pet store can run a campaign targeting male pet-owners that live in zip code 94123. Similarly, a regional bank can leverage our data to create and target an audience of households with children that generate a certain annual income and live in Central Arkansas.

·	AbiliTec. As shown in the illustration below, AbiliTec helps brands recognize individuals and households using a number of different input variables and connects identities online and offline.

By identifying and linking multiple identifiers and data elements back to a persistent ID, our clients are able to create a single view of the customer, which allows them to perform more effective audience targeting and deliver better, more relevant customer experiences.

Our Audience Solutions revenue consists primarily of licensing fees, which are typically in the form of recurring monthly billings, but can also be based on transactional volume or one-time usage. In addition, Audience Solutions generates digital data revenue from certain digital publishers and addressable television providers in the form of revenue sharing agreements. Our Marketing Database clients are a significant channel for our Audience Solutions offerings.

Connectivity

As shown in the illustration below, our Connectivity segment activates data and makes it portable across the open marketing ecosystem.

Through integrations with more than 300 leading digital marketing platforms and data providers, we have become a key point of entry into the digital ecosystem, thus helping our clients eliminate data silos and unlock greater value from the marketing tools they use every day. We operate as an open connectivity layer enabling our clients to reach consumers across channels and measure the impact of marketing on sales.

Today, we offer two primary services through our LiveRamp Connect platform:

·

Data Onboarding. Data Onboarding enables clients to activate offline data for use across their preferred marketing platforms for display, search, video, mobile, site optimization, data management, attribution, and more. By activating data through a central hub that is automated, secure, and privacy-safe, brands are able to reduce the number of places they send personally identifiable information. Data files are securely imported, anonymized, matched to online or mobile devices and digital IDs, and distributed for use to any of the more than 300 partners in our network.

·

Customer Link. Customer Link helps clients tie together customer data in a privacy-safe way. Using the same infrastructure developed for Data Onboarding, we ingest data from a variety of sources, including campaign impression data from digital advertising platforms, website traffic, and purchase data, and tie it to anonymous links that represent a unique consumer. This enables our clients to create a unified view of online and offline customer activity that can be used to improve campaign performance.

Our Connectivity revenue consists primarily of recurring subscription fees paid by advertisers, and to a lesser extent, transactional revenue from certain digital publishers and addressable television providers in the form of revenue-sharing agreements.

Summary

Together, our products and services form the "power grid" for data, the critical foundation for people-based marketing that brands need to engage consumers across today's highly fragmented landscape of channels and devices.

We provide integrations with the largest number of marketing platforms and data providers in the digital marketing ecosystem, enabling our clients to innovate through their preferred choice of technology, data, and services providers. Our industry-leading recognition and data assets power best-in-class consumer identification and linking across channels and devices. And, our integrated services offering provides the expertise required to manage large sets of data legally, ethically, securely, and in a way that protects consumer privacy.

Summary Results and Notable Events

During fiscal 2016, the Company completed the sale of its ITO business to Charlesbank Capital Partners and M/C Partners. The business qualified for treatment as discontinued operations during fiscal 2016. Accordingly, the results of operations, cash flows, and the balance sheet amounts pertaining to ITO, for all periods reported, have been classified as discontinued operations in the consolidated financial statements.

At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million stated sales price less closing adjustments and transaction costs of $9.0 million). The Company may also receive up to a maximum of $50 million in contingent payments in future periods through 2020 subject to certain conditions. Due to the uncertainty of contingent payments, income will be recorded upon receipt of payment as a component of income from discontinued operations. In addition, the Company has the right to participate in distributions of the divested entity above a defined amount. The Company reported a gain of $9.3 million on the sale which is included in earnings from discontinued operations, net of tax. The Company used $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company's existing credit agreement. The remaining proceeds from the sale were used to fund expansion of its common stock repurchase program and for general corporate purposes.

During fiscal 2015, the Company acquired all of the outstanding shares of LiveRamp, Inc. ("LiveRamp"), a leading service provider for onboarding customer data into digital marketing applications.  The Company has included the financial results of LiveRamp in the consolidated financial statements from the date of acquisition.  LiveRamp is included in the Connectivity segment.  Under the terms of the merger agreement, the Company paid $265.7 million, net of cash acquired, in cash for all outstanding LiveRamp shares.  The purchase price for the acquisition also included certain replacement stock options issued to LiveRamp employees resulting in an acquisition date total fair value of consideration transferred for LiveRamp of approximately $272.7 million.

During fiscal 2015, the Company completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a European business process outsourcing service provider.  The business qualified for treatment as discontinued operations during fiscal 2015.  Accordingly, the results of operations, cash flows, and the balance sheet amounts of 2Touch, for all periods reported, have been classified as discontinued operations in the consolidated financial statements.

A summary of the most recently completed fiscal year is presented below.

·	Revenues of $850.1 million, a 5.6% increase from $804.9 million in fiscal 2015.

·	Cost of revenue of $488.4 million, a 1.1% decrease from $494.0 million in fiscal 2015.

·	Gross margin increased to 42.5% from 38.6% in fiscal 2015.

·	Total operating expenses of $374.8 million, a 9.1% increase from $343.6 million in fiscal 2015.

·	Cost of revenue and operating expenses for fiscal 2016 and 2015 include the following items:

o	Non-cash stock compensation of $31.5 million and $28.3 million, respectively (cost of revenue and operating expenses)

o	Purchase intangible asset amortization of $15.5 million and $11.5 million, respectively (cost of revenue)

o	Accelerated amortization of $1.8 million and $4.3 million, respectively (cost of revenue)

o	Separation and transformation costs of $20.8 million and $31.3 million, respectively (operating expenses)

o	Restructuring charges, impairment and other adjustments of $19.0 million and $22.6 million, respectively (operating expenses)

·	Net loss from continuing operations of $8.6 million, a $17.9 million improvement from a loss of $26.5 million in fiscal 2015.

·	Net cash provided by operating activities of $113.6 million, an 85.9% increase from $61.1 million in fiscal 2015.

·	The Company acquired $52.8 million of its stock under the Company's common stock repurchase program.

·	The Company completed the sale of its ITO business.

The summary highlights significant events and transactions of the Company during the fiscal years ended March 31, 2016 and 2015.  However, this summary is not intended to be a full discussion of the Company's results.  This summary should be read in conjunction with the following discussion of Results of Operations and Capital Resources and Liquidity and with the Company's consolidated financial statements and footnotes accompanying this report.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") as set forth in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission ("SEC"). GAAP, as set forth within the ASC, requires management to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Note 1 to the accompanying consolidated financial statements includes a summary of significant accounting policies used in the preparation of Acxiom's consolidated financial statements. Of those policies, we have identified the following as the most critical because they are both important to the portrayal of the Company's financial condition and operating results, and they may require management to make judgments and estimates about inherently uncertain matters:

·	Revenue Recognition

·	Software, Purchased Software Licenses, and Research and Development Costs

·	Valuation of Goodwill

·	Restructuring

·	Accounting for Income Taxes

Revenue Recognition

The Company's policy follows the guidance from ASC 605, Revenue Recognition .

The Company provides marketing database services under long-term arrangements.  These arrangements may require the Company to perform setup activities such as the design and build of a database, and may include other products and services purchased at the same time, or within close proximity of one another (referred to as multiple element arrangements). Each element within a multiple element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by us. We consider a deliverable to have standalone value if the product or service is sold separately by us or another vendor or could be resold by the customer. Further, our revenue arrangements generally do not include a general right of return related to the delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for purposes of allocation of the arrangement consideration and revenue recognition.

For our multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement's inception. The relative selling price for each unit of accounting in a multiple-element arrangement is established using vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if available, or management's best estimate of stand-alone selling price (BESP).  In most cases, the Company has neither VSOE nor TPE and therefore uses BESP. The total arrangement consideration is allocated to each separate unit of accounting for each of the deliverables using the relative selling prices of each unit based on the aforementioned selling price hierarchy. We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting any specified performance conditions.

The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis.  Management's BESP is determined by considering multiple factors including actual contractual selling prices when the item is sold on a stand-alone basis, as well as market conditions, competition, internal costs, profit objectives and pricing practices.  As pricing and marketing strategies evolve, we may modify our pricing practices in the future, which could result in changes to BESP, or to the development of VSOE or TPE for individual products or services.  As a result, future revenue recognition for multiple-element arrangements could differ from recognition in the current period.  Our relative selling prices are analyzed on an annual basis or more frequently if we experience significant changes in selling prices.

Revenues are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products and services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured. Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met. Where applicable, we reduce revenue for certain incentive programs where we have the ability to sufficiently estimate the effects of these items. In some cases, the arrangements also contain provisions requiring customer acceptance of the setup activities prior to commencement of the ongoing services arrangement.  Up-front fees billed during the setup phase for these arrangements are deferred and setup costs that are direct and incremental to the contract are capitalized.  Revenue recognition does not begin until after customer acceptance in cases where contracts contain acceptance provisions.  Once the setup phase is complete and customer acceptance occurs, the Company recognizes revenue and the related costs for each element as delivered.  In situations where the arrangement does not require customer acceptance before the Company begins providing services, revenue is recognized for each element as delivered and no costs are deferred.

The Company evaluates its marketing database arrangements to determine whether the arrangement contains a lease.  If the arrangement is determined to contain a lease, applicable accounting standards require the Company to account for the lease component separately from the remaining components of the arrangement.  In cases where marketing database arrangements are determined to include a lease, the lease is evaluated to determine whether it is a capital lease or operating lease and accounted for accordingly.  These lease revenues are not significant to the Company's consolidated financial statements.

Sales of third-party software, hardware and certain other equipment are recognized when delivered.  If such sales are part of a multiple-element arrangement, they are recognized as a separate element unless collection of the sales price is dependent upon delivery of other products or services.  Additionally, the Company evaluates revenue from the sale of data, software, hardware and equipment in accordance with accounting standards to determine whether such revenue should be recognized on a gross or a net basis.  All of the factors in the accounting standards are considered with the primary factor being whether the Company is the primary obligor in the arrangement.  "Out-of-pocket" expenses incurred by, and reimbursed to, the Company in connection with customer contracts are recorded as gross revenue.

The Company also performs services on a project basis outside of, or in addition to, the scope of long-term arrangements.  The Company recognizes revenue from these services as the services are performed.

All taxes assessed on revenue-producing transactions described above are presented on a net basis, or excluded from revenues.

Revenues from the licensing of data are recognized upon delivery of the data to the customer.  Revenue from the licensing of data to the customer in circumstances where the license agreement contains a volume cap is recognized in proportion to the total records to be delivered under the arrangement.  Revenue from the sale of data on a per-record basis is recognized as the records are delivered.

Revenues from onboarding customer data into digital marketing applications are recognized as the services are delivered over the contract.

Accounts receivable include amounts billed to clients as well as unbilled amounts recognized in accordance with the Company's revenue recognition policies.  Unbilled amounts included in accounts receivable were $14.3 million at March 31, 2016 and 2015, respectively.

Included in the Company's consolidated balance sheets are deferred revenues resulting from billings and/or client payments in advance of revenue recognition.  Deferred revenue at March 31, 2016 was $44.5 million and $33.6 million at March 31, 2015.

Software, Purchased Software Licenses, and Research and Development Costs

Costs of internally developed software are capitalized in accordance with ASC 350-40, Internal Use Software .

The standard generally requires that research and development costs incurred prior to the beginning of the application development stage of software products are charged to operations as such costs are incurred.  Once the application development stage has begun, costs are capitalized until the software is available for general release.

Costs of internally developed software are amortized on a straight-line basis over the remaining estimated economic life of the software product, generally two to five years. The Company recorded amortization expense related to internally developed software of $30.7 million, $29.0 million, and $9.7 million for fiscal 2016, 2015 and 2014, respectively.  Of the amortization expense recorded in fiscal 2016 and 2015, $10.0 million and $7.5 million, respectively, relate to internally developed software acquired as part of the LiveRamp acquisition.  Amortization expense in fiscal 2016 and fiscal 2015 also included $1.8 million and $4.3 million, respectively, of accelerated amortization expense resulting from adjusting the remaining lives of certain capitalized software products as a result of the LiveRamp acquisition.

Costs of purchased software licenses are amortized using a units-of-production basis over the estimated economic life of the license, generally not to exceed five years.  The Company recorded amortization expense related to purchased software licenses of $3.8 million, $5.0 million and $4.0 million in 2016, 2015 and 2014, respectively.  Some of these licenses are, in effect, volume purchase agreements for software licenses needed for internal use and to provide services to customers over the terms of the agreements.  Therefore, amortization lives are periodically reevaluated and, if justified, adjusted to reflect current and future expected usage based on units-of-production amortization.

Capitalized software, including both purchased and internally developed, is reviewed when facts and circumstances indicate the carrying amount may not be recoverable and, if necessary, the Company reduces the carrying value of each product to its fair value.

Valuation of Goodwill

As discussed, during the first quarter of fiscal 2016, the Company changed its organizational structure which resulted in a change of operating segments and reporting units. During the third quarter of fiscal 2016, the Company further expanded its operating segments and reporting units. As a result, goodwill was reallocated to the new reporting units using a relative fair value approach.

Goodwill is measured and tested for impairment on an annual basis in the first quarter of the Company's fiscal year in accordance with ASC 350, Intangibles—Goodwill and Other , or more frequently if indicators of impairment exist.  Triggering events for interim impairment testing include indicators such as adverse industry or economic trends, restructuring actions, downward revisions to projections of financial performance, or a sustained decline in market capitalization. The performance of the impairment test involves a two-step process.  The first step requires comparing the estimated fair value of a reporting unit to its net book value, including goodwill.  A potential impairment exists if the estimated fair value of the reporting unit is lower than its net book value.  The second step of the impairment test involves assigning the estimated fair value of the reporting unit to its identifiable assets, with any residual fair value being assigned to goodwill.  If the carrying value of an individual indefinite-lived intangible asset (including goodwill) exceeds its estimated fair value, such asset is written down by an amount equal to the excess, and a corresponding amount is recorded as a charge to operations for the period in which the impairment test is completed.  Completion of the Company's annual impairment test during the quarter ended June 30, 2015 indicated no potential impairment of its goodwill balances.

During the second quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its Brazil Marketing Services and Audience Solutions reporting unit.  The triggering event was the announced closure of the Company's Brazil operation.  In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in this unit for impairment.  The results of the impairment testing indicated complete impairment of the goodwill as well as impairment for certain other long-lived assets.  The amount of impairment was $0.7 million, of which $0.5 million was goodwill and $0.2 million related to other long-lived assets, primarily property and equipment.

During the third quarter of fiscal 2016, management determined that results for the APAC component were lower than had been projected in the previous goodwill test in part due to an economic slowdown in Asia. Management further determined that the failure of the APAC component to meet expectations, combined with the expectation that future projections would also be lowered, constituted a triggering event, requiring an interim goodwill impairment test. The impairment test indicated a reduced fair value, but the fair value was still in excess of the carrying value resulting in no impairment.

During the fourth quarter of fiscal 2016, a triggering event occurred which required the Company to test the recoverability of goodwill associated with its APAC Marketing Services and Audience Solutions reporting units. The triggering event was the Company's decision to focus efforts in Australia exclusively on the Connectivity business; as a result, the Company plans to wind-down the Marketing Services and Audience Solutions operations in Australia. In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in these units for impairment. The results of the two-step test indicated complete impairment of the APAC Audience Solutions goodwill as well as impairment for certain other long-lived assets. The amount of impairment was $6.1 million, of which $5.4 million was goodwill and $0.7 million related to other long-lived assets, primarily property and equipment. The impairment test also indicated a reduced fair value for the APAC Marketing Services component, but the fair value was still in excess of the carrying value resulting in no impairment. Management believes that the estimated valuations it arrived at were reasonable and consistent with what other marketplace participants would use in valuing the APAC component. However, management cannot give any assurances that the values will not change in the future. For example, if the APAC projections are not achieved in the future or if there are strategic changes related to the reporting unit, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach. The Company continues to monitor potential triggering events including changes in the APAC business climate, the volatility of the APAC capital markets, and APAC operating performance and projections. The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charges.

In order to estimate the fair value for each of the components, management uses an income approach based on a discounted cash flow model together with valuations based on an analysis of public company market multiples and a similar transactions analysis.

The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital ("WACC"). The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Management, considering industry and company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.

The public company market multiple method is used to estimate values for each of the components by looking at market value multiples to revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) for selected public companies that are believed to be representative of companies that marketplace participants would use to arrive at comparable multiples for the individual component being tested.  These multiples are then used to develop an estimated value for each respective component.

The similar transactions method compares multiples based on acquisition prices of other companies believed to be those that marketplace participants would use to compare to the individual component being tested.  Those multiples are then used to develop an estimated value for that component.

In order to arrive at an estimated value for each component, management uses a weighted-average approach to combine the results of each analysis.  Management believes that using multiple valuation approaches and then weighting them appropriately is a technique that a marketplace participant would use.

As a final test of the annual valuation results, the total of the values of the components is reconciled to the actual market value of Acxiom common stock as of the valuation date.  Management believes this control premium is reasonable compared to historical control premiums observed in actual transactions.

During fiscal 2015, we did not recognize any goodwill impairment losses.

During fiscal 2014, triggering events occurred which required the Company to test the recoverability of goodwill associated with its European reporting unit and its 2Touch reporting unit (which is now included in discontinued operations).  The triggering event was the initiation of a restructuring of the European unit.  The restructuring included exiting the analog paper survey business in Europe.  The triggering event related to 2Touch was a potential exit from that business.  In addition to testing the recoverability of goodwill, the Company also tested certain other long-lived assets in those units for impairment.  In the case of 2Touch, the step one fair value indicated that all of the goodwill and other long-lived assets were impaired.  Therefore there was no need to perform detailed step two calculations in order to conclude that all of the goodwill and other long-lived assets of this unit should be written off.  In the case of the European unit, the Company first tested certain data assets within the unit, and concluded that $4.6 million of these data assets were impaired and should be written off.  Then the Company performed step one of the two-step goodwill test, which indicated the goodwill was impaired.  Step two of the goodwill recoverability test required the Company to perform a hypothetical purchase price allocation, under which the estimated fair value was allocated to the unit's tangible and intangible assets based on their estimated fair values.  This hypothetical purchase price allocation indicated that all of the unit's goodwill should be written off.  The amount of impairment for the European unit was $25.0 million, of which $20.3 million was goodwill and $4.6 million related to data assets.  The amount of impairment for the 2Touch unit was $3.9 million, of which $3.0 million was goodwill and $0.9 million was other assets, primarily property and equipment.

Management believes that the estimated valuations it arrived at are reasonable and consistent with what other marketplace participants would use in valuing the Company's components.  However, management cannot give any assurance that these market values will not change in the future.  For example, if discount rates demanded by the market increase, this could lead to reduced valuations under the income approach.  If the Company's projections are not achieved in the future, this could lead management to reassess their assumptions and lead to reduced valuations under the income approach.  If the market price of the Company's stock decreases, this could cause the Company to reassess the reasonableness of the implied control premium, which might cause management to assume a higher discount rate under the income approach which could lead to reduced valuations.  If future similar transactions exhibit lower multiples than those observed in the past, this could lead to reduced valuations under the similar transactions approach.  And finally, if there is a general decline in the stock market and particularly in those companies selected as comparable to the Company's components, this could lead to reduced valuations under the public company market multiple approach.  The Company's next annual impairment test will be performed during the first quarter of fiscal 2017.  The fair value of the Company's components could deteriorate which could result in the need to record impairment charges in future periods.  The Company continues to monitor potential triggering events including changes in the business climate in which it operates, attrition of key personnel, the volatility in the capital markets, the Company's market capitalization compared to its book value, the Company's recent operating performance, and the Company's financial projections.  The occurrence of one or more triggering events could require additional impairment testing, which could result in impairment charg es.

Restructuring

The Company records costs associated with employee terminations and other exit activity in accordance with ASC 420, Exit or Disposal Cost Obligations , depending on whether the costs relate to exit or disposal activities under the accounting standards, or whether they are other post-employment termination benefits.  Under applicable accounting standards for exit or disposal costs, the Company records employee termination benefits as an operating expense when the benefit arrangement is communicated to the employee and no significant future services are required.  Under the accounting standards related to post employment termination benefits the Company records employee termination benefits when the termination benefits are probable and can be estimated.  The

Company recognizes the present value of facility lease termination obligations, net of estimated sublease income and other exit costs, when the Company has future payments with no future economic benefit or a commitment to pay the termination costs of a prior commitment. In future periods the Company will record accretion expense to increase the liability to an amount equal to the estimated future cash payments necessary to exit the leases. This requires judgment and management estimation in order to determine the expected time frame for securing a subtenant, the amount of sublease income to be received and the appropriate discount rate to calculate the present value of the future cash flows. Should actual lease exit costs differ from estimates, the Company may be required to adjust the restructuring charge which will impact net income in the period any adjustment is recorded.

Income Taxes

The Company makes estimates and judgments in determining the provision for income taxes for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. Significant changes in these estimates may result in an increase or decrease to the tax provision in a subsequent period. The Company assesses the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company increases the provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable.  The Company believes that the deferred tax assets recorded on the consolidated balance sheets will be ultimately recovered. However, should a change occur in the Company's ability to recover its deferred tax assets, its tax provision would increase in the period in which the Company determined that the recovery was not likely.

The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process pursuant to ASC 740, Income Taxes . The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If the Company determines that a tax position will more likely than not be sustained on audit, the second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes.

The Company re-evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

Results of Operations

A summary of selected financial information for each of the years in the three-year period ended March 31, 2016 is presented below (dollars in thousands, except per share amounts):

Revenues

The following table presents the Company's revenues by reporting segment for each of the years in the three-year period ended March 31, 2016 (dollars in thousands):

Total revenues were $850.1 million in fiscal 2016, a $45.2 million, or 5.6%, increase from fiscal 2015. Excluding the unfavorable impact of exchange rates ($8.1 million), total revenues increased 6.6%.

Total revenues were $804.9 million in fiscal 2015, a $0.2 million decrease, or flat, from fiscal 2014.  Excluding the unfavorable impact of exchange rates ($2.3 million), total revenues increased $2.1 million.

Marketing Services ("MS") revenue was $449.8 million in fiscal 2016, a $3.7 million, or 0.8%, increase compared to fiscal 2015. On a geographic basis, U.S. MS revenue increased $11.3 million, or 2.8%, from fiscal 2015, due to increases in new and existing client business offset by a few contract terminations. International MS revenue decreased $7.6 million, or 16.6%.  Excluding the unfavorable impact of exchange rates ($2.9 million), International MS revenue decreased $4.7 million, primarily due to contract and volume reductions in Europe ($2.9 million) and APAC ($1.8 million).  By line of business, increases in Marketing Database ($12.2 million) were offset by declines in Acxiom Impact ($7.8 million).  Marketing Database increases were primarily in the U.S. and were partially offset by reductions in APAC of $0.7 million. Acxiom Impact declines were primarily from lost contracts and volume reductions in the U.S. ($4.4 million), Europe ($2.0 million) and APAC ($1.5 million).

MS revenue was $446.1 million in fiscal 2015 a $19.5 million, or 4.2%, decrease compared to fiscal 2014. On a geographic basis, U.S. MS revenue decreased $18.3 million, or 4.4%, from fiscal 2014, due to contract terminations, partially offset by increases in new business and client upsell. International MS revenue decreased $1.1 million, or 2.4%.  Excluding the unfavorable impact of exchange rates ($0.1 million), International MS revenue decreased $1.0 million, primarily due to contract and volume reductions in APAC.

Audience Solutions ("AS") revenue was $297.8 million in fiscal 2016, a $6.0 million, or 2.0%, decrease compared to fiscal 2015. On a geographic basis, U.S. AS revenue increased $2.9 million, or 1.1%, from fiscal 2015, due to increases in new business and client upsell offset by a contract termination. International AS revenue decreased $8.9 million, or 20.4%.  International AS revenue was impacted by unfavorable exchange rates ($4.7 million) and the exit from the Europe transactional data business in fiscal year 2015 ($5.1 million).  By line of business, AS revenue increases in Digital Data through the publisher and digital partner network ($16.4 million) were offset by declines in Enrichment ($11.6 million) and Recognition ($10.0 million). Enrichment and Recognition revenue was impacted by the exit from the Europe business, unfavorable exchange rates, lower volumes in Australia and a terminated contract in the U.S.

AS revenue was $303.8 million in fiscal 2015, a $22.1 million, or 6.8%, decrease compared to fiscal 2014. On a geographic basis, U.S. AS revenue decreased $4.9 million, or 1.8%, from fiscal 2014, due to contract terminations offset partially by increases in new business and client upsell. International AS revenue decreased $17.2 million, or 28.3%.  International AS revenue was impacted by unfavorable exchange rates ($1.9 million) and the exit from the Europe transactional data business in fiscal year 2015.  By line of business, AS revenue increases in Digital Data through the publisher and digital partner network ($8.4 million) were offset by declines in Enrichment ($25.6 million) and Recognition ($5.0 million). Enrichment revenue was impacted by the unfavorable exchange rates, restructuring in Europe, lower volumes in Australia, and contract terminations. Recognition was impacted by lower volumes in the U.S and Australia.

Connectivity revenue was $102.5 million in fiscal 2016, a $47.5 million, or 86.4%, increase compared to fiscal 2015.  The increase was related to LiveRamp new customer additions, and a full year of LiveRamp operations in fiscal 2016 versus nine months in fiscal 2015. On a geographic basis, U.S. Connectivity revenue increased $46.8 million, or 96.6%, from fiscal 2015. International Connectivity revenue increased $0.7 million, or 10.3%.

Connectivity revenue was $55.0 million in fiscal 2015, a $41.3 million, or 302.7%, increase compared to fiscal 2014.  The increase was related to the LiveRamp acquisition in July 2014, and new customer additions since the acquisition. On a geographic basis, U.S. Connectivity revenue increased $39.5 million, or 443.3%, from fiscal 2014. International Connectivity revenue increased $1.8 million, or 37.8%.

Cost of revenue and Gross profit

The following table presents the Company's cost of revenue and gross profit for each of the years in the three-year period ended March 31, 2016 (dollars in thousands):

Cost of revenue: Includes all direct costs of sales such as data and other third party costs directly associated with revenue. Cost of revenue also includes operating expenses for each of the Company's operations functions such as client services, account management, agency, strategy and analytics, IT, data acquisition, and products operations. Finally, cost of revenue includes amortization of internally developed software.

As described in Note 1 – Significant Accounting Policies, the Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue.  As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category.  Account management costs supporting contract extension and upsell are now classified as sales and marketing, and internal IT project management costs are now classified as general and administrative.

Cost of revenue was $488.4 million in fiscal 2016, a $5.7 million, or 1.1%, decrease from fiscal 2015, and gross margin increased to 42.5% compared to 38.6% in the prior year. The gross margin increase is due to the Connectivity revenue increases and cost efficiencies. U.S. gross margins increased to 43.8% in fiscal 2016 from 39.0% in the prior year due to the Connectivity revenue increases and AS revenue growth and cost reductions. International gross margins decreased to 30.4% in fiscal 2016 from 35.5% in the prior year due to the revenue reductions in Europe and APAC, as well as recent Connectivity investments.

Cost of revenue was $494.4 million in fiscal 2015, an $11.5 million, or 2.3%, decrease from fiscal 2014, and gross margin increased to 38.6% compared to 37.2%.

Operating Expenses

The following table presents the Company's operating expenses for each of the years in the three-year period ended March 31, 2016 (dollars in thousands):

Research and development ("R&D"): Includes operating expenses for the Company's engineering and product/project management functions supporting research, new development, and related product enhancement.

R&D expenses were $74.2 million in fiscal 2016, or flat compared to fiscal 2015, and is 8.7% of total revenues compared to 9.2% in fiscal 2015. The net change includes cost savings realized by the combination of the LiveRamp and AOS development teams offset partially by additional investment in AS R&D of approximately $9.0 million.

R&D expenses were $74.2 million in fiscal 2015, an increase of $11.4 million, or 18.1%, compared to fiscal 2014, and is 9.2% of total revenues compared to 7.8% in fiscal 2014. The increase is due to the acquisition of LiveRamp during fiscal 2015.

Sales and marketing ("S&M"): Includes operating expenses for the Company's sales, marketing, and product marketing functions.

As described in Note 1 – Significant Accounting Policies, the Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue.  As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category.  Account management costs supporting contract extension and upsell are now classified as sales and marketing.

S&M expenses were $146.2 million in fiscal 2016, an increase of $29.7 million, or 25.5%, compared to fiscal 2015, and is 17.2% of total revenues compared to 14.5% in fiscal 2015. The increase is due to headcount investments in U.S. Connectivity and AS sales, the full year impact of the LiveRamp acquisition, as well as higher incentive compensation costs from increased revenue. These increases were partially offset by reductions in International operations, partially due to exchange rates.

S&M expenses were $116.5 million in fiscal 2015, an increase of $22.9 million, or 24.5%, compared to fiscal 2014.

General and administrative (G&A): Represents operating expenses for all corporate functions, including finance, human resources, legal, corporate IT, and the corporate office.

G&A expenses were $135.4 million in fiscal 2016, an increase of $5.1 million, or 3.9%, compared to fiscal 2015, and is 15.9% of total revenues compared to 16.2% in fiscal 2015. The increase is due to higher incentive compensation levels, higher legal and third party fees, and increased facility costs with new offices, offset partially from cost savings primarily in corporate information technology as well as lower separation and transformation costs.

G&A expenses were $130.3 million in fiscal 2015, an increase of $30.7 million, or 30.9%, compared to fiscal 2014, and is 16.2% of total revenues compared to 12.4% in fiscal 2014.  The increase is primarily due to a $25.0 million increase in business separation activities and transformation costs related to separation of the former Marketing and Data Services business from ITO.

Impairment of goodwill and other: Represents the amount of impairment related to goodwill and other related long-lived assets.

Impairment of goodwill and other was $6.8 million in fiscal 2016, representing the impairment of APAC AS ($6.1 million) and Brazil MS and AS ($0.7 million). There was no impairment in fiscal 2015. Impairment of goodwill and other was $25.0 million in fiscal 2014, representing the impairment of the former European Marketing and Data Services unit.

Gains, losses, and other items, net: Represents restructuring costs and other adjustments.

Gains, losses and other items, net of $12.1 million in fiscal 2016 decreased $10.5 million, or 46.3%, compared to fiscal 2015.  The fiscal 2016 amount included severance and other associate-related charges of $8.6 million for the termination of associates in the U.S., Europe, Brazil and Australia, $3.0 million related to lease restructurings, and the write off of leasehold improvements $0.4 million.

Gains, losses and other items, net of $22.6 million in fiscal 2015 increased $5.4 million, or 31.6%, compared to fiscal 2014. The fiscal 2015 amount included severance and other associate-related charges of $13.3 million for the termination of associates in the U.S., Europe, Australia and China, $6.5 million related to lease restructurings, and the write-off of leasehold improvements of $2.0 million.

The following table summarizes the restructuring activity included in gains, losses and other items, net in the consolidated statements of operations for the fiscal years ended March 31, 2016, 2015 and 2014 (dollars in thousands):

Income (Loss) from Operations and Profit (Loss) Margins

The following table presents the Company's income (loss) from operations and margin by segment for each of the years in the three-year period ended March 31, 2016 (dollars in thousands):

Loss from operations was $13.1 million in fiscal 2016 compared to a loss of $32.7 million in fiscal 2015. Operating margin was a negative 1.5% compared to a negative 4.1%. The decrease in loss from operations of $19.6 million and the improvement in operating margin of 260 basis points was due primarily to improving Connectivity profitability.

Loss from operations was $32.7 million in fiscal 2015 compared to income from operations of $1.6 million in fiscal 2014. Operating margin was a negative 4.1% compared to a positive 0.2%. The increase in loss from operations of $34.4 million was due primarily to a $25.0 million increase in business separation activities and transformation costs related to separation of the former Marketing and Data Services business from ITO and higher intangible amortization and non-cash compensation associated with the LiveRamp acquisition, offset by lower goodwill impairment costs.

MS income from operations was $74.4 million, a 16.5% margin, in fiscal 2016 compared to $81.2 million, an 18.2% margin, in fiscal 2015.  U.S. margins decreased to 17.7% in the current period from 19.2% due to higher variable compensation. International margins decreased to 3.7% from 9.6% due to lower performance in Europe and APAC.

MS income from operations was $81.2 million, an 18.2% margin, in fiscal 2015 compared to $83.8 million, an 18.0% margin, in fiscal 2014.  U.S. margins increased to 19.2% in fiscal 2015 from 19.1% due to lower variable compensation offset partially by ongoing R&D investments. International margins increased to 9.6% from 6.6% due to S&M cost reductions.

AS income from operations was $109.6 million, a 36.8% margin, in fiscal 2016 compared to $115.1 million, a 37.9% margin, in fiscal 2015. U.S. margins decreased to 40.1% in the current period from 43.4% due to ongoing R&D and S&M investments. International margins increased to 11.6% from 4.9% due to S&M cost reductions.

AS income from operations was $115.1 million, a 37.9% margin, in fiscal 2015 compared to $120.0 million, a 36.8% margin, in fiscal 2014. U.S. margins decreased to 43.4% in fiscal 2015 from 44.0% due to ongoing S&M investments. International margins decreased to 4.9% from 6.2% due to lower revenue.

Connectivity loss from operations was $3.3 million, a negative 3.2% margin, in fiscal 2016 compared to a loss of $40.1 million, a negative 72.9% margin, in fiscal 2015. The improvement is due to revenue from new customers and upsell to existing customers and cost savings realized by the combination of the LiveRamp and AOS development teams.

Connectivity loss from operations was $40.1 million, a negative 72.9% margin, in fiscal 2015 compared to a loss of $46.8 million, a negative 342.6% margin, in fiscal 2014. The improvement is due to revenue from new customers and upsell to existing customers due to the acquisition of LiveRamp during fiscal 2015.

Other Income (Expense), Income Taxes and Other Items

Interest expense was $7.7 million in fiscal 2016, or flat compared to fiscal 2015.  On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement.  The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense was $0.4 million in fiscal 2016 and $1.3 million in fiscal 2015. Including this allocated interest, total interest expense was $8.1 million in fiscal 2016 and $9.0 million in fiscal 2015. The decrease is due primarily to the reduction in the term loan balance.

Interest expense was $7.7 million in fiscal 2015, a decrease of $1.0 million from $8.7 million in fiscal 2014.  The decrease primarily results from lower interest on capital leases and other borrowings.  Interest expense on the Company's term loan also decreased from the prior fiscal year.

Other income was $0.5 million in fiscal 2016 compared to other expense of $1.0 million in fiscal 2015 and other income of $1.8 million in fiscal 2014.  Other, net primarily consists of foreign currency transaction gains and losses, and interest and investment income.  In addition, during fiscal 2014, the Company recorded a $2.6 million gain from its investment in a real estate joint venture and $0.7 million in accelerated deferred debt costs as a result of refinancing its term loan agreement.

The fiscal 2016 effective tax rate was 57.4%.  Fiscal 2016 included a net $3.6 million tax benefit related to the release of a deferred tax valuation allowance in a certain foreign jurisdiction. Fiscal 2016 also included a net $4.0 million income tax benefit related to research and development tax credits. In addition, non-deductible stock compensation , primarily related to incentive stock options issued in connection with the LiveRamp acquisition, had a $1.9 million impact on tax expense.

The fiscal 2015 effective tax rate was 35.8%.  Fiscal 2015 included a net $3.1 million income tax benefit principally related to new state research and development tax credits which were partially offset by other state deferred tax activity.  In addition, non-deductible incentive stock options issued in connection with the LiveRamp acquisition had a $2.3 million impact on tax expense.

The fiscal 2014 effective tax rate was -227.2%.  Fiscal 2014 income taxes included $7.6 million of expense related to increasing valuation allowances for net operating loss carryforwards and deferred tax assets in France and the UK, offset by a $3.1 million income tax reserve adjustment resulting from expiration of certain statutes of limitations.  The fiscal 2014 effective tax rate was also negatively impacted by non-deductible goodwill impairment charges.

All three fiscal period tax rates were impacted by losses in foreign jurisdictions.  The Company does not record the tax benefit of certain of those losses due to uncertainty of future benefit.

Losses attributable to noncontrolling interest include the noncontrolling interest in the Company's Brazilian subsidiary.  During fiscal 2014, the Company acquired the remaining noncontrolling interest in Acxiom Brazil.

Discontinued operations

In fiscal 2016, the Company completed the sale of its ITO operations.  As a result, the ITO business qualified for treatment as discontinued operations.  The results of operations, cash flows, and the balance sheet amounts pertaining to ITO have been classified as discontinued operations in the consolidated financial statements.

Summary results of operations of ITO for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the Company's consolidated statements of operations and are as follows (dollars in thousands):

In fiscal 2015, the Company completed the sale of its U.K. call center operation, 2Touch.  As a result, the 2Touch business qualified for treatment as discontinued operations.  The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the consolidated financial statements.

Summary results of operations of 2Touch for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the Company's consolidated statements of operations and are as follows (dollars in thousands):

Capital Resources and Liquidity

Working Capital and Cash Flow

Working capital at March 31, 2016 totaled $152.0 million, a $75.6 million decrease when compared to $227.6 million at March 31, 2015, due primarily to the impact of the disposition of ITO. $55.0 million of the proceeds from the sale of ITO were used to reduce long-term debt. Excluding the net assets of ITO at March 31, 2015 of $114.9 million, working capital increased $39.2 million.

The Company's cash is primarily located in the United States.  Approximately $16.7 million of the total cash balance of $189.6 million, or approximately 8.8%, is located outside of the United States.  The Company has no current plans to repatriate this cash to the United States.

Accounts receivable days sales outstanding, from continuing operations, was 56 days at March 31, 2016 and March 31, 2015, respectively, and is calculated as follows (dollars in thousands):

Net cash provided by operating activities was $113.6 million in fiscal 2016 compared to $61.1 million and $95.8 million in fiscal 2015 and 2014, respectively.  The $52.5 million increase in fiscal 2016 resulted primarily from a decrease in net loss from continuing operations ($17.7 million) and the net increase in working capital. The $34.7 million decrease in fiscal 2015 primarily results from lower net earnings related to increased business separation, transformation, and restructuring costs and the impact of unfavorable working capital changes.

Investing activities used cash of $69.2 million in fiscal 2016 compared to $343.1 million and $54.9 million in fiscal 2015 and 2014, respectively. The primary decrease for fiscal 2016 compared to fiscal 2015 relates to net cash paid in acquisitions: $5.4 million for certain addressable television net assets of Allant in fiscal 2016 compared to $265.7 million for LiveRamp in fiscal 2015. Fiscal 2016 investing activities in addition to the net cash paid in acquisitions consisted of capital expenditures of $47.4 million, capitalization of software of $14.9 million and $1.6 million of data acquisition costs. The primary decrease for fiscal 2015 compared to fiscal 2014 relates to the net cash paid of $265.7 million for LiveRamp in fiscal 2015. Fiscal 2015 investing activities in addition to the net cash paid in acquisitions consisted of capital expenditures of $57.0 million, capitalization of software of $18.6 million and $1.9 million of data acquisition costs.

Under the Company's common stock repurchase program, the Company may purchase up to $300.0 million of its common stock through the period ending December 31, 2016. During fiscal year ended March 31, 2016, the Company repurchased 2.6 million shares of its common stock for $52.8 million.  During the fiscal year ended March 31, 2015, the Company repurchased 0.5 million shares of its common stock for $9.9 million.  During the fiscal year ended March 31, 2014, the Company repurchased 2.0 million shares of its common stock for $52.7 million.  Through March 31, 2016, the Company has repurchased 15.5 million shares of its stock for $255.2 million, leaving remaining capacity of $44.8 million under the stock repurchase program. Cash paid for acquisition of treasury stock in the consolidated statements of cash flows may differ from the aggregate purchase price due to trades made during one fiscal period that settle in a different period.

Financing activities used cash of $126.0 million in fiscal 2016. Fiscal 2016 financing activities included $10.4 million in proceeds from the sale of common stock and $3.6 million excess tax benefits from stock-based compensation, offset by $87.2 million in payments of debt, including the $55.0 million prepayment as a result of the ITO sale, and $52.8 million to acquire treasury stock. Financing activities used $26.8 million of cash in fiscal 2015. Fiscal 2015 financing activities included $5.0 million in proceeds from the sale of common stock and $4.6 million excess tax benefits from stock-based compensation, offset by $26.6 million in payments of debt and $9.9 million to acquire treasury stock.  Financing activities provided $103.0 million of cash in fiscal 2014. In fiscal 2014, the Company refinanced its term loan resulting in proceeds, net of fees, of $80.6 million. Fiscal 2014 financing activities also included $80.5 million in proceeds from the sale of common stock and $11.3 million excess tax benefits from stock-based compensation, offset by payments of debt of $16.2 million (excluding the $215.0 million prepayment of debt under the term loan refinancing) and $52.7 million to acquire treasury stock.

Net cash provided by discontinued operations was $130.6 million in fiscal 2016, primarily from net cash received of $130.2 million for the sale of ITO. Discontinued operations provided $32.8 million and $51.1 million in fiscal years 2015 and 2014, respectively.

Credit and Debt Facilities

The Company's amended and restated credit agreement provides for (1) term loans up to an aggregate principal amount of $300 million and (2) revolving credit facility borrowings consisting of revolving loans, letter of credit participations and swing-line loans up to an aggregate amount of $300 million.

The term loan is payable in quarterly installments of $7.5 million through September 2017, followed by quarterly installments of $11.3 million through June 2018, with a final payment of $106.3 million due October 9, 2018.  The revolving loan commitment expires October 9, 2018.

Term loan and revolving credit facility borrowings bear interest at LIBOR or at an alternative base rate plus a credit spread.  At March 31, 2016, the LIBOR credit spread was 2.00%.  There were no revolving credit borrowings outstanding at March 31, 2016 or March 31, 2015.  The weighted-average interest rate on term loan borrowings at March 31, 2016 was 2.68%.  Outstanding letters of credit at March 31, 2016 were $2.1 million.

The term loan allows for prepayments before maturity.  The credit agreement is secured by the accounts receivable of Acxiom and its domestic subsidiaries, as well as by the outstanding stock of certain Acxiom subsidiaries.

Under the terms of the term loan, the Company is required to maintain certain debt-to-cash flow and debt service coverage ratios, among other restrictions.  At March 31, 2016, the Company was in compliance with these covenants and restrictions.  In addition, if certain financial ratios and other conditions are not satisfied, the revolving credit facility limits the Company's ability to pay dividends in excess of $30 million in any fiscal year (plus additional amounts in certain circumstances).

On May 19, 2015, the Company entered into an agreement to further amend its credit agreement.  The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition that occurred on July 31, 2015 (See Note 4 – Discontinued Operations).  Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016.  Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases are limited to no more than $100 million depending on the Company's leverage ratio.  After March 31, 2016, the financial covenants and dividend and share repurchase rights and limitations will return to the requirements in the credit agreement in effect prior to the amendment.  In addition, the amendment revises certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.

On July 31, 2015, the Company used $55.0 million of proceeds from the ITO disposition to repay outstanding Company indebtedness as required by the Company's existing credit agreement.  The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business.  Allocated interest expense was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively.

On March 10, 2014, the Company entered into an interest rate swap agreement.  The agreement provides for the Company to pay interest through March 10, 2017 at a fixed rate of 0.98% plus the applicable credit spread on $50.0 million notional amount, while receiving interest for the same period at the LIBOR rate on the same notional amount.  The LIBOR rate as of March 31, 2016 was 0.63%.  The swap was entered into as a cash flow hedge against LIBOR interest rate movements on the term loan.  The Company assesses the effectiveness of the hedge based on the hypothetical derivative method.  There was no ineffectiveness for the period ended March 31, 2016.  Under the hypothetical derivative method, the cumulative change in fair value of the actual swap is compared to the cumulative change in fair value of the hypothetical swap, which has terms that identically match the critical terms of the hedged transaction.  Thus, the hypothetical swap is presumed to perfectly offset the hedged cash flows.  The change in the fair value of the hypothetical swap will then be regarded as a proxy for the present value of the cumulative change in the expected future cash flows from the hedged transactions.  All of the fair values are derived from an interest-rate futures model.  As of March 31, 2016, the hedge relationship still qualified as an effective hedge under applicable accounting standards.  Consequently, all changes in fair value of the derivative will be deferred and recorded in other comprehensive income (loss) until the related forecasted transaction is recognized in the consolidated statement of operations.  The fair market value of the derivative was zero at inception and an unrealized loss of $0.1 million since inception is recorded in other comprehensive income (loss).  The fair value of the interest rate swap agreement recorded in accumulated other comprehensive income (loss) may be recognized in the consolidated statement of operations if certain terms of the floating-rate debt change, if the floating-rate debt is extinguished or if the interest rate swap agreement is terminated prior to maturity.  The Company has assessed the creditworthiness of the counterparty of the swap and concludes that no substantial risk of default exists as of March 31, 2016.