NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
Description of Business
|
Description
of Business
Cirrus Logic, Inc. (Cirrus Logic, We, Us, Our, or the
Company) develops high-precision, analog and mixed-signal integrated circuits (ICs) for a broad range of consumer and industrial markets. Building on our diverse analog mixed-signal patent portfolio, Cirrus Logic delivers
highly optimized products for consumer and professional audio, automotive entertainment, and targeted industrial applications including energy control, energy management, light emitting diode (LED) and energy exploration.
We were incorporated in California in 1984, became a public company in 1989, and were reincorporated in the State of Delaware in February
1999. Our primary facility housing engineering, sales and marketing, and administration functions is located in Austin, Texas. In addition, we have sales locations internationally and throughout the United States. Specifically, we serve customers
from international sales offices in Europe and Asia, including the Peoples Republic of China, Hong Kong, South Korea, Japan, Singapore, Taiwan, and the United Kingdom. Our common stock, which has been publicly traded since 1989, is listed on
the NASDAQ Global Select Market under the symbol CRUS.
Basis of Presentation
We prepare financial statements on a 52-or 53-week year that ends on the last Saturday in March. Fiscal years 2011 and 2013 were 52-week
years, whereas fiscal year 2012 was a 53-week year.
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles
(U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to prior year
balances in order to conform to the current years presentation of financial information.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the use of management estimates. These estimates are
subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
2.
|
Summary of Significant Accounting Policies
|
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of money market funds, commercial paper, and U.S. Government Treasury and Agency instruments
with original maturities of three months or less at the date of purchase.
Marketable Securities
We determine the appropriate classification of marketable securities at the time of purchase and reevaluate this designation as of each
balance sheet date. We classify these securities as either held-to-maturity, trading, or available-for-sale. As of March 30, 2013 and March 31, 2012, all marketable securities and restricted
Page 41 of 69
investments were classified as available-for-sale securities. The Company classifies its investments as available for sale because it expects to possibly sell some securities prior to
maturity. The Companys investments are subject to market risk, primarily interest rate and credit risk. The Companys investments are managed by an outside professional manager within investment guidelines set by the Company. Such
guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting the Companys investments to high quality debt instruments with relatively short-term maturities. The fair value of investments
is determined using observable or quoted market prices for those securities.
Available-for-sale securities are carried at fair
value, with unrealized gains and losses included as a component of accumulated other comprehensive loss. Realized gains and losses, declines in value judged to be other than temporary, and interest on available-for-sale securities are included in
net income. The cost of securities sold is based on the specific identification method.
Inventories
We use the lower of cost or market method to value our inventories, with cost being determined on a first-in, first-out basis. One of the
factors we consistently evaluate in the application of this method is the extent to which products are accepted into the marketplace. By policy, we evaluate market acceptance based on known business factors and conditions by comparing forecasted
customer unit demand for our products over a specific future period, or demand horizon, to quantities on hand at the end of each accounting period.
On a quarterly and annual basis, we analyze inventories on a part-by-part basis. Inventory quantities on hand in excess of forecasted demand are considered to have reduced market value and, therefore, the
cost basis is adjusted to the lower of cost or market. Typically, market values for excess or obsolete inventories are considered to be zero. Product life cycles and the competitive nature of the industry are factors considered in the estimation of
customer unit demand at the end of each quarterly accounting period.
Inventories were comprised of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Work in process
|
|
$
|
34,169
|
|
|
$
|
30,921
|
|
Finished goods
|
|
|
85,131
|
|
|
|
24,994
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
119,300
|
|
|
$
|
55,915
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net
Property, plant and equipment is recorded at cost, net of depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis over estimated economic lives, ranging from
three to 39 years. Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated useful life. Furniture, fixtures, machinery, and equipment are all depreciated over a useful life of three to 10 years, while
buildings are depreciated over a period of up to 39 years. In general, our capitalized software is amortized over a useful life of three years, with capitalized enterprise resource planning software being amortized over a useful life of 10 years.
Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred.
Page 42 of 69
Property, plant and equipment was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Land
|
|
$
|
23,778
|
|
|
$
|
14,059
|
|
Buildings
|
|
|
38,257
|
|
|
|
8,351
|
|
Furniture and fixtures
|
|
|
9,677
|
|
|
|
4,320
|
|
Leasehold improvements
|
|
|
1,091
|
|
|
|
6,765
|
|
Machinery and equipment
|
|
|
51,080
|
|
|
|
37,481
|
|
Capitalized software
|
|
|
24,671
|
|
|
|
23,459
|
|
Construction in progress
|
|
|
2,528
|
|
|
|
28,497
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
151,082
|
|
|
|
122,932
|
|
Less: Accumulated depreciation and amortization
|
|
|
(50,459
|
)
|
|
|
(55,954
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
100,623
|
|
|
$
|
66,978
|
|
|
|
|
|
|
|
|
|
|
The increase in the land and buildings balances in fiscal year 2013 was primarily attributable to the
construction of the new headquarters facility, which was placed in service during fiscal year 2013, and the purchase of surrounding properties during fiscal year 2013. Depreciation and amortization expense on property, plant, and equipment for
fiscal years 2013, 2012, and 2011 was $10.2 million, $6.3 million, and $4.8 million, respectively.
Goodwill and Intangibles, net
Intangible assets include purchased technology licenses and patents that are reported at cost and are amortized on a
straight-line basis over their useful lives, generally ranging from one to ten years. Acquired intangibles include existing technology, core technology or patents, license agreements, trademarks, covenants not-to-compete and customer agreements.
These assets are amortized on a straight-line basis over lives ranging from four to fifteen years.
Goodwill is recorded at the
time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Goodwill and intangible assets deemed to have indefinite
lives are not amortized but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges
could be required. The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks,
including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy and the semiconductor industry, or (iv) any failure to meet the performance projections included in our forecasts of future operating
results. The Company tests goodwill and indefinite lived intangibles for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful
lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If our actual
results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period. There are no
impairments of goodwill or intangibles in 2013, 2012, and 2011.
Long-Lived Assets
We test for impairment losses on long-lived assets and definite-lived intangibles used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. We measure any impairment loss by comparing the fair value of the asset to its carrying amount. We estimate fair value
based on discounted future cash flows, quoted market prices, or independent appraisals.
Page 43 of 69
Foreign Currency Translation
All of our international subsidiaries have the U.S. dollar as the functional currency. The local currency financial statements are remeasured into U.S. dollars using current rates of exchange for assets
and liabilities. Gains and losses from remeasurement are included in other income (expense), net. Revenue and expenses from our international subsidiaries are remeasured using the monthly average exchange rates in effect for the period in which the
items occur. For all periods presented, our foreign currency remeasurement expense was not significant.
Concentration of Credit Risk
Financial instruments that potentially subject us to material concentrations of credit risk consist primarily of cash
equivalents, marketable securities, long-term marketable securities, and trade accounts receivable. We are exposed to credit risk to the extent of the amounts recorded on the balance sheet. By policy, our cash equivalents, marketable securities, and
long-term marketable securities are subject to certain nationally recognized credit standards, issuer concentrations, sovereign risk, and marketability or liquidity considerations.
In evaluating our trade receivables, we perform credit evaluations of our major customers financial condition and monitor closely
all of our receivables to limit our financial exposure by limiting the length of time and amount of credit extended. In certain situations, we may require payment in advance or utilize letters of credit to reduce credit risk. By policy, we establish
a reserve for trade accounts receivable based on the type of business in which a customer is engaged, the length of time a trade account receivable is outstanding, and other knowledge that we may possess relating to the probability that a trade
receivable is at risk for non-payment.
For fiscal year 2013, we had three contract manufacturers, Futaihua Industrial,
Hongfujin Precision and Protek, who represented 21 percent, 36 percent, and 16 percent of our consolidated gross accounts receivable, respectively. In fiscal year 2012, we had two contract manufacturers, Futaihua Industrial and Hongfujin Precision,
who represented 28 percent and 14 percent, respectively, of our consolidated gross accounts receivable. No other distributor or customer had receivable balances that represented more than 10 percent of consolidated gross accounts receivable as of
the end of fiscal year 2013 or 2012.
Since the components we produce are largely proprietary and generally not available from
second sources, we consider our end customer to be the entity specifying the use of our component in their design. These end customers may then purchase our products directly from us, from a distributor, or through a third party manufacturer
contracted to produce their end product. For fiscal years 2013, 2012, and 2011, our ten largest end customers represented approximately 89 percent, 74 percent, and 62 percent of our sales, respectively. For fiscal years 2013, 2012, and 2011, we had
one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 82 percent, 62 percent, and 47 percent of the Companys total sales, respectively. Further, we had one distributor, Avnet, Inc.,
that represented 15 percent, and 24 percent of our sales for fiscal years 2012, and 2011, respectively.
No other customer or distributor represented more than 10 percent of net sales in fiscal years 2013, 2012, or 2011.
Revenue Recognition
We
recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured. We evaluate our
distributor arrangements, on a distributor by distributor basis, with respect to each of the four criteria above. For a majority of our distributor arrangements, we provide rights of price protection and stock rotation. As a result, revenue is
deferred at the time of shipment to our domestic distributors and certain international distributors due to the determination that the ultimate sales price to the distributor is not fixed or determinable. Once the distributor has resold the product,
and our final sales price is fixed or determinable, we recognize revenue for the final sales price and record the related costs of sales. For certain of our smaller international distributors, we do not grant price protection rights and provide
minimal stock rotation rights. For these distributors, revenue is recognized upon delivery to the distributor, less an allowance for estimated returns, as the revenue recognition criteria have been met upon shipment.
Page 44 of 69
Further, the Company defers the associated cost of goods sold on our consolidated balance
sheet, net within the deferred income caption. The Company routinely evaluates the products held by our distributors for impairment to the extent such products may be returned by the distributor within these limited rights and such products would be
considered excess or obsolete if included within our own inventory. Products returned by distributors and subsequently scrapped have historically been immaterial to the Company.
Warranty Expense
We warrant our products and maintain a provision for
warranty repair or replacement of shipped products. The accrual represents managements estimate of probable returns. Our estimate is based on an analysis of our overall sales volume and historical claims experience, and the sales volume and
historical claims experience at our largest customer, Apple, Inc. The estimate is re-evaluated periodically for accuracy.
Shipping Costs
Our shipping and handling costs are included in cost of sales for all periods presented in the Consolidated Statements of
Comprehensive Income.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $1.5 million, $1.8 million, and $1.3 million, in fiscal years 2013, 2012, and 2011, respectively.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards and is recognized as an expense,
on a ratable basis, over the vesting period, which is generally between zero and four years. Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of
stock options. The Company calculates the grant-date fair value for stock options using the Black-Scholes valuation model. The use of valuation models requires the Company to make estimates of assumptions such as expected volatility, expected term,
risk-free interest rate, expected dividend yield, and forfeiture rates. The grant-date fair value of restricted stock units is the market value at grant date multiplied by the number of units.
Income Taxes
We provide
for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company evaluates the ability to realize its deferred tax assets based on all the facts and circumstances, including projections of future
taxable income and expiration dates of carryover attributes on a quarterly basis. We have provided a valuation allowance against a portion of our net U.S. deferred tax assets due to uncertainties regarding its realization. The calculation of our tax
liabilities involves assessing uncertainties with respect to the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. We recognize
liabilities for uncertain tax positions based on the two-step process. The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate
whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be
taken, in an income tax return as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in
facts or circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. If our estimates of these taxes are greater or less than actual results, an additional tax benefit or
charge will result.
Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, no
assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation,
Page 45 of 69
it could have a material effect on our income tax provision and net income in the period or periods for which that determination is made. We operate within multiple taxing jurisdictions and are
subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have
been made for all periods.
Net Income Per Share
Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the
period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming
exercise or conversion of all potentially dilutive common shares outstanding. These potentially dilutive items consist primarily of outstanding stock options and restricted stock awards.
The following table details the calculation of basic and diluted earnings per share for fiscal years 2013, 2012, and 2011 (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
136,598
|
|
|
$
|
87,983
|
|
|
$
|
203,503
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
64,580
|
|
|
|
64,934
|
|
|
|
67,857
|
|
Effect of dilutive securities
|
|
|
3,874
|
|
|
|
3,129
|
|
|
|
4,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares
|
|
|
68,454
|
|
|
|
68,063
|
|
|
|
72,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
2.12
|
|
|
$
|
1.35
|
|
|
$
|
3.00
|
|
Diluted earnings per share
|
|
$
|
2.00
|
|
|
$
|
1.29
|
|
|
$
|
2.82
|
|
The weighted outstanding options excluded from our diluted calculation for the years ended March 30,
2013, March 31, 2012, and March 26, 2011, were 453,000, 1,052,000, and 615,000, respectively, as the exercise price exceeded the average market price during the period.
Accumulated Other Comprehensive Loss
Our accumulated other comprehensive
loss is comprised of foreign currency translation adjustments from prior years when we had subsidiaries whose functional currency was not the U.S. Dollar, as well as unrealized gains and losses on investments classified as available-for-sale.
See Note 16 Accumulated Other Comprehensive loss for additional discussion.
Recently Issued Accounting Pronouncements
In July 2012, the FASB issued ASU No. 2012-02,
Intangibles Goodwill and Other (ASC Topic 350)
Testing Indefinite-Lived Intangible Assets for Impairment.
With the amendments in this update, an entity has the option to first assess qualitative factors to determine whether it is more likely than not that indefinite-lived assets, other than
goodwill, are impaired. If, after the assessment, an entity concludes it is not more likely than not that the asset is impaired, then the entity is not required to assess further. If an entity concludes otherwise, the fair value determination and
quantitative impairment test is required, in accordance with Subtopic 350-30. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption
permitted. The adoption of this ASU is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
In February 2013, the FASB issued ASU No. 2013-02,
Comprehensive Income (ASC Topic 220) Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.
With
the amendments in this update, an entity is required to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required
under U.S. GAAP to be
Page 46 of 69
reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is
required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments in this ASU are effective prospectively for reporting periods beginning after December 15, 2012,
with early adoption permitted. We began complying with this ASU, as defined, in fiscal year 2013 and the adoption of this ASU currently does not, and is not expected to have a material impact on our consolidated financial position, results of
operations or cash flows.
The Companys investments that have original maturities greater than 90 days have been classified as available-for-sale securities in
accordance with U.S. GAAP. Marketable securities are categorized on the consolidated balance sheet as marketable securities, as appropriate.
The following table is a summary of available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 30, 2013
|
|
Amortized
Cost
|
|
|
Gross Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Estimated Fair Value
(Net Carrying Amount)
|
|
Corporate debt securities
|
|
$
|
94,798
|
|
|
$
|
2
|
|
|
$
|
(133
|
)
|
|
$
|
94,667
|
|
U.S. Treasury securities
|
|
|
34,380
|
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
34,381
|
|
Agency discount notes
|
|
|
1,027
|
|
|
|
|
|
|
|
|
|
|
|
1,027
|
|
Commercial paper
|
|
|
40,089
|
|
|
|
9
|
|
|
|
(28
|
)
|
|
|
40,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
170,294
|
|
|
$
|
15
|
|
|
$
|
(164
|
)
|
|
$
|
170,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys specifically identified gross unrealized losses of $164 thousand relates to 43
different securities with a total amortized cost of approximately $124.1 million at March 30, 2013. Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before
recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at March 30, 2013. Further, the securities with gross unrealized losses had been in a continuous unrealized loss
position for less than 12 months as of March 30, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2012
|
|
Amortized
Cost
|
|
|
Gross Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Estimated Fair Value
(Net Carrying Amount)
|
|
Corporate debt securities
|
|
$
|
48,011
|
|
|
$
|
33
|
|
|
$
|
(19
|
)
|
|
$
|
48,025
|
|
U.S. Treasury securities
|
|
|
30,264
|
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
30,261
|
|
Agency discount notes
|
|
|
16,789
|
|
|
|
8
|
|
|
|
(1
|
)
|
|
|
16,796
|
|
Commercial paper
|
|
|
23,719
|
|
|
|
5
|
|
|
|
(15
|
)
|
|
|
23,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
118,783
|
|
|
$
|
47
|
|
|
$
|
(39
|
)
|
|
$
|
118,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys specifically identified gross unrealized losses of $39 thousand relates to 37
different securities with a total amortized cost of approximately $72.6 million at March 31, 2012. Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before
recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at March 31, 2012. Further, the securities with gross unrealized losses had been in a continuous unrealized loss
position for less than 12 months as of March 31, 2012.
The cost and estimated fair value of available-for-sale
investments by contractual maturity were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
March 31, 2012
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair
Value
|
|
Within 1 year
|
|
$
|
105,290
|
|
|
$
|
105,235
|
|
|
$
|
115,871
|
|
|
$
|
115,876
|
|
After 1 year
|
|
|
65,004
|
|
|
|
64,910
|
|
|
|
2,912
|
|
|
|
2,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
170,294
|
|
|
$
|
170,145
|
|
|
$
|
118,783
|
|
|
$
|
118,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 47 of 69
4.
|
Fair Value of Financial Instruments
|
The Company has determined that the only assets and liabilities in the Companys financial statements that are required to be measured at fair value on a recurring basis are the Companys
investment portfolio assets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the
following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value
measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
|
¡
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities.
|
|
¡
|
|
Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
¡
|
|
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
|
The Companys investment portfolio assets consist of corporate debt securities, money
market funds, U.S. Treasury securities, obligations of U.S. government-sponsored enterprises, and commercial paper, and are reflected on our consolidated balance sheet under the headings cash and cash equivalents, marketable securities, and
long-term marketable securities. The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party portfolio managers on the last day of the quarter, whose sources may use quoted
prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value.
As of March 30, 2013 and March 31, 2012, the Company classified all investment portfolio assets as Level 1 or Level 2
assets. The Company has no Level 3 assets. There were no transfers between Level 1, Level 2, or Level 3 measurements for the years ending March 30, 2013 and March 31, 2012.
The fair value of our financial assets at March 30, 2013, was determined using the following inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
in
Active
Markets
for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
Total
|
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
54,762
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
54,762
|
|
Commercial paper
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,762
|
|
|
$
|
1,500
|
|
|
$
|
|
|
|
$
|
56,262
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
$
|
|
|
|
$
|
94,667
|
|
|
$
|
|
|
|
$
|
94,667
|
|
U.S. Treasury securities
|
|
|
34,381
|
|
|
|
|
|
|
|
|
|
|
|
34,381
|
|
Agency discount notes
|
|
|
|
|
|
|
1,027
|
|
|
|
|
|
|
|
1,027
|
|
Commercial paper
|
|
|
|
|
|
|
40,070
|
|
|
|
|
|
|
|
40,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,381
|
|
|
$
|
135,764
|
|
|
$
|
|
|
|
$
|
170,145
|
|
Page 48 of 69
The fair value of our financial assets at March 31, 2012, was determined using the
following inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
in
Active
Markets
for
Identical
Assets
Level 1
|
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
Total
|
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
40,557
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
40,557
|
|
Commercial paper
|
|
|
|
|
|
|
15,952
|
|
|
|
|
|
|
|
15,952
|
|
Corporate debt securities
|
|
|
|
|
|
|
1,112
|
|
|
|
|
|
|
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,557
|
|
|
$
|
17,064
|
|
|
$
|
|
|
|
$
|
57,621
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
$
|
|
|
|
$
|
48,025
|
|
|
$
|
|
|
|
$
|
48,025
|
|
U.S. Treasury securities
|
|
|
30,261
|
|
|
|
|
|
|
|
|
|
|
|
30,261
|
|
Agency discount notes
|
|
|
|
|
|
|
16,796
|
|
|
|
|
|
|
|
16,796
|
|
Commercial paper
|
|
|
|
|
|
|
23,709
|
|
|
|
|
|
|
|
23,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,261
|
|
|
$
|
88,530
|
|
|
$
|
|
|
|
$
|
118,791
|
|
5.
|
Accounts Receivable, net
|
The following are the components of accounts receivable, net (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Gross accounts receivable
|
|
$
|
69,590
|
|
|
$
|
44,524
|
|
Allowance for doubtful accounts
|
|
|
(301
|
)
|
|
|
(371
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
69,289
|
|
|
$
|
44,153
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the changes in the allowance for doubtful accounts (in thousands):
|
|
|
|
|
Balance, March 27, 2010
|
|
$
|
(488
|
)
|
Bad debt expense, net of recoveries
|
|
|
67
|
|
|
|
|
|
|
Balance, March 26, 2011
|
|
|
(421
|
)
|
Bad debt expense, net of recoveries
|
|
|
50
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
(371
|
)
|
Bad debt expense, net of recoveries
|
|
|
70
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
(301
|
)
|
|
|
|
|
|
6.
|
Goodwill and Intangibles, net
|
The goodwill balance included on the Consolidated Balance Sheets under the caption Goodwill and intangibles, net is $6.0 million at March 30, 2013 and March 31, 2012.
Page 49 of 69
The following information details the gross carrying amount and accumulated amortization of our intangible
assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
March 31, 2012
|
|
Intangible Category (Weighted-Average
Amortization period (years))
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
|
|
|
|
Core technology (a)
|
|
$
|
1,390
|
|
|
$
|
(1,390
|
)
|
|
$
|
1,390
|
|
|
$
|
(1,390
|
)
|
License agreement (a)
|
|
|
440
|
|
|
|
(440
|
)
|
|
|
440
|
|
|
|
(440
|
)
|
Existing technology (10.1)
|
|
|
5,566
|
|
|
|
(3,802
|
)
|
|
|
17,235
|
|
|
|
(7,318
|
)
|
Trademarks (a)(b)
|
|
|
320
|
|
|
|
(320
|
)
|
|
|
2,758
|
|
|
|
(320
|
)
|
Non-compete agreements (b)
|
|
|
|
|
|
|
|
|
|
|
398
|
|
|
|
(258
|
)
|
Customer relationships (b)
|
|
|
|
|
|
|
|
|
|
|
4,682
|
|
|
|
(1,515
|
)
|
Technology licenses (3.2)
|
|
|
16,303
|
|
|
|
(13,417
|
)
|
|
|
14,187
|
|
|
|
(11,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,019
|
|
|
$
|
(19,369
|
)
|
|
$
|
41,090
|
|
|
$
|
(22,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Intangible assets are fully amortized.
|
|
(b)
|
Intangible assets existing at March 31, 2012 were fully or partially removed as part of the asset sale discussed in Note 7.
|
Amortization expense for all intangibles in fiscal years 2013, 2012, and 2011 was $3.4 million, $3.7 million, and $3.3 million,
respectively. The following table details the estimated aggregate amortization expense for all intangibles owned as of March 30, 2013, for each of the five succeeding fiscal years (in thousands):
|
|
|
|
|
For the year ended March 29, 2014
|
|
$
|
2,602
|
|
For the year ended March 28, 2015
|
|
$
|
1,809
|
|
For the year ended March 26, 2016
|
|
$
|
218
|
|
For the year ended March 25, 2017
|
|
$
|
21
|
|
For the year ended March 31, 2018
|
|
$
|
|
|
7. Asset Sale
The Company entered into an agreement to sell certain assets associated with Apex Precision Power (Apex) products in Tucson, Arizona for $26.1 million. On August 17, 2012, the Company
closed the transaction under this agreement. After closing the transaction, the Company maintained a high voltage / high power IC design team in Tucson. See Note 9 for information regarding the subsequent closure and relocation of the Tucson design
center. The Company received $22.2 million in cash and has recorded a long-term note receivable for $3.9 million to be paid in its entirety by August 17, 2014. The gain recorded on the sale was $0.2 million and is included on the
Consolidated Statement of Comprehensive Income under the caption, Restructuring and other, net.
8. Revolving Line of Credit
The Company maintained a revolving credit agreement (Credit Agreement) with Wells Fargo Bank, National Association, as administrative agent and issuing lender, Barclays Bank, as syndication
agent, Wells Fargo Securities, LLC and Barclays Capital, as joint lead arrangers and co-book managers. The aggregate borrowing limit under the unsecured revolving credit facility was $100 million with a $15 million letter of credit sublimit and was
intended to provide the Company with short-term borrowings for working capital and other general corporate purposes. The interest rate payable was, at the Companys election, (i) a base rate plus the applicable margin, where the base rate
is determined by reference to the highest of 1) the prime rate publicly announced by the administrative agent, 2) the Federal Funds Rate plus 0.50%, and 3) LIBOR for a one month period plus the difference between the applicable margin for LIBOR rate
loans and the applicable margin for base rate loans, or (ii) the LIBOR rate plus the applicable margin that varies according to the leverage ratio of the
Page 50 of 69
borrower. Certain representations and warranties were required under the Credit Agreement, and the Company must have been in compliance with specified financial covenants, including (i) the
requirement that the Company maintain a ratio of consolidated funded indebtedness to consolidated EBITDA of not greater than 1.75 to 1.0, computed in accordance with the terms of the Credit Agreement, and (ii) a minimum ratio of consolidated
EBITDA to consolidated interest expense of not less than 3.50 to 1.0. At March 30, 2013, the Company was in compliance with these covenants.
At March 30, 2013, the Company had no outstanding amounts under the facility. Additionally, there were no borrowings under the facility during fiscal year 2013. The credit facility expired on
April 19, 2013 and was not renewed.
9. Restructuring Costs
On November 6, 2012, the Company committed to a plan to close its Tucson, Arizona design center and move those operations, including
development efforts related to motor control technology, to the Companys headquarters in Austin, Texas. This restructuring eliminated approximately 25 employees in Tucson, Arizona, or 4% of the Companys total workforce, as well as
relocated to Austin, Texas approximately 20 positions, which are primarily research and development positions. As of December 29, 2012, the closure was materially completed.
The Company incurred a one-time charge for relocation, severance-related items and facility-related costs to operating expenses totaling
$3.5 million in the third quarter of fiscal year 2013. This charge, along with asset sale activities described in Note 7, are presented as a separate line item on the consolidated statement of comprehensive income in operating expenses under the
caption
Restructuring and other, net
, which was and will be paid through calendar year 2015. The charge included $1.1 million in relocation and related costs and $2.4 million in facility related costs and other related charges.
Of the $3.5 million expense incurred, approximately $2.0 million has been paid, and consisted of severance and
relocation-related costs of approximately $0.9 million, an asset impairment charge of approximately $1.0 million, and facility-related costs of approximately $0.1 million. As of March 30, 2013, we have a remaining restructuring accrual of
$1.5 million, included in
Other accrued liabilities
on the consolidated balance sheet.
10. Employee Benefit Plans
We have a 401(k) Profit Sharing Plan (the 401(k) Plan) covering all of our qualifying domestic employees. Under the 401(k) Plan, employees may elect to contribute any percentage of their
annual compensation up to the annual IRS limitations. We match 50 percent of the first 6 percent of the employees annual contribution to the plan. We made matching employee contributions of $1.5 million, $1.3 million, and $1.0 million during
fiscal years 2013, 2012, and 2011, respectively.
11. Equity Compensation
The Company is currently granting equity awards from the 2006 Stock Incentive Plan (the Plan), which was approved by
stockholders in July 2006. The Plan provides for granting of stock options, restricted stock awards, restricted stock units, performance awards, phantom stock awards, and bonus stock awards, or any combination of the foregoing. To date, the
Company has granted stock options, restricted stock awards, and restricted stock units under the Plan. Stock options generally vest between zero and four years, and are exercisable for a period of ten years from the date of grant. Generally,
restricted stock awards are subject to vesting schedules up to four years. Restricted stock units are generally subject to vesting from one to three years, depending upon the terms of the grant.
Page 51 of 69
The following table summarizes the activity in total shares available for grant (in
thousands):
|
|
|
|
|
|
|
Shares
Available
for
Grant
|
|
Balance, March 27, 2010
|
|
|
9,930
|
|
Plans terminated
|
|
|
(300
|
)
|
Granted
|
|
|
(1,927
|
)
|
Forfeited
|
|
|
472
|
|
|
|
|
|
|
Balance, March 26, 2011
|
|
|
8,175
|
|
Plans terminated
|
|
|
(34
|
)
|
Granted
|
|
|
(2,049
|
)
|
Forfeited
|
|
|
165
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
6,257
|
|
Plans terminated
|
|
|
|
|
Granted
|
|
|
(1,600
|
)
|
Forfeited
|
|
|
468
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
5,125
|
|
Stock Compensation Expense
The following table summarizes the effects of stock-based compensation on cost of goods sold, research and development, sales, general and administrative, pre-tax income, and net income after taxes for
options granted under the Companys equity incentive plans (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
Cost of sales
|
|
$
|
751
|
|
|
$
|
398
|
|
|
$
|
243
|
|
Research and development
|
|
|
10,549
|
|
|
|
5,590
|
|
|
|
2,641
|
|
Sales, general and administrative
|
|
|
10,195
|
|
|
|
6,190
|
|
|
|
5,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on pre-tax income
|
|
|
21,495
|
|
|
|
12,178
|
|
|
|
8,141
|
|
Income Tax Benefit
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expense (net of taxes)
|
|
|
21,389
|
|
|
|
12,178
|
|
|
|
8,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation effects on basic earnings per share
|
|
$
|
0.33
|
|
|
$
|
0.19
|
|
|
$
|
0.12
|
|
Share-based compensation effects on diluted earnings per share
|
|
|
0.32
|
|
|
|
0.18
|
|
|
|
0.11
|
|
Share-based compensation effects on operating activities cash flow
|
|
|
21,389
|
|
|
|
12,178
|
|
|
|
8,141
|
|
Share-based compensation effects on financing activities cash flow
|
|
|
106
|
|
|
|
|
|
|
|
|
|
The total share based compensation expense included in the table above and which is attributable to
restricted stock awards and restricted stock units was $16.3 million, $6.3 million, and $1.1 million for fiscal years 2013, 2012, and 2011, respectively.
As of March 30, 2013, there was $39.7 million of compensation costs related to non-vested stock options, restricted stock awards, and restricted stock units granted under the Companys equity
incentive plans not yet recognized in the Companys financial statements. The unrecognized compensation cost is expected to be recognized over a weighted average period of 0.96 years for stock options, 1.27 years for restricted stock awards,
and 1.57 years for restricted stock units.
Page 52 of 69
Stock Option Awards
We estimated the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model using a dividend yield of zero and the following additional assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 30, 2013(a)
|
|
|
March 31, 2012
|
|
|
March 26, 2011
|
|
Expected stock price volatility
|
|
|
63.42
|
%
|
|
|
59.25 - 66.11
|
%
|
|
|
52.03 - 67.11
|
%
|
Risk-free interest rate
|
|
|
0.31
|
%
|
|
|
0.27 - 1.43
|
%
|
|
|
1.19 - 2.06
|
%
|
Expected term (in years)
|
|
|
2.46
|
|
|
|
2.32 - 3.82
|
|
|
|
3.83 - 4.34
|
|
(a)
|
Actual assumptions at time of share issuance used.
|
The Black-Scholes valuation calculation requires us to estimate key assumptions such as stock price volatility, expected term, risk-free interest rate and dividend yield. The expected stock price
volatility is based upon implied volatility from traded options on our stock in the marketplace. The expected term of options granted is derived from an analysis of historical exercises and remaining contractual life of stock options, and represents
the period of time that options granted are expected to be outstanding. The risk-free interest rate reflects the yield on zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption. Finally, we have
never paid cash dividends, do not currently intend to pay cash dividends, and thus have assumed a zero percent dividend yield.
Using the Black-Scholes option valuation model, the weighted average estimated fair values of employee stock options granted in fiscal
years 2013, 2012, and 2011, were $20.43, $7.58, and $9.61, respectively.
During fiscal year 2013, 2012, and 2011, we received
a net $12.0 million, $4.1 million, and $31.0 million, respectively, from the exercise of 1.7 million, 0.6 million and 4.7 million, respectively, stock options granted under the Companys stock Plan.
The total intrinsic value of stock options exercised during fiscal year 2013, 2012, and 2011, was $48.6 million, $7.6 million, and
$50.4 million, respectively. Intrinsic value represents the difference between the market value of the Companys common stock at the time of exercise and the strike price of the stock option.
As of March 30, 2013, approximately 9.4 million shares of common stock were reserved for issuance under the stock option Plan.
Page 53 of 69
Additional information with respect to stock option activity is as follows (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
|
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
Balance, March 27, 2010
|
|
|
10,379
|
|
|
$
|
6.74
|
|
Options granted
|
|
|
977
|
|
|
|
16.75
|
|
Options exercised
|
|
|
(4,718)
|
|
|
|
6.57
|
|
Options forfeited
|
|
|
(153)
|
|
|
|
5.90
|
|
Options expired
|
|
|
(304)
|
|
|
|
23.68
|
|
|
|
|
|
|
|
|
|
|
Balance, March 26, 2011
|
|
|
6,181
|
|
|
$
|
7.63
|
|
Options granted
|
|
|
450
|
|
|
|
15.63
|
|
Options exercised
|
|
|
(593)
|
|
|
|
6.88
|
|
Options forfeited
|
|
|
(67)
|
|
|
|
7.70
|
|
Options expired
|
|
|
(67)
|
|
|
|
15.68
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
5,904
|
|
|
$
|
8.23
|
|
Options granted
|
|
|
264
|
|
|
|
37.22
|
|
Options exercised
|
|
|
(1,746)
|
|
|
|
6.88
|
|
Options forfeited
|
|
|
(144)
|
|
|
|
12.52
|
|
Options expired
|
|
|
|
|
|
|
20.25
|
|
|
|
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
|
4,278
|
|
|
$
|
10.42
|
|
Additional information with regards to outstanding options that are vesting, expected to vest, or
exercisable as of March 30, 2013 is as follows (in thousands, except years and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise price
|
|
|
Weighted Average
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Vested and expected to vest
|
|
|
4,196
|
|
|
$
|
10.15
|
|
|
|
6.07
|
|
|
$
|
56,376
|
|
Exercisable
|
|
|
3,217
|
|
|
$
|
7.76
|
|
|
|
5.51
|
|
|
$
|
48,228
|
|
In accordance with U.S. GAAP, stock options outstanding that are expected to vest are presented net of
estimated future option forfeitures, which are estimated as compensation costs are recognized. Options with a fair value of $4.8 million, $6.3 million, and $6.0 million, became vested during fiscal years 2013, 2012, and 2011, respectively.
Page 54 of 69
The following table summarizes information regarding outstanding and exercisable options as
of March 30, 2013 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number
|
|
|
Weighted
Average
Remaining
Contractual
Life
(years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
$2.59 - $5.25
|
|
|
764
|
|
|
|
4.78
|
|
|
$
|
5.05
|
|
|
|
754
|
|
|
$
|
5.05
|
|
$5.49 - $5.53
|
|
|
58
|
|
|
|
6.39
|
|
|
|
5.50
|
|
|
|
44
|
|
|
|
5.50
|
|
$5.55 - $5.55
|
|
|
1,217
|
|
|
|
6.48
|
|
|
|
5.55
|
|
|
|
961
|
|
|
|
5.55
|
|
$5.66 - $7.87
|
|
|
891
|
|
|
|
4.10
|
|
|
|
7.05
|
|
|
|
873
|
|
|
|
7.05
|
|
$8.06 - $16.25
|
|
|
874
|
|
|
|
7.72
|
|
|
|
15.18
|
|
|
|
434
|
|
|
|
14.90
|
|
$16.28 - $38.99
|
|
|
474
|
|
|
|
8.11
|
|
|
|
29.79
|
|
|
|
151
|
|
|
|
19.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,278
|
|
|
|
6.11
|
|
|
$
|
10.42
|
|
|
|
3,217
|
|
|
$
|
7.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 30, 2013 and March 31, 2012, the number of options exercisable was 3.2 million
and 3.8 million, respectively.
Restricted Stock Awards
The Company periodically grants restricted stock awards (RSAs) to select employees. The grant date for these awards is equal to the measurement date and the awards are valued as of the
measurement date and amortized over the requisite vesting period, which is no more than four years. Each full value award, including RSAs, reduces the total shares available for grant under the Plan at a rate of 1.5 shares per RSA granted. As
of March 30, 2013, approximately 0.1 million shares attributable to RSA awards were reserved for issuance under the Plan. A summary of the activity for RSAs in fiscal year 2013, 2012, and 2011 is presented below (in thousands, except
per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
(per share)
|
|
|
Aggregate
Intrinsic
value(1)
|
|
March 27, 2010
|
|
|
49
|
|
|
$
|
6.20
|
|
|
|
|
|
Granted
|
|
|
5
|
|
|
|
17.28
|
|
|
|
|
|
Vested
|
|
|
(7
|
)
|
|
|
7.35
|
|
|
|
134
|
|
Forfeited
|
|
|
(2
|
)
|
|
|
7.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 26, 2011
|
|
|
45
|
|
|
|
7.21
|
|
|
|
|
|
Granted
|
|
|
49
|
|
|
|
15.31
|
|
|
|
|
|
Vested
|
|
|
(54
|
)
|
|
|
14.57
|
|
|
|
826
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
40
|
|
|
|
7.19
|
|
|
|
|
|
Granted
|
|
|
27
|
|
|
|
28.24
|
|
|
|
|
|
Vested
|
|
|
(62
|
)
|
|
|
15.45
|
|
|
|
1,657
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
5
|
|
|
$
|
17.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the value of Cirrus stock on the date that the restricted stock vested.
|
The weighted average remaining recognition period for RSAs outstanding as of March 30, 2013 was 1.27 years. RSAs with a
fair value of $951 thousand, $637 thousand, and $37 thousand became vested during fiscal years 2013, 2012, and 2011, respectively.
Page 55 of 69
Restricted Stock Units
Commencing in fiscal year 2011, the Company began granting restricted stock units (RSUs) to select employees. These awards are valued as of the grant date and amortized over the
requisite vesting period. Generally, RSUs vest 100 percent on the first to third anniversary of the grant date depending on the vesting specifications. Each full value award, including RSUs, reduces the total shares available for grant
under the 2006 option plan at a rate of 1.5 shares per RSU granted. As of March 30, 2013, approximately 3.2 million shares attributable to RSU awards were reserved for issuance under the Plan, which includes the additional shares
associated with this full value award multiplier. A summary of the activity for RSUs in fiscal year 2013, 2012, and 2011 is presented below (in thousands, except year and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Fair Value
|
|
|
Weighted
Average
Remaining
Contractual Term
(years)
|
|
March 27, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Granted
|
|
|
628
|
|
|
|
16.41
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
16.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 26, 2011
|
|
|
620
|
|
|
|
16.41
|
|
|
|
2.54
|
|
Granted
|
|
|
1,017
|
|
|
|
16.59
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(21
|
)
|
|
|
16.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
1,616
|
|
|
|
16.52
|
|
|
|
1.94
|
|
Granted
|
|
|
864
|
|
|
|
37.26
|
|
|
|
|
|
Vested
|
|
|
(193
|
)
|
|
|
20.56
|
|
|
|
|
|
Forfeited
|
|
|
(216
|
)
|
|
|
21.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2013
|
|
|
2,071
|
|
|
$
|
23.66
|
|
|
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information with regards to outstanding restricted stock units that are vesting or expected to
vest as of March 30, 2013, is as follows (in thousands, except year and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Fair Value
|
|
|
Weighted Average
Remaining Contractual
Term (years)
|
|
Vested and expected to vest
|
|
|
1,888
|
|
|
$
|
23.66
|
|
|
|
1.53
|
|
RSUs outstanding that are expected to vest are presented net of estimated future forfeitures, which
are estimated as compensation costs are recognized. RSUs with a fair value of $3.8 million became vested during fiscal year 2013. No RSUs became vested during fiscal year 2012 or 2011. In fiscal year 2013, the Company required employees
with vested RSUs the option to cash settle or net settle, removing the option to sell all. As a result, the Company repurchases a portion of the shares at fair value, and uses the cash on behalf of the employee to satisfy the tax withholding
requirements. In fiscal year 2013, the vesting of RSUs reduced the authorized and unissued share balance by approximately 0.2 million, while the net released, outstanding share balance increased by approximately 0.1 million shares
and resulted in the $1.7 million payment and subsequent retirement of these shares out of the Plan.
12. Commitments
and Contingencies
Facilities and Equipment Under Operating Lease Agreements
With the exception of our corporate headquarters and select surrounding properties, we lease our facilities and certain equipment under
operating lease agreements, some of which have renewal options. Certain of these arrangements provide for lease payment increases based upon future fair market rates. As of May 1, 2013, our principal facilities are located in Austin, Texas.
Page 56 of 69
The Company closed operations in Tucson, Arizona during fiscal year 2013, which included
28,000 square feet of leased office space which was primarily occupied by engineering personnel. The term of this lease extends through May 2015.
The aggregate minimum future rental commitments under all operating leases, net of sublease income, for the following fiscal years are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities
|
|
|
Subleases
|
|
|
Net Facilities
Commitments
|
|
|
Equipment
Commitments
|
|
|
Total
Commitments
|
|
2014
|
|
$
|
2,974
|
|
|
$
|
112
|
|
|
$
|
2,862
|
|
|
$
|
11
|
|
|
$
|
2,873
|
|
2015
|
|
|
2,919
|
|
|
|
76
|
|
|
|
2,843
|
|
|
|
5
|
|
|
|
2,848
|
|
2016
|
|
|
2,271
|
|
|
|
|
|
|
|
2,271
|
|
|
|
2
|
|
|
|
2,273
|
|
2017
|
|
|
2,208
|
|
|
|
|
|
|
|
2,208
|
|
|
|
0
|
|
|
|
2,208
|
|
2018
|
|
|
543
|
|
|
|
|
|
|
|
543
|
|
|
|
|
|
|
|
543
|
|
Thereafter
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payment
|
|
$
|
10,984
|
|
|
$
|
188
|
|
|
$
|
10,796
|
|
|
$
|
18
|
|
|
$
|
10,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense was approximately $3.2 million, $4.7 million, and $4.6 million, for fiscal years 2013,
2012, and 2011, respectively. Sublease rental income was $0.1 million, $0.4 million, $1.1 million, for fiscal years 2013, 2012, and 2011, respectively.
Wafer, Assembly and Test Purchase Commitments
We rely primarily on
third-party foundries for our wafer manufacturing needs. As of March 30, 2013, we had agreements with multiple foundries for the manufacture of wafers. On December 22, 2011, the Company entered into a $10 million Capacity Investment and
Loading Agreement with STATS ChipPAC Ltd (Supplier Agreement) in order to secure assembly and test capacity for certain products. An initial $5 million payment was made on January 24, 2012, with the remaining $5 million paid July 2, 2012,
after certain capacity expansion commitments had been achieved by STATS ChipPAC. This liability was recorded on the consolidated balance sheet as of March 31, 2012, under the caption
Supplier Agreement
. As part of the
agreement, we are eligible to receive rebates on our purchases up to the full amount of the specified $10 million in the Supplier Agreement upon our meeting certain purchase volume milestones. Based on our current projections, we expect to receive
the full amount of our $10 million payments back in rebates during the term of the agreement. We have utilized $4.3 million during fiscal year 2013 related to the agreement. Other than the previously mentioned agreement, our foundry agreements
do not have volume purchase commitments or take or pay clauses and provide for purchase commitments based on purchase orders. Cancellation fees or other charges may apply and are generally dependent upon whether wafers have been started
or the stage of the manufacturing process at which the notice of cancellation is given. As of March 30, 2013, we had foundry commitments of $31.0 million.
In addition to our wafer supply arrangements, we contract with third-party assembly vendors to package the wafer die into finished products. Assembly vendors provide fixed-cost-per-unit pricing, as is
common in the semiconductor industry. We had non-cancelable assembly purchase orders with numerous vendors totaling $2.3 million at March 30, 2013.
Test vendors provide fixed-cost-per-unit pricing, as is common in the semiconductor industry. Our total non-cancelable commitment for outside test services as of March 30, 2013 was $1.1 million.
Other open purchase orders as of March 30, 2013 are insignificant in nature.
13. Legal Matters
From time to time, we are involved in legal proceedings concerning matters arising in connection with the conduct of our business activities. We regularly evaluate the status of legal proceedings in which
we are involved, to assess whether a loss is probable or there is a reasonable possibility that a loss or additional loss may have been incurred and determine if accruals are appropriate. We further evaluate each legal proceeding to assess whether
an estimate of possible loss or range of loss can be made, if accruals are not appropriate. We intend to vigorously defend ourselves against the allegations made in the legal cases described below.
Page 57 of 69
For the cases described below, management is unable to provide a meaningful estimate of the
possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported and/or exaggerated; (iv) there is
uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties. For
these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material adverse effect on our financial condition. However, the ultimate resolutions of these
various proceedings and matters are inherently difficult to predict; as such, our operating results could be materially affected by the unfavorable resolution of one or more of these proceedings or matters for any particular period, depending,
in part, upon the operating results for such period.
On June 4, 2012, U.S. Ethernet Innovations, LLC (the
Plaintiff) filed suit against Cirrus Logic and two other defendants in the U.S. District Court, Eastern District of Texas. The Plaintiff alleges that Cirrus Logic infringed four U.S. patents relating to Ethernet technology. In its
complaint, the Plaintiff indicated that it is seeking unspecified monetary damages, including up to treble damages for willful infringement. We answered the complaint on June 29, 2012, denying the allegations of infringement and seeking a
declaratory judgment that the patents in suit were invalid and not infringed. On September 21, 2012, the Plaintiff amended its complaint to allege that we infringed on a fifth patent related to similar technology. We answered the amended
complaint on October 8, 2012, again denying the allegations of infringement and seeking a declaratory judgment that the patents in suit were invalid and not infringed.
On February 4, 2013, a purported shareholder filed a class action complaint in the United States District Court for the Southern
District of New York against the Company and two of the Companys executives (the Securities Case).
Koplyay v. Cirrus Logic, Inc., et al.
Civil Action No. 13-CV-0790. The complaint alleges that the defendants violated
the federal securities laws by making materially false and misleading statements regarding our business results between July 31, 2012, and October 31, 2012, and seeks unspecified damages along with plaintiffs costs and expenses,
including attorneys fees. A second complaint was filed on April 13, 2013, by a different purported shareholder, in the same court, setting forth substantially the same allegations. On April 19, 2013, the court appointed the plaintiff
and counsel in the first class action complaint as the lead plaintiff and lead counsel. The lead plaintiff filed an amended complaint on May 1, 2013, including substantially the same allegations as the original complaint.
On April 13, 2013, another purported shareholder filed a shareholder derivative complaint against several of our
current officers and directors in the District Court of Travis County, Texas, 53
rd
Judicial District (the Derivative Case).
Graham, derivatively on behalf of Cirrus Logic, Inc. v. Rhode, et. al.,
Cause No. D-1-GN-13-001285. In this complaint, the plaintiff makes
allegations similar to those presented in the Securities Case, but the plaintiff asserts various state law causes of action, including claims of breach of fiduciary duty and unjust enrichment. The Company is named solely as a nominal defendant
against whom no recovery is sought.
14. Patent Agreement, Net
On July 13, 2010, we entered into a patent purchase agreement for the sale of certain Company owned patents. As a result of this
agreement, on August 31, 2010, the Company received cash consideration of $4.0 million from the purchaser. The proceeds were recorded during fiscal year 2011 as a recovery of costs previously incurred and are reflected as a separate line
item on the Consolidated Statements of Comprehensive Income in operating expenses under the caption
Patent agreement, net.
15. Stockholders Equity
Share Repurchase Program
On November 4, 2010, we announced that our
Board of Directors authorized an $80 million share repurchase program. As of March 31, 2012, the Company had repurchased 5.1 million shares at a cost of $79.5 million, or an average cost of $15.51 per share. During the third quarter
of the current fiscal year, the Company completed this stock repurchase program and repurchased the remaining outstanding shares in
Page 58 of 69
conjunction with the new share repurchase program, announced below. There are no outstanding remaining available repurchase obligations under this plan. All repurchased common stock shares were
retired.
On November 20, 2012, we announced that our Board of Directors authorized a share repurchase program of up to
$200 million of the Companys common stock. The Company repurchased 3.0 million shares of its common stock for $86.1 million (including the remaining $0.5 million available under the 2010 plan discussed above) during fiscal year 2013, at
an average cost of $28.59 per share, leaving approximately $114.4 million available for repurchase under this plan as of March 30, 2013. All of these shares were repurchased in the open market and were funded from existing cash. All shares of
our common stock that were repurchased were retired as of March 30, 2013.
Preferred Stock
We have 5.0 million shares of Preferred Stock authorized. As of March 30, 2013 we have not issued any of the authorized shares.
16. Accumulated Other Comprehensive Loss
Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments and unrealized gains and losses on
investments classified as available-for-sale. The foreign currency translation adjustments are not currently adjusted for income taxes because they relate to indefinite investments in non-U.S. subsidiaries that have since changed from a foreign
functional currency to a U.S dollar functional currency.
The following table summarizes the changes in the components of
accumulated other comprehensive loss, net of tax (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
|
|
|
Unrealized Gains
(Losses) on Securities
|
|
|
Total
|
|
Balance, March 26, 2011
|
|
$
|
(770
|
)
|
|
$
|
16
|
|
|
$
|
(754
|
)
|
Current period activity
|
|
|
|
|
|
|
(8
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
|
(770
|
)
|
|
|
8
|
|
|
|
(762
|
)
|
Current period activity
|
|
|
|
|
|
|
(157
|
)
|
|
|
(157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 30, 2013
|
|
$
|
(770
|
)
|
|
$
|
(149
|
)
|
|
$
|
(919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. Income Taxes
Income before income taxes consisted of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
United States
|
|
$
|
200,124
|
|
|
$
|
79,425
|
|
|
$
|
83,569
|
|
Non-U.S.
|
|
|
1,066
|
|
|
|
558
|
|
|
|
645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
201,190
|
|
|
$
|
79,983
|
|
|
$
|
84,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 59 of 69
The provision (benefit) for income taxes consists of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,537
|
|
|
$
|
1,322
|
|
|
$
|
163
|
|
State
|
|
|
323
|
|
|
|
518
|
|
|
|
312
|
|
Non-U.S.
|
|
|
243
|
|
|
|
261
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax provision
|
|
$
|
4,103
|
|
|
$
|
2,101
|
|
|
$
|
679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
60,506
|
|
|
|
(10,102
|
)
|
|
|
(120,057
|
)
|
Non-U.S.
|
|
|
(17
|
)
|
|
|
1
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax provision (benefit)
|
|
|
60,489
|
|
|
|
(10,101
|
)
|
|
|
(119,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provision (benefit)
|
|
$
|
64,592
|
|
|
$
|
(8,000
|
)
|
|
$
|
(119,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective income tax rates differ from the rates computed by applying the statutory federal rate to
pretax income as follows (in percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
Expected income tax provision at the U.S. federal statutory rate
|
|
|
35.0
|
|
|
|
35.0
|
|
|
|
35.0
|
|
Valuation allowance changes affecting the provision of income taxes
|
|
|
(1.3
|
)
|
|
|
(46.7
|
)
|
|
|
(178.6
|
)
|
Foreign taxes at different rates
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
0.1
|
|
R&D credit
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
|
0.1
|
|
|
|
1.0
|
|
|
|
(0.1
|
)
|
Nondeductible expenses
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
1.1
|
|
Other
|
|
|
0.2
|
|
|
|
0.6
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
32.1
|
|
|
|
(10.0
|
)
|
|
|
(141.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 60 of 69
Significant components of our deferred tax assets and liabilities as of March 30, 2013
and March 31, 20121 are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Inventory valuation
|
|
$
|
12,065
|
|
|
$
|
3,240
|
|
Accrued expenses and allowances
|
|
|
5,077
|
|
|
|
3,656
|
|
Net operating loss carryforwards
|
|
|
28,162
|
|
|
|
105,220
|
|
Research and development tax credit carryforwards
|
|
|
37,054
|
|
|
|
36,032
|
|
State tax credit carryforwards
|
|
|
237
|
|
|
|
244
|
|
Capitalized research and development
|
|
|
6,601
|
|
|
|
9,779
|
|
Other
|
|
|
21,505
|
|
|
|
18,747
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
110,701
|
|
|
$
|
176,918
|
|
Valuation allowance for deferred tax assets
|
|
|
(23,232
|
)
|
|
|
(29,075
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
87,469
|
|
|
$
|
147,843
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
5,238
|
|
|
$
|
287
|
|
Acquisition intangibles
|
|
|
623
|
|
|
|
5,348
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
5,861
|
|
|
$
|
5,635
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
81,608
|
|
|
$
|
142,208
|
|
|
|
|
|
|
|
|
|
|
These net deferred tax assets have been categorized on the Consolidated Balance Sheets as of
March 30, 2013 and March 31, 2012 as follows:
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Current deferred tax assets
|
|
$
|
64,937
|
|
|
$
|
53,137
|
|
Long-term deferred tax assets
|
|
|
16,671
|
|
|
|
89,071
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets
|
|
$
|
81,608
|
|
|
$
|
142,208
|
|
|
|
|
|
|
|
|
|
|
The current and long-term deferred tax assets are disclosed separately under their respective
captions on the consolidated balance sheets.
The valuation allowance decreased by $5.8 million in fiscal year 2013 and
$39.3 million in fiscal year 2012. During fiscal year 2013, the valuation allowance that the Company had maintained on its capital loss carryforward was released due to the capital gain income generated by the sale of assets associated with the
Companys Apex products. The Company maintained its valuation allowance on various state net operating losses and credits due to the likelihood that they will expire or go unutilized because the Company no longer has a significant apportionment
in the jurisdiction in which the attribute was created. The decrease in the fiscal year 2012 allowance was the result of a release of the valuation allowance on Federal net operating losses, research credits and other Federal deductions due to an
expectation that forecasted income as of the end of fiscal year 2012 would be sufficient to utilize these deferred tax assets. With regard to the remaining deferred tax assets, Management believes that the Companys results from future
operations will generate sufficient taxable income such that it is more likely than not that these deferred tax assets will be realized.
At March 30, 2013, we had federal net operating loss carryforwards of $177.1 million. Of that amount, $20.9 million related to companies we acquired during fiscal year 2002 and are, therefore,
subject to certain limitations under Section 382 of the Internal Revenue Code. Because the Company has elected the with and without method for purposes of tracking its excess stock deductions, the amount of federal net operating
loss
Page 61 of 69
included in deferred tax assets is $56.8 million, which yields a tax effected deferred tax asset of $19.9 million. The Company had $120.3 million of excess stock deductions which are not included
in deferred tax assets. The tax benefit from these deductions will increase additional paid-in capital when they are deemed realized under the with and without method. We had net operating losses in various states that total $101.6
million. The federal net operating loss carryforwards expire in fiscal years 2019 through 2033. The state net operating loss carryforwards expire in fiscal years 2014 through 2029. We also have non-U.S. net operating losses of $2.0 million, which do
not expire.
There are federal research and development credit carryforwards of $22.5 million that expire in fiscal years 2014
through 2033. There are $14.5 million of state research and development credits. Of that amount, $2.8 million will expire in fiscal years 2022 through 2027. The remaining $11.7 million of state research and development credits are not subject to
expiration. The American Taxpayer Relief Act of 2012 (the Act) was enacted on January 2, 2013. The Act retroactively reinstates the federal research and development credit from January 1, 2012 through December 31, 2013. As
a result of the retroactive extension of the R&D credit, we recognized a $4.2 million benefit to tax expense during fiscal year 2013, a portion of which related to qualified research expenditures that were incurred during the last quarter of
fiscal year 2012.
We have approximately $228 thousand of cumulative undistributed earnings in certain non-U.S. subsidiaries.
We have not recognized a deferred tax liability on these undistributed earnings because the Company currently intends to reinvest these earnings in operations outside the U.S. The unrecognized deferred tax liability on these earnings is
approximately $81 thousand.
We record unrecognized tax benefits for the estimated risk associated with tax positions taken on
tax returns. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
Balance at March 31, 2012
|
|
$
|
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Reductions for tax positions of prior years
|
|
|
|
|
Settlements
|
|
|
|
|
Reductions related to expirations of statutes of limitation
|
|
|
|
|
|
|
|
|
|
Balance at March 30, 2013
|
|
$
|
|
|
|
|
|
|
|
The Company does not believe that its unrecognized tax benefits will significantly increase or decrease
during the next 12 months.
We accrue interest and penalties related to unrecognized tax benefits as a component of the
provision for income taxes. We did not record any interest or penalties during fiscal year 2013 or 2012.
The Company and its
subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. Fiscal years 2010 through 2013 remain open to examination by the major taxing jurisdictions to which we are subject.
18. Segment Information
We determine our operating segments in accordance with FASB guidelines. Our Chief Executive Officer (CEO) has been identified as the chief operating decision maker under these guidelines.
The Company operates and tracks its results in one reportable segment, but reports revenue performance in two product lines,
which currently are audio and energy. Our CEO receives and uses enterprise-wide financial information to assess financial performance and allocate resources, rather than detailed information at a product line level. Additionally, our product lines
have similar characteristics and customers. They share operations support functions such as sales, public relations, supply chain management, various research and development and engineering support, in addition to the general and administrative
functions of human resources, legal,
Page 62 of 69
finance and information technology. Therefore, there is no complete, discrete financial information maintained for these product lines. Revenue from our product lines are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
Audio Products
|
|
$
|
754,769
|
|
|
$
|
350,743
|
|
|
$
|
264,840
|
|
Energy Products
|
|
|
55,017
|
|
|
|
76,100
|
|
|
|
104,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
809,786
|
|
|
$
|
426,843
|
|
|
$
|
369,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Area
The following illustrates sales by geographic locations based on the sales office location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
|
March 26,
2011
|
|
United States
|
|
$
|
38,670
|
|
|
$
|
50,230
|
|
|
$
|
66,701
|
|
United Kingdom
|
|
|
19,211
|
|
|
|
23,927
|
|
|
|
27,398
|
|
China
|
|
|
700,051
|
|
|
|
294,143
|
|
|
|
205,775
|
|
Hong Kong
|
|
|
8,590
|
|
|
|
8,671
|
|
|
|
9,216
|
|
Japan
|
|
|
9,299
|
|
|
|
15,196
|
|
|
|
16,902
|
|
South Korea
|
|
|
8,975
|
|
|
|
9,781
|
|
|
|
12,413
|
|
Taiwan
|
|
|
11,694
|
|
|
|
10,662
|
|
|
|
13,073
|
|
Other Asia
|
|
|
10,387
|
|
|
|
13,063
|
|
|
|
16,012
|
|
Other non-U.S. countries
|
|
|
2,909
|
|
|
|
1,170
|
|
|
|
2,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated sales
|
|
$
|
809,786
|
|
|
$
|
426,843
|
|
|
$
|
369,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following illustrates property, plant and equipment, net, by geographic locations, based on physical
location (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
United States
|
|
$
|
100,343
|
|
|
$
|
66,530
|
|
United Kingdom
|
|
|
23
|
|
|
|
20
|
|
China
|
|
|
137
|
|
|
|
158
|
|
Hong Kong
|
|
|
5
|
|
|
|
3
|
|
Japan
|
|
|
25
|
|
|
|
167
|
|
South Korea
|
|
|
6
|
|
|
|
6
|
|
Taiwan
|
|
|
70
|
|
|
|
83
|
|
Other Asia
|
|
|
14
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total consolidated property, plant and equipment, net
|
|
$
|
100,623
|
|
|
$
|
66,978
|
|
|
|
|
|
|
|
|
|
|
19. Quarterly Results (Unaudited)
The following quarterly results have been derived from our audited annual consolidated financial statements. In the opinion of management,
this unaudited quarterly information has been prepared on the same basis as the annual consolidated financial statements and includes all adjustments, including normal recurring adjustments, necessary for a fair presentation of this quarterly
information. This information should be read along with the financial statements and related notes. The operating results for any quarter are not necessarily indicative of results to be expected for any future period.
Page 63 of 69
The unaudited quarterly statement of operations data for each quarter of fiscal years 2013
and 2012 were as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2013
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
Net sales
|
|
$
|
99,006
|
|
|
$
|
193,774
|
|
|
$
|
310,133
|
|
|
$
|
206,873
|
|
Gross margin
|
|
|
53,440
|
|
|
|
100,087
|
|
|
|
158,050
|
|
|
|
83,614
|
|
Net income
|
|
|
6,927
|
|
|
|
35,449
|
|
|
|
67,862
|
|
|
|
26,360
|
|
Basic income per share
|
|
$
|
0.11
|
|
|
$
|
0.55
|
|
|
$
|
1.04
|
|
|
$
|
0.41
|
|
Diluted income per share
|
|
|
0.10
|
|
|
|
0.51
|
|
|
|
0.99
|
|
|
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2012
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net sales
|
|
$
|
92,242
|
|
|
$
|
101,602
|
|
|
$
|
122,368
|
|
|
$
|
110,631
|
|
Gross margin
|
|
|
47,709
|
|
|
|
54,355
|
|
|
|
66,030
|
|
|
|
62,347
|
|
Net income
|
|
|
9,178
|
|
|
|
11,247
|
|
|
|
16,731
|
|
|
|
50,827
|
|
Basic income per share
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
$
|
0.26
|
|
|
$
|
0.79
|
|
Diluted income per share
|
|
|
0.13
|
|
|
|
0.17
|
|
|
|
0.25
|
|
|
|
0.75
|
|
|
(1)
|
The $39.5 million tax benefit recorded in the fourth quarter of 2012 favorably impacted net income, as a result of a $37.3 million release in valuation allowance on
deferred tax assets.
|
Page 64 of 69