INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Cash flows provided by operating activities:
|
|
|
|
|
|
Net income
|
$
|
194,737
|
|
|
$
|
93,909
|
|
|
$
|
88,364
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Depreciation
|
18,346
|
|
|
18,808
|
|
|
20,872
|
|
Amortization of intangible assets
|
15,354
|
|
|
6,573
|
|
|
24,793
|
|
Amortization of debt issuance cost and debt discount
|
5,354
|
|
|
—
|
|
|
—
|
|
Asset impairment
|
—
|
|
|
8,471
|
|
|
7,230
|
|
Gain on sale of property, plant and equipment
|
(325
|
)
|
|
—
|
|
|
—
|
|
Gain from divestitures
|
—
|
|
|
(16,840
|
)
|
|
(78,632
|
)
|
Stock-based compensation expense, net of amounts capitalized in inventory
|
34,125
|
|
|
22,259
|
|
|
13,352
|
|
Deferred tax benefit
|
(67,277
|
)
|
|
(293
|
)
|
|
(8
|
)
|
Excess tax benefit from stock-based payment arrangements
|
(4,475
|
)
|
|
—
|
|
|
—
|
|
Changes in assets and liabilities (net of amounts acquired):
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
(1,640
|
)
|
|
5,286
|
|
|
(6,821
|
)
|
Inventories
|
11,719
|
|
|
4,412
|
|
|
2,935
|
|
Prepayments and other assets
|
2,705
|
|
|
(2,337
|
)
|
|
4,348
|
|
Accounts payable
|
6,527
|
|
|
2,314
|
|
|
(144
|
)
|
Accrued compensation and related expenses
|
(13,312
|
)
|
|
19,306
|
|
|
1,847
|
|
Deferred income on shipments to distributors
|
(8,688
|
)
|
|
1,688
|
|
|
(533
|
)
|
Income taxes payable and receivable
|
4,463
|
|
|
90
|
|
|
(888
|
)
|
Other accrued liabilities and long-term liabilities
|
(5,011
|
)
|
|
8,126
|
|
|
(1,086
|
)
|
Net cash provided by operating activities
|
192,602
|
|
|
171,772
|
|
|
75,629
|
|
Cash flows used for investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired
|
(279,138
|
)
|
|
—
|
|
|
—
|
|
Cash in escrow related to acquisitions
|
2,700
|
|
|
1,026
|
|
|
6,000
|
|
Proceeds from divestitures
|
—
|
|
|
15,300
|
|
|
96,299
|
|
Purchases of property, plant and equipment, net
|
(16,286
|
)
|
|
(17,765
|
)
|
|
(17,448
|
)
|
Purchase of intangible assets
|
(10,800
|
)
|
|
—
|
|
|
—
|
|
Purchases of non-marketable equity securities
|
(6,020
|
)
|
|
(4,000
|
)
|
|
—
|
|
Purchases of short-term investments
|
(364,029
|
)
|
|
(285,817
|
)
|
|
(463,283
|
)
|
Proceeds from sales of short-term investments
|
551,289
|
|
|
119,070
|
|
|
231,890
|
|
Proceeds from maturities of short-term investments
|
96,771
|
|
|
90,344
|
|
|
34,422
|
|
Net cash used for investing activities
|
(25,513
|
)
|
|
(81,842
|
)
|
|
(112,120
|
)
|
Cash flows used for financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
19,722
|
|
|
21,067
|
|
|
46,066
|
|
Repurchase of common stock
|
(422,262
|
)
|
|
(79,245
|
)
|
|
(44,005
|
)
|
Proceeds from issuance of senior convertible notes, net of issuance costs
|
363,445
|
|
|
—
|
|
|
—
|
|
Purchase of convertible note hedge
|
(94,185
|
)
|
|
—
|
|
|
—
|
|
Proceeds from issuance of warrants
|
56,847
|
|
|
—
|
|
|
—
|
|
Payment of acquisition related contingent consideration
|
—
|
|
|
(1,600
|
)
|
|
(5,130
|
)
|
Payment of capital lease obligations
|
(221
|
)
|
|
—
|
|
|
—
|
|
Repayment of loans
|
(9,437
|
)
|
|
—
|
|
|
—
|
|
Excess tax benefit from stock-based payment arrangements
|
4,475
|
|
|
—
|
|
|
—
|
|
Net cash used for financing activities
|
(81,616
|
)
|
|
(59,778
|
)
|
|
(3,069
|
)
|
Effect of exchange rates on cash and cash equivalents
|
813
|
|
|
(4,418
|
)
|
|
(66
|
)
|
Net increase (decrease) in cash and cash equivalents
|
86,286
|
|
|
25,734
|
|
|
(39,626
|
)
|
Cash and cash equivalents at beginning of period
|
116,945
|
|
|
91,211
|
|
|
130,837
|
|
Cash and cash equivalents at end of period
|
$
|
203,231
|
|
|
$
|
116,945
|
|
|
$
|
91,211
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
67
|
|
|
$
|
27
|
|
|
$
|
21
|
|
Fees on prepayment of loans
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes, net of refunds
|
$
|
996
|
|
|
$
|
1,840
|
|
|
$
|
1,848
|
|
Non-cash investing activities:
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment included in accounts payable
|
$
|
1,389
|
|
|
$
|
473
|
|
|
$
|
223
|
|
Additions to intangible assets included in other long-term liabilities
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Conversion of a cost method investment in convertible notes to ordinary shares of stock
|
$
|
(2,020
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these consolidated financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock and Additional Paid-In Capital
|
|
Treasury
Stock
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
Stockholders'
Equity
|
(in thousands)
|
Shares
|
|
Dollars
|
|
|
|
|
|
|
|
|
Balance, March 31, 2013
|
146,253
|
|
|
$
|
2,408,144
|
|
|
$
|
(977,296
|
)
|
|
$
|
(802,308
|
)
|
|
$
|
1,486
|
|
|
$
|
630,026
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
88,364
|
|
|
—
|
|
|
88,364
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
123
|
|
Issuance of common stock
|
7,873
|
|
|
46,066
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,066
|
|
Repurchase of common stock
|
(4,130
|
)
|
|
—
|
|
|
(44,005
|
)
|
|
—
|
|
|
—
|
|
|
(44,005
|
)
|
Stock-based compensation expense
|
—
|
|
|
13,281
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,281
|
|
Balance, March 30, 2014
|
149,996
|
|
|
2,467,491
|
|
|
(1,021,301
|
)
|
|
(713,944
|
)
|
|
1,609
|
|
|
733,855
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
93,909
|
|
|
—
|
|
|
93,909
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,790
|
)
|
|
(3,790
|
)
|
Issuance of common stock
|
3,710
|
|
|
21,067
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,067
|
|
Repurchase of common stock
|
(5,292
|
)
|
|
—
|
|
|
(79,245
|
)
|
|
—
|
|
|
—
|
|
|
(79,245
|
)
|
Stock-based compensation expense
|
—
|
|
|
22,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,458
|
|
Balance, March 29, 2015
|
148,414
|
|
|
2,511,016
|
|
|
(1,100,546
|
)
|
|
(620,035
|
)
|
|
(2,181
|
)
|
|
788,254
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
194,737
|
|
|
—
|
|
|
194,737
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,533
|
)
|
|
(1,533
|
)
|
Issuance of common stock
|
3,342
|
|
|
19,722
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,722
|
|
Repurchase of common stock
|
(17,871
|
)
|
|
—
|
|
|
(422,262
|
)
|
|
—
|
|
|
—
|
|
|
(422,262
|
)
|
Equity component of senior convertible notes, net of issuance costs
|
—
|
|
|
96,578
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96,578
|
|
Purchases of convertible note hedge
|
—
|
|
|
(94,185
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(94,185
|
)
|
Proceeds from issuance of warrants
|
—
|
|
|
56,847
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,847
|
|
Excess tax benefit from stock-based payment arrangement
|
—
|
|
|
4,475
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,475
|
|
Stock-based compensation expense
|
—
|
|
|
34,062
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,062
|
|
Balance, April 3, 2016
|
133,885
|
|
|
$
|
2,628,515
|
|
|
$
|
(1,522,808
|
)
|
|
$
|
(425,298
|
)
|
|
$
|
(3,714
|
)
|
|
$
|
676,695
|
|
The accompanying notes are an integral part of these consolidated financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Business
.
Integrated Device Technology, Inc. (IDT or the Company) designs, develops, manufactures and markets a broad range of integrated circuits for the advanced communications, computing, consumer and automotive industries.
Basis of Presentation
.
The Company's fiscal year is the
52
or
53
week period ending on the Sunday nearest to March 31. Fiscal
2016
included
53
weeks and ended on
April 3, 2016
. Fiscal
2015
included
52
weeks and ended on
March 29, 2015
and fiscal
2014
included
52
weeks and ended on
March 30, 2014
.
On December 7, 2015, the Company completed its acquisition of Zentrum Mikroelektronik Dresden AG (ZMDI), a privately-held company mainly operating in Germany, for a purchase price of Euro-equivalent of
$307.0 million
. The consolidated financial statements for fiscal year ended April 3, 2016 include the results of operations of ZMDI, commencing on the closing date of the acquisition.
Principles of Consolidation
. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
Use of Estimates
. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Accounting for Business Combinations.
The Company uses the acquisition method of accounting, which is in accordance with ASC 805, Business Combinations, for business combinations and recognizes assets acquired and liabilities assumed measured at their fair values on the date acquired. This requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While management uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company adjusts the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the Company's Consolidated Statements of Operations.
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies and contingent consideration, where applicable. Although the Company believes the assumptions and estimates made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets that the Company have acquired include, but are not limited to future expected cash flows from product sales, customer contracts and acquired technologies, and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
Cash and Cash Equivalents
.
Cash equivalents are highly liquid investments with remaining maturities of
three
months or less at the time of purchase.
Trade Receivables Factoring Facility.
The Company has an agreement with a financial institution to sell certain of its trade receivables from customers with limited, non-credit-related recourse provisions. Total receivables sold under the factoring facility during fiscal 2016 were
$21.8 million
. Total collections from the sale of receivables and from holdbacks (i.e. amount withheld by the factoring institution) during fiscal 2016 were
$21.8 million
and
$2.1 million
, respectively. The total available amount of the factoring facility as of April 3, 2016 was
$1.9 million
. The sales of accounts receivable in accordance with the factoring agreement are reflected as a reduction of Accounts Receivable, net in the Consolidated Balance Sheets as they meet the applicable criteria of ASC 860, Transfers and Servicing. Collections of holdbacks are included in the change in accounts receivable under the operating activities section of the Consolidated Statements of Cash Flows. The holdback amount due from the factoring institution was
$0.8 million
at April 3, 2016, and is shown in Prepayments and Other Current Assets on the Consolidated Balance Sheets. The Company pays factoring fees associated with the sale of receivables based on the dollar value of the receivables sold. Such fees are not material for fiscal 2016.
Investments
Available-for-Sale Investments
.
Investments designated as available-for-sale include marketable debt and equity securities. Available-for-sale investments are classified as short-term, as these investments generally consist of highly marketable
securities that are intended to be available to meet near-term cash requirements. Marketable securities classified as available-for-sale are reported at market value, with net unrealized gains or losses recorded in accumulated other comprehensive income (loss), a separate component of stockholders' equity, until realized. Realized gains and losses on investments are computed based upon specific identification, are included in interest income and other, net and have not been significant for all periods presented.
Non-Marketable Equity Securities
.
Non-marketable equity securities are accounted for at historical cost or, if the Company has significant influence over the investee, using the equity method of accounting.
Other-Than-Temporary Impairment
.
All of the Company’s available-for-sale investments and non-marketable equity securities are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the previous six months, general market conditions and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for recovery. For non-marketable equity securities, the impairment analysis requires the identification of events or circumstances that would likely have a significant adverse effect on the fair value of the investment, including revenue and earnings trends, overall business prospects and general market conditions in the investees’ industry or geographic area. Investments identified as having an indicator of impairment are subject to further analysis to determine if the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.
Inventories
.
Inventories are recorded at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market value. Inventory held at consignment locations is included in finished goods inventory as the Company retains full title and rights to the product. Inventory valuation includes provisions for excess and obsolete inventory based on management’s forecasts of demand over specific future time horizons and reserves to value the Company's inventory at the lower of cost or market which rely on forecasts of average selling prices (ASPs) in future periods.
Property, Plant and Equipment
.
Property, plant and equipment are stated at cost. Property, plant and equipment acquired in conjunction with mergers or acquisitions are stated at estimated fair value at the time of acquisition. For financial reporting purposes, depreciation is computed using the straight-line method over estimated useful lives of the assets. Estimated useful lives for major asset categories are as follows: machinery and equipment,
3
to
5
years; and buildings and improvements,
10
to
30 years
. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining term of the lease.
Long-Lived Assets and Goodwill
.
The carrying values of long-lived assets, including purchased intangibles are evaluated whenever events or circumstances indicate that the carrying values may not be recoverable. If estimated undiscounted cash flows are not sufficient to recover the carrying values, the affected assets are considered impaired and are written down to their estimated fair value, which is generally determined on the basis of discounted cash flows or outside appraisals.
The Company tests for impairment of goodwill and other indefinite-lived assets on an annual basis, or more frequently if indicators of impairment are present. These tests are performed at the reporting unit level using a two-step, fair-value based approach. The first step, used to determine if impairment possibly exists, is to compare the carrying amount of a reporting unit, including goodwill, to its fair value. If the carrying amount of the reporting unit exceeds the fair value, the second step is to measure the amount of impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.
Income Taxes
. The Company accounts for income taxes under an asset and liability approach that requires the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities be recognized as deferred tax assets and liabilities. Generally accepted accounting principles require the Company to evaluate the ability to realize the value of its net deferred tax assets on an ongoing basis. A valuation allowance is recorded to reduce the net deferred tax assets to an amount that will more likely than not be realized. Accordingly, the Company considers all available positive and negative evidence, including various tax planning strategies, forecasts of future taxable income, and recent operating results in assessing the need for a valuation allowance.
Since the fourth quarter of fiscal 2003, the Company determined that, under applicable accounting principles, it was more likely than not that the Company would not realize the value of the Company's net deferred tax assets. The Company maintained a full valuation allowance against the Company's deferred tax assets through the third quarter of fiscal 2016 as there was insufficient positive evidence to overcome the significant negative evidence and to conclude that it was more likely than not that the deferred tax assets would be realized. The Company reached this decision based on judgment, which included consideration of historical U.S. operating results, projections of future U.S. profits, and a history of expiring tax attributes. In the fourth quarter of fiscal 2016, the Company generated a substantial amount of U.S. profit, especially as a result of the repatriation of foreign earnings during the fourth quarter of fiscal 2016, utilizing the Company's remaining U.S. federal net operating loss carryovers available as well as a significant amount of U.S. tax credit carryforwards. In addition, in the fourth quarter of fiscal 2016, the Company completed its business plan for fiscal 2017, and validated its mid-term business plan. The Company also considered forecasts of future taxable income and evaluated the utilization of its remaining tax credit carryforwards prior to their date of expiration. All of these are significant positive factors that overcame prior negative evidence and the Company concluded that it was appropriate
to release the valuation allowance of
$61.7 million
against the Company's deferred tax assets as of April 3, 2016, with the exception of deferred tax assets related to certain foreign and state jurisdictions.
As of April 3, 2016, the Company continues to maintain a valuation allowance against the Company's net deferred tax assets in certain foreign and state jurisdictions, as the Company is not able to conclude that it is more likely than not that these deferred tax assets will be realized. The Company reached this decision based on judgment, which included consideration of historical operating results and projections of future profits. The Company will continue to monitor the need for the valuation allowance on a quarterly basis.
The Company recognizes the tax liabilities for uncertain income tax positions taken on the income tax return based on the two-step process prescribed under U.S. GAAP. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires the Company to determine the probability of various possible outcomes. The Company evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If the Company later determines that the exposure is lower or that the liability is not sufficient to cover its revised expectations, the Company adjusts the liability and effect a related change in its tax provision during the period in which the Company makes such determination.
Revenue Recognition
.
The Company’s revenue results from semiconductor products sold through
three
channels: direct sales to original equipment manufacturers (OEMs) and electronic manufacturing service providers (EMSs), consignment sales to OEMs and EMSs, and sales through distributors. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and its ability to collect is reasonably assured.
Distributors who serve our customers worldwide and distributors who serve our customers in the U.S. and Europe regions, who have stock rotation, price protection and ship from stock pricing adjustment rights, the Company defers revenue and related cost of revenues on sales to these distributors until the product is sold through by the distributor to an end-customer. Subsequent to shipment to the distributor, the Company may reduce product pricing through price protection based on market conditions, competitive considerations and other factors. Price protection is granted to distributors on the inventory that they have on hand at the date the price protection is offered. The Company also grants certain credits to its distributors on specifically identified portions of the distributors’ business to allow them to earn a competitive gross margin on the sale of the Company’s products to their end customers. As a result of its inability to estimate these credits, the Company has determined that
the sales price to these distributors is not fixed or determinable until the final sale to the end-customer.
In the Asia Pacific region and Japan, the Company has distributors for which revenue is recognized upon shipment, with reserves recorded for the estimated return and pricing adjustment exposures. The determination of the amount of reserves to be recorded for stock rotation rights requires the Company to make estimates as to the amount of product which will be returned by customers within their limited contractual rights. The Company utilizes historical return rates to estimate the exposure
.
In addition, the Company offers pricing adjustments to distributors for product purchased in a given quarter that remains in their inventory. These amounts are estimated by management based on discussions with customers, assessment of market trends, as well as historical practice.
Shipping and Handling Costs
.
The Company includes shipping and handling costs billed to customers in revenues. The Company’s shipping and handling costs are included in cost of revenues.
Stock-based Compensation
.
The fair value of employee restricted stock units is equal to the market value of the Company’s common stock on the date the award is granted. For performance-based restricted stock units, the Company is required to assess the probability of achieving certain financial objectives at the end of each reporting period. Based on the assessment of this probability, which requires subjective judgment, the Company records stock-based compensation expense before the performance criteria are actually fully achieved, which may then be reversed in future periods if the Company determines that it is no longer probable that the objectives will be achieved. The expected cost of each award is reflected over the performance period and is reduced for estimated forfeitures. For restricted stock units which are subject to a market condition, compensation cost is recognized regardless of whether the market condition is satisfied, provided that the requisite service period has been provided. The market condition is considered in the estimate of fair value using a method that incorporates the possibility that the market condition may not be satisfied.
The Company estimates the fair value of employee stock options and the right to purchase shares under the employee stock purchase plan using the Black-Scholes valuation model, consistent with the FASB’s authoritative guidance for stock-based payments. Option-pricing models require the input of highly subjective assumptions, including the expected term of options and the expected price volatility of the stock underlying such options. In addition, the Company is required to estimate the number of stock-based awards that will be forfeited due to employee turnover and true up these forfeiture rates when actual results are different from the Company's estimates. The Company attributes the value of stock-based compensation to expense on an
accelerated method. Finally, the Company capitalizes into inventory a portion of the periodic stock-based compensation expense that relates to employees working in manufacturing activities. For market-based stock unit awards, the fair value of each award is estimated on the date of grant using a Monte Carlo simulation model that uses the assumptions such as expected price volatility, expected term, and risk-free interest rate.
The Company updates the expected term of stock option grants annually based on its analysis of the stock option exercise behavior over a period of time. The interest rate used in the Black-Scholes valuation model to value the stock option is based on the average U.S. Treasury interest rate over the expected term during the applicable quarter. The Company believes that the implied volatility of its common stock is an important consideration of overall market conditions and a good indicator of the expected volatility of its common stock. However, due to the limited volume of options freely traded over the counter, the Company believes that implied volatility, by itself, is not representative of the expected volatility of its common stock. Therefore, the Company's volatility factor used to estimate the fair value of its stock-based awards reflects a blend of historical volatility of its common stock and implied volatility of call options and dealer quotes on call options, generally having a term of less than twelve months. The Company has not paid, nor does it have current plans to pay dividends on its common stock in the foreseeable future.
The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company recognizes a tax benefit from stock-based awards in additional paid-in capital only if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes, such as the research tax credit, through the Consolidated Statements of Operations.
Comprehensive Income (Loss)
.
Comprehensive income (loss) is comprised of net income (loss) and unrealized gains and losses on available-for-sale securities and foreign exchange contracts and changes in pension assets and liabilities. Accumulated other comprehensive income (loss), as presented on the Consolidated Balance Sheets, consists of net unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments, and changes in post-employment and post-retirement benefit plan assets and liabilities, net of tax.
Pensions and Other Post-retirement Plans
.
The Company, through its actuaries, utilizes assumptions when estimating the liabilities for pension and other employee benefit plans. These assumptions, where applicable, include the discount rates used to determine the actuarial present value of projected benefit obligations, the rate of increase in future compensation levels, the long-term rate of return on assets and the growth in health care costs. The cost of these benefits is recognized over an employee’s term of service with the Company, and the accrued benefits are reported as other long-term liabilities on the Consolidated Balance Sheets.
Translation of Foreign Currencies
.
For subsidiaries in which the functional currency is the local currency, gains and losses resulting from translation of foreign currency financial statements into U.S. dollars are recorded as a component of accumulated other comprehensive income (loss). For subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in interest income and other, net and have not been material for all periods presented.
Certain Risk and Concentrations
.
The Company's most significant potential exposure to credit concentration risk includes debt-security investments, foreign exchange contracts and trade accounts receivable. The Company’s investment policy addresses sector and industry concentrations, credit ratings and maturity dates. The Company invests its excess cash primarily in highly-rated money market and short-term debt instruments, diversifies its investments and, by policy, invests only in highly-rated securities to minimize credit risk.
The Company sells integrated circuits to OEMs, distributors and EMSs primarily in the U.S., Europe, Japan and APAC. The Company monitors the financial condition of its major customers, including performing credit evaluations of those accounts which management considers to be high risk, and generally does not require collateral from its customers. When deemed necessary, the Company may limit the credit extended to certain customers. The Company’s relationship with the customer, and the customer’s past and current payment experience, are also factored into the evaluation in instances in which limited financial information is available. The Company maintains an allowance for doubtful accounts for probable credit losses, including reserves based upon a percentage of total receivables. When the Company becomes aware that a specific customer may default on its financial obligation, a specific amount, which takes into account the level of risk and the customer’s outstanding accounts receivable balance, is reserved. These reserved amounts are classified within selling, general and administrative expenses. Write-offs of accounts receivable balances were not material in each of the three fiscal years presented.
Sales through a distributor, Uniquest, represented approximately
16%
, of the Company's revenues in each of the fiscal years
2016
and 2015. Sales through a distributor, Avnet and its affiliates, represented approximately
15%
,
14%
and
17%
of the Company’s revenues in fiscal
2016
,
2015
and
2014
, respectively. As of
April 3, 2016
,
two
distributors represented approximately
12%
and
10%
, respectively, of the Company's account receivable. As of
March 29, 2015
,
two
distributors represented approximately
11%
and
10%
,
respectively, of the Company's account receivable.
For foreign exchange contracts, the Company manages its potential credit exposure primarily by restricting transactions with only high-credit quality counterparties.
The semiconductor industry is characterized by rapid technological change, competitive pricing pressures, and cyclical market patterns. The Company's results of operations are affected by a wide variety of factors, including general economic conditions, both at home and abroad; economic conditions specific to the semiconductor industry; demand for the Company's products; the timely introduction of new products; implementation of new manufacturing technologies; manufacturing capacity; the availability and cost of materials and supplies; competition; the ability to safeguard patents and intellectual property in a rapidly evolving market; and reliance on assembly and manufacturing foundries, independent distributors and sales representatives. As a result, the Company may experience substantial period-to-period fluctuations in future operating results due to the factors mentioned above or other factors.
Product Warranty
. The Company maintains a reserve for obligations it incurs under its product warranty program. The standard warranty period offered is
one
year, though in certain instances the warranty period may be extended to as long as
two
years. Management estimates the fair value of its warranty liability based on actual past warranty claims experience, its policies regarding customer warranty returns and other estimates about the timing and disposition of product returned under the program.
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In November 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, amending the current accounting guidance and requiring an entity to classify all deferred tax assets and liabilities as non-current in a classified statement of financial position. The standard is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted and the standard may be adopted either prospectively or retrospectively. The Company early adopted the standard prospectively in third quarter of fiscal 2016. The adoption resulted in a reclassification from current deferred tax liabilities of
$1.4 million
, net of deferred non-current tax assets of
$0.7 million
, to non-current deferred tax liabilities in the period of adoption.
In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, that requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. The Company has early adopted the standard in fiscal 2016. There was no impact to prior periods.
Accounting Pronouncements Not Yet Effective for Fiscal 2016
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, amending the existing accounting standards for stock-based compensation. The amendments impact several aspects of accounting for stock-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for reporting periods in fiscal years beginning after December 15, 2016, including interim periods within those years, with early adoption permitted. If early adoption is elected, all amendments must be adopted in the same period. The manner of application varies by the various provisions of the guidance, with certain provisions applied on a retrospective or modified retrospective approach, while others are applied prospectively. The Company is currently evaluating the impact of these amendments and plans to adopt the new standard in fiscal 2017.
In February 2016, the FASB issued an ASU 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, Elements of Financial Statements, and, therefore, recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. This ASU is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. The Company is currently evaluating the impact the pronouncement will have on the Company’s consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the
same issuer. The guidance simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. The guidance eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The guidance also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements is required under this guidance. The guidance further clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The guidance is applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption and is effective for the Company in its first quarter of fiscal 2018. Early adoption is permitted only if certain criteria is met. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying Accounting for Measurement Period Adjustments, which provides that an acquirer should recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Under this guidance, the acquirer is required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. It is also required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. Early adoption is permitted. The guidance is applied prospectively and is effective for the Company in its first quarter of fiscal year 2017. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
In July 2015, the FASB issued AUS No. 2015-11, Simplifying the Measurement of Inventory, which provides the guidance applying to inventory measured using any other method other than last-in, last-out method. Under this guidance, inventory is measured at the lower of cost and net realizable value. The net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is applied prospectively and is effective for the Company in its first quarter of fiscal 2018. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. On July 9, 2015, the FASB decided to delay the effective date by one year to December 15, 2017 for annual periods beginning after that date. The FASB also decided to allow early adoption of the standard, but not before the original effective date of December 15, 2016. In March, April and May 2016, the FASB issued additional updates to the new revenue standard relating to reporting revenue on a gross versus net basis, identifying performance obligations and licensing arrangements, and narrow-scope improvements and practical expedients, respectively. The Company is currently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
Note 2. Net Income Per Share From Continuing Operations
Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common and dilutive potential common shares outstanding during the period. Potential common shares include employee stock options and restricted stock units. For purposes of computing diluted net income per share, weighted-average potential common shares do not include potential common shares that are anti-dilutive under the treasury stock method.
The following table sets forth the computation of basic and diluted net income per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands, except per share amounts)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Numerator (basic and diluted):
|
|
|
|
|
|
Net income from continuing operations
|
$
|
195,299
|
|
|
$
|
114,581
|
|
|
$
|
111,313
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
142,783
|
|
|
148,714
|
|
|
149,480
|
|
Dilutive effect of employee stock options, restricted stock units and performance stock units
|
4,869
|
|
|
5,269
|
|
|
3,889
|
|
Weighted average common shares outstanding, diluted
|
147,652
|
|
|
153,983
|
|
|
153,369
|
|
|
|
|
|
|
|
Basic net income per share from continuing operations
|
$
|
1.37
|
|
|
$
|
0.77
|
|
|
$
|
0.74
|
|
Diluted net income per share from continuing operations
|
$
|
1.32
|
|
|
$
|
0.74
|
|
|
$
|
0.73
|
|
Potential dilutive common shares of
0.4 million
,
11 thousand
and
1.5 million
pertaining to employee stock options, restricted stock and performance stock units were excluded from the calculation of diluted earnings per share for the fiscal years ended
April 3, 2016
,
March 29, 2015
and
March 30, 2014
, respectively, because the effect would have been anti-dilutive.
The denominator for diluted net income per share for the fiscal 2016 does not include any effect from the
0.875%
Convertible Senior Notes due 2022, or the Convertible Notes. In accordance with ASC 260, Earnings per Share, the Convertible Notes will not impact the denominator for diluted net income per share unless the average price of our common stock, as calculated under the terms of the Notes, exceeds the conversion price of
$33.45
per share. Likewise, the denominator for diluted net income per share will not include any effect from the warrants unless the average price of our common stock, as calculated under the terms of the warrants, exceeds
$48.66
per share.
The denominator for diluted net income per share for the fiscal 2016 also does not include any effect from the convertible note hedge transaction, or the Note Hedges. In future periods, the denominator for diluted net income per share will exclude any effect of the Note Hedges, as their effect would be anti-dilutive. In the event an actual conversion of any or all of the Convertible Notes occurs, the shares that will be delivered to us under the Note Hedges are designed to neutralize the dilutive effect of the shares that the Company will issue under the Convertible Notes. Refer to Note 17 for further discussion regarding the Convertible Notes.
Note 3. Business Combinations
Acquisition of Zentrum Mikroelektronik Dresden AG
On December 7, 2015, the Company completed its purchase all of the outstanding no-par-value shares of Zentrum Mikroelektronik Dresden AG (ZMDI), a privately-held company mainly operating in Germany, in an all-cash transaction for approximately
$307.0 million
. ZMDI is a global supplier of sensing products for mobile, automotive and industrial solutions. The acquisition provides the Company a significant new growth opportunity in the automotive and industrial business.
Total consideration consisted of the following:
|
|
|
|
|
(in thousands)
|
|
Cash paid to ZMDI shareholders
|
$
|
307,030
|
|
Less: cash acquired
|
(27,892
|
)
|
Total purchase price, net of cash acquired
|
$
|
279,138
|
|
The total cash consideration paid includes a Euro-equivalent of
$20.0 million
which is maintained in an escrow account and will be released to the selling shareholders upon meeting of certain conditions in accordance with the escrow agreement.
The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. Because the Acquisition was structured as a stock acquisition for income tax purposes, none of the asset step-up or asset recognition required by purchase accounting, including the goodwill described below, is deductible for tax purposes.
The fair value of cash, accounts receivable, other current assets, accounts payable, and other accrued liabilities were generally determined using historical carrying values given the short-term nature of these assets and liabilities. The fair values for acquired inventory, property, plant and equipment and intangible assets were determined with the assistance of third-party valuation using discounted cash flow analysis, and estimate made by management. The fair values of certain other liabilities were determined internally using historical carrying values and estimates made by management. As additional information becomes available, the Company may revise the preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material.
The financial results of the ZMDI business have been included in the Company’s Consolidated Statements of Operations from December 7, 2015, the closing date of the acquisition. The Company's results of continuing operations for fiscal 2016 include
$24.4 million
of net revenue attributable to ZMDI. The Company incurred approximately
$2.5 million
of acquisition related costs for fiscal 2016 which were included in Selling, General and Administrative Expenses in the Consolidated Statements of Operations. Goodwill is primarily attributable to the assembled workforce of ZMDI, anticipated synergies and economies of scale expected from the operations of the combined company.
The Company's preliminary allocation of the purchase price is as follows:
|
|
|
|
|
(in thousands)
|
Estimated Fair Value
|
Cash
|
$
|
27,892
|
|
Accounts receivable
|
10,618
|
|
Inventories
|
19,892
|
|
Other current assets
|
1,551
|
|
Property, plant and equipment
|
9,287
|
|
Other non-current assets
|
2,003
|
|
Intangible assets
|
126,200
|
|
Goodwill
|
170,089
|
|
Accounts payable
|
(5,633
|
)
|
Accrued and other current liabilities
|
(19,141
|
)
|
Loans payable
|
(9,437
|
)
|
Deferred tax liability
|
(23,467
|
)
|
Other long term liabilities
|
(2,824
|
)
|
Total purchase price
|
$
|
307,030
|
|
A summary of the preliminary allocation of intangible assets is as follows:
|
|
|
|
|
|
(in thousands)
|
Estimated Fair Value
|
Estimated Useful Life (in years)
|
Developed technology
|
$
|
75,600
|
|
7
|
Customer relationships
|
44,000
|
|
7
|
Order backlog
|
5,800
|
|
1
|
Trademark
|
800
|
|
1
|
Total
|
$
|
126,200
|
|
|
Identifiable Tangible Assets and Liabilities:
Assets and liabilities were reviewed and adjusted, if required, to their estimated fair value.
Inventory:
The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less reasonable selling margin.
Bank Loans:
The Company assumed liabilities of ZMDI which include outstanding bank loans of approximately
$9.4 million
as of December 7, 2015. The Company subsequently paid the full assumed amount which reduced the outstanding balance to
zero
as of April 3, 2016.
I
ntangible Assets:
The allocation of the purchase price to tangible and identified intangible assets acquired was based on the Company's best estimate of the fair value of such assets as of the acquisition date. The fair value of acquired tangible and identified intangible assets was determined based on inputs that are unobservable and significant to the overall fair value measurement.
Developed technology consists of ZMDI's products that have reached technological feasibility. The Company valued the developed technology utilizing a multi-period excess earnings (MPEE) method, which uses the discounted future earnings specifically attributed to this intangible asset that is in excess of returns for other assets that contributed to those earnings. The economic useful life was determined based on the technology cycle related to the products and its expected contribution to forecasted revenue. The Company utilized a discount rate of
13.5%
in estimating the fair value of the developed technology.
Customer relationships represent the fair value of future projected revenue that is expected to be derived from sales of products to existing customers of the acquired company. Customer contracts and related relationships value has been estimated utilizing a with-and-without method, which uses projected cash flows with and without the intangible asset in place. Cash flow differentials are then discounted to present value to arrive at an estimate of fair value for the asset. The economic useful life was determined based on the life of the developed technology, assuming that the existing customers will remain with the Company until the developed technology becomes obsolete. The Company utilized a discount rate of
13.5%
in estimating the fair value of the customer relationships.
Order backlog represents business under existing contractual obligations as of the acquisition date. The fair value of backlog was determined using the MPEE method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period. The Company utilized a discount rate of
5.4%
in estimating the fair value of the order backlog.
Trademark relates to ZMDI’s product brand and its fair value was determined by applying the relief-from-royalty method under the income approach. This valuation method is based on the application of a royalty rate to forecasted revenue under the respective trade name and involves discounting net cash flows resulting from the forecast of avoided royalties over a transition period, giving consideration to the cost of capital estimate as well as the risk and timing of the cash flows associated with this asset relative to the other asset classes. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods. The Company utilized a discount rate of
13.5%
in estimating the fair value of the trade name and trademark.
Pro Forma Financial Information (unaudited):
The following unaudited pro forma financial information present combined results of operations for each of the periods presented, as if ZMDI had been acquired as of the beginning of fiscal year 2015. The pro forma financial information include the business combination effect of the amortization charges from acquired intangible assets, the amortization of fair market value inventory write-up and acquisition-related costs. The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2015 or of the results of future operations of the combined business. Consequently, actual results will differ from the unaudited pro forma information presented below:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
(Unaudited in thousands, except per share data)
|
|
2016
|
2015
|
Revenues
|
|
$
|
760,232
|
|
$
|
650,815
|
|
Net income
|
|
$
|
202,213
|
|
$
|
67,690
|
|
Basic net income per share - continuing operations
|
|
$
|
1.42
|
|
$
|
0.46
|
|
Diluted net income per share - continuing operations
|
|
$
|
1.37
|
|
$
|
0.44
|
|
Note 4. Discontinued Operations
High-Speed Converter (“HSC”) Business
In fiscal 2014, the Company initiated a project to divest its HSC business and has classified the related assets as held for sale. In fiscal 2014, the Company recorded total impairment charge of
$4.8 million
to discontinued operations, which consisted of
$2.2 million
in goodwill and
$2.6 million
in intangible assets. The HSC business included the assets of NXP B.V.’s Data Converter Business and Alvand Technologies, Inc., which were acquired in fiscal 2013.
On May 30, 2014, the Company completed the sale of certain assets related to the Alvand portion of the HSC business to a buyer pursuant to an Asset Purchase Agreement. Upon the closing of the transaction, the buyer paid the Company
$18.0 million
in cash consideration, of which
$2.7 million
was initially held in an escrow and was paid to the Company in December 2015. The Company recorded a gain of
$16.8 million
in discontinued operations related to this divestiture during fiscal 2015. The following table summarizes the components of the gain (in thousands):
|
|
|
|
|
|
Amount
|
Cash proceeds from sale (including amounts held in escrow)
|
$
|
18,000
|
|
Less book value of assets sold and direct costs related to the sale:
|
|
Intangible assets
|
(990
|
)
|
Transaction and other costs
|
(170
|
)
|
Gain on divestiture
|
$
|
16,840
|
|
Following the sale of assets related to the Alvand portion of the HSC business, the business had remaining long-lived assets classified as held for sale amounting to
$8.5 million
, which consisted of
$2.9 million
in fixed assets and
$5.6 million
in intangible assets. The Company evaluated the carrying value of the disposal group and determined that it exceeded its estimated fair value based on estimated selling price less cost to sell. Accordingly, total impairment charge of
$8.5 million
was recorded to loss from discontinued operations in the Consolidated Statement of Operations for fiscal 2015.
All long-lived assets related to the HSC business were fully impaired in fiscal 2015.
On April 27, 2015, the Company completed the sale of the remaining HSC business to eSilicon, for
$1.5 million
which will be paid on or before April 27, 2017. In connection with the sale, the Company entered into an Exclusive Intellectual Property License Agreement with eSilicon, whereby the Company provided an exclusive license to eSilicon to develop, manufacture, sell and maintain HSC products. In connection with the sale, the Company and eSilicon also entered into a Transition Services Agreement, whereby the Company will provide certain transition services over a specific period from the effective date of the sale. The transition services do not represent significant continuing involvement of the Company in the HSC business.
As of April 3, 2016, the Company had a receivable of
$1.5 million
representing uncollected proceeds from the sale that was included under Other Assets on the Consolidated Balance Sheet. Given the term of the sale, the Company deferred the gain from this divestiture and will recognize it into discontinued operations when collectibility becomes certain. The following table summarizes the components of the deferred gain which was included under Other Long-term Liabilities on the Consolidated Balance Sheet as of April 3, 2016:
|
|
|
|
|
(in thousands)
|
Amount
|
Sale price
|
$
|
1,500
|
|
Less book value of assets sold
|
(115
|
)
|
Deferred gain on divestiture
|
$
|
1,385
|
|
The HSC business was included in the Company’s Communications reportable segment. For financial statements purposes, the results of operations for the HSC business have been segregated from those of the continuing operations and are presented in the Company's consolidated financial statements as discontinued operations.
The results of the HSC business discontinued operations for the fiscal years
2016
,
2015
and
2014
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended,
|
|
April 3, 2016
|
|
March 29, 2015
|
|
March 30, 2014
|
Revenues
|
$
|
176
|
|
|
$
|
3,803
|
|
|
$
|
3,466
|
|
Cost of revenue
|
477
|
|
|
1,939
|
|
|
2,935
|
|
Goodwill and long-lived assets impairment
|
—
|
|
|
8,471
|
|
|
4,797
|
|
Restructuring charges (see Note 14)
|
—
|
|
|
18,305
|
|
|
—
|
|
Operating expenses
|
246
|
|
|
12,325
|
|
|
18,622
|
|
Gain on divestiture
|
—
|
|
|
16,840
|
|
|
—
|
|
Other income
|
—
|
|
|
—
|
|
|
(50
|
)
|
Income tax provision (benefit)
|
15
|
|
|
275
|
|
|
11
|
|
Net loss from discontinued operations
|
$
|
(562
|
)
|
|
$
|
(20,672
|
)
|
|
$
|
(22,949
|
)
|
Note 5. Other Divestitures (not accounted for as discontinued operations)
Sale of Certain Assets of Audio Business
On
December 13, 2013
, Integrated Device Technology, Inc. and Integrated Device Technology (Malaysia) Sdn. Bhd., a wholly-owned subsidiary of IDT (collectively “IDT”), completed the sale of certain assets of its Audio business to Stravelis, Inc. for
$0.2 million
in cash and up to a maximum of
$1.0 million
additional consideration contingent upon future revenues. The Company estimated the fair value of the contingent consideration at the time of sale to be
zero
based on the estimated probability of attainment of future revenue targets. During fiscal 2015, the Company received
$0.3 million
in cash of the contingent consideration, which was recorded as interest income and other, net in the Consolidated Statement of Operations. The Company recorded a loss of
$3.7 million
on divestiture related to the sale in fiscal 2014.
Prior to the divestiture, this business was part of a larger cash-flow generating product group and did not, on its own, represent a separate operation of the Company and, therefore, this sale did not qualify as discontinued operations.
Sale of Certain Assets of PCI Express ("PCIe") Enterprise Flash Controller Business
On
July 12, 2013
, Integrated Device Technology, Inc. and Integrated Device Technology (Malaysia) Sdn. Bhd., a wholly-owned subsidiary of IDT (collectively “IDT”), completed the sale of certain assets of its PCI Express ("PCIe") enterprise flash controller business to PMC-Sierra, Inc.(“PMC”), for
$96.1 million
in cash.
The Company recorded a gain of
$82.3 million
on divestiture related to this transaction in fiscal 2014.
Prior to the divestiture, the operating results for IDTs PCIe flash controller business were included in the Company's Computing, Consumer and Industrial reportable segment. The PCIe enterprise flash controller business was part of a larger cash-flow generating product group and did not, on its own, represent a separate operation of the Company and, therefore, this sale did not qualify as discontinued operations.
Note 6. Fair Value Measurement
Fair value measurement is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing assets or liabilities. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact.
Fair Value Hierarchy
The three levels of inputs that may be used to measure fair value are as follows:
Level 1: Quoted market prices for identical assets or liabilities in active markets at the measure date.
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.
The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of
April 3, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at Reporting Date Using
|
(in thousands)
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents and short-term investments:
|
|
|
|
|
|
|
|
U.S. government treasuries and agencies securities
|
$
|
32,519
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,519
|
|
Money market funds
|
124,504
|
|
|
—
|
|
|
—
|
|
|
124,504
|
|
Asset-backed securities
|
—
|
|
|
10,515
|
|
|
—
|
|
|
10,515
|
|
Corporate bonds
|
—
|
|
|
91,388
|
|
|
—
|
|
|
91,388
|
|
International government bonds
|
—
|
|
|
2,208
|
|
|
—
|
|
|
2,208
|
|
Corporate commercial paper
|
—
|
|
|
1,992
|
|
|
—
|
|
|
1,992
|
|
Bank deposits
|
—
|
|
|
11,711
|
|
|
—
|
|
|
11,711
|
|
Repurchase agreements
|
—
|
|
|
114
|
|
|
—
|
|
|
114
|
|
Municipal bonds
|
—
|
|
|
900
|
|
|
—
|
|
|
900
|
|
Total assets measured at fair value
|
$
|
157,023
|
|
|
$
|
118,828
|
|
|
$
|
—
|
|
|
$
|
275,851
|
|
The Convertible Notes are carried on the Consolidated Balance Sheets at their original issuance value including accreted interest, net of unamortized debt discount and issuance cost. The Convertible Notes are not marked to fair value at the end of each reporting period. As of
April 3, 2016
, the fair value of Convertible Notes was
$351.5 million
, which was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See Note 17 for additional information on the Convertible Notes.
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of
March 29, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at Reporting Date Using
|
(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 and short-term investments:
|
|
|
|
|
|
|
|
U.S. government treasuries and agencies securities
|
$
|
135,945
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
135,945
|
|
Money market funds
|
55,578
|
|
|
—
|
|
|
—
|
|
|
55,578
|
|
Asset-backed securities
|
—
|
|
|
31,830
|
|
|
—
|
|
|
31,830
|
|
Corporate bonds
|
—
|
|
|
245,675
|
|
|
—
|
|
|
245,675
|
|
International government bonds
|
—
|
|
|
1,006
|
|
|
—
|
|
|
1,006
|
|
Corporate commercial paper
|
—
|
|
|
4,999
|
|
|
—
|
|
|
4,999
|
|
Bank deposits
|
—
|
|
|
16,915
|
|
|
—
|
|
|
16,915
|
|
Repurchase agreements
|
—
|
|
|
191
|
|
|
—
|
|
|
191
|
|
Municipal bonds
|
—
|
|
|
6,044
|
|
|
—
|
|
|
6,044
|
|
Total assets measured at fair value
|
$
|
191,523
|
|
|
$
|
306,660
|
|
|
$
|
—
|
|
|
$
|
498,183
|
|
The deferred compensation plan assets of
$14.6 million
and
$16.5 million
as of April 3, 2016 and March 29, 2015, are carried on the Consolidated Balance Sheets at their fair value which were determined on the basis of market prices observable for similar instruments and are considered Level 2 in the fair value hierarchy. See Note 16 for additional information on the Employee Benefit Plans.
U.S. government treasuries and U.S. government agency securities as of
April 3, 2016
and
March 29, 2015
do not include any U.S. government guaranteed bank issued paper.
The securities in Level 1 are highly liquid and actively traded in exchange markets or over-the-counter markets. Level 2 fixed income securities are priced using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data.
In connection with the prior acquisitions of Fox Enterprises Inc. (Fox) and Alvand Technologies in fiscal 2013, liabilities were recognized for the Company’s estimate of the fair value of contingent consideration on the acquisition dates based on probability-based forecasted revenues, gross profits and attainment of product development milestones. These fair value measurements are based on significant inputs not observed in the market and thus represent a Level 3 measurement, which reflect the Company’s own assumptions concerning future revenues, gross profit and product development milestones of the acquired businesses in measuring fair value. During fiscal year 2014, the Company settled the contingent consideration with Fox and paid
$3.3 million
to the former shareholders of Fox. Also during the fiscal year 2014, the Company paid
$1.8 million
in contingent consideration for Alvand Technologies. The remaining estimated fair value of the contingent liability for Alvand Technologies as of
March 29, 2015
was
zero
. During fiscal 2015, the Company paid
$1.6 million
and released the remaining contingent consideration of
$0.5 million
to discontinued operations, as the remaining future milestones were not achieved as a result of the sale of certain assets related to the Alvand portion of the HSC business.
The following table summarizes the change in the fair value of liabilities measured using significant unobservable inputs (Level 3) for fiscal
2015
:
|
|
|
|
|
(
in thousands
)
|
Estimated Fair Value
|
Balance as of March 30, 2014
|
$
|
2,140
|
|
Changes in fair value
|
(1,600
|
)
|
Payment
|
(540
|
)
|
Balance as of March 29, 2015
|
$
|
—
|
|
Cash equivalents are highly liquid investments with original maturities of
three
months or less at the time of purchase. The Company maintains its cash and cash equivalents with reputable major financial institutions. Deposits with these banks may exceed the FDIC insurance limits or similar limits in foreign jurisdictions. These deposits typically may be redeemed upon demand and, therefore, bear minimal risk. While the Company monitors daily the cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be affected if one or more of the financial institutions with which the Company deposits fails or is subject to other adverse conditions in the financial markets. As of
April 3, 2016
, the Company has not experienced any losses in its operating accounts.
All of the Company’s available-for-sale investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the length of time, general market conditions and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for recovery. Although the Company believes its portfolio continues to be comprised of sound investments due to high credit ratings and government guarantees of the underlying investments, a further decline in the capital and financial markets would adversely impact the market values of its investments and their liquidity. The Company continually monitors the credit risk in its portfolio and future developments in the credit markets and makes appropriate changes to its investment policy as deemed necessary. The Company did not record any impairment charges related to its available-for-sale investments in fiscal
2016
,
2015
and
2014
.
Note 7. Investments
Available-for-Sale Securities
Available-for-sale investments at
April 3, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated Fair
Value
|
U.S. government treasuries and agencies securities
|
$
|
32,374
|
|
|
$
|
146
|
|
|
$
|
(1
|
)
|
|
$
|
32,519
|
|
Money market funds
|
124,504
|
|
|
—
|
|
|
—
|
|
|
124,504
|
|
Asset-backed securities
|
10,518
|
|
|
4
|
|
|
(7
|
)
|
|
10,515
|
|
Corporate bonds
|
91,321
|
|
|
246
|
|
|
(179
|
)
|
|
91,388
|
|
International government bonds
|
2,195
|
|
|
13
|
|
|
—
|
|
|
2,208
|
|
Corporate commercial paper
|
1,992
|
|
|
—
|
|
|
—
|
|
|
1,992
|
|
Bank deposits
|
11,711
|
|
|
—
|
|
|
—
|
|
|
11,711
|
|
Repurchase agreements
|
114
|
|
|
—
|
|
|
—
|
|
|
114
|
|
Municipal bonds
|
900
|
|
|
—
|
|
|
—
|
|
|
900
|
|
Total available-for-sale investments
|
275,629
|
|
|
409
|
|
|
(187
|
)
|
|
275,851
|
|
Less amounts classified as cash equivalents
|
(124,618
|
)
|
|
—
|
|
|
—
|
|
|
(124,618
|
)
|
Short-term investments
|
$
|
151,011
|
|
|
$
|
409
|
|
|
$
|
(187
|
)
|
|
$
|
151,233
|
|
Available-for-sale investments at
March 29, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated Fair
Value
|
U.S. government treasuries and agencies securities
|
$
|
135,570
|
|
|
$
|
398
|
|
|
$
|
(23
|
)
|
|
$
|
135,945
|
|
Money market funds
|
55,578
|
|
|
—
|
|
|
—
|
|
|
55,578
|
|
Asset-backed securities
|
31,830
|
|
|
9
|
|
|
(9
|
)
|
|
31,830
|
|
Corporate bonds
|
245,229
|
|
|
567
|
|
|
(121
|
)
|
|
245,675
|
|
International government bonds
|
1,010
|
|
|
—
|
|
|
(4
|
)
|
|
1,006
|
|
Corporate commercial paper
|
4,999
|
|
|
—
|
|
|
—
|
|
|
4,999
|
|
Bank deposits
|
16,915
|
|
|
—
|
|
|
—
|
|
|
16,915
|
|
Repurchase agreements
|
191
|
|
|
—
|
|
|
—
|
|
|
191
|
|
Municipal bonds
|
6,001
|
|
|
45
|
|
|
(2
|
)
|
|
6,044
|
|
Total available-for-sale investments
|
497,323
|
|
|
1,019
|
|
|
(159
|
)
|
|
498,183
|
|
Less amounts classified as cash equivalents
|
(60,068
|
)
|
|
—
|
|
|
—
|
|
|
(60,068
|
)
|
Short-term investments
|
$
|
437,255
|
|
|
$
|
1,019
|
|
|
$
|
(159
|
)
|
|
$
|
438,115
|
|
The cost and estimated fair value of available-for-sale debt securities at
April 3, 2016
, by contractual maturity, were as follows:
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
Amortized
Cost
|
|
Estimated Fair
Value
|
Due in 1 year or less
|
$
|
150,253
|
|
|
$
|
150,262
|
|
Due in 1-2 years
|
69,571
|
|
|
69,666
|
|
Due in 2-5 years
|
55,805
|
|
|
55,923
|
|
Total investments in available-for-sale debt securities
|
$
|
275,629
|
|
|
$
|
275,851
|
|
The cost and estimated fair value of available-for-sale debt securities at
March 29, 2015
, by contractual maturity, were as follows:
|
|
|
|
|
|
|
|
|
(
in thousands
)
|
Amortized
Cost
|
|
Estimated Fair
Value
|
Due in 1 year or less
|
$
|
153,753
|
|
|
$
|
153,823
|
|
Due in 1-2 years
|
132,241
|
|
|
132,529
|
|
Due in 2-5 years
|
211,329
|
|
|
211,831
|
|
Total investments in available-for-sale debt securities
|
$
|
497,323
|
|
|
$
|
498,183
|
|
The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses as of
April 3, 2016
, aggregated by investment category and length of time that individual securities have been in a continuous loss position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
(in thousands)
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
Corporate bonds
|
$
|
33,407
|
|
|
$
|
(179
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,407
|
|
|
$
|
(179
|
)
|
Asset-backed securities
|
4,979
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
4,979
|
|
|
(7
|
)
|
U.S. government treasuries and agencies securities
|
6,097
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
6,097
|
|
|
(1
|
)
|
Total
|
$
|
44,483
|
|
|
$
|
(187
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44,483
|
|
|
$
|
(187
|
)
|
The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses, as of
March 29, 2015
, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
(in thousands)
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
Corporate bonds
|
$
|
63,367
|
|
|
$
|
(121
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,367
|
|
|
$
|
(121
|
)
|
Asset-backed securities
|
17,736
|
|
|
(9
|
)
|
|
|
|
|
|
17,736
|
|
|
(9
|
)
|
U.S. government treasuries and agencies securities
|
18,478
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
18,478
|
|
|
(23
|
)
|
Municipal bonds
|
1,001
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
1,001
|
|
|
(2
|
)
|
International government bonds
|
1,006
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
1,006
|
|
|
(4
|
)
|
Total
|
$
|
101,588
|
|
|
$
|
(159
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
101,588
|
|
|
$
|
(159
|
)
|
Currently, a significant portion of the Company’s available-for-sale investments that it holds are high grade instruments. As of
April 3, 2016
, the unrealized losses on the Company’s available-for-sale investments represented an insignificant amount in relation to its total available-for-sale portfolio. Substantially all of the Company’s unrealized losses on its available-for-sale marketable debt instruments can be attributed to fair value fluctuations in an unstable credit environment that resulted in a decrease in the market liquidity for debt instruments. Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company did not consider these investments to be other-than-temporarily impaired at
April 3, 2016
or
March 29, 2015
.
Non-marketable Equity Securities
The Company accounts for its equity investments in privately held companies under the cost method. These investments are subject to periodic impairment review and measured and recorded at fair value when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of its investment has occurred and is other than temporary, an assessment was made by considering available evidence, including the general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing. The valuation also takes into account the investee’s capital structure, liquidation preferences for its capital and other economic variables. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management's judgment.
As of April 3, 2016 and March 29, 2015, the Company holds capital stock of privately-held companies with total amount of
$10.0 million
and
$4.0 million
, respectively. During fiscal 2016, the Company purchased
$2.0 million
of convertible notes in a privately-held company which were automatically converted into ordinary shares of stock in accordance with the terms of the instrument at December 31, 2015. During fiscal 2016, the Company also purchased preferred shares of a privately-held company for
$4.0 million
. These and other investments in stocks (included in Other Assets on the Consolidated Balance Sheet) are accounted for as
cost-method investments, as the Company owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity.
The Company did not record any impairment charge for these investments in fiscal 2016, 2015 and 2014.
Note 8. Stock-Based Employee Compensation
Equity Incentive Programs
The Company currently issues awards under
two
equity-based plans in order to provide additional incentive and retention to directors and employees who are considered to be essential to the long-range success of the Company. These plans are further described below.
2004 Equity Plan (2004 Plan)
In September 2004, the Company’s stockholders approved the 2004 Plan. On July 21, 2010, the Board of Directors of the Company approved an amendment to the Company’s 2004 Plan to increase the number of shares of common stock reserved for issuance thereunder from
28,500,000
shares to
36,800,000
shares (an increase of
8,300,000
shares), provided, however, that the aggregate number of common shares available for issuance under the 2004 Plan is reduced by
1.74
shares for each common share delivered in settlement of any full value award, which are awards other than stock options and stock appreciation rights, that are granted under the 2004 Plan on or after September 23, 2010. On September 23, 2010, the stockholders of the Company approved the proposed amendment described above, which also includes certain other changes to the 2004 Plan, including an extension of the term of the 2004 Plan. Options granted by the Company under the 2004 Plan generally expire
seven
years from the date of grant and generally vest over a
four
-year period from the date of grant, with one-quarter of the shares of common stock vesting on the
1 year
anniversary of the grant date and the remaining shares vesting monthly for the
36
months thereafter. The exercise price of the options granted by the Company under the 2004 Plan shall not be less than
100%
of the fair market value for a common share subject to such option on the date the option is granted. Full value awards made under the 2004 Plan shall become vested over a period of not less than
3 years
(or, if vesting is performance-based, over a period of not less than
one
year) following the date such award is made; provided, however, that full value awards that result in the issuance of an aggregate of up to
5%
of common stock available under the 2004 Plan may be granted to any one or more participants without respect to such minimum vesting provisions. As of
April 3, 2016
, there were
8.3 million
shares available for future grant under the 2004 Plan.
Compensation Expense
The following table summarizes stock-based compensation expense by line items appearing in the Company’s Consolidated Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Cost of revenue
|
$
|
2,707
|
|
|
$
|
1,936
|
|
|
$
|
1,189
|
|
Research and development
|
15,268
|
|
|
9,813
|
|
|
5,601
|
|
Selling, general and administrative
|
16,182
|
|
|
10,704
|
|
|
5,887
|
|
Discontinued operations
|
(32
|
)
|
|
(194
|
)
|
|
675
|
|
Total stock-based compensation expense
|
$
|
34,125
|
|
|
$
|
22,259
|
|
|
$
|
13,352
|
|
The amount of stock-based compensation expense that was capitalized during the periods presented above was immaterial. Stock-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest. The authoritative guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes the value of stock-based compensation to expense on an accelerated method.
Valuation Assumptions
The Company uses the Black-Scholes option-pricing model as its method of valuation for stock-based awards. The Company’s determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, as well as the expected term of the awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Stock option plans:
|
|
|
|
|
|
|
Expected term (in years)
|
4.00
|
|
|
4.00
|
|
|
4.60
|
|
Risk-free interest rate
|
1.20
|
%
|
|
1.25
|
%
|
|
0.95
|
%
|
Volatility
|
42.6
|
%
|
|
38.7
|
%
|
|
40.1
|
%
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Weighted-average grant-date fair value
|
$
|
7.55
|
|
|
$
|
3.84
|
|
|
$
|
2.99
|
|
ESPP:
|
|
|
|
|
|
|
|
|
Expected term (in years)
|
0.25
|
|
|
0.25
|
|
|
0.25
|
|
Risk-free interest rate
|
0.06
|
%
|
|
0.04
|
%
|
|
0.06
|
%
|
Volatility
|
42.1
|
%
|
|
40.5
|
%
|
|
35.0
|
%
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Weighted-average grant-date fair value
|
$
|
5.05
|
|
|
$
|
3.53
|
|
|
$
|
1.89
|
|
The following is a summary of the Company's stock option activity and related weighted average exercise prices for each category:
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
(shares in thousands)
|
Shares
|
|
Weighted-Average
Exercise Price
|
Beginning stock options outstanding
|
3,680
|
|
|
$
|
7.71
|
|
Granted
|
428
|
|
|
21.96
|
|
Exercised (1)
|
(1,394
|
)
|
|
6.74
|
|
Canceled
|
(120
|
)
|
|
10.27
|
|
Ending stock options outstanding
|
2,594
|
|
|
$
|
10.47
|
|
Ending stock options exercisable
|
1,693
|
|
|
$
|
7.72
|
|
|
|
(1)
|
Upon exercise, the Company issues new shares of common stock.
|
The following is a summary of information about stock options outstanding at
April 3, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of Exercise
Prices
|
|
Number
Outstanding (in thousands)
|
|
Weighted-Average
Remaining
Contractual Life
(in years)
|
|
Weighted-Average
Exercise Price
|
|
Number
Exercisable (in thousands)
|
|
Weighted-Average
Exercise Price
|
5.05 - 5.75
|
|
334
|
|
1.68
|
|
$5.45
|
|
325
|
|
$5.45
|
5.77 - 5.77
|
|
397
|
|
2.50
|
|
5.77
|
|
365
|
|
5.77
|
5.79 - 7.24
|
|
135
|
|
2.04
|
|
6.44
|
|
133
|
|
6.45
|
7.67 - 7.67
|
|
378
|
|
2.95
|
|
7.67
|
|
265
|
|
7.67
|
7.81 - 7.92
|
|
5
|
|
2.20
|
|
7.92
|
|
5
|
|
7.92
|
8.49 - 8.49
|
|
270
|
|
2.08
|
|
8.49
|
|
270
|
|
8.49
|
11.13 - 11.13
|
|
35
|
|
5.03
|
|
11.13
|
|
10
|
|
11.13
|
11.79 - 11.79
|
|
350
|
|
4.88
|
|
11.79
|
|
190
|
|
11.79
|
12.16 - 12.16
|
|
277
|
|
4.26
|
|
12.16
|
|
125
|
|
12.16
|
18.55-27.36
|
|
413
|
|
5.86
|
|
21.95
|
|
5
|
|
19.46
|
|
|
2,594
|
|
3.47
|
|
$10.47
|
|
1,693
|
|
$7.72
|
As of
April 3, 2016
, the weighted-average remaining contractual life of stock options outstanding was
3.47 years
and the aggregate intrinsic value was
$27.2 million
. The weighted-average remaining contractual life of stock options exercisable was
2.69
years and the aggregate intrinsic value was
$22.1 million
. Unrecognized compensation cost related to non-vested stock options, net of estimated forfeitures, was
$1.5 million
and will be recognized over a weighted-average period of
1.04 years
.
As of
April 3, 2016
, stock options vested and expected to vest totaled approximately
2.5 million
with a weighted-average exercise price of
$10.09
and a weighted-average remaining contractual life of
3.37
years. The aggregate intrinsic value as of
April 3, 2016
was approximately
$26.6 million
.
Restricted Stock Units
Restricted stock units granted by the Company under the 2004 Plan generally vest over at least a
three
year period from the grant date with one-third of restricted stock units vesting on each one-year anniversary. As of
April 3, 2016
,
3.7 million
restricted stock unit awards were outstanding under the 2004 Plan.
The following table summarizes the Company’s restricted stock unit activity and related weighted-average exercise prices for each category:
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
(shares in thousands)
|
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
Beginning RSUs outstanding
|
3,457
|
|
|
$
|
10.58
|
|
Granted
|
1,855
|
|
|
21.80
|
|
Released
|
(1,150
|
)
|
|
9.94
|
|
Forfeited
|
(469
|
)
|
|
13.17
|
|
Ending RSUs outstanding
|
3,693
|
|
|
$
|
16.09
|
|
As of
April 3, 2016
, restricted stock units expected to vest totaled approximately
3.1 million
with a weighted-average remaining contract life of
1.21
years. The aggregate intrinsic value was approximately
$65.1 million
.
As of April 3, 2016, the unrecognized compensation cost related to restricted stock units granted under the Company’s equity incentive plan was approximately
$23.1 million
, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of
1.35
years.
Performance-Based Stock Units
In fiscal 2013, the Compensation Committee (the Committee) of the Board of Directors of IDT approved the Company’s Executive Retention Plan (the Retention Plan), in which each of the President and Chief Executive Officer’s direct reports are eligible to participate. The Retention Plan provides for the grant of performance-based stock units under the 2004 Plan which vest and convert into between
zero
and one and a half shares of the Company's common stock based on the level of achievement of pre-established performance goals during a specified performance period. The initial performance period under the Retention Plan is the Company’s fiscal year 2014 for which performance goals related to the Company’s annual non-GAAP operating margin and revenue growth relative to a peer group of companies, weighted
60%
and
40%
, respectively, were established by the Committee. Any shares of Company common stock earned by performance stock unit holders will vest and be issued in
two
equal installments, the first on the date the Committee determines the achievement of the performance goals and the second on the first anniversary of such determination. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining stock-based compensation expense for the Retention Plan. The performance-based stock units that were granted under the Retention Plan have vested in the first quarter of fiscal 2016 based on actual achievement of the performance goals.
In addition, the Committee approved the Company's Key Talent Incentive Plan (Incentive Plan). The Incentive Plan provides for the grant of performance-based stock units under the 2004 Plan which vest and convert into
one
share of the Company's common stock based on the level of achievement of pre-established performance goals during a specified performance period. The initial performance period under the Incentive Plan is the Company's fourth quarter of fiscal 2013 through the fourth quarter of fiscal 2016 for which performance goals relate to cumulative revenue targets for a specific product group. Any shares of Company common stock earned by performance stock unit holders will vest and be issued quarterly based on the achievement of the performance goals. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining stock-based compensation expense for the Incentive Plan. The performance-based stock units that were granted under the Incentive Plan have vested in the first quarter of fiscal 2016 based on actual achievement of the performance goals.
The following table summarizes the Company’s performance stock unit activity and related weighted-average exercise prices for each category:
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
(shares in thousands)
|
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
Per Share
|
Beginning PSUs outstanding
|
517
|
|
|
$
|
8.06
|
|
Granted
|
84
|
|
|
11.45
|
|
Released
|
(191
|
)
|
|
8.19
|
|
Forfeited
|
(206
|
)
|
|
8.36
|
|
Ending PSUs outstanding
|
204
|
|
|
$
|
9.04
|
|
As of
April 3, 2016
, performance stock units expected to vest totaled approximately
0.2 million
with a weighted-average remaining contract life of
0.27
year. The aggregate intrinsic value was approximately
$3.4 million
.
As of April 3, 2016, the unrecognized compensation cost related to performance stock units granted under the Company’s equity incentive plan was approximately
$0.3 million
, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of
0.28
year.
Market-Based Stock Units
In June 2015, under the 2004 Plan, the Company granted approximately
0.2 million
shares of restricted stock units with a market-based condition to a group of executive-level employees. These equity awards vest and convert into shares of the Company’s common stock based on the achievement of the Company’s relative total shareholder return over the performance period of
2
years. The earned market-based stock units will vest in
two
equal installments, with the first installment of vesting to occur on June 15, 2017, and the second on June 15, 2018.
In June 2014, under the 2004 Plan, the Company granted approximately
0.5 million
shares of restricted stock units with a market-based condition to a group of executive-level employees. These equity awards vest and convert into shares of the Company’s common stock based on the achievement of the Company’s relative total shareholder return over the performance period of
2
years
. The earned market-based stock units will vest in
two
equal installments, with the first installment of vesting to occur on June 15, 2016, and the second on June 15, 2017.
The fair value of each market-based stock unit award was estimated on the date of grant using a Monte Carlo simulation model that uses the assumptions noted in the table below. The Company uses historical data to estimate employee termination within the valuation model. The expected term of
1.8 years
was derived from the output of the valuation model and represents the period of time that restricted stock units granted are expected to be outstanding.
The following weighted average assumptions were used to calculate the fair value of the market-based equity award using a Monte Carlo simulation model:
|
|
|
|
|
|
|
|
|
June 15, 2015
|
June 15, 2014
|
Estimated fair value
|
$
|
33.08
|
|
$
|
21.00
|
|
Expected volatility
|
41.2
|
%
|
34.6
|
%
|
Expected term (in years)
|
1.80
|
|
1.80
|
|
Risk-free interest rate
|
0.65
|
%
|
0.38
|
%
|
Dividend yield
|
—
|
%
|
—
|
%
|
As of
April 3, 2016
, the total market-based stock units outstanding was approximately
0.7 million
.
As of
April 3, 2016
, market-based stock units vested and expected to vest totaled approximately
0.6 million
with a weighted-average remaining contract life of
0.93
years. The aggregate intrinsic value was approximately
$13.4 million
.
As of
April 3, 2016
, the unrecognized compensation cost related to market-based stock units granted under the Company’s equity incentive plans was approximately
$6.1 million
, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of
0.99
years.
2009 Employee Stock Purchase Plan (2009 ESPP)
On
June 18, 2009
, the Board approved implementation of the 2009 Employee Stock Purchase Plan (2009 ESPP) and authorized the reservation and issuance of up to
9.0 million
shares of the Company’s common stock, subject to stockholder approval. On September 17, 2009, the Company’s stockholders approved the plan at the 2009 Annual Meeting of Stockholders. The 2009 ESPP is intended to be implemented in successive quarterly purchase periods commencing on the first day of each fiscal quarter of the Company. In order to maintain its qualified status under Section 423 of the Internal Revenue Code, the 2009 ESPP imposes certain restrictions, including the limitation that no employee is permitted to participate in the 2009 ESPP if the rights of such employee to purchase common stock of the Company under the 2009 ESPP and all similar purchase plans of the Company or its subsidiaries would accrue at a rate which exceeds
$25,000
of the fair market value of such stock (determined at the time the right is granted) for each calendar year. At the 2012 annual meeting of stockholders on September 13, 2012, the Company's stockholders approved an additional
5.0 million
. The number of shares of common stock reserved for issuance thereunder increased from
9.0 million
shares to
14.0 million
shares.
Activity under the Company’s ESPP is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts)
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
Number of shares issued
|
606
|
|
|
641
|
|
|
1,206
|
|
Average issuance price
|
$
|
17.05
|
|
|
$
|
12.89
|
|
|
$
|
7.23
|
|
Number of shares available at year-end
|
3,772
|
|
|
4,378
|
|
|
5,019
|
|
Note 9. Stockholders' Equity
Stock Repurchase Program
.
In April 2015, the Company's Board of Directors approved a new share repurchase program authorization for
$300 million
. In October 2015, the Company's Board of Directors approved an increase in the share repurchase authorization by another
$300 million
. In fiscal 2014, the Company repurchased
4.1 million
shares for
$44.0 million
. In fiscal 2015, the Company repurchased
5.3 million
shares for
$79.2 million
. In fiscal 2016, the Company repurchased
17.9 million
shares for
$422.3 million
.
As of
April 3, 2016
, after giving effect to the ASR Agreements described below as well as other share repurchases, approximately
$185.6 million
was available for future purchase under the Company's share repurchase program. Share repurchases were recorded as treasury stock and resulted in a reduction of stockholders’ equity. The program is intended to reduce the number of outstanding shares of Common Stock to offset dilution from employee equity grants and increase stockholder value.
Accelerated Share Repurchase.
On November 2, 2015, the Company entered into separate accelerated share repurchase agreements (the ASR Agreements) with JPMorgan Chase Bank and Bank of America to repurchase a total of
$225 million
of its common stock. Pursuant to the terms of the ASR Agreements, approximately
7.0
million shares of its common stock at
$25.69
per share were received by the Company on November 5, 2015. Of the total initial amount paid to the Dealers,
$45 million
represents prepayment for subsequent settlement of the ASR Agreements. In January 2016, the ASR Agreements settled resulting in the repurchase of
1.6 million
of the Company's common stock at an average price per share of
$28.32
. The shares delivered resulted in a reduction, on the delivery date, of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The ASR Agreements were entered into pursuant to the Company’s increase in share repurchase authorization effective October 2015.
Note 10. Balance Sheet Detail
|
|
|
|
|
|
|
|
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
Inventories, net
|
|
|
|
Raw materials
|
$
|
3,251
|
|
|
$
|
4,709
|
|
Work-in-process
|
29,408
|
|
|
18,377
|
|
Finished goods
|
21,584
|
|
|
22,324
|
|
Total inventories, net
|
$
|
54,243
|
|
|
$
|
45,410
|
|
Property, plant and equipment, net
|
|
|
|
|
|
Land
|
$
|
11,535
|
|
|
$
|
11,578
|
|
Machinery and equipment
|
250,628
|
|
|
292,180
|
|
Building and leasehold improvements
|
49,015
|
|
|
48,031
|
|
Total property, plant and equipment, gross
|
311,178
|
|
|
351,789
|
|
Less: accumulated depreciation (1)
|
(237,301
|
)
|
|
(286,281
|
)
|
Total property, plant and equipment, net
|
$
|
73,877
|
|
|
$
|
65,508
|
|
Other current liabilities
|
|
|
|
|
|
Accrued restructuring costs (2)
|
2,641
|
|
|
10,512
|
|
Other (3)
|
12,333
|
|
|
7,070
|
|
Total other current liabilities
|
$
|
14,974
|
|
|
$
|
17,582
|
|
|
|
|
|
|
|
|
|
|
Other long-term obligations
|
|
|
|
Deferred compensation related liabilities
|
$
|
13,052
|
|
|
$
|
13,143
|
|
Other (4)
|
8,212
|
|
|
4,462
|
|
Total other long-term liabilities
|
$
|
21,264
|
|
|
$
|
17,605
|
|
(1) Depreciation expense was
$18.3 million
,
$18.8 million
and
$20.9 million
for fiscal years 2016, 2015 and 2014, respectively.
(2) Includes accrued severance costs related to integration, the disposed HSC business, and other restructuring actions of
$1.2 million
,
$1.5 million
, and
$0.1 million
, respectively, as of April 3, 2016; and accrued severance costs related to disposed HSC business of
$10.2 million
as of
March 29, 2015
.
(3) Other current liabilities consist primarily of accrued royalties and outside commissions, current portion of supplier obligations, current portion of capital lease payable, and other accrued unbilled expenses.
(4) Other long-term obligations consist primarily of non-current portion of capital lease payable, non-current deferred gain and other long-term accrued liabilities.
Note 11. Deferred Income on Shipments to Distributors
Included in the caption “
Deferred income on shipments to distributors
” on the Consolidated Balance Sheets are amounts related to shipments to certain distributors for which revenue is not recognized until the Company's product has been sold by the distributor to an end customer
.
The components of deferred income on shipments to distributors as of
April 3, 2016
and
March 29, 2015
were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
Gross deferred revenue
|
$
|
9,460
|
|
|
$
|
19,299
|
|
Gross deferred costs
|
(2,454
|
)
|
|
(3,605
|
)
|
Deferred income on shipments to distributors
|
$
|
7,006
|
|
|
$
|
15,694
|
|
The gross deferred revenue represents the gross value of shipments to distributors at the list price billed to the distributor less any price protection credits provided to them in connection with reductions in list price while the products remain in their inventory. The amount ultimately recognized as revenue will be lower than this amount as a result of ship from stock pricing credits which are issued in connection with the sell through of the Company's products to end customers. Based on the last four quarters, this amount has ranged from an average of approximately
31%
to
34%
of the list price billed to the customer. The gross deferred costs represent the standard costs (which approximate actual costs) of products the Company sells to the distributors. Although the Company monitors the levels and quality of inventory in the distribution channel, the Company's experience is that products returned from these distributors may be sold to a different distributor or in a different region of the world. As such, inventory write-downs or products in the distribution channel have not been significant.
Note 12. Accumulated Other Comprehensive Income (Loss)
Changes in the balance of accumulated other comprehensive income (loss), net of taxes, by component consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Cumulative translation adjustments
|
|
Unrealized gain on available-for-sale investments
|
|
Pension adjustments
|
|
Total
|
Balance, March 30, 2014
|
$
|
1,497
|
|
|
$
|
194
|
|
|
$
|
(82
|
)
|
|
$
|
1,609
|
|
Other comprehensive income (loss) before reclassifications
|
(5,218
|
)
|
|
793
|
|
|
814
|
|
|
(3,611
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
(127
|
)
|
|
(52
|
)
|
|
(179
|
)
|
Net current-period other comprehensive income (loss)
|
(5,218
|
)
|
|
666
|
|
|
762
|
|
|
(3,790
|
)
|
Balance, March 29, 2015
|
(3,721
|
)
|
|
860
|
|
|
680
|
|
|
(2,181
|
)
|
Other comprehensive loss before reclassifications
|
(280
|
)
|
|
(983
|
)
|
|
—
|
|
|
(1,263
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
345
|
|
|
(615
|
)
|
|
(270
|
)
|
Net current-period other comprehensive loss
|
(280
|
)
|
|
(638
|
)
|
|
(615
|
)
|
|
(1,533
|
)
|
Balance, April 3, 2016
|
$
|
(4,001
|
)
|
|
$
|
222
|
|
|
$
|
65
|
|
|
$
|
(3,714
|
)
|
Amounts reclassified out of comprehensive income (loss) components consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30, 2014
|
|
Location
|
Unrealized holding gains or losses on available-for-sale investments
|
|
$
|
345
|
|
|
$
|
(127
|
)
|
|
$
|
(97
|
)
|
|
interest and other, net
|
Change in unrealized gains or losses on post-employment and post-retirement benefit plans
|
|
(615
|
)
|
|
(52
|
)
|
|
(6
|
)
|
|
operating expense
|
Total amounts reclassified out of accumulated other comprehensive loss
|
|
$
|
(270
|
)
|
|
$
|
(179
|
)
|
|
$
|
(103
|
)
|
|
|
Note 13. Goodwill and Intangible Assets, Net
Goodwill activity for fiscal
2016
and
2015
is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
(in thousands)
|
Communications
|
|
Computing, Consumer and Industrial
|
|
Total
|
Balance as of March 30, 2014
|
$
|
122,248
|
|
|
$
|
13,396
|
|
|
$
|
135,644
|
|
Balance as of March 29, 2015
|
$
|
122,248
|
|
|
$
|
13,396
|
|
|
$
|
135,644
|
|
Additions - ZMDI acquisition (see Note 3)
|
600
|
|
|
169,489
|
|
|
170,089
|
|
Balance as of April 3, 2016
|
$
|
122,848
|
|
|
$
|
182,885
|
|
|
$
|
305,733
|
|
Goodwill balances as of
April 3, 2016
and
March 29, 2015
are net of
$920.3 million
and
$922.5 million
, respectively, in accumulated impairment losses.
Intangible asset balances as of
April 3, 2016
and
March 29, 2015
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2016
|
(in thousands)
|
Gross Assets
|
|
Accumulated
Amortization
|
|
Net Assets
|
Purchased intangible assets:
|
|
|
|
|
|
Developed technology
|
$
|
279,514
|
|
|
$
|
(205,307
|
)
|
|
$
|
74,207
|
|
Trademark
|
5,211
|
|
|
(4,576
|
)
|
|
635
|
|
Customer relationships
|
172,787
|
|
|
(130,745
|
)
|
|
42,042
|
|
Order backlog
|
5,800
|
|
|
(4,504
|
)
|
|
1,296
|
|
Intellectual property licenses
|
11,400
|
|
|
(1,819
|
)
|
|
9,581
|
|
Total purchased intangible assets
|
$
|
474,712
|
|
|
$
|
(346,951
|
)
|
|
$
|
127,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2015
|
(in thousands)
|
Gross Assets
|
|
Accumulated
Amortization
|
|
Net Assets
|
Purchased intangible assets:
|
|
|
|
|
|
Developed technology
|
$
|
211,170
|
|
|
$
|
(206,491
|
)
|
|
$
|
4,679
|
|
Trademark
|
4,411
|
|
|
(3,850
|
)
|
|
561
|
|
Customer relationships
|
131,045
|
|
|
(130,750
|
)
|
|
295
|
|
Total purchased intangible assets
|
$
|
346,626
|
|
|
$
|
(341,091
|
)
|
|
$
|
5,535
|
|
As a result of the acquisition of ZMDI, the Company recognized additional intangible assets with total original value of
$126.2 million
during fiscal 2016 (see Note 3).
During fiscal 2016, the Company individually purchased intangible assets with a total cost of
$11.4 million
and estimated useful life of
3 to 7.5 years
. These intangible assets are comprised of intellectual property licenses that are being used by the Company in the development, manufacture and sale of certain products.
Amortization expense for identified intangibles is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3, 2016
|
|
March 29, 2015
|
|
March 30, 2014
|
Existing technology
|
$
|
6,052
|
|
|
$
|
4,534
|
|
|
$
|
19,730
|
|
Trademarks
|
726
|
|
|
916
|
|
|
3,405
|
|
Customer relationships
|
2,253
|
|
|
1,123
|
|
|
916
|
|
Backlog
|
4,504
|
|
|
—
|
|
|
91
|
|
Intellectual property licenses
|
1,819
|
|
|
—
|
|
|
—
|
|
Non-compete agreements
|
—
|
|
|
—
|
|
|
651
|
|
Total
|
$
|
15,354
|
|
|
$
|
6,573
|
|
|
$
|
24,793
|
|
The intangible assets are being amortized over estimated useful lives of
1
to
7.5 years
.
During fiscal 2015, the Company recorded an impairment charge relating to the HSC assets held for sale of
$5.6 million
, which consisted of existing technology of
$4.6 million
, customer relationships of
$0.9 million
and non-compete agreements of
$0.1 million
. Refer to Note 4 for additional information.
During fiscal 2014, the Company initiated actions to discontinue production and sale of products using technology attained through the acquisitions of Mobius Microsystems in fiscal 2010 and IKOR in fiscal 2011. In connection with the decision to discontinue these products, the Company revised the estimated remaining useful life of the related acquired intangible assets, resulting in an additional
$8.7 million
in accelerated amortization which was charged to cost of revenues in fiscal 2014. In addition, the Company recorded a
$2.4 million
impairment charge to research and development expense associated with the decision to discontinue further development required to complete the Mobius Microsystems acquired in-process research and development.
Based on the intangible assets recorded at
April 3, 2016
, assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated amortization expense is expected to be as follows (in thousands):
|
|
|
|
|
Fiscal Year
|
Amount
|
2017
|
$
|
23,061
|
|
2018
|
19,325
|
|
2019
|
18,871
|
|
2020
|
18,569
|
|
2021 and thereafter
|
47,935
|
|
Total
|
$
|
127,761
|
|
Note 14. Restructuring
The following table shows the provision of the restructuring charges and the liability remaining as of
April 3, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others (Continuing Operations)
|
|
|
(in thousands)
|
HSC (Discontinued Operations)
|
|
Cost of Revenues
|
|
Operating Expenses
|
|
Total
|
Balance as of March 31, 2013
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
1,636
|
|
|
$
|
1,662
|
|
Provision
|
—
|
|
|
—
|
|
|
5,538
|
|
|
5,538
|
|
Cash payments
|
—
|
|
|
(26
|
)
|
|
(6,536
|
)
|
|
(6,562
|
)
|
Balance as of March 30, 2014
|
—
|
|
|
—
|
|
|
638
|
|
|
638
|
|
Provision
|
18,305
|
|
|
—
|
|
|
1,078
|
|
|
19,383
|
|
Cash payments
|
(6,073
|
)
|
|
—
|
|
|
(1,421
|
)
|
|
(7,494
|
)
|
Foreign exchange impact
|
(2,015
|
)
|
|
—
|
|
|
—
|
|
|
(2,015
|
)
|
Balance as of March 29, 2015
|
10,217
|
|
|
—
|
|
|
295
|
|
|
10,512
|
|
Provision
|
—
|
|
|
435
|
|
|
11,197
|
|
|
11,632
|
|
Cash payments
|
(8,877
|
)
|
|
(128
|
)
|
|
(10,533
|
)
|
|
(19,538
|
)
|
Foreign exchange impact
|
194
|
|
|
—
|
|
|
16
|
|
|
210
|
|
Balance as of April 3, 2016
|
$
|
1,534
|
|
|
$
|
307
|
|
|
$
|
975
|
|
|
$
|
2,816
|
|
As part of an effort to streamline operations with changing market conditions and to create a more efficient organization, the Company has undertaken restructuring actions to reduce its workforce and consolidate facilities. The Company’s restructuring expenses were primarily of: (i) severance and termination benefit costs related to the reduction of its workforce; and (ii) lease termination costs and costs associated with permanently vacating certain facilities.
Integration-related Restructuring Plan
In December 2015, the Company began the implementation of planned cost reduction and restructuring activities in connection with the acquisition of ZMDI. The Company recorded charges of approximately
$6.9 million
of employee termination cost for
two
former executives of ZMDI and
36
employees during fiscal 2016. As of April 3, 2016, the total accrued balance for employee severance costs related to these actions was
$1.2 million
. The Company expects to complete these actions by the first quarter of fiscal 2017.
HSC Business
In fiscal 2015, the Company prepared a workforce-reduction plan (the Plan) with respect to employees of its HSC business in France and the Netherlands. The Plan sets forth the general parameters, terms and benefits for employee dismissals. The Plan was approved by the French Works Council and Labor Administrator and the related Plan details were communicated to the affected employees in France and the Netherlands. No works council consultation was required in the Netherlands. The Company has not historically offered similar termination benefits as defined in the Plan for these locations. The Plan identified the number of employees to be terminated, their job classification or function, their location and the date that the Plan was expected to be completed. The Plan also established the terms of the benefit arrangement in sufficient detail to enable the employees to determine the type and amount of benefits that they would receive if terminated. In addition, the actions required to complete the Plan indicated that it was unlikely that substantial changes to the Plan would be made after communication to the employees. Accordingly, the Company accrued restructuring charges in accordance with ASC 420,
Exit or Disposal Cost Obligations
. The restructuring charges recorded to discontinued operations in the Consolidated Statement of Operations were approximately
$18.3 million
for the fiscal year ended March 29, 2015, for a total of
53
employees in France and the Netherlands combined.
The Company has substantially completed payments of these termination benefits as of April 3, 2016 and will complete the action by December 2017.
Other
During fiscal 2016, the Company recorded charges of
$4.7 million
and reduced headcount by
48
employees. During fiscal 2016, the Company paid
$4.6 million
related to these actions. As of April 3, 2016, the total accrued balance for employee severance costs related to these actions was
$0.1
million. The Company expects to complete these actions by the second quarter of fiscal 2017.
During fiscal 2015, the Company recorded other restructuring charges of
$1.1 million
and reduced headcount by
28
employees in multiple reduction in workforce actions. During fiscal 2016 and 2015, the Company paid
$0.3 million
and
$0.8 million
, respectively, related to these actions. As of April 3,2016, the total accrued balance for employee severance costs related to these actions was
zero
.
During fiscal 2014, the Company recorded restructuring charges of
$5.5 million
and reduced headcount by
117
employees in multiple reduction in workforce actions. During fiscal 2015 and 2014, the Company paid
$0.6 million
and
$4.9 million
, respectively, related to these actions. As of March 29, 2015, the total accrued balance for employee severance costs related to these actions was
zero
.
Note 15. Commitments and Contingencies
Guarantees
As of
April 3, 2016
, the Company’s financial guarantees consisted of guarantees and standby letters of credit, which are primarily related to the Company’s electrical utilities in Malaysia, consumption tax in Japan, office rental in Italy and a workers’ compensation plan in the United States. The maximum amount of potential future payments under these arrangements is approximately
$1.8 million
.
Commitments
Although the Company owns its corporate headquarters in San Jose, California, the Company leases various administrative facilities under operating leases which expire at various dates through fiscal 2021.
As of
April 3, 2016
, aggregate future minimum commitments for the next five fiscal years and thereafter under all operating leases, excluding leases in which amounts have been accrued for impairment charges, were as follows (in thousands):
|
|
|
|
|
Fiscal Year
|
Amount
|
2017
|
$
|
5,153
|
|
2018
|
3,769
|
|
2019
|
3,562
|
|
2020
|
2,876
|
|
2021 and thereafter
|
3,633
|
|
Total
|
$
|
18,993
|
|
Rent expense for the fiscal years ended
April 3, 2016
,
March 29, 2015
and
March 30, 2014
totaled approximately
$3.2 million
,
$4.2 million
and
$4.6 million
, respectively. Other supplier obligations including payments due under various software design tool and technology license agreements totaled
$11.6 million
and
$4.6 million
as of
April 3, 2016
and
March 29, 2015
, respectively.
Capital Leases
The Company has machinery and equipment that are accounted for as capital leases. The related liabilities are apportioned between current and long-term other liabilities on the Consolidated Balance Sheets based on the contractual timing of payments. These capital leases will expire in fiscal 2020.
As of
April 3, 2016
, aggregate future commitments for the next five fiscal years and thereafter under all capital leases, were as follows (in thousands):
|
|
|
|
|
Fiscal Year
|
Amount
|
2017
|
$
|
1,392
|
|
2018
|
1,157
|
|
2019
|
455
|
|
2020
|
109
|
|
Total
|
$
|
3,113
|
|
Indemnification
During the normal course of business, the Company makes certain indemnifications and commitments under which it may be required to make payments in relation to certain transactions. In addition to indemnifications related to non-infringement of patents and intellectual property, other indemnifications include indemnification of the Company’s directors and officers in connection with legal proceedings, indemnification of various lessors in connection with facility leases for certain claims arising from such
facility or lease, and indemnification of other parties to certain acquisition agreements. The duration of these indemnifications and commitments varies, and in certain cases, is indefinite. The Company believes that substantially all of its indemnities and commitments provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities and commitments because such liabilities are contingent upon the occurrence of events which are not reasonably determinable. The Company believes that any liability for these indemnities and commitments would not be material to its consolidated financial statements.
The Company maintains an accrual for obligations it incurs under its standard product warranty program and customer, part, or process specific matters. The Company’s standard warranty period is
one
year; however, in certain instances the warranty period may be extended to as long as
two
years. Management estimates the fair value of the Company’s warranty liability based on actual past warranty claims experience, its policies regarding customer warranty returns and other estimates about the timing and disposition of product returned under the standard program. Customer, part, or process specific accruals are estimated using a specific identification method. Historical profit and loss impact related to warranty returns activity has been minimal. The total warranty accrual was
$0.3 million
and
$0.1 million
as of
April 3, 2016
and
March 29, 2015
.
Litigation
In January 2012, Maxim I Properties, a general partnership that had purchased a certain parcel of real property (the Property) in 2003, filed a complaint in the Northern District of California naming approximately
30
defendants, including the Company ("Defendants"), alleging various environmental violations of the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA), the California Hazardous Substance Account Act (HSAA), and other common law claims (the Complaint). The Complaint alleges that Defendants including the Company “…generated, transported, and/or arranged for the transport and/or disposal of hazardous waste to the Property.” The Complaint further alleges that Defendants are liable for the costs of investigation and remediation of the Property due to the release of hazardous substances, and that Defendants violated their duty to prevent the release of such hazardous substances. On August 15, 2012, the plaintiff voluntarily dismissed its Complaint against the Company without prejudice. However, Moyer Products, Inc., another defendant, counter-claimed against the plaintiff Maxim and cross-claimed against Defendants, including the Company, and thus the Company remains a cross-defendant in this action.
In September 2012, the California Department of Toxic Substances Control (DTSC) notified the Company that it identified the Company, along with more than
50
other entities, as a respondent to DTSC's Enforcement Order, as “a generator of hazardous waste” that was sent to the Property. In April 2013, the Company, along with the other “respondent” parties, entered into a Corrective Action Consent Agreement (CACA) to conduct the Property investigation and corrective action selection. The CACA supersedes the Enforcement Order. In February 2013, the court stayed the Maxim/Moyer litigation pending the Property investigation under the CACA and DTSC's corrective action selection.
Property investigation activity took place between April 2013 and June 2015. On June 23, 2015, the Property investigation was deemed completed by the DTSC. The DTSC continues to evaluate corrective action alternatives. The Company will continue to vigorously defend itself against the allegations in the Complaint and evaluate settlement options with Moyer upon notification from DTSC of its corrective action selection. Because no specific corrective action has been selected yet and no specific monetary demands have been made, it is not possible for the Company to estimate the potential loss or range of potential losses for these actions.
As of
April 3, 2016
, the Company is also party to various other legal proceedings and claims arising in the normal course of business. With regard to these or future litigation matters that may arise, potential liability and probable losses or ranges of probable losses due to an unfavorable litigation outcome cannot be reasonably estimated at this time. Generally, litigation is subject to inherent uncertainties, and no assurance can be given that the Company will prevail in the Maxim lawsuit or any other particular lawsuit or claim. Pending lawsuits, claims as well as potential future litigation, could result in substantial costs and diversion of resources and could have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Note 16. Employee Benefit Plans
401(k) Plan
The Company sponsors a 401(k) retirement matching plan for qualified domestic employees. The Company recorded expenses of approximately
$2.6 million
,
$2.1 million
and
$2.1 million
in matching contributions under the plan in fiscal
2016
,
2015
, and
2014
, respectively.
Deferred Compensation Plans
Effective November 1, 2000, the Company established an unfunded deferred compensation plan to provide benefits to executive officers and other key employees. Under the plan, participants can defer any portion of their salary and bonus compensation into the plan and may choose from a portfolio of funds from which earnings are measured. Participant balances are always
100%
vested. As of
April 3, 2016
and
March 29, 2015
, obligations under the plan totaled approximately
$13.1 million
and
$13.1 million
, respectively. Additionally, the Company has set aside assets in a separate trust that is invested in corporate owned life insurance intended to substantially fund the liability under the plan. As of
April 3, 2016
and
March 29, 2015
, the deferred compensation plan assets were approximately
$14.6 million
and
$16.5 million
, respectively. The Company incurred costs for this plan for insurance, administration and other support of
$0.2 million
,
$0.1 million
and
$0.3 million
in fiscal
2016
,
2015
and
2014
, respectively.
During the first quarter of fiscal 2013, the Company assumed a deferred compensation plan associated with the acquisition of Fox. Under this plan, participants in retirement are entitled to receive a fixed amount from the Company on a monthly basis. The Company has purchased life insurance policies with the intention of funding the liability under this plan. As of
April 3, 2016
and
March 29, 2015
, the deferred compensation plan assets were approximately
$0.8 million
. As of
April 3, 2016
and
March 29, 2015
the liabilities under this plan were approximately
$1.8 million
and
$1.7 million
, respectively.
International Employee Benefit Plans
The Company sponsors defined-benefit pension plans, defined-contribution plans, multi-employer plans and other post-employment benefit plans covering employees in certain of the Company's international locations. As of
April 3, 2016
and
March 29, 2015
, the net liability for all of these international benefit plans totaled
$0.8 million
and
$1.0 million
, respectively.
Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of each country’s plan. The funding policy is consistent with the local requirements of each country. The Company does not have defined-benefit pension plans for its United States-based employees. The projected obligations of international employee defined-benefit pension plans and related offsetting plan assets were determined based on actuarial calculations. As of
April 3, 2016
, the net accumulated liability for these defined-benefit plans was not material. In fiscal 2015, as a result of a workforce-reduction plan under the HSC business in France, the related pension liability decreased by
$0.6 million
and long-term pension asset increased by
$0.4 million
. The net period expense was insignificant during fiscal 2016, 2015 and 2014. Distributions made from plans during fiscal 2016, 2015, and 2014 were not material. The Company includes accrued net defined-benefit plan obligations in other long-term liabilities on the Company's Consolidated Balance Sheets.
Note 17. Convertible Senior Notes, Warrants and Hedges
Convertible Notes Offering
On October 29, 2015, the Company priced its private offering of
$325 million
in aggregate principal amount of
0.875%
Convertible Senior Notes due 2022 ("Initial Convertible Notes"). On November 3, 2015, the initial purchasers in such offering exercised in full the over-allotment option to purchase an additional
$48.8 million
in aggregate principal amount of Convertible Notes (“Additional Convertible Notes”, and together “Convertible Notes”). The aggregate principal amount of Convertible Notes is
$373.8 million
. The net proceeds from this offering were approximately
$363.4 million
, after deducting the initial purchasers’ discounts and commissions and the offering expenses. The Company used approximately
$37.4 million
of the net proceeds to pay the cost of the Bond Hedges described below (after such cost was partially offset by the proceeds to the Company from the Warrant Transactions described below). The Company used a portion of the remaining net proceeds from the offering to purchase an aggregate of
$300 million
of its common stock, as authorized under its share repurchase program. The Company used
$75.0 million
under the currently approved repurchase authorization to purchase shares of common stock from a purchaser of the Convertible Notes in a privately negotiated transaction concurrent with the closing of the offering, and
$225 million
to purchase additional shares of common stock under the ASR Agreements. The Company intends to use the remainder of the net proceeds for working capital and general corporate purposes.
The Convertible Notes are governed by the terms of an indenture, dated November 4, 2015 (“Indenture”), between the Company and Wilmington Trust, National Association (“Trustee”). The Convertible Notes are the senior unsecured obligations of the Company and bear interest at a rate of
0.875%
per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 2016. The Convertible Notes will mature on November 15, 2022, unless earlier repurchased or converted. At any time prior to the close of business on the business day immediately preceding August 15, 2022, holders may convert their Convertible Notes at their option only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on April 3, 2016 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to
130%
of the conversion price on each applicable trading day; (2) during the
five
business day period after any
five
consecutive trading day period (the “measurement period”) in which the trading price per
$1,000
principal amount of Convertible Notes for each trading day of the measurement period was less than
98%
of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after August 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. Holders will not receive any additional cash payment or additional shares of the Company's common stock representing accrued and unpaid interest, if any, upon conversion of a Convertible Note, except in limited circumstances. Instead, interest will be deemed to be paid by the cash and shares, if any, of the Company’s common stock paid or delivered, as the case may be, to such holder upon conversion of a Convertible Note.
The conversion rate for the Convertible Notes will initially be
29.8920
shares of common stock per
$1,000
principal amount of Convertible Notes, which corresponds to an initial conversion price of approximately
$33.45
per share of common stock. The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of certain stock dividends on common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, the payment of cash dividends and certain issuer tender or exchange offers.
The Company may not redeem the Convertible Notes prior to the maturity date and no sinking fund is provided for the Convertible Notes, which means that the Company is not required to periodically redeem or retire the Convertible Notes. Upon the occurrence of certain fundamental changes involving the Company, holders of the Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes in principal amounts of
$1,000
or an integral multiple thereof at a repurchase price equal to
100%
of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least
25%
in principal amount of the outstanding Convertible Notes by written notice to the Company and the Trustee, may declare
100%
of the principal of and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company,
100%
of the principal of and accrued and unpaid interest, if any, on all of the Convertible Notes will become due and payable automatically. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right to receive additional interest on the Convertible Notes. As of April 3, 2016, none of the conditions allowing holders of the Notes to convert had been met.
In accordance with ASC 470-20, Debt with Conversion and Other Options, the Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. Such amount was based on the contractual cash flows discounted at an appropriate market rate for non-convertible debt at the date of issuance, which was determined to be
5.5%
. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount ("debt discount") is amortized to interest expense over the term of the Convertible Notes using the effective interest method with an effective interest rate of
5.5%
per annum. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accordance with ASU No. 2015-03, the Company allocated the total transaction costs related to the Convertible Note issuance to the liability and equity components based on their relative values. Issuance costs attributable to the
$274.4 million
liability component are being amortized to expense over the term of the Convertible Notes, and issuance costs attributable to the
$99.3 million
equity component are included along with the equity component in stockholders' equity.
At the debt issuance date, the Convertible Notes, net of issuance costs, consist of the following (in thousands):
|
|
|
|
|
|
November 3, 2015
|
|
Liability component
|
|
Principal
|
$
|
274,435
|
|
Less: Issuance cost
|
(7,568
|
)
|
Net carrying amount
|
266,867
|
|
Equity component
|
|
Allocated amount
|
99,316
|
|
Less: Issuance cost
|
(2,738
|
)
|
Net carrying amount
|
96,578
|
|
Convertible Notes, net
|
$
|
363,445
|
|
The following table includes total interest expense recognized related to the Convertible Notes for the year ended
April 3, 2016
(in thousands):
|
|
|
|
|
|
Fiscal Year Ended April 3, 2016
|
|
Contractual interest expense
|
$
|
1,363
|
|
Amortization of debt issuance costs
|
450
|
|
Amortization of debt discount
|
4,904
|
|
|
$
|
6,717
|
|
The net liability component of Convertible Notes is comprised of the following as of
April 3, 2016
(in thousands):
|
|
|
|
|
|
April 3, 2016
|
|
Net carrying amount at issuance date
|
$
|
266,867
|
|
Amortization of debt issuance costs during the year
|
450
|
|
Amortization of debt discount during the year
|
4,904
|
|
|
$
|
272,221
|
|
See Note 6 to the Company's consolidated financial statements for fair value disclosures related to the Company's Convertible Notes.
Convertible Note Hedge and Warrant Transactions
In connection with the pricing of the Convertible Notes, on October 29, 2015, the Company entered into convertible note hedge transaction (the "Initial Bond Hedge"), with JPMorgan Chase Bank, National Association (the “Option Counterparty”) and paid
$81.9 million
.
On October 29, 2015, the Company also entered into separate warrant transaction (the "Initial Warrant Transaction") with the Option Counterparty and received
$49.4 million
.
In connection with the exercise of the Over-Allotment Option, on November 3, 2015, the Company entered into a convertible note hedge transaction (the “Additional Bond Hedge”, and together with the Initial Bond Hedges, the “Bond Hedge”) with the Option Counterparty and paid
$12.3 million
. On November 3, 2015, the Company also entered into a separate additional warrant transaction (the “Additional Warrant Transaction”, and together with the Initial Warrant Transaction, the “Warrant Transactions”) with the Option Counterparty and received
$7.4 million
. Total amount paid for the purchase of bond hedge and total amount received for the sale of warrants was
$94.2 million
and
$56.8 million
, respectively.
The Bond Hedges are generally expected to reduce the potential dilution upon conversion of the Convertible Notes and/or offset any payments in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, that the Company is required to make in excess of the principal amount of the Convertible Notes upon conversion of any Convertible Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the Bond Hedges, is greater than the strike price (
$33.45
) of the Bond Hedges, which initially corresponds to the conversion price of the Convertible Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Convertible Notes. The Warrant Transactions will separately have a dilutive effect to the extent that the market value per share of common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants issued pursuant to the Warrant Transactions (the “Warrants”). The initial strike price of the Warrants is
$48.66
per share. The Bond Hedges and Warrants are not marked to market. The value of the Bond Hedges and Warrants were initially recorded in stockholders' equity and continue to be classified as stockholders' equity in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity. As of April 3, 2016, no warrants have been exercised.
Aside from the initial payment of a premium to the Option Counterparty under the Bond Hedges, which amount is partially offset by the receipt of a premium under the Warrant Transactions, the Company is not required to make any cash payments to the Option Counterparty under the Bond Hedges and will not receive any proceeds if the Warrants are exercised.
Note 18. Income Taxes
The components of income (loss) before income taxes and the income tax expense (benefit) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3, 2016
|
|
March 29, 2015
|
|
March 30, 2014
|
Income before income taxes from continuing operations:
|
|
|
|
|
|
United States
|
$
|
5,431
|
|
|
$
|
6,113
|
|
|
$
|
8,634
|
|
Foreign
|
128,433
|
|
|
109,825
|
|
|
103,660
|
|
Income before income taxes
|
$
|
133,864
|
|
|
$
|
115,938
|
|
|
$
|
112,294
|
|
Income tax expense (benefit) from continuing operations:
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
United States
|
$
|
5,694
|
|
|
$
|
—
|
|
|
$
|
(118
|
)
|
State
|
154
|
|
|
47
|
|
|
35
|
|
Foreign
|
38
|
|
|
1,312
|
|
|
867
|
|
|
5,886
|
|
|
1,359
|
|
|
784
|
|
Deferred:
|
|
|
|
|
|
|
|
|
United States
|
(59,944
|
)
|
|
79
|
|
|
240
|
|
State
|
26
|
|
|
2
|
|
|
14
|
|
Foreign
|
(7,403
|
)
|
|
(83
|
)
|
|
(57
|
)
|
|
(67,321
|
)
|
|
(2
|
)
|
|
197
|
|
Income tax expense (benefit) from continuing operations
|
$
|
(61,435
|
)
|
|
$
|
1,357
|
|
|
$
|
981
|
|
For fiscal years
2016
the income tax benefit associated with stock-based compensation that decreased income taxes payable and was recorded in additional paid-in capital was
$4.5 million
. For fiscal years
2015
and
2014
, there was
no
income tax benefit associated with stock-based compensation that decreased income taxes payable and was recorded in additional paid-in capital.
Reconciliation between the statutory U.S. income tax rate of
35%
and the effective rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Provision from continuing operations at 35% U.S. statutory rate
|
$
|
46,852
|
|
|
$
|
40,579
|
|
|
$
|
39,303
|
|
State tax, net of federal benefit
|
198
|
|
|
160
|
|
|
32
|
|
Effect of foreign operations
|
(55,331
|
)
|
|
(35,740
|
)
|
|
(33,217
|
)
|
Repatriation of foreign earnings
|
32,957
|
|
|
—
|
|
|
5,623
|
|
Valuation allowance
|
(81,553
|
)
|
|
3,372
|
|
|
(4,622
|
)
|
Research tax credits
|
(6,150
|
)
|
|
(4,439
|
)
|
|
(6,363
|
)
|
Stock-based compensation
|
1,028
|
|
|
(2,740
|
)
|
|
(689
|
)
|
Other
|
564
|
|
|
165
|
|
|
914
|
|
Income tax expense (benefit) from continuing operations
|
$
|
(61,435
|
)
|
|
$
|
1,357
|
|
|
$
|
981
|
|
As a result of the Company's international manufacturing operations, a significant portion of the Company's worldwide profits are in jurisdictions outside the United States, primarily Malaysia, which has granted the Company significant reductions in tax rates. These lower tax rates allow the Company to record a relatively low tax expense on a worldwide basis. The Company was granted a tax incentive in Malaysia during fiscal 2009. The tax incentive was contingent upon the Company continuing to meet specified investment criteria in fixed assets, and to operate an APAC regional headquarters center. In the fourth quarter of fiscal 2012, the Company agreed with the Malaysia Industrial Development Board to cancel the previously granted tax incentive and enter into a new tax incentive agreement which provides a full tax exemption on statutory income for a period of
10
years commencing April 4, 2011. The Company is required to meet several conditions as to financial targets, investment, headcount and activities in Malaysia to retain this status. The impact of these tax incentives decreased foreign taxes by
$25.0 million
,
$9.7
million
and
$2.0 million
for fiscal
2016
,
2015
and
2014
, respectively. The benefit of the tax incentives on net income per share (diluted) was approximately
$0.17
,
$0.06
, and
$0.01
for fiscal
2016
,
2015
and
2014
, respectively.
After examination of the Company’s projected offshore cash flows, and global cash requirements, the Company has determined that beginning in fiscal year 2016, the Company would change its capital allocation strategy, such that it no longer requires 100% of its foreign-generated cash to support its foreign operations. The Company plans to repatriate a portion of its offshore earnings generated after fiscal year 2015 to the U.S. for domestic operations, and the Company has accrued for the related tax impacts accordingly.
In the fourth quarter of fiscal 2016, the Company repatriated
$85 million
of its offshore earnings to the U.S. for domestic operations, bringing the total repatriation in fiscal 2016 to
$101 million
, which includes a distribution above and beyond the anticipated annual amount. This repatriation, during the fourth quarter of fiscal 2016, reflected the Company’s objectives of increasing its available U.S. cash and providing liquidity to meet its cash needs in the U.S., including, among other things, servicing debt, potentially funding strategic investments, and potentially funding opportunistic share repurchases on an accelerated basis, while evaluating the future cash needs in the Company’s foreign jurisdictions after our recent foreign acquisition.
For earnings accumulated as of March 29, 2015, the Company continues to indefinitely reinvest such amounts in its foreign jurisdictions, except to the extent there is any previously taxed income which is expected to be repatriated. No U.S. income taxes have been provided for approximately
$888.7 million
of undistributed earnings of foreign subsidiaries. As the Company currently has no plans to repatriate those earnings, no U.S. income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company could be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. As the Company does not know the time or manner in which the Company would repatriate those funds, it is not practical to determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings and therefore the Company cannot quantify the tax liability.
The Protecting Americans from Tax Hikes Act of 2015 (the “Act”) was signed into law on December 18, 2015. The Act contains a number of provisions including, most notably, a permanent extension of the U.S. federal research tax credit. The Company’s tax provision for fiscal 2016 reflects the benefit of the U.S. federal research credit.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
April 3, 2016
|
|
March 29, 2015
|
Deferred tax assets:
|
|
|
|
Deferred income on shipments to distributors
|
$
|
2,016
|
|
|
$
|
3,057
|
|
Non-deductible accruals and reserves
|
19,432
|
|
|
9,337
|
|
Net operating losses and credit carryforwards
|
112,380
|
|
|
122,178
|
|
Depreciation and amortization
|
14,473
|
|
|
12,274
|
|
Stock options
|
3,262
|
|
|
1,849
|
|
Other
|
1,747
|
|
|
1,737
|
|
Total deferred tax assets
|
153,310
|
|
|
150,432
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Purchased intangibles
|
(38,318
|
)
|
|
(564
|
)
|
Other
|
(10,975
|
)
|
|
(2,699
|
)
|
Total deferred tax liabilities
|
(49,293
|
)
|
|
(3,263
|
)
|
Valuation allowance
|
(62,800
|
)
|
|
(148,954
|
)
|
Net deferred tax assets (liabilities)
|
$
|
41,217
|
|
|
$
|
(1,785
|
)
|
The Company maintained a full valuation allowance against its deferred tax assets through the third quarter of fiscal 2016 as there was insufficient positive evidence to overcome the significant negative evidence and to conclude that it was more likely than not that the deferred tax assets would be realized. The Company reached this decision based on judgment, which included consideration of historical U.S. operating results, projections of future U.S. profits, and a history of expiring tax attributes. In the fourth quarter of fiscal 2016, the Company generated a substantial amount of U.S. profits, especially as a result of the repatriation of foreign earnings during the fourth quarter of fiscal 2016, utilizing its remaining U.S. federal net operating loss carryovers available as well as a significant amount of U.S. tax credit carryforwards. In addition, in the fourth quarter of fiscal 2016 the Company
completed its business plan for fiscal 2017 and validated its mid-term business plan. The Company also considered forecasts of future taxable income and evaluated the utilization of its remaining tax credit carryforwards prior to their date of expiration. All of these are significant positive factors that overcame prior negative evidence and the Company concluded that it was appropriate to release the valuation allowance of
$61.7 million
against its deferred tax assets as of April 3, 2016, with the exception of deferred tax assets related to certain foreign and state jurisdictions.
As of April 3, 2016, the Company continued to maintain a valuation allowance against its net deferred tax assets in certain foreign and state jurisdictions, as management is not able to conclude that it is more likely than not that these deferred tax assets will be realized. The Company reached this decision based on judgment, which included consideration of historical operating results and projections of future profits. The valuation allowance for deferred tax assets decreased by
$86.2 million
in fiscal 2016 and increased by
$5.3 million
in fiscal
2015
.
As of
April 3, 2016
, the Company had federal, state and foreign net operating loss (NOL) carryforwards of approximately
$2.0 million
and
$53.7 million
and
$112.0 million
, respectively, which include excess tax benefits related to stock-based compensation. The foreign net operating loss carryforwards were obtained as part of the acquisition of ZMDI in fiscal 2016 (see Note 3, “Business Combinations” for additional information on the acquisition). The federal NOL carryforwards will expire in various years from fiscal 2020 through 2024, if not utilized. The state NOL carryforwards will expire in various years from fiscal 2017 through 2036, if not utilized. The foreign NOL carryforwards do not expire. The utilization of US federal and state NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, the Company does not expect that such annual limitation will impair the realization of these NOLs.
As of
April 3, 2016
, the Company had approximately
$61.9 million
of federal research and development tax credit carryforwards, and
$12.3 million
of foreign tax credit carryforwards. The federal research and development tax credit carryforwards will expire in fiscal years 2019 through 2036, if not utilized, and the foreign tax credit carryforwards will expire in fiscal years 2017 to 2025, if not utilized. The Company also had, as of
April 3, 2016
, approximately
$84.6 million
of state income tax credit carryforwards, of which
$7.3 million
will expire in fiscal years 2019 through 2036, if not utilized. The Company also had, as of
April 3, 2016
, approximately
$8.8 million
of tax credit carryforwards in foreign jurisdictions, which will expire in fiscal years 2019 through
2026
.
Of the NOLs and credits described above, approximately
$26.8 million
, tax effected, relate to excess stock compensation benefits and thus such carryforwards are not recorded as deferred tax assets. Instead, these excess stock compensation benefits will be credited to additional paid-in capital when recognized.
The federal, state, and foreign NOL and tax credit carryforwards in the income tax returns filed include unrecognized tax benefits. The deferred tax assets recognized for those NOLs and tax credits are presented net of these unrecognized tax benefits.
In October 2015, the Company issued Convertible Notes which led to the establishment of
$0.9 million
of net deferred tax liability associated with the equity component of the Convertible Notes and its related debt issuance costs (see Note 17, “Convertible Senior Notes, Warrants and Hedges” for additional information on the Convertible Notes). This deferred tax liability led to a net reduction of valuation allowance of an equal amount in the third quarter of fiscal 2016.
The following tables summarize the activities of gross unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3, 2016
|
|
March 29, 2015
|
|
March 30, 2014
|
Beginning balance
|
$
|
33,190
|
|
|
$
|
32,237
|
|
|
$
|
31,066
|
|
Increases related to prior year tax positions
|
1,474
|
|
|
549
|
|
|
90
|
|
Decreases related to prior year tax positions
|
(719
|
)
|
|
(296
|
)
|
|
(301
|
)
|
Increases related to current year tax positions
|
938
|
|
|
803
|
|
|
1,498
|
|
Decrease related to settlement
|
(1,758
|
)
|
|
—
|
|
|
—
|
|
Decreases related to the lapsing of statute of limitations
|
(50
|
)
|
|
(103
|
)
|
|
(116
|
)
|
Ending balance
|
$
|
33,075
|
|
|
$
|
33,190
|
|
|
$
|
32,237
|
|
The amount of unrecognized tax benefits that would favorably impact the effective tax rate were approximately
$16.0 million
and
$0.3 million
as of
April 3, 2016
and
March 29, 2015
, respectively. As of
April 3, 2016
, approximately
$17.1 million
of unrecognized tax benefits would be offset by a change in valuation allowance. The Company recognizes potential interest and penalties related to the income tax on the unrecognized tax benefits as a component of income tax expense and accrued approximately
$0.1 million
for these items in fiscal
2016
and
2015
, respectively.
During the quarter ended June 28, 2015, the Company reached an understanding regarding the terms for settling with the U.S. Internal Revenue Service ("IRS") and closed out all positions as part of the examination of its income tax returns for the fiscal years 2010 through 2012. As a result, the Company remeasured its tax positions based on the facts, circumstances, and information available at the reporting date. The outcome did not have a material effect on the Company’s financial position, cash flows or results of operations due to its tax attributes.
As of April 3, 2016, the Company’s fiscal years 2009 through 2012 are under audit by the Inland Revenue Authority of Singapore. Although the final outcome is uncertain, based on currently available information, the Company believes that the ultimate outcome will not have a material adverse effect on its financial position, cash flows or results of operations.
On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion, in favor of Altera Corp., related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. The Internal Revenue Service filed a notice of appeal on February 19, 2016 in this case. Due to the uncertainty surrounding the status of the current regulations, questions related to the scope of potential benefits, and the risk of the Tax Court’s decision being overturned upon appeal, the Company has not recorded any benefit as of April 3, 2016. The Company will continue to monitor ongoing developments and potential impacts to its financial statements.
The Company believes that within the next 12 months, it is reasonably possible that a decrease of up to
$0.3 million
in unrecognized tax benefits may occur due to settlements with tax authorities or statute lapses.
The Company's open years in the U.S. federal jurisdiction are fiscal 2013 and later years. In addition, the Company is effectively subject to federal tax examination adjustments for tax years ended on or after fiscal year 1999, in that the Company has tax attribute carryforwards from these years that could be subject to adjustments, if and when utilized. The Company's open years in various state and foreign jurisdictions are fiscal years 2008 and later.
Note 19. Segment Information
The Chief Operating Decision Maker is the Company’s President and Chief Executive Officer.
The Company's reportable segments include the following:
|
|
•
|
Communications segment: includes clock and timing solutions, flow-control management devices including Serial RapidIO
®
switching solutions, multi-port products, telecommunications products, high-speed static random access memory, first in and first out, digital logic, radio frequency, and frequency control solutions.
|
|
|
•
|
Computing, Consumer and Industrial segment: includes clock generation and distribution products, high-performance server memory interfaces, PCI Express switching solutions, power management solutions, signal integrity products, and sensing products for mobile, automotive and industrial solutions.
|
The Company completed the acquisition of ZMDI in December 2015 and is in the process of integrating the ZMDI business into the Company's reporting segment. During fiscal 2016, the Company renamed its Computing and Consumer reportable segment to Computing, Consumer and Industrial in order to reflect the operations of ZMDI which are primarily aggregated into the Computing, Consumer and Industry reportable segment.
The tables below provide information about these segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by segment
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Communications
|
$
|
302,188
|
|
|
$
|
313,630
|
|
|
$
|
292,435
|
|
Computing, Consumer and Industrial
|
395,188
|
|
|
259,275
|
|
|
192,344
|
|
Total revenues
|
$
|
697,376
|
|
|
$
|
572,905
|
|
|
$
|
484,779
|
|
The Company utilizes global and regional distributors around the world, that buy product directly from the Company on behalf of their customers. Sales through a distributor, Uniquest, represented approximately
16%
of the Company's revenues in each of the fiscal years
2016
and
2015
. Sales through a distributor, Avnet and its affiliates, represented approximately
15%
,
14%
and
17%
of the Company’s revenues in fiscal
2016
,
2015
and
2014
, respectively. Each of these distributors serves customers within both of the Company's reportable segments. SK Hynix and its affiliates, which is a direct OEM customer, accounted for
12%
of the Company's revenues in fiscal 2016.
At
April 3, 2016
,
two
distributors represented approximately
12%
and
10%
, respectively, of the Company's account receivable. At
March 29, 2015
,
two
distributors represented approximately
11%
and
10%
,
respectively, of the Company's account receivable.
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) by segment from continuing operations
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Communications
|
$
|
115,888
|
|
|
$
|
116,018
|
|
|
$
|
103,457
|
|
Computing, Consumer and Industrial
|
88,101
|
|
|
29,301
|
|
|
(22,658
|
)
|
Unallocated expenses:
|
|
|
|
|
|
Amortization of intangible assets
|
(13,662
|
)
|
|
(6,573
|
)
|
|
(21,964
|
)
|
Inventory fair market value adjustment
|
(5,531
|
)
|
|
—
|
|
|
—
|
|
Impairment of acquired in-process R&D
|
—
|
|
|
—
|
|
|
(2,433
|
)
|
Gain on divestitures
|
—
|
|
|
—
|
|
|
78,632
|
|
Asset impairment and other
|
(147
|
)
|
|
(2,968
|
)
|
|
(4,113
|
)
|
Stock-based compensation
|
(34,158
|
)
|
|
(22,453
|
)
|
|
(12,677
|
)
|
Severance, retention and facility closure costs
|
(11,701
|
)
|
|
(1,250
|
)
|
|
(6,590
|
)
|
Acquisition-related income (costs) and other
|
(2,591
|
)
|
|
125
|
|
|
(802
|
)
|
Deferred compensation plan expense (benefit)
|
(26
|
)
|
|
(50
|
)
|
|
51
|
|
Interest income and other, net
|
(2,309
|
)
|
|
3,788
|
|
|
1,391
|
|
Income from continuing operations, before income taxes
|
$
|
133,864
|
|
|
$
|
115,938
|
|
|
$
|
112,294
|
|
The Company does not allocate goodwill and intangible assets impairment charge, IPR&D, severance and retention costs, acquisition-related costs, stock-based compensation, interest income and other, and interest expense to its segments. In addition, the Company does not allocate assets to its segments. The Company excludes these items consistent with the manner in which it internally evaluates its results of operations.
Revenues from unaffiliated customers by geographic area, based on the customers' shipment locations, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
|
March 30,
2014
|
Hong Kong
|
$
|
304,392
|
|
|
$
|
262,274
|
|
|
$
|
190,903
|
|
Rest of Asia Pacific
|
173,408
|
|
|
137,066
|
|
|
136,213
|
|
Korea
|
75,402
|
|
|
42,873
|
|
|
22,834
|
|
Americas (1)
|
74,631
|
|
|
68,373
|
|
|
71,305
|
|
Europe
|
69,543
|
|
|
62,319
|
|
|
63,524
|
|
Total revenues
|
$
|
697,376
|
|
|
$
|
572,905
|
|
|
$
|
484,779
|
|
|
|
(1)
|
Revenues from the customers in the U.S. were
$65.2 million
,
$61.7 million
and
$63.1 million
in fiscal
2016
,
2015
and
2014
, respectively.
|
The Company’s significant operations outside of the United States include a test facility in each of Malaysia and Germany, design centers in the U.S., Canada and China, and sales subsidiaries in Japan, APAC and Europe. The Company's net property, plant and equipment are summarized below by geographic area:
|
|
|
|
|
|
|
|
|
(in thousands)
|
April 3,
2016
|
|
March 29,
2015
|
United States
|
$
|
38,735
|
|
|
$
|
38,879
|
|
Malaysia
|
20,150
|
|
|
21,244
|
|
Germany
|
9,235
|
|
|
—
|
|
Canada
|
3,781
|
|
|
3,997
|
|
All other countries
|
1,976
|
|
|
1,388
|
|
Total property, plant and equipment, net
|
$
|
73,877
|
|
|
$
|
65,508
|
|
Note 20. Interest Income and Other, Net
The components of interest income and other, net are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
(in thousands)
|
April 3, 2016
|
|
March 29, 2015
|
|
March 30, 2014
|
Interest income
|
$
|
3,616
|
|
|
$
|
2,724
|
|
|
$
|
1,348
|
|
Other income, net
|
652
|
|
|
2,094
|
|
|
1,380
|
|
Interest income and other, net
|
$
|
4,268
|
|
|
$
|
4,818
|
|
|
$
|
2,728
|
|
Interest income is derived from earnings on cash and short term investments. Other income, net primarily consists of gains or losses in the value of deferred compensation plan assets, foreign currency gains or losses and other non-operating gains or losses.
Note 21. Derivative Financial Instruments
As a result of its international operations, sales and purchase transactions, the Company is subject to risks associated with fluctuating currency exchange rates. The Company may use derivative financial instruments to hedge these risks when instruments are available and cost effective, in an attempt to minimize the impact of currency exchange rate movements on its operating results and on the cost of capital equipment purchases.
As of
April 3, 2016
and
March 29, 2015
, the Company did not have any outstanding foreign currency contracts that were designated as hedges of forecasted cash flows or capital equipment purchases. The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company also has foreign exchange facilities used for hedging arrangements with banks that allow the Company to enter into foreign exchange contracts totaling approximately
$20.0 million
, all of which was available at
April 3, 2016
.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY RESULTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended April 3, 2016
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter (3)
|
|
Fourth
Quarter (3)(4)
|
Revenues
|
$
|
160,907
|
|
|
$
|
169,498
|
|
|
$
|
177,610
|
|
|
$
|
189,361
|
|
Gross profit
|
99,234
|
|
|
106,546
|
|
|
107,911
|
|
|
107,963
|
|
Net income from continuing operations
|
38,720
|
|
|
42,423
|
|
|
32,545
|
|
|
81,611
|
|
Net loss from discontinued operations
|
(562
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
|
38,158
|
|
|
42,423
|
|
|
32,545
|
|
|
81,611
|
|
|
|
|
|
|
|
|
|
Basic net income per share – continuing operations
|
$
|
0.26
|
|
|
$
|
0.29
|
|
|
$
|
0.23
|
|
|
$
|
0.61
|
|
Basic net income per share
|
$
|
0.26
|
|
|
$
|
0.29
|
|
|
$
|
0.23
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
Diluted net income per share – continuing operations
|
$
|
0.25
|
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
$
|
0.59
|
|
Diluted net income per share
|
$
|
0.25
|
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 29, 2015
|
|
First
Quarter (1)
|
|
Second
Quarter (2)
|
|
Third
Quarter (2)
|
|
Fourth
Quarter
|
Revenues
|
$
|
126,302
|
|
|
$
|
137,093
|
|
|
$
|
151,160
|
|
|
$
|
158,350
|
|
Gross profit
|
74,009
|
|
|
81,876
|
|
|
91,364
|
|
|
98,055
|
|
Net income from continuing operations
|
17,111
|
|
|
24,246
|
|
|
32,841
|
|
|
40,383
|
|
Net income (loss) from discontinued operations
|
4,732
|
|
|
(9,804
|
)
|
|
(14,483
|
)
|
|
(1,117
|
)
|
Net income
|
21,843
|
|
|
14,442
|
|
|
18,358
|
|
|
39,266
|
|
|
|
|
|
|
|
|
|
Basic net income per share – continuing operations
|
$
|
0.11
|
|
|
$
|
0.16
|
|
|
$
|
0.22
|
|
|
$
|
0.27
|
|
Basic net income (loss) per share – discontinued operations
|
$
|
0.04
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.01
|
)
|
Basic net income per share
|
$
|
0.15
|
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
Diluted net income per share – continuing operations
|
$
|
0.11
|
|
|
$
|
0.16
|
|
|
$
|
0.21
|
|
|
$
|
0.26
|
|
Diluted net income (loss) per share – discontinued operations
|
$
|
0.03
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.01
|
)
|
Diluted net income per share
|
$
|
0.14
|
|
|
$
|
0.09
|
|
|
$
|
0.12
|
|
|
$
|
0.25
|
|
(1) In the first quarter of fiscal 2015, the Company recorded a gain of
$16.8 million
in net income from discontinued operations related to the divestiture of the Alvand portion of its HSC business.
(2) In the second quarter of fiscal 2015, the Company recorded
$6.8 million
of minimum statutory benefits to discontinued operations with regards to a workforce-reduction plan that covered certain employees of its HSC business in France and the Netherlands. In the third quarter of fiscal 2015, the Company recorded
$11.9 million
of restructuring charges to discontinued operations in addition to the minimum statutory amount recognized in the previous quarter.
(3) In the third quarter of fiscal 2016, the Company completed the acquisition of ZMDI. The results of operations of the ZMDI business have been included for the period of December 7, 2015 to April 3, 2016.
(4) In the fourth quarter of fiscal 2016, the Company recorded a tax benefit of
$61.7 million
from the release of a valuation allowance. Based on significant positive evidence which overcame prior negative evidence, the Company concluded that it was appropriate to release the valuation allowance against its deferred tax assets, with the exception of deferred tax assets related to certain foreign and state jurisdictions.