CIRRUS LOGIC INC, 10-K filed on 5/30/2012
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Mar. 31, 2012
May 29, 2012
Sep. 23, 2011
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Entity Registrant Name
CIRRUS LOGIC INC 
 
 
Entity Central Index Key
0000772406 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Document Period End Date
Mar. 31, 2012 
 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--03-31 
 
 
Entity Common Stock, Shares Outstanding
 
64,479,256 
 
Entity Public Float
 
 
$ 863,787,764 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2012
Mar. 26, 2011
Assets
 
 
Cash and cash equivalents
$ 65,997 
$ 37,039 
Restricted investments
 
5,786 
Marketable securities
115,877 
159,528 
Accounts receivable, net
44,153 
39,098 
Inventories
55,915 
40,497 
Deferred tax assets
53,137 
30,797 
Prepaid assets
12,017 
3,457 
Other current assets
4,491 
3,268 
Total current assets
351,587 
319,470 
Long-term marketable securities
2,914 
12,702 
Property, plant and equipment, net
66,978 
34,563 
Intangibles, net
18,241 
20,125 
Deferred tax assets
89,071 
102,136 
Goodwill
6,027 
6,027 
Other assets
9,644 
1,598 
Total assets
544,462 
496,621 
Liabilities and Stockholders' Equity
 
 
Accounts payable
38,108 
27,639 
Accrued salaries and benefits
13,634 
12,402 
Deferred income
7,228 
6,844 
Supplier agreement
5,000 
 
Other accrued liabilities
9,015 
5,169 
Total current liabilities
72,985 
52,054 
Other long-term liabilities
5,620 
6,188 
Stockholders' equity:
 
 
Preferred Stock, 5.0 million shares authorized but unissued
   
   
Common stock, $0.001 par value, 280,000 shares authorized, 64,394 shares and 68,664 shares issued and outstanding at March 31, 2012 and March 26, 2011, respectively
64 
69 
Additional paid-in capital
1,008,164 
991,878 
Accumulated deficit
(541,609)
(552,814)
Accumulated other comprehensive loss
(762)
(754)
Total stockholders' equity
465,857 
438,379 
Total liabilities and stockholders' equity
$ 544,462 
$ 496,621 
Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2012
Mar. 26, 2011
Consolidated Balance Sheets [Abstract]
 
 
Preferred Stock, shares authorized but unissued
5,000,000 
5,000,000 
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
280,000,000 
280,000,000 
Common stock, shares issued
64,394,000 
68,664,000 
Common stock, shares outstanding
64,394,000 
68,664,000 
Consolidated Statements Of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Mar. 31, 2012
Mar. 26, 2011
Mar. 27, 2010
Consolidated Statements Of Operations [Abstract]
 
 
 
Net sales
$ 426,843 
$ 369,571 
$ 220,989 
Cost of sales
196,402 
167,576 
102,258 
Gross Margin
230,441 
201,995 
118,731 
Operating expenses:
 
 
 
Research and development
85,697 
63,934 
51,421 
Selling, general and administrative
65,208 
58,734 
43,306 
Patent agreement, net
 
(4,000)
(1,400)
Total operating expenses
150,905 
118,668 
93,327 
Income from operations
79,536 
83,327 
25,404 
Interest income
517 
860 
1,345 
Other income (expense), net
(70)
27 
(66)
Income before income taxes
79,983 
84,214 
26,683 
Benefit for income taxes
(8,000)
(119,289)
(11,715)
Net income
$ 87,983 
$ 203,503 
$ 38,398 
Basic earnings per share:
$ 1.35 
$ 3.00 
$ 0.59 
Diluted earnings per share:
$ 1.29 
$ 2.82 
$ 0.59 
Basic weighted average common shares outstanding:
64,934 
67,857 
65,338 
Diluted weighted average common shares outstanding:
68,063 
72,103 
65,626 
Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Mar. 31, 2012
Mar. 26, 2011
Mar. 27, 2010
Cash flows from operating activities:
 
 
 
Net income
$ 87,983 
$ 203,503 
$ 38,398 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
9,972 
8,145 
7,888 
Loss (gain) on retirement or write-off of long-lived assets
23 
(24)
70 
Amortization of lease settlement
 
 
(83)
Deferred income taxes
(10,154)
(120,045)
(11,932)
Gain on marketable securities
 
 
(500)
Stock compensation expense
12,178 
8,141 
5,318 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(5,055)
(15,135)
(13,149)
Inventories
(15,418)
(5,101)
(15,518)
Other assets
(9,783)
(1,158)
(937)
Accounts payable
10,469 
7,299 
10,454 
Accrued salaries and benefits
1,232 
2,440 
3,530 
Deferred revenues
384 
356 
3,062 
Income taxes payable
(130)
(80)
116 
Other accrued liabilities
1,494 
(1,401)
(1,581)
Net cash provided by operating activities
83,195 
86,940 
25,136 
Cash flows from investing activities:
 
 
 
Proceeds from sale of available for sale marketable securities
181,282 
202,753 
111,167 
Purchases of available for sale marketable securities
(127,852)
(255,426)
(147,929)
Proceeds from sale of non-marketable securities
 
 
500 
Purchases of property, plant and equipment
(35,948)
(20,060)
(3,654)
Investments in technology
(6,604)
(1,527)
(2,185)
Acquisition of business, net of cash acquired
 
 
(550)
Decrease (increase) in restricted investments
5,786 
69 
(100)
(Increase) decrease in deposits and other assets
1,773 
(58)
190 
Net cash provided by (used) in investing activities
18,437 
(74,249)
(42,561)
Cash flows from financing activities:
 
 
 
Repurchase and retirement of common stock
(76,782)
(22,766)
 
Issuance of common stock, net of issuance costs
4,108 
31,005 
2,030 
Net cash provided by (used in) financing activities
(72,674)
8,239 
2,030 
Net increase (decrease) in cash and cash equivalents
28,958 
20,930 
(15,395)
Cash and cash equivalents at beginning of year
37,039 
16,109 
31,504 
Cash and cash equivalents at end of year
65,997 
37,039 
16,109 
Supplemental disclosures of cash flow information
 
 
 
Interest expense
   
   
   
Income taxes
$ 2,268 
$ 784 
$ 90 
Consolidated Statements Of Stockholders' Equity (USD $)
In Thousands, unless otherwise specified
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
Balance at Mar. 28, 2009
$ 65 
$ 945,390 
$ (771,951)
$ (576)
$ 172,928 
Balance, shares at Mar. 28, 2009
65,241 
 
 
 
 
Components of comprehensive income:
 
 
 
 
 
Net income
 
 
38,398 
 
38,398 
Change in unrealized gain on marketable securities
 
 
 
(73)
(73)
Total comprehensive income
 
 
 
 
38,325 
Issuance of stock under stock option plans and other, value
2,029 
 
 
2,030 
Issuance of stock under stock option plans and other, shares
412 
 
 
 
 
Amortization of deferred stock compensation
 
5,318 
 
 
5,318 
Balance at Mar. 27, 2010
66 
952,737 
(733,553)
(649)
218,601 
Balance, shares at Mar. 27, 2010
65,653 
 
 
 
 
Components of comprehensive income:
 
 
 
 
 
Net income
 
 
203,503 
 
203,503 
Change in unrealized gain on marketable securities
 
 
 
(105)
(105)
Total comprehensive income
 
 
 
 
203,398 
Issuance of stock under stock option plans and other, value
31,000 
 
 
31,005 
Issuance of stock under stock option plans and other, shares
4,770 
 
 
 
 
Repurchase and retirement of common stock, value
(2)
 
(22,764)
 
(22,766)
Repurchase and retirement of common stock, shares
(1,759)
 
 
 
 
Amortization of deferred stock compensation
 
8,141 
 
 
8,141 
Balance at Mar. 26, 2011
69 
991,878 
(552,814)
(754)
438,379 
Balance, shares at Mar. 26, 2011
68,664 
 
 
 
 
Components of comprehensive income:
 
 
 
 
 
Net income
 
 
87,983 
 
87,983 
Change in unrealized gain on marketable securities
 
 
 
(8)
(8)
Total comprehensive income
 
 
 
 
87,975 
Issuance of stock under stock option plans and other, value
 
4,108 
 
 
4,108 
Issuance of stock under stock option plans and other, shares
642 
 
 
 
 
Repurchase and retirement of common stock, value
(5)
 
(76,778)
 
(76,783)
Repurchase and retirement of common stock, shares
(4,912)
 
 
 
 
Amortization of deferred stock compensation
 
12,178 
 
 
12,178 
Balance at Mar. 31, 2012
$ 64 
$ 1,008,164 
$ (541,609)
$ (762)
$ 465,857 
Balance, shares at Mar. 31, 2012
64,394 
 
 
 
 
Description Of Business
Description Of Business

1.      Description of Business 

 

Description of Business

 

         Cirrus Logic, Inc. (“Cirrus Logic,” “Cirrus,” “We,” “Us,” “Our,” or the “Company”) develops high-precision, analog and mixed-signal integrated circuits (“ICs”) for a broad range of consumer and industrial markets.  Building on our diverse analog and mixed-signal patent portfolio, Cirrus Logic delivers highly optimized products for consumer and commercial audio, automotive entertainment, and targeted industrial applications including energy control, energy measurement and energy exploration.  We also develop ICs, board-level modules and hybrids for high-power amplifier applications branded as the Apex Precision Power™ (“Apex”) line of products.  We also provide complete system reference designs based on our technology that enable our customers to bring products to market in a timely and cost-effective manner.

        

         We were incorporated in California in 1984, became a public company in 1989, and were reincorporated in the State of Delaware in February 1999.  Our primary facilities housing engineering, sales and marketing, administration, and test operations are located in Austin, Texas.  In addition, we have engineering, administrative and assembly facilities in Tucson, Arizona and sales locations internationally and throughout the United States. We also serve customers from international sales offices in Europe and Asia, including the People’s Republic of China, Hong Kong, South Korea, Japan, Singapore, Taiwan, and the United Kingdom.  Our common stock, which has been publicly traded since 1989, is listed on the NASDAQ Global Select Market under the symbol CRUS.

 

Basis of Presentation

 

         We prepare financial statements on a 52- or 53-week year that ends on the last Saturday in March.  Fiscal years 2011 and 2010 were 52-week years, whereas fiscal year 2012 was a 53-week year.

 

Principles of Consolidation

 

         The accompanying consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles (U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated.

 

Reclassifications    

Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation of financial information.

 

Use of Estimates

 

         The preparation of financial statements in accordance with U.S. GAAP requires the use of management estimates.  These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from these estimates.
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies

2.      Summary of Significant Accounting Policies

 

Cash and Cash Equivalents

 

         Cash and cash equivalents consist primarily of money market funds, commercial paper, and U.S. Government Treasury and Agency instruments with original maturities of three months or less at the date of purchase.

 

Restricted Investments

 

         As of March 31, 2012, and March 26, 2011, we had restricted investments of zero and $5.8 million, respectively, in support of our letters of credit needs.  The letters of credit primarily secured certain obligations under our operating lease agreement for our headquarters and engineering facility in Austin, Texas, which expired in fiscal year 2012. 

 

Marketable Securities

 

         We determine the appropriate classification of marketable securities at the time of purchase and reevaluate this designation as of each balance sheet date.  We classify these securities as either held-to-maturity, trading, or available-for-sale.  As of March 31, 2012, and March 26, 2011, all marketable securities and restricted investments were classified as available-for-sale securities.  The Company classifies its investments as “available for sale” because it expects to possibly sell some securities prior to maturity.  The Company’s investments are subject to market risk, primarily interest rate and credit risk.  The Company’s investments are managed by an outside professional manager within investment guidelines set by the Company.  Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities.  The fair value of investments is determined using observable or quoted market prices for those securities.

 

         Available-for-sale securities are carried at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive loss.  Realized gains and losses, declines in value judged to be other than temporary, and interest on available-for-sale securities are included in net income.  The cost of securities sold is based on the specific identification method.

 

Inventories

 

         We use the lower of cost or market method to value our inventories, with cost being determined on a first-in, first-out basis.  One of the factors we consistently evaluate in the application of this method is the extent to which products are accepted into the marketplace.  By policy, we evaluate market acceptance based on known business factors and conditions by comparing forecasted customer unit demand for our products over a specific future period, or demand horizon, to quantities on hand at the end of each accounting period.

 

         On a quarterly and annual basis, we analyze inventories on a part-by-part basis.  Inventory quantities on hand in excess of forecasted demand are considered to have reduced market value and, therefore, the cost basis is adjusted to the lower of cost or market.  Typically, market values for excess or obsolete inventories are considered to be zero.  Product life cycles and the competitive nature of the industry are factors considered in the estimation of customer unit demand at the end of each quarterly accounting period.

 

         Inventories were comprised of the following (in thousands):

 

 

 

 

Year Ended

        

March 31,

   2012 

March 26,

   2011 

         Work in process....................................................................................................................................

$  30,921

$  22,048

         Finished goods......................................................................................................................................

   24,994

    18,449

Inventories........................................................................................................................................

$ 55,915

$ 40,497

        

Property, Plant and Equipment, net

 

         Property, plant and equipment is recorded at cost, net of depreciation and amortization.  Depreciation and amortization is calculated on a straight-line basis over estimated economic lives, ranging from three to 39 years.  Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated useful life.  Furniture, fixtures, machinery, and equipment are all depreciated over a useful life of three to 10 years, while buildings are depreciated over a period of up to 39 years.  In general, our capitalized software is amortized over a useful life of three years, with capitalized enterprise resource planning software being amortized over a useful life of 10 years.  Gains or losses related to retirements or dispositions of fixed assets are recognized in the period incurred. 

 

        

Property, plant and equipment was comprised of the following (in thousands):

 

        

March 31,

   2012 

March 26,

   2011 

 

        Land and buildings.........................................................................................................................

  $      22,410

  $      19,051

 

         Furniture and fixtures...................................................................................................................

    4,320

    4,215

 

         Leasehold improvements.............................................................................................................

     6,765

     6,732

 

         Machinery and equipment..........................................................................................................

37,481

29,583

 

         Capitalized software.....................................................................................................................

     23,459

     22,579

 

        Construction in progress................................................................................................................

     28,497

2,986

 

         Total property, plant and equipment ........................................................................................

   122,932

   85,146

 

         Less:  Accumulated depreciation and amortization...............................................................

   (55,954)

   (50,583)

 

    Property, plant and equipment, net...................................................................................

$    66,978

$    34,563

 

        

         The increase in the construction in progress balance in fiscal year 2012 was primarily attributable to costs incurred during the construction of the new headquarters facility.  Depreciation and amortization expense on property, plant, and equipment for fiscal years 2012, 2011 and 2010 was $6.3 million, $4.8 million, and $4.3 million, respectively.  During fiscal year 2011 we retired fully depreciated assets with an original cost of $3.7 million.

 

Other-Than-Temporary Impairment

 

         All of the Company’s available-for-sale investments and other 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.  Marketable securities are evaluated for impairment if the decline in fair value below cost basis is significant and/or has lasted for an extended period of time.  Other investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary.  For investments accounted for using the cost method of accounting, management evaluates information (e.g., budgets, business plans, financial statements) in addition to quoted market price, if any, in determining whether an other-than-temporary decline in value exists.  Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults, and subsequent rounds of financings at an amount below the cost basis of the investment.  When a decline in value is deemed to be other-than-temporary, we recognize an impairment loss in the current period's operating results to the extent of the decline. 

 

Goodwill and Intangibles, net

 

        Intangible assets include purchased technology licenses and patents that are reported at cost and are amortized on a straight-line basis over their useful lives, generally ranging from one to ten years.  Acquired intangibles include existing technology, core technology or patents, license agreements, trademarks, covenants not-to-compete and customer agreements.  These assets are amortized on a straight-line basis over lives ranging from four to fifteen years.  Goodwill is recorded at the time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. 

 

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests.  If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required.  The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy and the semiconductor industry, or (iv) any failure to meet the performance projections included in our forecasts of future operating results.  The Company tests goodwill and indefinite lived intangibles for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist.  Impairment evaluations involve management estimates of asset useful lives and future cash flows.  Significant management judgment is required in the forecasts of future operating results that are used in the evaluations.  It is possible, however, that the plans and estimates used may be incorrect.  If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period.  There are no impairments of goodwill in 2012, 2011, and 2010.

 

Long-Lived Assets

 

         We test for impairment losses on long-lived assets and definite-lived intangibles used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.  We measure any impairment loss by comparing the fair value of the asset to its carrying amount.  We estimate fair value based on discounted future cash flows, quoted market prices, or independent appraisals. 

 

Foreign Currency Translation

 

         All of our international subsidiaries have the U.S. dollar as the functional currency.  The local currency financial statements are remeasured into U.S. dollars using current rates of exchange for assets and liabilities.  Gains and losses from remeasurement are included in other income (expense), net.  Revenue and expenses from our international subsidiaries are remeasured using the monthly average exchange rates in effect for the period in which the items occur.  For all periods presented, our foreign currency remeasurement expense was not significant.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject us to material concentrations of credit risk consist primarily of cash equivalents, restricted investments, marketable securities, long-term marketable securities, and trade accounts receivable.  We are exposed to credit risk to the extent of the amounts recorded on the balance sheet.  By policy, our cash equivalents, restricted investments, marketable securities, and long-term marketable securities are subject to certain nationally recognized credit standards, issuer concentrations, sovereign risk, and marketability or liquidity considerations.

 

        In evaluating our trade receivables, we perform credit evaluations of our major customers’ financial condition and monitor closely all of our receivables to limit our financial exposure by limiting the length of time and amount of credit extended.  In certain situations, we may require payment in advance or utilize letters of credit to reduce credit risk.  By policy, we establish a reserve for trade accounts receivable based on the type of business in which a customer is engaged, the length of time a trade account receivable is outstanding, and other knowledge that we may possess relating to the probability that a trade receivable is at risk for non-payment. 

 

         For fiscal years 2012 and 2011, we had one contract manufacturer, Futaihua Industrial, who represented 28 percent and 42 percent, respectively of our consolidated gross accounts receivable.  In fiscal year 2012, we had one contract manufacturer, Hongfujin Precision, who represented 14 percent of our consolidated gross accounts receivable.  For fiscal year 2011, we had one distributor, Avnet, Inc. who represented 17 percent, of our consolidated gross accounts receivable.  No other distributor or customer had receivable balances that represented more than 10 percent of consolidated gross accounts receivable as of the end of fiscal years 2012 or 2011.

 

         Since the components we produce are largely proprietary and generally not available from second sources, we consider our end customer to be the entity specifying the use of our component in their design.  These end customers may then purchase our products directly from us, from a distributor, or through a third party manufacturer contracted to produce their end product.  For fiscal years 2012, 2011, and 2010, our ten largest end customers represented approximately 74 percent, 62 percent, and 54 percent of our sales, respectively.  For fiscal years 2012, 2011, and 2010, we had one end customer, Apple Inc., who purchased through multiple contract manufacturers and represented approximately 62 percent, 47 percent, and 35 percent of the Company’s total sales, respectively.  Further, we had one distributor, Avnet, Inc., that represented 15 percent, 24 percent, and 26 percent of our sales for fiscal years 2012, 2011, and 2010, respectively.  No other customer or distributor represented more than 10 percent of net sales in fiscal years 2012, 2011, or 2010.

        

Revenue Recognition

 

We recognize revenue when all of the following criteria are met: persuasive evidence that an arrangement exists, delivery of goods has occurred, the sales price is fixed or determinable and collectability is reasonably assured.  We evaluate our distributor arrangements, on a distributor by distributor basis, with respect to each of the four criteria above.  For a majority of our distributor arrangements, we provide rights of price protection and stock rotation.  As a result, revenue is deferred at the time of shipment to our domestic distributors and certain international distributors due to the determination that the ultimate sales price to the distributor is not fixed or determinable.  Once the distributor has resold the product, and our final sales price is fixed or determinable, we recognize revenue for the final sales price and record the related costs of sales.  For certain of our smaller international distributors, we do not grant price protection rights and provide minimal stock rotation rights.  For these distributors, revenue is recognized upon delivery to the distributor, less an allowance for estimated returns, as the revenue recognition criteria have been met upon shipment. 

 

         Further, the Company defers the associated cost of goods sold on our consolidated balance sheet, net within the deferred income caption.  The Company routinely evaluates the products held by our distributors for impairment to the extent such products may be returned by the distributor within these limited rights and such products would be considered excess or obsolete if included within our own inventory.  Products returned by distributors and subsequently scrapped have historically been immaterial to the Company.

 

Warranty Expense

 

         We warrant our products and maintain a provision for warranty repair or replacement of shipped products.  The accrual represents management’s estimate of probable returns.  Our estimate is based on an analysis of our overall sales volume and historical claims experience, and the sales volume and historical claims experience at our largest customer, Apple, Inc.  The estimate is re-evaluated periodically for accuracy.

 

Shipping Costs

 

         Our shipping and handling costs are included in cost of sales for all periods presented.

 

Advertising Costs

 

         Advertising costs are expensed as incurred.  Advertising costs were $1.8 million, $1.3 million, and $1.0 million, in fiscal years 2012, 2011, and 2010, respectively.

 

Stock-Based Compensation

 

Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards and is recognized as an expense, on a ratable basis, over the vesting period, which is generally between zero and four years.  Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of stock options.  The Company calculates the grant-date fair value for stock options using the Black-Scholes valuation model.  The use of valuation models requires the Company to make estimates of assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield, and forfeiture rates.  


 

 

Income Taxes

 

          We recognize deferred tax assets if realization of such assets is more likely than not.  We have provided a valuation allowance against a portion of our net U.S. deferred tax assets due to uncertainties regarding their realization.  We evaluate our ability to realize our deferred tax assets on a quarterly basis.

 

          We recognize liabilities for uncertain tax positions based on the two-step process.  The first step requires us to determine if the weight of available evidence indicates that the tax position has met the threshold for recognition; therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals or litigation processes.  The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.  We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.  Depending on the jurisdiction, such a change in recognition or measurement may result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

 

Net Income Per Share 

 

         Basic net income per share is based on the weighted effect of common shares issued and outstanding and is calculated by dividing net income by the basic weighted average shares outstanding during the period.  Diluted net income per share is calculated by dividing net income by the weighted average number of common shares used in the basic net income per share calculation, plus the equivalent number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.  These potentially dilutive items consist primarily of outstanding stock options and restricted stock awards.

 

         The weighted outstanding options excluded from our diluted calculation for the years ended March 31, 2012, March 26, 2011, and March 27, 2010, were 1,052,000, 615,000, and 8,043,000, respectively, as the exercise price exceeded the average market price during the period.

 

Accumulated Other Comprehensive Loss

 

         Our accumulated other comprehensive loss is comprised of foreign currency translation adjustments from prior years when we had subsidiaries whose functional currency was not the U.S. Dollar, as well as unrealized gains and losses on investments classified as available-for-sale.  See Note 13 – Accumulated Other Comprehensive loss for additional discussion.

 

Recently Issued Accounting Pronouncements

 

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Accounting Standards Codification (“ASC”) Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  The amendments in this ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and international financial reporting standards (“IFRS”).  The ASU provides for certain changes in current GAAP disclosure requirements, including the measurement of level 3 assets and measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity.  The amendments in this ASU are to be applied prospectively, and are effective during interim and annual periods beginning after December 15, 2011.  The adoption of this guidance is not anticipated to have a material impact on our consolidated financial position, results of operations or cash flows.

 

In May 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (ASC Topic 220) — Presentation of Comprehensive Income.  With this update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  Current U.S. GAAP allows reporting entities the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity; this update eliminates that option.  The amendments in this ASU should be applied retrospectively, and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  This ASU was further revised in ASU No. 2011-12, Comprehensive Income (Topic 220) - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 that was issued in December 2011.  The adoption of this guidance will affect financial statement presentation only and therefore, will not have a material impact on our consolidated financial position, results of operations or cash flows. 

 

         In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350 - Testing Goodwill for Impairment.  Under the amendments in this ASU, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test and proceed as dictated in previous FASB guidance.  Under the amendments in this ASU, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test.  An entity may resume performing the qualitative assessment in any subsequent period.  The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.  The adoption of this guidance is not anticipated to have a material impact on our consolidated financial position, results of operations or cash flows, but will result in an additional statement of other comprehensive income.
Marketable Securities
Marketable Securities

3.      Marketable Securities

 

         The Company’s investments that have original maturities greater than 90 days have been classified as available-for-sale securities in accordance with US GAAP.  Marketable securities are categorized on the consolidated balance sheet as restricted investments and marketable securities, as appropriate.

 

 

         The following table is a summary of available-for-sale securities (in thousands):

 

 

As of March 31, 2012:

Amortized

Cost

Gross Unrealized

Gains

Gross Unrealized

Losses

Estimated Fair Value (Net Carrying Amount)

Corporate securities – U.S.................................................

       48,011

             33

          (19)

               48,025

U.S. Treasury securities......................................................

30,264

        1

    (4)

30,261

Agency discount notes.......................................................

16,789

   8

    (1)

16,796

Commercial paper..............................................................

23,719

5

(15)

23,709

Total securities.................................................................

$   118,783

$         47

$      (39)

$   118,791

 

         The Company’s specifically identified gross unrealized losses of $39 thousand relates to 37 different securities with a total amortized cost of approximately $72.6 million at March 31, 2012.  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at March 31, 2012.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of March 31, 2012.


 

 

 

 

As of March 26, 2011:

Amortized

Cost

Gross Unrealized

Gains

Gross Unrealized

Losses

Estimated Fair Value (Net Carrying Amount)

Corporate securities – U.S.................................................

    64,228

22       

  (38)

64,212

U.S. Treasury securities......................................................

35,268

  13

  

35,281

Agency discount notes.......................................................

16,588

  5

 (2)

16,591

Commercial paper..............................................................

56,130

23

(7)

56,146

Total securities.................................................................

$   172,214

$        63

$      (47)

$   172,230

 

         The Company’s specifically identified gross unrealized losses of $47 thousand relates to 28 different securities with a total amortized cost of approximately $61.8 million at March 26, 2011.  Because the Company does not intend to sell the investments at a loss and the Company will not be required to sell the investments before recovery of its amortized cost basis, it did not consider the investment in these securities to be other-than-temporarily impaired at March 26, 2011.  Further, the securities with gross unrealized losses had been in a continuous unrealized loss position for less than 12 months as of March 26, 2011.

 

The cost and estimated fair value of available-for-sale investments by contractual maturity were as follows:

 

 

 

 

 

 

 

March 31, 2012

March 26, 2011

 

Amortized

Cost

Estimated Fair Value

Amortized

Cost

Estimated Fair Value

Within 1 year.......................................................................

$  115,871

    $  115,876

$  159,516

    $ 159,528

After 1 year.........................................................................

  2,912 

   2,915

  12,698 

   12,702

 

$  118,783

$  118,791

$  172,214

$  172,230

Fair Value Of Financial Instruments
Fair Value Of Financial Instruments

4.      Fair Value of Financial Instruments

 

The Company has determined that the only assets and liabilities in the Company’s financial statements that are required to be measured at fair value on a recurring basis are the Company’s investment portfolio assets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

 

 

 

 

 

 

 

Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

 

 

 

 

 

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

 

 

 

 

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The Company’s investment portfolio assets consist of corporate debt securities, money market funds, U.S. Treasury securities, obligations of U.S. government-sponsored enterprises, and commercial paper, and are reflected on our consolidated balance sheet under the headings cash and cash equivalents, restricted investments, marketable securities, and long-term marketable securities.  The Company determines the fair value of its investment portfolio assets by obtaining non-binding market prices from its third-party portfolio managers on the last day of the quarter, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. 

 

As of March 26, 2011, the Company classified all investment portfolio assets as Level 1 inputs.  In fiscal year 2012, the Company determined that certain of its available-for-sale marketable securities should have been classified as Level 2.  These changes in the disclosed classification had no effect on the reported fair values of these investments.  Prior period amounts have been reclassified to properly present the securities as Level 2.  The Company has no Level 3 assets. 

 

The fair value of our financial assets at March 31, 2012, was determined using the following inputs (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

Significant

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

 

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Money market funds...........................................

 

$

40,557

 

 

$

 

 

$

 

 

$

40,557

 

   Commercial paper...............................................

 

 

 

 

 

15,952

 

 

 

 

 

 

15,952

 

   Corporate debt securities....................................

 

 

 

 

 

1,112

 

 

 

 

 

 

1,112

 

 

 

$

40,557

 

 

$

17,064

 

 

$

 

 

$

57,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Corporate debt securities....................................

 

$

 

 

$

48,025

 

 

$

 

 

$

48,025

 

   U.S. Treasury securities.....................................

 

 

30,261

 

 

 

 

 

 

 

 

 

30,261

 

   Agency discount notes........................................

 

 

 

 

 

16,796

 

 

 

 

 

 

16,796

 

   Commercial paper...............................................

 

 

 

 

 

23,709

 

 

 

 

 

 

23,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

30,261

 

 

$

88,530

 

 

$

 

 

$

118,791

 

 

The fair value of our financial assets at March 26, 2011, was determined using the following inputs (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

in Active

 

 

Significant

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Assets

 

 

Inputs

 

 

Inputs

 

 

 

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Money market funds................................................

 

$

17,700

 

 

$

 

 

$

 

 

$

17,700

 

   Commercial paper...................................................

 

 

 

 

 

4,999

 

 

 

 

 

 

4,999

 

   U.S. Treasury securities...........................................

 

 

 

 

 

10,500

 

 

 

 

 

 

10,500

 

 

 

$

17,700

 

 

$

15,499

 

 

$

 

 

$

33,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Corporate debt securities.........................................

 

$

 

 

$

64,212

 

 

$

 

 

$

64,212

 

   U.S. Treasury securities...........................................

 

 

35,281

 

 

 

 

 

 

 

 

 

35,281

 

   Agency discount notes.............................................

 

 

 

 

 

16,591

 

 

 

 

 

 

16,591

 

   Commercial paper...................................................

 

 

 

 

 

56,146

 

 

 

 

 

 

56,146