Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 25, 2010
Commission file number 000-49602
SYNAPTICS INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware
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77-0118518 |
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.) |
3120 Scott Blvd.
Santa Clara, California 95054
(Address of principal
executive offices) (Zip code)
(408) 454-5100
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Number of shares of Common Stock outstanding at January 20, 2011: 33,896,908
SYNAPTICS INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2010
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
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ITEM 1. |
|
FINANCIAL STATEMENTS |
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
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December 31, |
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June 30, |
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2010 |
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2010 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
216,444 |
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$ |
209,858 |
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Accounts receivable, net of allowances of $709 and $500
at December 31, 2010 and June 30, 2010, respectively |
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125,643 |
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101,509 |
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Inventories |
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23,002 |
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18,667 |
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Prepaid expenses and other current assets |
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4,422 |
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4,471 |
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Total current assets |
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369,511 |
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334,505 |
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Property and equipment at cost, net of accumulated depreciation of $24,020
and $20,256 at December 31, 2010 and June 30, 2010, respectively |
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27,470 |
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25,821 |
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Goodwill |
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1,927 |
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1,927 |
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Non-current investments |
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28,452 |
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28,012 |
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Other assets |
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26,528 |
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24,414 |
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$ |
453,888 |
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$ |
414,679 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
76,628 |
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$ |
65,618 |
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Accrued compensation |
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11,928 |
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|
11,330 |
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Income taxes payable |
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6,984 |
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10,061 |
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Other accrued liabilities |
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23,734 |
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18,962 |
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Total current liabilities |
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119,274 |
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105,971 |
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Notes payable |
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2,305 |
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2,305 |
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Other liabilities |
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21,555 |
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19,892 |
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Stockholders equity: |
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Common stock: |
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$0.001 par value; 120,000,000 and 60,000,000 shares authorized,
45,910,212 and 44,891,834 shares issued, and 33,587,719 and 34,020,521
shares outstanding, at December 31, 2010 and June 30, 2010,
respectively |
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46 |
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45 |
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Additional paid-in capital |
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375,159 |
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347,764 |
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Treasury stock: 12,322,493 and 10,871,313 common treasury shares at
December 31, 2010 and June 30, 2010, respectively, at cost |
|
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(322,142 |
) |
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(281,932 |
) |
Accumulated other comprehensive income |
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|
2,195 |
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|
1,515 |
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Retained earnings |
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255,496 |
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219,119 |
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Total stockholders equity |
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310,754 |
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286,511 |
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$ |
453,888 |
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$ |
414,679 |
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|
|
|
|
|
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|
See notes to condensed consolidated financial statements (unaudited).
3
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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December 31, |
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December 31, |
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2010 |
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2009 |
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2010 |
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2009 |
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Net revenue |
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$ |
159,581 |
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$ |
133,323 |
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$ |
312,766 |
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$ |
252,915 |
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Cost of revenue |
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94,543 |
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79,492 |
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184,900 |
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150,762 |
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Gross margin |
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65,038 |
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53,831 |
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127,866 |
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102,153 |
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Operating expenses: |
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Research and development |
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26,640 |
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22,442 |
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51,560 |
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42,417 |
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Selling, general, and administrative |
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18,958 |
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16,575 |
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34,506 |
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30,339 |
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Total operating expenses |
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45,598 |
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39,017 |
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86,066 |
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72,756 |
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Operating income |
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19,440 |
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14,814 |
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41,800 |
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29,397 |
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Interest income |
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226 |
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|
241 |
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|
437 |
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|
572 |
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Interest expense |
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|
(5 |
) |
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(968 |
) |
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(9 |
) |
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(2,391 |
) |
Impairment (loss)/recovery on
investments, net |
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10 |
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(443 |
) |
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Income before provision for income taxes |
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19,661 |
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14,087 |
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42,238 |
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|
27,135 |
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Provision for income taxes |
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1,983 |
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|
1,860 |
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5,861 |
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5,104 |
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Net income |
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$ |
17,678 |
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$ |
12,227 |
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$ |
36,377 |
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$ |
22,031 |
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Net income per share: |
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Basic |
|
$ |
0.52 |
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$ |
0.36 |
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$ |
1.06 |
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$ |
0.65 |
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Diluted |
|
$ |
0.50 |
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$ |
0.35 |
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$ |
1.02 |
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$ |
0.62 |
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Shares used in computing net income per
share: |
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Basic |
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33,954 |
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|
33,611 |
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34,181 |
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33,976 |
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Diluted |
|
|
35,360 |
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|
34,936 |
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35,644 |
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|
35,477 |
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|
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|
|
|
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|
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|
See notes to condensed consolidated financial statements (unaudited).
4
SYNAPTICS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Six Months Ended |
|
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December 31, |
|
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2010 |
|
|
2009 |
|
Cash flows from operating activities |
|
|
|
|
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|
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|
Net income |
|
$ |
36,377 |
|
|
$ |
22,031 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Share-based compensation costs |
|
|
17,357 |
|
|
|
19,144 |
|
Deferred taxes |
|
|
(1,924 |
) |
|
|
(2,084 |
) |
Depreciation of property and equipment |
|
|
5,295 |
|
|
|
4,171 |
|
Amortization of debt issuance costs |
|
|
|
|
|
|
118 |
|
Impairment/(recovery) of investments, net |
|
|
(10 |
) |
|
|
443 |
|
Amortization of debt discount |
|
|
|
|
|
|
2,069 |
|
Changes in operating assets and liabilities: |
|
|
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|
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|
Accounts receivable, net |
|
|
(24,134 |
) |
|
|
(15,563 |
) |
Inventories |
|
|
(4,335 |
) |
|
|
(887 |
) |
Prepaid expenses and other current assets |
|
|
49 |
|
|
|
(153 |
) |
Other assets |
|
|
(190 |
) |
|
|
(2,055 |
) |
Accounts payable |
|
|
11,010 |
|
|
|
20,699 |
|
Accrued compensation |
|
|
598 |
|
|
|
(381 |
) |
Income taxes |
|
|
(1,482 |
) |
|
|
4,397 |
|
Other accrued liabilities |
|
|
4,840 |
|
|
|
3,686 |
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|
|
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|
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|
Net cash provided by operating activities |
|
|
43,451 |
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|
55,635 |
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Cash flows from investing activities |
|
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|
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|
|
|
Purchases of short-term investments |
|
|
|
|
|
|
(5,986 |
) |
Proceeds from sales and maturities of short-term investments |
|
|
|
|
|
|
28,912 |
|
Proceeds from sales and maturities of non-current investments |
|
|
250 |
|
|
|
1,000 |
|
Purchases of property and equipment |
|
|
(6,944 |
) |
|
|
(4,165 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(6,694 |
) |
|
|
19,761 |
|
|
|
|
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|
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|
Cash flows from financing activities |
|
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|
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|
Purchases of treasury stock |
|
|
(40,210 |
) |
|
|
(44,545 |
) |
Proceeds from issuance of common stock upon exercise of
options
and stock purchase plan |
|
|
11,558 |
|
|
|
4,156 |
|
Retirement of debt, net of discount |
|
|
|
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|
(62,998 |
) |
Payroll taxes for deferred stock units |
|
|
(1,519 |
) |
|
|
(1,012 |
) |
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|
|
|
|
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|
Net cash used in financing activities |
|
|
(30,171 |
) |
|
|
(104,399 |
) |
|
|
|
|
|
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|
Net increase (decrease) in cash and cash equivalents |
|
|
6,586 |
|
|
|
(29,003 |
) |
Cash and cash equivalents at beginning of period |
|
|
209,858 |
|
|
|
169,036 |
|
|
|
|
|
|
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|
Cash and cash equivalents at end of period |
|
$ |
216,444 |
|
|
$ |
140,033 |
|
|
|
|
|
|
|
|
|
|
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Supplemental disclosures of cash flow information |
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|
|
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|
Cash paid for income taxes |
|
$ |
9,291 |
|
|
$ |
2,792 |
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements (unaudited).
5
SYNAPTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and
U.S. generally accepted accounting principles, or U.S. GAAP. However, certain information or
footnote disclosures normally included in financial statements prepared in accordance with U.S.
GAAP have been condensed or omitted pursuant to such SEC rules and regulations. In our opinion,
the financial statements include all adjustments, which are of a normal and recurring nature,
necessary for the fair presentation of the results of the interim periods presented. The results
of operations for the interim periods are not necessarily indicative of the operating results for
the full fiscal year or any future period. These financial statements should be read in
conjunction with the audited consolidated financial statements and related notes included in our
annual report on Form 10-K for the fiscal year ended June 30, 2010.
The consolidated financial statements include our financial statements and those of our wholly
owned subsidiaries. All significant intercompany balances and transactions have been eliminated
upon consolidation.
Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Our fiscal
2011 will be a 52-week period ending on June 25, 2011. Our fiscal 2010 was a 52-week period ending
on June 26, 2010. The fiscal periods presented in this report were 13-week periods for the three
months ended December 25, 2010 and December 26, 2009. For ease of presentation, the accompanying
consolidated financial statements have been shown as ending on December 31 and calendar quarter end
dates for all annual, interim, and quarterly financial statement captions, unless otherwise
indicated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue,
expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to revenue recognition, allowance for doubtful
accounts, cost of revenue, inventories, product warranty, share-based compensation costs, provision
for income taxes, income taxes payable, investments, and contingencies. We base our estimates on
historical experience, applicable laws and regulations, and various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or
conditions.
2. Revenue Recognition
We recognize revenue from product sales when there is persuasive evidence that an arrangement
exists, delivery has occurred and title has transferred, the price is fixed or determinable, and
collection is reasonably assured. We accrue for estimated sales returns and other allowances,
based on historical experience, at the time we recognize revenue.
6
3. Net Income Per Share
The computation of basic and diluted net income per share was as follows (in thousands, except
per share data):
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|
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|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
17,678 |
|
|
$ |
12,227 |
|
|
$ |
36,377 |
|
|
$ |
22,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares, basic |
|
|
33,954 |
|
|
|
33,611 |
|
|
|
34,181 |
|
|
|
33,976 |
|
Effect of
dilutive
share-based
awards |
|
|
1,406 |
|
|
|
1,325 |
|
|
|
1,463 |
|
|
|
1,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares, diluted |
|
|
35,360 |
|
|
|
34,936 |
|
|
|
35,644 |
|
|
|
35,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.52 |
|
|
$ |
0.36 |
|
|
$ |
1.06 |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.50 |
|
|
$ |
0.35 |
|
|
$ |
1.02 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our basic net income per share amounts for each period presented have been computed using
the weighted average number of shares of common stock outstanding. Our diluted net income per
share amounts for each period presented include the weighted average effect of potentially dilutive
shares. We use the treasury stock method to determine the dilutive effect of our share-based
awards and Convertible Senior Subordinated Notes, or Notes.
Dilutive net income per share amounts do not include the weighted average effect of 3,851,002
and 4,306,400 share-based awards that were outstanding during the three months ended December 31,
2010 and 2009, respectively, and 3,916,290 and 3,502,321 share-based awards that were outstanding
during the six months ended December 31, 2010 and 2009, respectively. These share-based awards
were not included in the computation of diluted net income per share because the proceeds received,
if any, from such share-based awards combined with the average unamortized compensation costs
adjusted for the hypothetical tax benefit or deficiency creditable or chargeable, respectively, to
additional paid-in capital were greater than the average market price of our common stock, and
therefore, their effect would have been antidilutive.
4. Auction Rate Securities Investments
Our non-current investments include auction rate securities, or ARS, which are reported at
fair value, with unrealized gains and losses excluded from earnings and are shown separately as a
component of accumulated other comprehensive income within stockholders equity. We charge any
other-than-temporary declines in the fair value of a debt security to earnings (within impairment
(loss)/recovery on investments, net) if the decline results from a credit loss or to other
comprehensive income if the decline results from a noncredit loss. We charge any
other-than-temporary declines in the fair value of equity securities to earnings (within impairment
(loss)/recovery on investments, net). Other-than-temporary declines result in the establishment of
a new cost basis for the security. We include interest earned on investments in interest income.
Our ARS investments, which have a par value of $40.5 million, have failed to settle in
auctions beginning in September 2007. These investments are not liquid, and in the event we need
to access these funds prior to their maturity, we will not be able to do so without a loss of
principal, unless redeemed by the issuers or a future auction on these investments is successful.
During the three and six months ended December 31, 2010, $50,000 and $250,000, respectively, of our
ARS investments were redeemed at par, and we realized a gain of zero and $10,000 on the redemption
of these investments, which is included in impairment (loss)/recovery on investments, net. During
the three and six months ended December 31, 2009, $300,000 and $1.0 million, respectively, of our
ARS investments were redeemed at par, and we realized a gain of zero and $6,000 on the redemption
of these investments.
7
As there are currently no active markets for our various failed ARS investments, we have
estimated the fair value as of December 31, 2010 using a trinomial discounted cash flow analysis.
The analysis considered, among other factors, the following:
|
|
|
the collateral underlying the security investments; |
|
|
|
creditworthiness of the counterparty; |
|
|
|
timing of expected future cash flows; |
|
|
|
the probability of a successful auction in a future period; |
|
|
|
the underlying structure of each investment; |
|
|
|
the present value of future principal and interest payments discounted at rates
considered to reflect current market conditions; |
|
|
|
consideration of the probabilities of default, passing a future auction, or redemption
at par for each period; and |
|
|
|
estimates of the recovery rates in the event of default for each investment. |
When possible, our failed ARS investments were compared to other observable market data or
securities with similar characteristics. Our estimate of the fair value of our ARS investments
could change materially from period to period based on future market conditions.
Contractual maturities for our ARS investments are generally greater than five years, with
fair value of $9.6 million maturing from 2015 to 2017, $8.9 million maturing from 2034 to 2045, and
$10.0 million having no stated maturity. Of our ARS investments, $22.0 million par value are
investment grade, and the remaining $18.5 million par value are below investment grade. For the
six-month period ended December 31, 2010, we recorded a realized gain of $10,000 on the redemption
of ARS investments. In connection with our fair value analysis for the six-month period ended
December 31, 2009, we recognized a $443,000 other-than-temporary impairment charge on our ARS
investments in preferred stock.
The various types of ARS investments we held as of December 31, 2010, including the original
cost basis, other-than-temporary impairment included in other comprehensive income,
other-than-temporary impairment included in retained earnings, new cost basis, unrealized gain, and
fair value consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Other-than- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
temporary Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included |
|
|
Included |
|
|
|
|
|
|
|
|
|
|
|
|
Original |
|
|
in Other |
|
|
in |
|
|
New |
|
|
|
|
|
|
|
|
|
Cost |
|
|
Comprehensive |
|
|
Retained |
|
|
Cost |
|
|
Unrealized |
|
|
Fair |
|
|
|
Basis |
|
|
Income |
|
|
Earnings |
|
|
Basis |
|
|
Gain |
|
|
Value |
|
Student loans |
|
$ |
9,300 |
|
|
$ |
(602 |
) |
|
$ |
(252 |
) |
|
$ |
8,446 |
|
|
$ |
403 |
|
|
$ |
8,849 |
|
Closed end municipal
and corporate
funds |
|
|
10,650 |
|
|
|
(1,112 |
) |
|
|
(93 |
) |
|
|
9,445 |
|
|
|
568 |
|
|
|
10,013 |
|
Credit linked notes |
|
|
13,500 |
|
|
|
(156 |
) |
|
|
(8,765 |
) |
|
|
4,579 |
|
|
|
3,132 |
|
|
|
7,711 |
|
Preferred stock |
|
|
5,000 |
|
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Municipals |
|
|
2,000 |
|
|
|
(203 |
) |
|
|
(83 |
) |
|
|
1,714 |
|
|
|
165 |
|
|
|
1,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ARS |
|
$ |
40,450 |
|
|
$ |
(2,073 |
) |
|
$ |
(14,193 |
) |
|
$ |
24,184 |
|
|
$ |
4,268 |
|
|
$ |
28,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
The various types of ARS investments we held as of June 30, 2010, including the original
cost basis, other-than-temporary impairment included in other comprehensive income,
other-than-temporary impairment included in retained earnings, new cost basis, unrealized gain, and
fair value consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Other-than- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
temporary Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included |
|
|
Included |
|
|
|
|
|
|
|
|
|
|
|
|
Original |
|
|
in Other |
|
|
in |
|
|
New |
|
|
|
|
|
|
|
|
|
Cost |
|
|
Comprehensive |
|
|
Retained |
|
|
Cost |
|
|
Unrealized |
|
|
Fair |
|
|
|
Basis |
|
|
Income |
|
|
Earnings |
|
|
Basis |
|
|
Gain |
|
|
Value |
|
Student loans |
|
$ |
9,550 |
|
|
$ |
(617 |
) |
|
$ |
(262 |
) |
|
$ |
8,671 |
|
|
$ |
251 |
|
|
$ |
8,922 |
|
Closed end municipal
and corporate
funds |
|
|
10,650 |
|
|
|
(1,112 |
) |
|
|
(93 |
) |
|
|
9,445 |
|
|
|
293 |
|
|
|
9,738 |
|
Credit linked notes |
|
|
13,500 |
|
|
|
(156 |
) |
|
|
(8,765 |
) |
|
|
4,579 |
|
|
|
2,952 |
|
|
|
7,531 |
|
Preferred stock |
|
|
5,000 |
|
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Municipals |
|
|
2,000 |
|
|
|
(203 |
) |
|
|
(83 |
) |
|
|
1,714 |
|
|
|
107 |
|
|
|
1,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ARS |
|
$ |
40,700 |
|
|
$ |
(2,088 |
) |
|
$ |
(14,203 |
) |
|
$ |
24,409 |
|
|
$ |
3,603 |
|
|
$ |
28,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have accounted for all of our ARS investments as non-current (included in non-current
investments in the accompanying condensed consolidated balance sheets) as we are not able to
reasonably determine when the ARS markets will recover or be restructured. Based on our ability to
access our cash, our expected operating cash flows, and our other sources of cash, we have the
intent and ability to hold these investments until the value recovers or the investments mature.
We will continue to monitor our ARS investments and evaluate our accounting for these investments
quarterly. Subsequent to recording other-than-temporary impairment charges, certain of our ARS
investments have increased in value above their new cost bases, and this increase is included as
unrealized gain above and in accumulated other comprehensive income in the accompanying condensed
consolidated balance sheets.
5. Fair Value of Cash Equivalents and Investments
Certain financial assets and liabilities have been recognized or disclosed at fair value on a
recurring basis. For other financial assets and liabilities, we elected not to apply the fair
value option.
Current accounting standards establish a consistent framework for measuring fair value on
either a recurring or nonrecurring basis in which inputs, used in valuation techniques, are
assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
|
|
|
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets
or liabilities in active markets. |
|
|
|
Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets
that are not active; quoted prices for similar assets or liabilities in active markets;
inputs other than quoted prices that are observable for the assets or liabilities; or
inputs that are derived principally from or corroborated by observable market data by
correlation or other means. |
|
|
|
Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation
techniques used to determine fair value. These assumptions must be consistent with market
participant assumptions that are reasonably available. Our Level 3 assets consist of
long-term ARS investments. We estimated the fair value of our ARS investments based on
the following: (i) the underlying structure of each investment; (ii) the present value of
future principal and interest payments discounted at rates considered to reflect current
market
conditions; (iii) consideration of the probabilities of default, passing a future auction,
or repurchase at par for each period; and (iv) estimates of the recovery rates in the event
of default for each investment. |
9
Financial assets and liabilities measured at fair value on a recurring basis, by level within
the fair value hierarchy consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2010 |
|
|
2010 |
|
|
|
Level 1 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market |
|
$ |
211,845 |
|
|
$ |
|
|
|
$ |
208,040 |
|
|
$ |
|
|
Auction rate securities |
|
|
|
|
|
|
28,452 |
|
|
|
|
|
|
|
28,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities |
|
$ |
211,845 |
|
|
$ |
28,452 |
|
|
$ |
208,040 |
|
|
$ |
28,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market balances are included in cash and cash equivalents as of December 31, 2010
and June 30, 2010. ARS are included in non-current investments as of December 31, 2010 and June
30, 2010.
Changes in fair value of our Level 3 financial assets were as follows (in thousands):
|
|
|
|
|
Balance as of June 30, 2010 |
|
$ |
28,012 |
|
Net unrealized gain |
|
|
680 |
|
Realized gain on redeemed securities |
|
|
10 |
|
Redemptions |
|
|
(250 |
) |
|
|
|
|
Balance as of December 31, 2010 |
|
$ |
28,452 |
|
|
|
|
|
There were no transfers in or out of our Level 1 or 3 assets during the six months ended
December 31, 2010.
The fair values of our cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximate their carrying values because of the short-term nature of those
instruments.
6. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market (estimated
net realizable value) and consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2010 |
|
|
2010 |
|
Raw materials |
|
$ |
12,765 |
|
|
$ |
12,251 |
|
Finished goods |
|
|
10,237 |
|
|
|
6,416 |
|
|
|
|
|
|
|
|
|
|
$ |
23,002 |
|
|
$ |
18,667 |
|
|
|
|
|
|
|
|
Periodically, we purchase inventory from our contract manufacturers when a customer
delays its delivery schedule or cancels its order. In those circumstances in which our customer
has cancelled its order and we purchase inventory from our contract manufacturers, we consider a
write-down to reduce the carrying value of the inventory purchased to its net realizable value. We
charge write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory
to net realizable value to cost of revenue. The effect of these write-downs is to establish a new
cost basis in the related inventory, which we do not subsequently write up.
7. Product Warranties, Indemnifications, and Contingencies
Product Warranties
We generally warrant our products for a period of 12 months or more from the date of sale and
estimate probable product warranty costs at the time we recognize revenue. Factors that affect our
warranty liability include historical and
anticipated rates of warranty claims, materials usage, and service delivery costs. We assess
the adequacy of our warranty obligations periodically and adjust the accrued warranty liability on
the basis of our estimates.
10
Indemnifications
In connection with certain third-party agreements, we are obligated to indemnify the third
party in connection with any technology infringement by us. We have also entered into
indemnification agreements with our officers and directors. Maximum potential future payments
cannot be estimated because these agreements do not have a maximum stated liability. However,
historical costs related to these indemnification provisions have not been significant. We have
not recorded any liability in our consolidated financial statements for such indemnification
obligations.
Contingencies
We may receive notices from third parties that claim our products infringe their rights. From
time to time, we receive notice from third parties alleging infringement of their intellectual
property rights. We cannot be certain that our technologies and products do not or will not
infringe issued patents or other proprietary rights of third parties.
Any infringement claims, with or without merit, could result in significant litigation costs
and diversion of management and financial resources, including the payment of damages, which could
have a material adverse effect on our business, financial condition, and results of operations.
8. Convertible Senior Subordinated Notes
In December 2004, we issued an aggregate of $125 million of Notes maturing December 1, 2024 in
a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended, or the
Securities Act. In connection with issuing the Notes, we incurred debt issuance costs of $4.3
million, consisting primarily of the initial purchasers discount and costs related to legal,
accounting, and printing, which were amortized over five years. We used the net proceeds for
working capital and general corporate purposes.
In fiscal 2009, we repurchased and retired $59.7 million of our outstanding Notes at a
discount from par of approximately 7%, which resulted in a $1.1 million net loss on retirement of
debt after deducting the associated unamortized debt discount and debt issuance costs. In December
2009, we repurchased and retired $63.0 million par value of our Notes when investors exercised
their rights to require us to repurchase their Notes. As of December 31, 2010, $2.3 million par
value of our Notes remained outstanding and have been classified as long-term as the next date
Noteholders can require us to repurchase all or a portion of their Notes is beyond one year.
We recorded interest expense on the Notes of $5,000 and $1.0 million during the three-month
periods ended December 31, 2010 and 2009, respectively, and $9,000 and $2.4 million during the
six-month periods ended December 31, 2010 and 2009, respectively. Through December 31, 2009,
interest expense included the amortization of debt discount and debt issuance costs. As of
December 31, 2010, the if-converted value of the Notes did not exceed the principal amount of the
Notes.
9. Share-Based Compensation
The purpose of our various share-based compensation plans is to attract, motivate, retain, and
reward high-quality employees, directors, and consultants by enabling such persons to acquire or
increase their proprietary interest in our common stock in order to strengthen the mutuality of
interests between such persons and our stockholders and to provide such persons with long-term
performance incentives to focus their best efforts in the creation of stockholder value.
Consequently, share-based compensatory awards issued subsequent to the initial award to our
employees and consultants are determined primarily on individual performance. Our share-based
compensation plans with outstanding awards consist of our 1996 Stock Option Plan, our 2001
Incentive Compensation Plan, as amended, our 2010 Incentive Compensation Plan, and our 2001
Employee Stock Purchase Plan, as amended.
11
Share-based compensation and the related tax benefit recognized in our consolidated statements
of income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Cost of revenue |
|
$ |
369 |
|
|
$ |
815 |
|
|
$ |
677 |
|
|
$ |
1,263 |
|
Research and development |
|
|
3,325 |
|
|
|
4,646 |
|
|
|
6,752 |
|
|
|
7,444 |
|
Selling, general, and administrative |
|
|
5,757 |
|
|
|
6,635 |
|
|
|
9,928 |
|
|
|
10,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,451 |
|
|
$ |
12,096 |
|
|
$ |
17,357 |
|
|
|
19,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit recorded on share-based
compensation |
|
$ |
2,716 |
|
|
$ |
3,106 |
|
|
$ |
5,079 |
|
|
$ |
5,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We utilize the Black-Scholes option pricing model to estimate the grant date fair value
of certain employee share-based compensatory awards, which requires the input of highly subjective
assumptions, including expected volatility and expected life. Historical and implied volatilities
were used in estimating the fair value of our share-based awards, while the expected life of our
options and estimated forfeitures for share-based awards that are not expected to vest were
estimated based on historical trends since our initial public offering. Changes in these inputs
and assumptions can materially affect the measure of estimated fair value of our share-based
compensation. We charge the estimated fair value less estimated forfeitures to earnings on a
straight-line basis over the vesting period of the underlying awards, which is generally four years
for our stock options and deferred stock units and up to two years for our employee stock purchase
plan. The Black-Scholes option pricing model was developed for use in estimating the fair value of
traded options having no vesting restrictions and being fully transferable. As our stock option
and employee stock purchase plan awards have characteristics that differ significantly from traded
options and, as changes in the subjective assumptions can materially affect the estimated value,
our estimate of fair value may not accurately represent the value assigned by a third party in an
arms-length transaction. While our estimate of fair value and the associated charge to earnings
materially affects our results of operations, it has no impact on our cash position.
We recognize tax benefit upon expensing certain share-based awards associated with our
share-based compensation plans, including nonqualified stock options and deferred stock units, but
we cannot recognize tax benefit concurrent with the recognition of share-based compensation
expenses associated with incentive stock options (qualified stock options) and employee stock
purchase plan shares. For qualified stock options that vested after we began expensing share-based
compensation, we recognize tax benefit only in the period when disqualifying dispositions of the
underlying stock occur, which historically has been up to several years after vesting and in a
period when our stock price substantially increases. For qualified stock options that vested prior
to when we began expensing share-based compensation, we record the tax benefit directly to
additional paid-in capital.
We determine excess tax benefit using the long-haul method in which we compare the actual tax
benefit associated with the tax deduction from share-based award activity to the hypothetical tax
benefit on the grant date fair values of the corresponding share-based awards. Tax benefit
associated with excess tax deduction creditable to additional paid-in capital is not recognized
until the deduction reduces taxes payable.
Historically, we have issued new shares in connection with our share-based compensation plans;
however, treasury shares were also available for issuance as of December 31, 2010. Any additional
shares repurchased under our stock repurchase program would be available for issuance under our
share-based compensation plans.
Stock Options
Our share-based compensation plans with outstanding stock option awards include our 1996 Stock
Option Plan, 2001 Incentive Compensation Plan, as amended, and our 2010 Incentive Compensation Plan
(the 2010 Plan). We currently grant stock-based awards only under our 2010 Plan. Under the 2010
Plan, we may grant employees, consultants, and directors incentive stock options or nonqualified
stock options to purchase shares of our common stock at not less than 100% of the fair market value
on the date of grant. Stock options granted to our employees generally are incentive stock options,
or qualified options under the Internal Revenue Code, subject to calendar year vesting limitations
with any balance being nonqualified stock options.
12
Stock option activity and weighted average exercise prices for options outstanding and
exercisable, the weighted average exercise prices and the aggregate intrinsic value were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Weighted |
|
|
Aggregate |
|
|
|
Option |
|
|
Average |
|
|
Intrinsic |
|
|
|
Awards |
|
|
Exercise |
|
|
Value |
|
|
|
Outstanding |
|
|
Price |
|
|
(thousands) |
|
Balance at June 30, 2010 |
|
|
7,748,570 |
|
|
$ |
22.43 |
|
|
|
|
|
Granted |
|
|
796,120 |
|
|
|
29.41 |
|
|
|
|
|
Exercised |
|
|
(700,492 |
) |
|
|
12.57 |
|
|
|
|
|
Forfeited |
|
|
(320,211 |
) |
|
|
28.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
|
7,523,987 |
|
|
|
23.81 |
|
|
$ |
46,940 |
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31,
2010 |
|
|
4,377,737 |
|
|
$ |
21.37 |
|
|
$ |
38,876 |
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value is based on the closing price of our common stock on
December 23, 2010 and excludes stock options with exercise prices above the closing price of
$29.52. Options granted under the 2010 Plan generally vest over four years from the vesting
commencement date and expire seven years after the date of grant if not exercised.
Deferred Stock Units
Our 2010 Plan enables us to grant deferred stock units, or DSUs, to our employees,
consultants, and directors. A DSU is a promise to deliver shares of our common stock at a future
date in accordance with the terms of the DSU grant agreement.
DSU activity, including DSUs granted, delivered, and forfeited, and the balance and aggregate
intrinsic value of DSUs were as follows:
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
Aggregate |
|
|
|
Stock Unit |
|
|
Intrinsic |
|
|
|
Awards |
|
|
Value |
|
|
|
Outstanding |
|
|
(thousands) |
|
Balance at June 30, 2010 |
|
|
821,146 |
|
|
|
|
|
Granted |
|
|
248,414 |
|
|
|
|
|
Delivered |
|
|
(193,983 |
) |
|
|
|
|
Forfeited |
|
|
(49,179 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
|
826,398 |
|
|
$ |
24,395 |
|
|
|
|
|
|
|
|
The aggregate intrinsic value is based on the closing price of our common stock on
December 23, 2010 of $29.52.
DSUs granted under the 2010 Plan generally vest over four years from the vesting
commencement date. Delivery of shares under the plan takes place on quarterly vesting dates. At
the delivery date, we withhold shares to cover statutory minimum tax withholding by delivering a
net number of shares. Until delivery of shares, the grantee has no rights as a stockholder.
Of the shares delivered, 51,495 shares valued at $1,518,760 were withheld to meet statutory
minimum tax withholding requirements.
Employee Stock Purchase Plan
Our 2001 Employee Stock Purchase Plan, as amended, became effective on January 29, 2002, the
effective date of the registration statement for our initial public offering (ESPP plan) became
effective in October 2010. The ESPP plan allows employees to designate up to 15% of their base
compensation, subject to legal restrictions and limitations, to purchase shares of common stock at
85% of the lesser of the fair market value, or FMV, at the beginning of the offering period or the
exercise date. The offering period extends for up to two years and includes four exercise dates
occurring at six month intervals. Under the terms of the plan, if the FMV at an exercise date is
less than the FMV at the beginning of the offering period, the current offering period will
terminate and a new two-year offering period will commence.
13
Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic
value for ESPP purchases during the six-month period ended December 31, 2010 were as follows (in
thousands, except for shares purchased and weighted average purchase price):
|
|
|
|
|
Shares purchased |
|
|
174,817 |
|
Weighted average purchase price |
|
$ |
15.75 |
|
Cash received |
|
$ |
2,753 |
|
Aggregate intrinsic value |
|
$ |
2,054 |
|
The early termination of an offering period followed by the commencement of a new
offering period represents a modification to the terms of the underlying awards. Under the terms
of our ESPP plan, the offering period that commenced on July 1, 2007 was terminated on December 31,
2008 and a new offering period commenced on January 1, 2009. The December 31, 2008 modification
affected approximately 257 employees. The modification resulted in incremental compensation
costs, which were not material and which have been recognized on a straight-line basis over the
two-year period ending December 31, 2010.
10. Income Taxes
We account for income taxes under the asset and liability method. We consider the operating
earnings of our foreign subsidiaries to be indefinitely invested outside the United States.
Accordingly, no provision has been made for the federal, state, or foreign taxes that may result
from future remittances of undistributed earnings of our foreign subsidiaries.
The provision for income taxes of $2.0 million and $1.9 million for the three months ended
December 31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes.
The effective tax rate for the three months ended December 31, 2010 was 10.1% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates, the retroactive reinstatement of the federal research credit, and the state
research credit, partially offset by foreign withholding taxes and net unrecognized tax benefit
associated with qualified stock options. The effective tax rate for the three months ended
December 31, 2009 was 13.2% and diverged from the combined federal and state statutory rate
primarily because of increased foreign income taxed at lower tax rates, the benefit of research tax
credits, the release of unrecognized tax benefits, the impact of the adjustment to share-based
compensation expense, and the impact of tax-exempt interest income, partially offset by foreign
withholding taxes, net unrecognized tax benefit associated with qualified stock options, the
impairment of an investment for which a full valuation allowance was established, and the
establishment of a valuation allowance on certain deferred tax assets.
The provision for income taxes of $5.9 million and $5.1 million for the six months ended
December 31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes.
The effective tax rate for the six months ended December 31, 2010 was 13.9% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates and, the retroactive reinstatement of the federal research credit, and the state
research credit, partially offset by foreign withholding taxes and net unrecognized tax benefit
associated with qualified stock options. The effective tax rate for the six months ended December
31, 2009 was 18.8% and diverged from the combined federal and state statutory rate primarily
because of increased foreign income taxed at lower tax rates, the benefit of research tax credits,
the release of unrecognized tax benefits, and the impact of tax-exempt interest income, partially
offset by foreign withholding taxes, net unrecognized tax benefit associated with qualified stock
options, the impairment of an investment for which a full valuation allowance was established, and
the establishment of a valuation allowance on certain deferred tax assets.
Unrecognized Tax Benefits
The total liability for gross unrecognized tax benefits increased $633,000 during the quarter
ended December 31, 2010 to $20.6 million from $19.9 million at September 30, 2010. The liability
for gross unrecognized tax benefit, if recognized, would reduce the effective tax rate on income
from continuing operations. The increase is related to a current year tax position. The total
interest and penalties accrued related to unrecognized tax benefits as of the end of September 30,
2010 was $1.4 million. The liability for gross interest expense and penalties was increased by
$171,000 to $1.5 million as of December 31, 2010. We classify interest and penalties, if any, as
components of income tax expense.
14
No material unrecognized tax benefit is expected to be paid within one year, and we cannot
make a reliable estimate when cash settlement with a taxing authority may occur. Any prospective
adjustments to our unrecognized tax benefits will be recorded as an increase or decrease to income
tax expense and cause a corresponding change to our effective tax rate. Accordingly, our effective
tax rate could fluctuate materially from period to period.
It is reasonably possible that the amount of the liability for unrecognized tax benefits may
change within the next 12 months. An estimate of the range of possible changes cannot be made at
this time because of the high uncertainty of the resolution of our tax positions with the various
tax jurisdictions in which we operate. Accordingly, the unrecognized tax
benefits from prior year tax positions that may be necessary to accrue or reverse for the next
12 months cannot be reasonably estimated at this time.
Our major tax jurisdictions are the United States, California, and Hong Kong SAR, and fiscal
2003 onward remain subject to examination by one or more of these jurisdictions.
On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010, or the Act. The Act in part retroactively
reinstated the research credit to January 1, 2010. Accordingly, our current quarterly and
year-to-date effective tax rates for fiscal 2011 include the benefit of the retroactive
reinstatement.
11. Segment, Customers, and Geographic Information
We operate in one segment: the development, marketing, and sale of custom-designed capacitive
interface solutions that enable people to interact more easily and intuitively with a wide variety
of electronic devices and products. We generate our revenue from two broad product categories:
the personal computing, or PC, market and digital lifestyle product market. The PC market
accounted for 45% and 55% of net revenue for the three months ended December 31, 2010 and 2009,
respectively, and 48% and 59% of net revenue for the six months ended December 31, 2010 and 2009,
respectively.
Net revenue within geographic areas based on our customers locations for the periods
presented was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
China |
|
$ |
110,490 |
|
|
$ |
108,251 |
|
|
$ |
211,637 |
|
|
$ |
203,984 |
|
Taiwan |
|
|
24,275 |
|
|
|
7,805 |
|
|
|
49,414 |
|
|
|
13,816 |
|
Japan |
|
|
17,125 |
|
|
|
9,523 |
|
|
|
34,346 |
|
|
|
17,584 |
|
Korea |
|
|
4,310 |
|
|
|
7,723 |
|
|
|
9,740 |
|
|
|
17,355 |
|
Other |
|
|
3,381 |
|
|
|
21 |
|
|
|
7,629 |
|
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
159,581 |
|
|
$ |
133,323 |
|
|
$ |
312,766 |
|
|
$ |
252,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major customers as a percentage of net revenue for the periods presented were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Customer A |
|
|
10 |
% |
|
|
10 |
% |
|
|
* |
|
|
|
* |
|
Customer C |
|
|
* |
|
|
|
12 |
% |
|
|
* |
|
|
|
11 |
% |
Customer D |
|
|
* |
|
|
|
13 |
% |
|
|
* |
|
|
|
10 |
% |
15
We sell our products primarily to contract manufacturers that provide manufacturing services
to Original Equipment Manufacturers, or OEMs. We extend credit based on an evaluation of a
customers financial condition, and we generally do not require collateral. Major customer
accounts receivable as a percentage of accounts receivable for the periods presented were as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
As of |
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2010 |
|
|
2010 |
|
Customer A |
|
|
10 |
% |
|
|
15 |
% |
Customer B |
|
|
* |
|
|
|
15 |
% |
12. Comprehensive Income
Our comprehensive income generally consists of net income plus the effect of unrealized gains
and losses on our investments primarily due to changes in market value of certain of our ARS
investments and interest rate fluctuations on
our fixed interest rate investments. In addition, we recognize the noncredit portion of
other-than-temporary impairment in comprehensive income. We recognize remeasurement adjustments in
our consolidated statement of income as the U.S. dollar is the functional currency of our foreign
entities.
Our comprehensive income was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
17,678 |
|
|
$ |
12,227 |
|
|
$ |
36,377 |
|
|
$ |
22,031 |
|
Net unrealized gain on
available-for-sale
investments, net of tax |
|
|
143 |
|
|
|
403 |
|
|
|
680 |
|
|
|
1,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
17,821 |
|
|
$ |
12,630 |
|
|
$ |
37,057 |
|
|
$ |
23,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Subsequent Events
We have evaluated all events or transactions that occurred after December 31, 2010 through the
date of filing this report and determined there were no material recognizable subsequent events.
16
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements and Factors That May Affect Results
You should read the following discussion and analysis in conjunction with our unaudited
condensed consolidated financial statements and notes in Item 1 and with our audited consolidated
financial statements and notes included in our Annual Report on Form 10-K for the year ended June
30, 2010.
In addition to the historical information contained in this report, this report contains
forward-looking statements, including those related to our operating model and strategies; our
market penetration and market share in the PC and digital lifestyle product markets; competitive
factors in the PC and digital lifestyle product markets; revenue from the PC and digital lifestyle
product markets; industry estimates of growth rates of these markets; average selling prices;
product design mix; manufacturing costs; cost-improvement programs; gross margins; customer
relationships; research and development expenses; selling, general, and administrative expenses;
liquidity and anticipated cash requirements; our ability to provide local sales, operational, and
engineering support to customers, and our assessment of the combination of the added value we bring
to our OEM customers products in meeting their custom design requirements and the impact of our
ongoing cost improvement programs. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially.
We caution that these statements are qualified by various factors that may affect future
results, including the following: economic conditions; changes in the market for our products and
the success of our customers products; our success in moving products from the design phase into
the manufacturing phase; changes in the competitive environment; infringement claims; warranty
obligations related to product failures; the failure of key technologies to deliver commercially
acceptable performance; our dependence on certain key markets; penetration into new markets; the
absence of both long-term purchase and supply commitments; and our lengthy development and product
acceptance cycles. This report should be read in conjunction with our Annual Report on Form 10-K
for the year ended June 30, 2010, including particularly Item 1A Risk Factors.
Overview
We are a leading worldwide developer and supplier of custom-designed human interface solutions
that enable people to interact more easily and intuitively with a wide variety of mobile computing,
communications, entertainment, and other electronic devices. We believe our results to date
reflect the combination of our customer focus, the strength of our intellectual property, and our
engineering know-how, which allow us to develop or engineer products that meet the demanding design
specifications of OEMs.
Many of our customers have migrated their manufacturing operations from Taiwan to China, and
many of our OEM customers have established design centers in that region. With our expanded global
presence, including offices in Canada, China, Finland, Hong Kong, Japan, Korea, Switzerland,
Taiwan, and the United States, we are well positioned to provide local sales, operational, and
engineering support services to our existing customers, as well as potential new customers, on a
global basis.
Our manufacturing operations are based on a variable cost model in which we outsource all of
our production requirements and generally drop ship our products directly to our customers from our
contract manufacturers facilities, eliminating the need for significant capital expenditures and
allowing us to minimize our investment in inventories. This approach requires us to work closely
with our contract manufacturers to ensure adequate production capacity to meet our forecasted
volume requirements. We provide our contract manufacturers with six-month rolling forecasts and
issue purchase orders based on our anticipated requirements for the next 90 days. However, we do
not have any long-term supply contracts with any of our contract manufacturers. We use two
third-party wafer manufacturers to supply wafers and two third-party packaging manufacturers to
package our proprietary ASICs. In certain cases, we rely on a single source or a limited number of
suppliers to provide other key components of our products. Our cost of revenue includes all costs
associated with the production of our products, including materials, logistics, manufacturing,
assembly, and test costs paid to third-party manufacturers and related overhead costs associated
with our indirect manufacturing operations personnel. Additionally, we charge all warranty costs,
yield losses, and any inventory provisions or write-downs to cost of revenue.
Our gross margin generally reflects the combination of the added value we bring to our OEM
customers products in meeting their custom design requirements and the impact of our ongoing
cost-improvement programs. These cost-improvement programs include reducing materials and
component costs and implementing design and process
improvements. Our newly introduced products may have lower margins than our more mature
products, which have realized greater benefits associated with our ongoing cost-improvement
programs. As a result, new product introductions may initially negatively impact our gross margin.
17
Our research and development expenses include personnel costs and supplies and materials costs
related to product development, as well as the engineering costs incurred to design capacitive
interface solutions for OEM customers prior to and after their commitment to incorporate those
solutions into their products. These expenses have generally increased, reflecting our continuing
commitment to the technological and design innovation required to maintain our position in our
existing markets and to adapt our existing technologies or develop new technologies for new
markets.
Selling, general, and administrative expenses include expenses related to sales, marketing,
and administrative personnel; internal sales and outside sales representatives commissions; market
and usability research; outside legal, accounting, and consulting costs; and other marketing and
sales activities. These expenses have generally increased, primarily reflecting incremental
staffing and related support costs associated with our increased business levels, growth in our
existing markets, and penetration into new markets.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue,
expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates, including those related to revenue recognition, allowance for doubtful
accounts, inventories, product warranty, provision for income taxes, income taxes payable,
intangible assets, and contingencies. We base our estimates on historical experience, applicable
laws, and various other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The methods, estimates, interpretations, and judgments we use in applying our most critical
accounting policies can have a significant impact on the results that we report in our consolidated
financial statements. The SEC considers an entitys most critical accounting policies to be those
policies that are both most important to the portrayal of the entitys financial condition and
results of operations and those that require the entitys most difficult, subjective, or complex
judgments, often as a result of the need to make estimates about matters that are inherently
uncertain. We believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We recognize revenue from product sales when there is persuasive evidence that an arrangement
exists, delivery has occurred or title has transferred, the price is fixed or determinable, and
collection is reasonably assured. We accrue for estimated sales returns and other allowances,
based on historical experience, at the time we recognize revenue.
Investments
We record available-for-sale securities at fair value, with unrealized gains and losses being
reported as a component of other comprehensive income and we assess whether our investments with
loss positions are other-than-temporarily impaired. We follow the hierarchal approach to determine
fair value of our investments.
The accounting standards define 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. Our fair value estimates consider, among other factors, the collateral
underlying the security investments, creditworthiness of the counterparty, timing of expected
future cash flows, and, in the case of ARS investments, the probability of a successful auction in
a future period. We follow the guidance provided to estimate fair value when the volume and level
of activity for an asset or liability have significantly decreased in relation to normal market
activity for the asset or liability and to determine circumstances that may indicate that a
transaction is not orderly.
Further, we use judgment in evaluating whether a decline in fair value is temporary or
other-than-temporary and consider the following indicators: changes in credit ratings or asset
quality; changes in the economic environment; length of time and extent to which fair value has
been below cost basis; changes in market conditions; and changes in expected cash flows. We do not
intend to sell the investments, and it is more likely than not that we will not be required to sell
the investments before recovery of their amortized cost basis. We record temporary declines in
fair value as charges to accumulated other comprehensive income in the equity section of our
balance sheet, while other-than-temporary declines
in fair value are bifurcated between credit losses, which are charged to earnings, and
noncredit losses, which depending on the type of investment, may be charged to other comprehensive
income or earnings.
18
Inventory
We state our inventories at the lower of cost or market. We base our assessment of the
ultimate realization of inventories on our projections of future demand and market conditions.
Sudden declines in demand, rapid product improvements, or technological changes, or any combination
of these factors, can cause us to have excess or obsolete inventories. On an ongoing basis, we
review for estimated obsolete or unmarketable inventories and write down our inventories to their
net realizable value based upon our forecasts of future demand and market conditions. If actual
market conditions are less favorable than our forecasts, additional inventory write-downs may be
required. The following factors influence our estimates: changes to or cancellations of customer
orders, unexpected decline in demand, rapid product improvements and technological advances, and
termination or changes by our OEM customers of any product offerings incorporating our product
solutions.
Periodically, we purchase inventory from our contract manufacturers when a customer delays its
delivery schedule or cancels its order. In those circumstances in which our customer has cancelled
its order and we purchase inventory from our contract manufacturers, we consider a write-down to
reduce the carrying value of the inventory purchased to its net realizable value. We charge
write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net
realizable value to cost of revenue. The effect of these write-downs is to establish a new cost
basis in the related inventory, which we do not subsequently write up.
Share-Based Compensation Costs
We utilize the Black-Scholes option pricing model to estimate the grant date fair value of
employee share-based compensatory awards, which requires the input of highly subjective
assumptions, including expected volatility and expected life. Historical and implied volatilities
were used in estimating the fair value of our share-based awards, while the expected life for our
options was estimated based on historical trends since our initial public offering. Changes in
these inputs and assumptions can materially affect the measure of estimated fair value of our
share-based compensation. Further, we estimate forfeitures for share-based awards that are not
expected to vest. We charge the estimated fair value less estimated forfeitures to earnings on a
straight-line basis over the vesting period of the underlying awards, which is generally four years
for our stock options and DSUs and up to two years for our ESPP.
The Black-Scholes option pricing model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. As our stock option
and ESPP awards have characteristics that differ significantly from traded options, and as changes
in the subjective assumptions can materially affect the estimated value, our estimate of fair value
may not accurately represent the value assigned by a third party in an arms-length transaction.
There currently is no market-based mechanism to verify the reliability and accuracy of the
estimates derived from the Black-Scholes option pricing model or other allowable valuation models,
nor is there a means to compare and adjust the estimates to actual values. While our estimate of
fair value and the associated charge to earnings materially affects our results of operations, it
has no impact on our cash position.
There are significant variations among allowable valuation models, and there is a possibility
that we may adopt a different valuation model or refine the inputs and assumptions under our
current valuation model in the future, resulting in a lack of consistency in future periods. Our
current or future valuation model and the inputs and assumptions we make may also lack
comparability to other companies that use different models, inputs, or assumptions, and the
resulting differences in comparability could be material.
Income Taxes
We recognize federal, foreign, and state current tax liabilities or assets based on our
estimate of taxes payable or refundable in the then current fiscal year for each tax jurisdiction.
We also recognize federal, foreign, and state deferred tax liabilities or assets for our estimate
of future tax effects attributable to temporary differences and carryforwards and record a
valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based
on available evidence and our judgment, are not expected to be realized. If our assumptions, and
consequently our estimates, change in the future, the valuation allowance we have established for
our deferred tax assets may be changed, which could impact income tax expense.
19
We use a two-step approach to recognizing and measuring uncertain tax positions. The first
step is to determine whether it is more-likely-than-not that a tax position will be sustained upon
examination, including resolution of any
related appeals or litigation processes. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized upon ultimate settlement with a
taxing authority. The calculation of tax liabilities involves significant judgment in estimating
the impact of uncertainties in the application of highly complex tax laws. Resolution of these
uncertainties in a manner inconsistent with our expectations could have a material impact on our
consolidated financial position, result of operations, or cash flows. We believe we have
adequately provided for reasonably foreseeable outcomes in connection with the resolution of income
tax uncertainties. However, our results have in the past, and could in the future, include
favorable and unfavorable adjustments to our estimated tax liabilities in the period a
determination of such estimated tax liability is made or resolved, upon the filing of an amended
return, upon a change in facts, circumstances, or interpretation, or upon the expiration of a
statute of limitation. Accordingly, our effective tax rate could fluctuate materially from period
to period.
We recognize tax benefit upon expensing nonqualified stock options and DSUs issued under our
share-based compensation plans. However, under current accounting standards, we cannot recognize
tax benefit concurrent with expensing incentive stock options and employee stock purchase plan
shares (qualified stock options) issued under our share-based compensation plans. For qualified
stock options that vested after our adoption of new accounting standards, we recognize tax benefit
only in the period when disqualifying dispositions of the underlying stock occur, which
historically has been up to several years after vesting and in periods when our stock price
substantially increases. For qualified stock options that vested prior to our adoption of new
accounting standards, we record the tax benefit directly to additional paid-in capital.
Accordingly, because we cannot recognize the tax benefit for share-based compensation expense
associated with qualified stock options until the occurrence of future disqualifying dispositions
of the underlying stock and such disqualified dispositions may happen in periods when our stock
price substantially increases, and because a portion of that tax benefit may be directly recorded
to additional paid-in capital, our future quarterly and annual effective tax rates will be subject
to greater volatility and, consequently, our ability to estimate reasonably our future quarterly
and annual effective tax rates is greatly diminished.
20
Results of Operations
Certain of our condensed consolidated statements of income data for the periods indicated,
together with comparative absolute and percentage changes in these amounts, were as follows (in
thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PC applications |
|
$ |
71,026 |
|
|
$ |
73,653 |
|
|
$ |
(2,627 |
) |
|
|
(3.6 |
%) |
|
$ |
149,879 |
|
|
$ |
148,218 |
|
|
$ |
1,661 |
|
|
|
1.1 |
% |
Digital lifestyle product applications |
|
|
88,555 |
|
|
|
59,670 |
|
|
|
28,885 |
|
|
|
48.4 |
% |
|
|
162,887 |
|
|
|
104,697 |
|
|
|
58,190 |
|
|
|
55.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
|
159,581 |
|
|
|
133,323 |
|
|
|
26,258 |
|
|
|
19.7 |
% |
|
|
312,766 |
|
|
|
252,915 |
|
|
|
59,851 |
|
|
|
23.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
65,038 |
|
|
|
53,831 |
|
|
|
11,207 |
|
|
|
20.8 |
% |
|
|
127,866 |
|
|
|
102,153 |
|
|
|
25,713 |
|
|
|
25.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
26,640 |
|
|
|
22,442 |
|
|
|
4,198 |
|
|
|
18.7 |
% |
|
|
51,560 |
|
|
|
42,417 |
|
|
|
9,143 |
|
|
|
21.6 |
% |
Selling, general, and administrative |
|
|
18,958 |
|
|
|
16,575 |
|
|
|
2,383 |
|
|
|
14.4 |
% |
|
|
34,506 |
|
|
|
30,339 |
|
|
|
4,167 |
|
|
|
13.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
19,440 |
|
|
|
14,814 |
|
|
|
4,626 |
|
|
|
31.2 |
% |
|
|
41,800 |
|
|
|
29,397 |
|
|
|
12,403 |
|
|
|
42.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
226 |
|
|
|
241 |
|
|
|
(15 |
) |
|
|
(6.2 |
%) |
|
|
437 |
|
|
|
572 |
|
|
|
(135 |
) |
|
|
(23.6 |
%) |
Interest expense |
|
|
(5 |
) |
|
|
(968 |
) |
|
|
963 |
|
|
|
(99.5 |
%) |
|
|
(9 |
) |
|
|
(2,391 |
) |
|
|
2,382 |
|
|
|
(99.6 |
%) |
Impairment (loss)/recovery of investment, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m |
(1) |
|
|
10 |
|
|
|
(443 |
) |
|
|
453 |
|
|
|
(102.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
19,661 |
|
|
|
14,087 |
|
|
|
5,574 |
|
|
|
39.6 |
% |
|
|
42,238 |
|
|
|
27,135 |
|
|
|
15,103 |
|
|
|
55.7 |
% |
Provision for income taxes |
|
|
1,983 |
|
|
|
1,860 |
|
|
|
123 |
|
|
|
6.6 |
% |
|
|
5,861 |
|
|
|
5,104 |
|
|
|
757 |
|
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
17,678 |
|
|
$ |
12,227 |
|
|
$ |
5,451 |
|
|
|
44.6 |
% |
|
$ |
36,377 |
|
|
$ |
22,031 |
|
|
$ |
14,346 |
|
|
|
65.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of our condensed consolidated statements of income data as a percentage of net revenue
for the periods indicated were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
Three Months Ended |
|
|
Point |
|
|
Six Months Ended |
|
|
Point |
|
|
|
December 31, |
|
|
Increase |
|
|
December 31, |
|
|
Increase |
|
|
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PC applications |
|
|
44.5 |
% |
|
|
55.2 |
% |
|
|
(10.7 |
%) |
|
|
47.9 |
% |
|
|
58.6 |
% |
|
|
(10.7 |
%) |
Digital lifestyle product applications |
|
|
55.5 |
% |
|
|
44.8 |
% |
|
|
10.7 |
% |
|
|
52.1 |
% |
|
|
41.4 |
% |
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
40.8 |
% |
|
|
40.4 |
% |
|
|
0.4 |
% |
|
|
40.9 |
% |
|
|
40.4 |
% |
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
16.7 |
% |
|
|
16.8 |
% |
|
|
(0.1 |
%) |
|
|
16.5 |
% |
|
|
16.8 |
% |
|
|
(0.3 |
%) |
Selling, general, and administrative |
|
|
11.9 |
% |
|
|
12.5 |
% |
|
|
(0.6 |
%) |
|
|
11.0 |
% |
|
|
12.0 |
% |
|
|
(1.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
12.2 |
% |
|
|
11.1 |
% |
|
|
1.1 |
% |
|
|
13.4 |
% |
|
|
11.6 |
% |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
12.3 |
% |
|
|
10.6 |
% |
|
|
1.7 |
% |
|
|
13.5 |
% |
|
|
10.7 |
% |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
1.2 |
% |
|
|
1.4 |
% |
|
|
(0.2 |
%) |
|
|
1.9 |
% |
|
|
2.0 |
% |
|
|
(0.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
11.1 |
% |
|
|
9.2 |
% |
|
|
1.9 |
% |
|
|
11.6 |
% |
|
|
8.7 |
% |
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Net Revenue.
Net revenue was $159.6 million for the quarter ended December 31, 2010 compared with $133.3
million for the quarter ended December 31, 2009, an increase of $26.3 million, or 19.7%. Of our
second quarter fiscal 2011 net revenue, $71.0 million, or 44.5%, was from PC products and $88.6
million, or 55.5%, was from digital lifestyle products, including $87.5 million from mobile
smartphones. The increase in net revenue for the quarter ended December 31, 2010 was attributable
to a $28.9 million, or a 48.4%, increase in net revenue from digital lifestyle product
applications, partially offset by a $2.6 million, or 3.6%, decrease in net revenue from PC
applications. The overall increase in net revenue was primarily attributable to a 7% increase in
total unit shipments reflecting higher market penetration of our products in the digital lifestyle
market, as well as a slightly higher priced product mix, partially offset by a decline in unit
shipments in the PC market.
Net revenue was $312.8 million for the six months ended December 31, 2010 compared with $252.9
million for the six months ended December 31, 2009, an increase of $59.9 million, or 23.7%. Of our
six months fiscal 2011 net revenue, $149.9 million, or 47.9%, was from PC applications and $162.9
million, or 52.1%, was from digital lifestyle products
applications, including $159.9 million from mobile smartphones. The increase in net revenue
for the six months ended December 31, 2010 was attributable to a $58.2 million, or 55.6%, increase
in net revenue from digital lifestyle product applications, and a $1.7 million, or 1.1%, increase
in net revenue from PC applications. The overall increase in net revenue was primarily attributable
to a 15% increase in total unit shipments, reflecting higher market penetration of our products in
the PC and digital lifestyle markets, as well as a slightly higher priced product mix.
Based on calendar year 2011 industry estimates, the notebook market is anticipated to increase
approximately 15% and the mobile smartphone market is anticipated to increase approximately 22%
over 2010 levels.
Gross Margin.
Gross margin as a percentage of net revenue was 40.8%, or $65.0 million, for the quarter ended
December 31, 2010 compared with 40.4%, or $53.8 million, for the quarter ended December 31, 2009.
Gross margin as a percentage of net revenue was 40.9%, or $127.9 million, for the six months ended
December 31, 2010 compared with 40.4%, or $102.2 million, for the six months ended December 31,
2009.
As each custom-designed module we sell utilizes our capacitive sensing technology in a design
that is generally unique or specific to a customers application, gross margin varies on a
product-by-product basis, making our cumulative gross margin a blend of our product specific
designs and independent of the vertical markets that our products serve.
Operating Expenses.
Research and Development Expenses. Research and development expenses decreased as a
percentage of net revenue to 16.7% from 16.8%, while the cost of research and development
activities increased $4.2 million, or 18.7%, to $26.6 million for the three-month period ended
December 31, 2010 compared with $22.4 million for the three-month period ended December 31, 2009.
The increase in research and development expenses primarily reflected a $2.0 million increase in
employee related costs, a $1.4 million increase in temporary services, a $1.1 million increase in
facility and related costs to support the additional staffing, an $804,000 increase in supplies and
related costs, partially offset by a $1.3 million decrease in share-based compensation costs. The
decrease in share-based compensation costs is due to a cumulative error adjustment which was
recorded in the quarter ended December 31, 2009.
Research and development expenses decreased as a percentage of net revenue to 16.5% from
16.8%, while the cost of research and development activities increased $9.1 million, or 21.6%, to
$51.6 million for the six-month period ended December 31, 2010 compared with $42.4 million for the
six-month period ended December 31, 2009. The increase in research and development expenses
primarily reflected a $4.1 million increase in employee related costs, a $2.4 million increase in
temporary services, a $2.1 million increase in facility and related costs to support the additional
staffing, partially offset by a $692,000 decrease in share-based compensation costs. The decrease
in share-based compensation costs is due to a cumulative error adjustment which was recorded in the
quarter ended December 31, 2009.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses
decreased as a percentage of net revenue to 11.9% from 12.5%, while the cost of selling, general,
and administrative activities increased to $19.0 million for the three-month period ended December
31, 2010 compared with $16.6 million for the three-month period ended December 31, 2009. The
increase in selling, general, and administrative expenses primarily reflected a $2.7 million
increase in non-recurring costs related to the resignation of our previous Chief Executive Officer
(CEO), a $1.3 million increase in employee related costs, and a $751,000 increase in facilities
and related costs to support the additional staffing, partially offset by a $2.3 million decrease
in ongoing share-based compensation costs. The decrease in share-based compensation costs is due
to a cumulative error adjustment which was recorded in the quarter ended December 31, 2009.
22
Selling, general, and administrative expenses decreased as a percentage of net revenue to
11.0% from 12.0%, while the cost of selling, general, and administrative activities increased to
$34.5 million for the six-month period ended December 31, 2010 compared with $30.3 million for the
six-month period ended December 31, 2009. The increase in selling, general, and administrative
expenses primarily reflected a $2.7 million increase in non-recurring costs related to the
resignation of our previous CEO, a $2.3 million increase in employee related costs, a $601,000
increase in travel and entertainment costs, a $441,000 increase in professional fees, partially
offset by a $1.9 million decrease in ongoing share-based compensation costs. The decrease in
share-based compensation costs is due to a cumulative error adjustment which was recorded in the
quarter ended December 31, 2009.
Interest Expense. All of our interest expense related to our Notes issued in December 2004.
Interest expense was $5,000 for the three months ended December 31, 2010 compared with interest
expense of $1.0 million, of which
$838,000 represents debt issuance cost amortization, for the three months ended December 31,
2009. During fiscal 2010, $63.0 million of Notes were retired, leaving $2.3 million outstanding as
of June 30, 2010 and December 31, 2010.
Interest expense was $9,000 for the six months ended December 31, 2010 compared with interest
expense of $2.4 million, of which $2.0 million represents debt issuance cost amortization, for the
six months ended December 31, 2009.
Provision for Income Taxes.
We account for income taxes under the asset and liability method. We consider the operating
earnings of our foreign subsidiaries to be indefinitely invested outside the United States.
Accordingly, no provision has been made for the U.S. federal, state, or foreign taxes that may
result from future remittances of undistributed earnings of our foreign subsidiaries.
The provision for income taxes of $2.0 million and $1.9 million for the three months ended
December 31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes.
The effective tax rate for the three months ended December 31, 2010 was 10.1% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates, the retroactive reinstatement of the federal research credit, and the state
research credit, partially offset by foreign withholding taxes and net unrecognized tax benefit
associated with qualified stock options. The effective tax rate for the three months ended
December 31, 2009 was 13.2% and diverged from the combined federal and state statutory rate
primarily because of increased foreign income taxed at lower tax rates, the benefit of research tax
credits, the release of unrecognized tax benefits, the impact of the adjustment to share-based
compensation expense, and the impact of tax-exempt interest income, partially offset by foreign
withholding taxes, net unrecognized tax benefit associated with qualified stock options, the
impairment of an investment for which a full valuation allowance was established, and the
establishment of a valuation allowance on certain deferred tax assets.
Tax benefit associated with share-based compensation was approximately $2.7 million and $3.1
million for the three months ended December 31, 2010 and 2009, respectively. Excluding the impact
of share-based compensation and the related tax benefit, the effective tax rate for the three
months ended December 31, 2010 and 2009 would have been 16.1% and 19.0%, respectively.
The provision for income taxes of $5.9 million and $5.1 million for the six months ended
December 31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes.
The effective tax rate for the six months ended December 31, 2010 was 13.9% and diverged from the
combined federal and state statutory rate primarily because of increased foreign income taxed at
lower tax rates and, the retroactive reinstatement of the federal research credit, and the state
research credit, partially offset by foreign withholding taxes and net unrecognized tax benefit
associated with qualified stock options. The effective tax rate for the six months ended December
31, 2009 was 18.8% and diverged from the combined federal and state statutory rate primarily
because of increased foreign income taxed at lower tax rates, the benefit of research tax credits,
the release of unrecognized tax benefits, and the impact of tax-exempt interest income, partially
offset by foreign withholding taxes, net unrecognized tax benefit associated with qualified stock
options, the impairment of an investment for which a full valuation allowance was established, and
the establishment of a valuation allowance on certain deferred tax assets.
23
Tax benefit associated with share-based compensation was approximately $5.1 million and $5.3
million for the six months ended December 31, 2010 and 2009, respectively. Excluding the impact of
share-based compensation and the related tax benefit, the effective tax rate for the six months
ended December 31, 2010 and 2009 would have been 18.4% and 22.5%, respectively.
On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010, or the Act. The Act in part retroactively
reinstated the research credit to January 1, 2010. Accordingly, our current quarterly and
year-to-date effective tax rates for fiscal 2011 include the benefit of the retroactive
reinstatement.
24
Liquidity and Capital Resources
Our cash and cash equivalents were $216.4 million as of December 31, 2010 compared with $209.9
million as of June 30, 2010, an increase of $6.5 million. The increase primarily reflected $43.5
million provided from operating cash flows and $11.6 million of proceeds from common stock issued
under our share-based compensation plans, partially offset by $40.2 million used for purchases of
our common stock and $6.9 million used for the purchase of capital equipment.
Cash Flows from Operating Activities. Operating activities during the six months ended
December 31, 2010 generated cash of approximately $43.5 million compared with approximately $55.6
million of cash generated during the six months ended December 31, 2009. For the six months ended
December 31, 2010, net cash provided by operating activities was primarily attributable to net
income of $36.4 million plus adjustments for non-cash charges of $20.7 million, offset by a $13.7
million net increase in operating assets and liabilities. The net increase in operating assets and
liabilities was primarily attributable to a $24.1 million increase in accounts receivable
reflecting the increase in our net revenue during the period. Our days sales outstanding increased
from 63 to 71 days from June 30, 2010 to December 31, 2010 and our inventory turns decreased from
19 to 16 for the same period.
Cash Flows from Investing Activities. Our investing activities typically relate to purchases
of government-backed securities and investment-grade fixed income instruments and purchases of
property and equipment. Investing activities during the six months ended December 31, 2010 used
net cash of $6.7 million compared with $19.8 million of net cash generated during the six months
ended December 31, 2009. During the six months ended December 31, 2010, net cash used in investing
activities consisted of $6.9 million used for the purchase of property and equipment, partially
offset by proceeds of $250,000 from non-current investments.
Cash Flows from Financing Activities. Net cash used in financing activities for the six
months ended December 31, 2010 was approximately $30.2 million compared with $104.4 million net
cash used in financing activities for the six months ended December 31, 2009. Cash used in
financing activities for the six months ended December 31, 2010 included $40.2 million used for
purchases of our common stock, $1.5 million used for the payment of payroll taxes for deferred
stock units, partially offset by $11.6 million of proceeds from common stock issued under our
share-based compensation plans.
Common Stock Repurchase Program. Our Board of Directors has cumulatively authorized $420.0
million for our common stock repurchase program. The program authorizes us to purchase our common
stock in the open market or in privately negotiated transactions depending upon market conditions
and other factors. The number of shares repurchased and the timing of repurchases is based on the
level of our cash balances, general business and market conditions, and other factors, including
alternative investment opportunities. We hold common stock repurchased under this program as
treasury stock. From April 2005 through December 31, 2010, we repurchased 12,322,493 shares of our
common stock in the open market for an aggregate cost of $322.1 million. Treasury shares purchased
prior to August 28, 2008 were not subject to the stock split on that date, if adjusted for the
stock split the average cost would be $19.10. As of December 31, 2010, we had $97.9 million
available under our common stock repurchase program, which expires in April 2012.
Bank Credit Facility. We currently maintain a $40.0 million unsecured working capital line of
credit with Wells Fargo Bank. The Wells Fargo Bank revolving line of credit, which expires on
September 1, 2011, provides for an interest rate equal to the prime lending rate or 250 basis
points above LIBOR, depending on whether we choose a variable or fixed rate, respectively. We had
not borrowed any amounts under the line of credit as of December 31, 2010.
Convertible Senior Subordinated Notes. In December 2004, we issued an aggregate of $125
million of Notes maturing December 1, 2024 in a private offering pursuant to Rule 144A under the
Securities Act. In connection with issuing the Notes, we incurred debt issuance costs of $4.3
million, consisting primarily of the initial purchasers discount and costs related to legal,
accounting, and printing. We have purchased and retired $122.7 million of the Notes. The
remaining $2.3 million of Notes outstanding as of December 31, 2010 have been classified as
long-term as the next date Noteholders can require us to repurchase all or a portion of the Notes
is beyond one year.
$250 Million Shelf Registration. We have registered an aggregate of $250 million of common
stock (including the associated rights), preferred stock, debt securities, depositary shares,
warrants, purchase contracts, and units (collectively securities) for issuance to raise funds for
general corporate purposes, which may include the repayment of indebtedness outstanding from time
to time, working capital, capital expenditures, acquisitions, and repurchases of our common stock
or other securities. Securities issued under the shelf registration generally will be freely
tradeable after their issuance unless held by an affiliate of our company, in which case such
shares will be subject to the volume and manner of sale restrictions of Rule 144.
25
$100 Million Shelf Registration. We have registered an aggregate of $100 million of common
stock and preferred stock for issuance in connection with acquisitions, which shares generally will
be freely tradeable after their issuance under Rule 145 of the Securities Act unless held by an
affiliate of the acquired company, in which case such shares will be subject to the volume and
manner of sale restrictions of Rule 144.
Liquidity and Capital Resources. We believe our existing cash and cash equivalents balances
and anticipated cash flows from operating activities will be sufficient to meet our working capital
and other cash requirements over the course of at least the next 12 months. Our future capital
requirements will depend on many factors, including our revenue, the timing and extent of spending
to support product development efforts, costs related to protecting our intellectual property, the
expansion of sales and marketing activities, the timing of introductions of new products and
enhancements to existing products, the costs to ensure access to adequate manufacturing capacity,
the continuing market acceptance of our product solutions, our common stock purchase program, and
the amount and timing of our investments in, or acquisitions of, other technologies or companies.
Further equity or debt financing may not be available to us on acceptable terms or at all. If
sufficient funds are not available or are not available on acceptable terms, our ability to take
advantage of unexpected business opportunities or to respond to competitive pressures could be
limited or severely constrained.
Our non-current investments consist of ARS investments, which have failed to settle in
auctions. These failures generally resulted in the interest rates resetting on the regularly
scheduled auction dates. These investments are not liquid, and in the event we need to access
these funds, we will not be able to do so without a loss of principal, unless redeemed by the
issuers or a future auction on these investments is successful. At December 31, 2010, the fair
value of our ARS investments was $28.5 million with an original cost basis of $40.5 million. In
the first six months of 2011, $250,000 of our ARS investments were redeemed at par and we realized
a gain of $10,000 on the redemption. In connection with our fair value analysis for the three
months ended December 31, 2010, there was no other-than-temporary impairment charge recorded.
Based on our ability to access our cash and other short-term investments, our expected
operating cash flows, and our other sources of cash, we do not anticipate the lack of liquidity on
these investments will affect our ability to operate our business as usual.
Contractual Obligations and Commercial Commitments
Our material contractual obligations and commercial commitments as of December 31, 2010 were
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
More than |
|
Contractual Obligations |
|
Total |
|
|
1 year |
|
|
Years |
|
|
Years |
|
|
5 Years |
|
Convertible senior subordinated notes (1) |
|
$ |
3 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3 |
|
Leases |
|
|
6 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Purchase obligations and other commitments |
|
|
17 |
|
|
|
6 |
|
|
|
6 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
26 |
|
|
$ |
9 |
|
|
$ |
9 |
|
|
$ |
5 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents both principal and interest payable through the maturity date
of the underlying contractual obligation. |
As of December 31, 2010, we were unable to make a reasonably reliable estimate of when cash
settlement with a taxing authority may occur in connection with our unrecognized tax benefits of
$20.6 million.
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk has not changed significantly from the interest rate and foreign currency
risks disclosed in Item 7A of our Annual Report on Form 10-K for the fiscal year ended June 30,
2010.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, our Interim Chief Executive Officer and
Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls
and procedures, which included inquiries made to certain other of our employees. Based on their
evaluation, our Interim Chief Executive Officer and Chief Financial Officer have each concluded
that our disclosure controls and procedures are designed and are effective to ensure that
information required to be disclosed is accumulated and communicated to our management, including
our Interim Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure and are effective and sufficient to ensure that we record, process,
summarize, and report information required to be disclosed by us in our periodic reports filed
under the Securities Exchange Act of 1934, as amended, within the time periods specified by the
SECs rules and forms.
During the fiscal quarter covered by this report, there have not been any changes in our
internal control over financial reporting that have materially affected, or a reasonably likely to
materially affect, our internal control over financial reporting.
27
PART II OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Issuer Purchases of Equity Securities
Our Board of Directors has cumulatively authorized $420.0 million for our common stock
repurchase program. The remaining amount authorized for the repurchase of our common stock is
$97.9 million. Repurchases under the stock repurchase program were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Dollar Value |
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
of Shares |
|
|
|
|
|
|
|
Average |
|
|
Purchased |
|
|
that May |
|
|
|
Total |
|
|
Price |
|
|
as Part of |
|
|
Yet Be |
|
|
|
Number |
|
|
Paid |
|
|
Publicly |
|
|
Purchased |
|
|
|
of Shares |
|
|
per |
|
|
Announced |
|
|
Under the |
|
Period |
|
Purchased |
|
|
Share |
|
|
Program |
|
|
Program |
|
September 26, 2010 October 23, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
138,068,000 |
|
October 24, 2010 November 20, 2010 |
|
|
1,451,180 |
|
|
|
27.71 |
|
|
|
1,451,180 |
|
|
|
97,858,000 |
|
November 21, 2010 December 25, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,858,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,451,180 |
|
|
|
27.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
10.24(a) |
|
|
2010 Incentive Compensation Plan (1) |
|
|
|
|
|
|
10.24(b) |
|
|
Form of Non-Qualified Stock Option Agreement for 2010 Incentive Compensation Plan (2) |
|
|
|
|
|
|
10.24(c) |
|
|
Form of Incentive Stock Option Agreement for 2010 Incentive Compensation Plan (2) |
|
|
|
|
|
|
10.24(d) |
|
|
Form of Deferred Stock Award Agreement for 2010 Incentive Compensation Plan (2) |
|
|
|
|
|
|
10.25 |
|
|
2010 Employee Stock Purchase Plan (2) |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer |
|
|
|
|
|
|
32.1 |
|
|
Section 1350 Certification of Chief Executive Officer |
|
|
|
|
|
|
32.2 |
|
|
Section 1350 Certification of Chief Financial Officer |
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document |
|
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
* |
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files
are deemed not filed or part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and
otherwise are not subject to liability under those sections. |
|
(1) |
|
Incorporated by reference to the registrants Form 10-Q as filed with the SEC
on November 2, 2010. |
|
(2) |
|
Incorporated by reference to the registrants Form 8-K as filed with the SEC on
October 22, 2010. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SYNAPTICS INCORPORATED
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|
Date: January 28, 2011 |
By: |
/s/ Russell J. Knittel
|
|
|
|
Name: |
Russell J. Knittel |
|
|
|
Title: |
Interim President and Chief Executive Officer |
|
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|
|
|
By: |
/s/ Kathleen A. Bayless
|
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|
|
Name: |
Kathleen A. Bayless |
|
|
|
Title: |
Chief Financial Officer, Secretary, and Treasurer |
|
30
Exhibit 31.1
EXHIBIT 31.1
Certification of Chief Executive Officer
I, Russell J. Knittel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Synaptics Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
Date: January 28, 2011
|
|
|
|
|
|
/s/ Russell J. Knittel
|
|
|
Russell J. Knittel |
|
|
Interim Chief Executive Officer |
|
|
Exhibit 31.2
EXHIBIT 31.2
Certification of Chief Financial Officer
I, Kathleen A. Bayless, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Synaptics Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
Date: January 28, 2011
|
|
|
|
|
|
/s/ Kathleen A. Bayless
|
|
|
Kathleen A. Bayless |
|
|
Chief Financial Officer |
|
|
Exhibit 32.1
EXHIBIT 32.1
Section 1350 Certification of Chief Executive Officer
In connection with the Quarterly Report on Form 10-Q of Synaptics Incorporated (the Company)
for the quarterly period ended December 25, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Russell J. Knittel, Chief Executive Officer of the
Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
|
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
/s/ Russell J. Knittel
Russell J. Knittel
|
|
|
Interim Chief Executive Officer |
|
|
January 28, 2011 |
|
|
Exhibit 32.2
EXHIBIT 32.2
Section 1350 Certification of Chief Financial Officer
In connection with the Quarterly Report on Form 10-Q of Synaptics Incorporated (the Company)
for the quarterly period ended December 25, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Kathleen A. Bayless, Chief Financial Officer of
the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
|
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
|
|
|
/s/ Kathleen A. Bayless
Kathleen A. Bayless
|
|
|
Chief Financial Officer |
|
|
January 28, 2011 |
|
|