10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 25, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to .

Commission file number 000-49602

 

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

77-0118518

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1251 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (Zip code)

(408) 904-1100

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $.001 per share

SYNA

The Nasdaq Global Select Market

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

Number of shares of Common Stock outstanding at October 28, 2021: 39,271,418

 

 


 

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED September 25, 2021

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

Part I. Financial Information

 

 

 

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited):

 

3

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets—September 25, 2021 and June 26, 2021

 

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income—Three months Ended September 25, 2021 and September 26, 2020

 

4

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity—Three months Ended September 25, 2021 and September 26, 2020

 

5

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows—Three Months Ended September 25, 2021 and September 26, 2020

 

6

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

 

Item 2.

 

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

 

22

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

31

 

 

Part II. Other Information

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

32

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

32

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

 

 

 

 

 

 

Item 6.

 

Exhibits

 

33

 

 

 

 

 

 

 

Signatures

 

34

 

 

 

 


 

`PART I—FINANCIAL INFORMATION

 

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value and share amounts)

(unaudited)

 

 

 

September

 

 

June

 

 

 

2021

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

347.3

 

 

$

836.3

 

Accounts receivable, net of allowances of $5.6 and $5.8 at September 2021 and June 2021, respectively

 

 

269.7

 

 

 

228.3

 

Inventories

 

 

88.7

 

 

 

82.0

 

Prepaid expenses and other current assets

 

 

43.7

 

 

 

33.1

 

Total current assets

 

 

749.4

 

 

 

1,179.7

 

Property and equipment at cost, net of accumulated depreciation of $136.2 and $131.0 at
   September 2021 and June 2021, respectively

 

 

92.1

 

 

 

91.2

 

Goodwill

 

 

570.0

 

 

 

570.0

 

Acquired intangibles, net

 

 

276.3

 

 

 

301.5

 

Non-current other assets

 

 

94.4

 

 

 

84.4

 

 

 

$

1,782.2

 

 

$

2,226.8

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

109.7

 

 

$

97.6

 

Accrued compensation

 

 

64.0

 

 

 

76.4

 

Income taxes payable

 

 

18.0

 

 

 

29.4

 

Other accrued liabilities

 

 

111.8

 

 

 

96.2

 

Convertible notes, net

 

 

-

 

 

 

487.1

 

Total current liabilities

 

 

303.5

 

 

 

786.7

 

Long-term debt

 

 

394.5

 

 

 

394.4

 

Other long-term liabilities

 

 

82.8

 

 

 

78.5

 

Total liabilities

 

 

780.8

 

 

 

1,259.6

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

$0.001 par value; 120,000,000 shares authorized, 67,347,872 and 66,963,006 shares
   issued, and
39,223,251 and 35,331,903 shares outstanding, at September 2021
   and June 2021, respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

874.6

 

 

 

1,391.5

 

Treasury stock: 28,124,621 and 31,631,103 common treasury shares at September
   2021 and June 2021, respectively, at cost

 

 

(694.5

)

 

 

(1,205.4

)

Retained earnings

 

 

821.2

 

 

 

781.0

 

Total stockholders' equity

 

 

1,001.4

 

 

 

967.2

 

 

 

$

1,782.2

 

 

$

2,226.8

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

3


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

 

September

 

 

 

 

2021

 

 

2020

 

 

Net revenue

 

$

372.7

 

 

$

328.4

 

 

Cost of revenue

 

 

174.6

 

 

 

193.9

 

 

Gross margin

 

 

198.1

 

 

 

134.5

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

86.1

 

 

 

80.9

 

 

Selling, general, and administrative

 

 

41.6

 

 

 

35.3

 

 

Acquired intangibles amortization

 

 

8.4

 

 

 

6.7

 

 

Restructuring costs

 

 

1.4

 

 

 

5.6

 

 

Total operating expenses

 

 

137.5

 

 

 

128.5

 

 

Operating income

 

 

60.6

 

 

 

6.0

 

 

Interest and other expense, net

 

 

(5.9

)

 

 

(4.7

)

 

Loss on redemption of convertible notes

 

 

(8.1

)

 

 

 

 

Income before provision for income taxes
   and equity investment loss

 

 

46.6

 

 

 

1.3

 

 

Provision for income taxes

 

 

5.9

 

 

 

3.6

 

 

Equity investment loss

 

 

(0.5

)

 

 

(0.5

)

 

Net income (loss) and Comprehensive income (loss)

 

$

40.2

 

 

$

(2.8

)

 

Net income (loss) per share:

 

 

 

 

 

 

 

Basic

 

$

1.07

 

 

$

(0.08

)

 

Diluted

 

$

0.99

 

 

$

(0.08

)

 

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

Basic

 

 

37.5

 

 

 

34.2

 

 

Diluted

 

 

40.6

 

 

 

34.2

 

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

4


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Earnings

 

 

Equity

 

Balance at June 2021

 

 

66,963,006

 

 

$

0.1

 

 

$

1,391.5

 

 

$

(1,205.4

)

 

$

781.0

 

 

$

967.2

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40.2

 

 

 

40.2

 

Issuance of common stock
   for share-based award
   compensation plans

 

 

384,866

 

 

 

 

 

 

7.8

 

 

 

 

 

 

 

 

 

7.8

 

Payroll taxes for deferred
   stock units

 

 

 

 

 

 

 

 

(27.7

)

 

 

 

 

 

 

 

 

(27.7

)

Redemption of convertible debt

 

 

 

 

 

 

 

 

(518.2

)

 

 

510.9

 

 

 

 

 

 

(7.3

)

Share-based compensation

 

 

 

 

 

 

 

 

21.2

 

 

 

 

 

 

 

 

 

21.2

 

Balance at September 2021

 

 

67,347,872

 

 

$

0.1

 

 

$

874.6

 

 

$

(694.5

)

 

$

821.2

 

 

$

1,001.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Earnings

 

 

Equity

 

Balance at June 2020

 

 

65,871,648

 

 

$

0.1

 

 

$

1,340.2

 

 

$

(1,222.6

)

 

$

701.4

 

 

$

819.1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.8

)

 

 

(2.8

)

Issuance of common stock
   for share-based award
   compensation plans

 

 

296,917

 

 

 

 

 

 

10.4

 

 

 

 

 

 

 

 

 

10.4

 

Payroll taxes for deferred
   stock units

 

 

 

 

 

 

 

 

(5.6

)

 

 

 

 

 

 

 

 

(5.6

)

Share-based compensation attributable to acquisition

 

 

 

 

 

 

 

 

3.2

 

 

 

 

 

 

 

 

 

3.2

 

Share-based compensation

 

 

 

 

 

 

 

 

14.4

 

 

 

 

 

 

 

 

 

14.4

 

Balance at September 2020

 

 

66,168,565

 

 

$

0.1

 

 

$

1,362.6

 

 

$

(1,222.6

)

 

$

698.6

 

 

$

838.7

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

 

5


 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

 

Three Months Ended

 

 

 

September

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

40.2

 

 

$

(2.8

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Share-based compensation costs

 

 

21.2

 

 

 

14.4

 

Depreciation and amortization

 

 

5.2

 

 

 

5.2

 

Acquired intangibles amortization

 

 

25.2

 

 

 

25.4

 

Loss on redemption of convertible notes

 

 

8.1

 

 

 

 

Deferred taxes

 

 

(1.4

)

 

 

(3.7

)

Amortization of convertible debt discount and issuance costs

 

 

1.6

 

 

 

4.8

 

Amortization of debt issuance costs

 

 

0.2

 

 

 

0.1

 

Amortization of cost of development services

 

 

2.5

 

 

 

1.7

 

Equity investment loss

 

 

0.5

 

 

 

0.5

 

Foreign currency remeasurement loss

 

 

 

 

 

(0.7

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net

 

 

(41.4

)

 

 

(25.4

)

Inventories

 

 

(6.7

)

 

 

20.5

 

Prepaid expenses and other current assets

 

 

(5.0

)

 

 

(10.0

)

Other assets

 

 

(7.4

)

 

 

(11.4

)

Accounts payable

 

 

10.7

 

 

 

11.7

 

Accrued compensation

 

 

(12.3

)

 

 

(1.5

)

Income taxes payable

 

 

(6.9

)

 

 

(16.2

)

Other accrued liabilities

 

 

24.0

 

 

 

(6.1

)

Net cash provided by operating activities

 

 

58.3

 

 

 

6.5

 

Cash flows from investing activities

 

 

 

 

 

 

Acquisition of businesses, net of cash and cash equivalents acquired

 

 

 

 

 

(621.8

)

Proceeds from maturities of investments

 

 

 

 

 

31.1

 

Purchases of property and equipment

 

 

(4.7

)

 

 

(3.9

)

Net cash used in investing activities

 

 

(4.7

)

 

 

(594.6

)

Cash flows from financing activities

 

 

 

 

 

 

Payment for redemption of convertible notes

 

 

(505.6

)

 

 

 

Proceeds from issuance of shares

 

 

7.8

 

 

 

10.4

 

Payroll taxes for deferred stock and market stock units

 

 

(27.7

)

 

 

(5.6

)

Refundable deposit paid to vendor

 

 

(16.6

)

 

 

 

Net cash provided by (used in) financing activities

 

 

(542.1

)

 

 

4.8

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(0.5

)

 

 

0.1

 

Net decrease in cash and cash equivalents

 

 

(489.0

)

 

 

(583.2

)

Cash and cash equivalents at beginning of period

 

 

836.3

 

 

 

763.4

 

Cash and cash equivalents at end of period

 

$

347.3

 

 

$

180.2

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

Cash paid for taxes

 

$

16.7

 

 

$

23.6

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment in current liabilities

 

$

3.4

 

 

$

1.0

 

 

See accompanying notes to condensed consolidated financial statements (unaudited)

6


 

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 United States generally accepted accounting principles, or U.S. GAAP. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations. In our opinion, the financial statements include all adjustments, which are of a normal and recurring nature and 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 26, 2021.

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 2022 and 2021 are 52-week periods ending June 25, 2022 and June 26, 2021, respectively. The fiscal periods presented in this report are 13-week periods ended September 25, 2021, and September 26, 2020, respectively.

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, loss on purchase commitments, product warranty, accrued liabilities, share-based compensation costs, provision for income taxes, deferred income tax asset valuation allowances, uncertain tax positions, goodwill, intangible assets, investments and loss 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, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic, 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.

Cash Equivalents

Cash equivalents consist of highly liquid investments with original maturities of three months or less. Our cash equivalents as of September 25, 2021 and as of June 26, 2021 included bank deposits with a carrying value of $0.9 million and $509.1 million, respectively, which approximates fair value, and are included in cash and cash equivalents on the condensed consolidated balance sheets.

Foreign Currency Transactions and Foreign Exchange Contracts

The U.S. dollar is our functional and reporting currency. We remeasure our monetary assets and liabilities not denominated in the functional currency into U.S. dollar equivalents at the rate of exchange in effect on the balance sheet date. We measure and record non-monetary balance sheet accounts at the historical rate in effect at the date of transaction. We remeasure foreign currency expenses at the weighted average exchange rate in the month that the transaction occurred. Our foreign currency transactions and remeasurement gains and losses are included in selling, general, and administrative expenses in the condensed consolidated statements of income and resulted in immaterial amounts in each of the three months ended September 25, 2021, and the three months ended September 26, 2020.

Leases

We determine if a contract is a lease or contains a lease at the inception of the contract and reassess that conclusion if the contract is modified. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use, or ROU, assets are included in non-current other assets on our condensed consolidated balance sheet. Operating lease liabilities are separated into a current portion, included within accrued liabilities on our condensed consolidated balance sheet, and a non-current portion, included within other long-term liabilities on our condensed consolidated balance sheet. We do not have any finance lease

7


 

ROU assets or liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We do not obtain and control the right to use the identified asset until the lease commencement date.

Our lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Because the interest rate implicit in the lease is not readily determinable, we generally use our incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. We factor in publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability.

The term of our leases equals the non-cancellable period of the lease, including any rent-free periods provided by the lessor, and also include options to renew or extend the lease (including by not terminating the lease) that we are reasonably certain to exercise. We establish the term of each lease at lease commencement and reassess that term in subsequent periods when one of the triggering events outlined in Accounting Standards Codification (ASC) Topic 842 occurs. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term.

Our lease contracts often include lease and non-lease components. For our leases, we have elected the practical expedient offered by the standard to not separate lease from non-lease components and account for them as a single lease component.

We have elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term. 

 

 

2. Revenue Recognition

We account for revenue using Accounting Standards Codification Topic 606, or ASC 606, Revenue from Contracts with Customers. Our revenue is primarily generated from the sale of application specific integrated circuit chips, or ASIC chips, either directly to a customer or to a distributor. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. We generally warrant our products for a period of 12 months from the date of sale and estimate probable product warranty costs at the time we recognize revenue as the warranty is considered an assurance warranty and not a performance obligation. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We then select an appropriate method for measuring satisfaction of the performance obligations.

Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect to payment, delivery, warranty and supply. In the absence of a master sales agreement, we consider a customer's purchase order or our standard terms and conditions to be the contract with the customer.

Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation rights, price protection and price allowances; variable consideration associated with these rights is expected to be inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current liabilities under the revenue standard, and are shown as customer obligations in Note 9 Other Accrued Liabilities and Other Long-Term Liabilities. We estimate the amount of variable consideration for such arrangements based on the expected value to be provided to customers, and we do not believe that there will be significant changes to our estimates of variable consideration. When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable, they are estimated and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical return rates applied to distributor inventory subject to stock rotation rights and recorded as a reduction to revenue with a corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded as prepaid expenses and other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements and we estimate total unit volumes under such arrangements to determine the expected transaction price for the units expected to be transferred. Such arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns liabilities are recorded as refund liabilities within other accrued liabilities.

8


 

Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. Payments are generally due within three months of completion of the performance obligation and subsequent invoicing and therefore, do not include significant financing components. To date, there have been no material bad debt charges recorded on accounts receivable. There were $1.2 million in contract assets recorded on the condensed consolidated balance sheets as of September 25, 2021 and $1.9 million as of June 26, 2021. Contract assets are presented as part of prepaid expenses and other current assets. Contract liabilities and refund liabilities were $11.2 million and $42.5 million, respectively, as of September 25, 2021 and $7.0 million and $36.1 million, respectively, as of June 26, 2021. Both contract liabilities and refund liabilities are presented as customer obligations in Note 9 Other Accrued Liabilities and Other Long-Term Liabilities. During the three months ended September 25, 2021, and the three months ended September 26, 2020, we recognized $2.9 million and $0.6 million, respectively, in revenue related to contract liabilities, which was outstanding as of the beginning of each such fiscal year.

We invoice customers for each delivery upon shipment and recognize revenue in accordance with delivery terms. As of September 25, 2021, we did not have any remaining unsatisfied performance obligations with an original duration greater than one year. Accordingly, under the optional exception provided by ASC 606, we do not disclose revenues allocated to future performance obligations of partially completed contracts. We account for shipping and handling costs as fulfillment costs before the customer obtains control of the goods and include these costs in cost of revenue. We account for collection of all taxes on a net basis.

We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are recorded as a selling, general and administrative expense in the condensed consolidated statements of income) are expensed when the product is shipped because such commissions are owed after shipment.

Revenue from contracts with customers disaggregated by geographic area based on customer location and groups of similar products is presented in Note 14 Segment, Customers, and Geographical Information.

 

 

3. Net Income (Loss) Per Share

The computation of basic and diluted net income (loss) per share was as follows (in millions, except per share data):

 

 

 

Three Months Ended

 

 

 

September

 

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

40.2

 

 

$

(2.8

)

Denominator:

 

 

 

 

 

 

Shares, basic

 

 

37.5

 

 

 

34.2

 

Effect of dilutive share-based awards and convertible notes

 

 

3.1

 

 

 

-

 

Shares, diluted

 

 

40.6

 

 

 

34.2

 

Net income (loss) per share:

 

 

 

 

 

 

Basic

 

$

1.07

 

 

$

(0.08

)

Diluted

 

$

0.99

 

 

$

(0.08

)

Our basic net income (loss) per share amounts for each period presented have been computed using the weighted average number of shares of common stock, $0.001 par value, or the common stock, outstanding over the period measured. 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 stock options, restricted stock units, or RSUs, market stock units, or MSUs, performance stock units, or PSUs, and our convertible notes.

Dilutive net income (loss) per share amounts do not include the potential weighted average effect of 1,010 and 1,827,212 shares of common stock related to certain share-based awards that were outstanding during the three months ended September 25, 2021 and September 26, 2020, respectively. These share-based awards were not included in the computation of diluted net income per share because their effect would have been antidilutive.

 

9


 

4. Fair Value

Our carrying values of cash equivalents approximate their fair values due to the short period of time to maturity.

The fair values of our accounts receivable and accounts payable approximate their carrying values because of the short-term nature of those instruments. Intangible assets, property and equipment, and goodwill are measured at fair value on a non-recurring basis if impairment is indicated. The interest rate on our bank debt is variable, which is subject to change from time to time to reflect a market interest rate; we currently do not have any bank borrowings, however, when we do have outstanding borrowing the carrying value of our bank debt approximates fair value.

The fair value of our $400.0 million principal amount of 4.0% senior notes due 2029 is measured at fair value for disclosure purposes. The fair value of the senior notes as of September 25, 2021 and June 26, 2021 was approximately $411.5 million and $401.5 million, respectively, based on the last trading price of the senior notes for the period.

 

5. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consisted of the following (in millions):

 

 

 

September

 

 

June

 

 

 

2021

 

 

2021

 

Raw materials and work-in-progress

 

$

52.1

 

 

$

49.1

 

Finished goods

 

 

36.6

 

 

 

32.9

 

 

 

$

88.7

 

 

$

82.0

 

 

We record a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which we do not subsequently write up. We also record a liability and charge to cost of revenue for estimated losses on inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer delays, order cancellations, or other factors. The following factors influence our estimates: changes to or cancellations of customer orders, unexpected or sudden decline in demand, rapid product improvements, technological advances, and termination or changes by our original equipment manufacturers, or OEM, customers of any product offerings incorporating our product solutions.

 

6. Acquired Intangibles and Goodwill

Acquired Intangibles

The following table summarizes the life, the gross carrying value and the related accumulated amortization of our acquired intangible assets (in millions):

 

 

 

 

 

 

September 2021

 

 

June 2021

 

 

 

Weighted Average
Life in Years

 

 

Gross Carrying
Value

 

 

Accumulated
Amortization

 

 

Net Carrying
Value

 

 

Gross Carrying
Value

 

 

Accumulated
Amortization

 

 

Net Carrying
Value

 

Audio and video technology

 

 

5.9

 

 

$

117.1

 

 

$

(81.2

)

 

$

35.9

 

 

$

138.6

 

 

$

(97.6

)

 

$

41.0

 

Customer relationships

 

 

4.2

 

 

 

125.5

 

 

 

(71.6

)

 

 

53.9

 

 

 

125.5

 

 

 

(63.8

)

 

 

61.7

 

Wireless connectivity technology

 

 

6.0

 

 

 

93.0

 

 

 

(18.1

)

 

 

74.9

 

 

 

93.0

 

 

 

(14.2

)

 

 

78.8

 

Video interface technology

 

 

3.0

 

 

 

82.0

 

 

 

(31.9

)

 

 

50.1

 

 

 

82.0

 

 

 

(25.1

)

 

 

56.9

 

Display driver technology