0000817720 2010-10-01 2010-12-31 0000817720 2009-10-01 2009-12-31 0000817720 2009-12-31 0000817720 2009-06-30 0000817720 2010-12-31 0000817720 2010-06-30 0000817720 2009-07-01 2009-12-31 0000817720 2009-12-24 0000817720 2011-01-20 0000817720 2010-07-01 2010-12-31 iso4217:USD xbrli:shares xbrli:shares iso4217:USD <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock--> <!-- xbrl,ns --> <!-- xbrl,nx --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left"> </div> <div align="center" style="font-size: 10pt"><b></b></div> <div align="center" style="font-size: 10pt"></div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of Presentation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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&#160;30, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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&#160;25, 2011. Our fiscal 2010 was a 52-week period ending on June&#160;26, 2010. The fiscal periods presented in this report were 13-week periods for the three months ended December&#160;25, 2010 and December&#160;26, 2009. For ease of presentation, the accompanying consolidated financial statements have been shown as ending on December&#160;31 and calendar quarter end dates for all annual, interim, and quarterly financial statement captions, unless otherwise indicated. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Use of Estimates</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 2 - us-gaap:RevenueRecognitionPolicyTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Revenue Recognition</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Net Income Per Share</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The computation of basic and diluted net income per share was as follows (in thousands, except per share data): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%"> <!-- Begin Table Head --> <tr valign="bottom"> <td width="44%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> <td width="3%">&#160;</td> <td width="1%">&#160;</td> <td width="9%">&#160;</td> <td width="1%">&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="6">Six Months Ended</td> <td>&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</td> <td>&#160;</td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td> <td>&#160;</td> <td>&#160;</td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td> <td>&#160;</td> </tr> <!-- End Table Head --> <!-- Begin Table Body --> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; 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Our diluted net income per share amounts for each period presented include the weighted average effect of potentially dilutive shares. We use the &#8220;treasury stock&#8221; method to determine the dilutive effect of our share-based awards and Convertible Senior Subordinated Notes, or Notes. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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&#160;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&#160;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. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 4 - syna:AuctionRateSecuritiesInvestmentsTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Auction Rate Securities Investments</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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&#8217; 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our ARS investments, which have a par value of $40.5&#160;million, have failed to settle in auctions beginning in September&#160;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&#160;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&#160;31, 2009, $300,000 and $1.0&#160;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. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As there are currently no active markets for our various failed ARS investments, we have estimated the fair value as of December&#160;31, 2010 using a trinomial discounted cash flow analysis. 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Our estimate of the fair value of our ARS investments could change materially from period to period based on future market conditions. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Contractual maturities for our ARS investments are generally greater than five years, with fair value of $9.6&#160;million maturing from 2015 to 2017, $8.9&#160;million maturing from 2034 to 2045, and $10.0&#160;million having no stated maturity. Of our ARS investments, $22.0&#160;million par value are investment grade, and the remaining $18.5&#160;million par value are below investment grade. For the six-month period ended December&#160;31, 2010, we recorded a realized gain of $10,000 on the redemption of ARS investments. 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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. 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We have not recorded any liability in our consolidated financial statements for such indemnification obligations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Contingencies</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. 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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&#8217;-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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. 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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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Of the shares delivered, 51,495 shares valued at $1,518,760 were withheld to meet statutory minimum tax withholding requirements. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Employee Stock Purchase Plan</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our 2001 Employee Stock Purchase Plan, as amended, became effective on January&#160;29, 2002, the effective date of the registration statement for our initial public offering (&#8220;ESPP plan&#8221;) became effective in October&#160;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. 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Under the terms of our ESPP plan, the offering period that commenced on July&#160;1, 2007 was terminated on December&#160;31, 2008 and a new offering period commenced on January&#160;1, 2009. The December&#160;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&#160;31, 2010. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 10 - us-gaap:IncomeTaxDisclosureTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Income Taxes</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes of $2.0&#160;million and $1.9&#160;million for the three months ended December&#160;31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes. The effective tax rate for the three months ended December&#160;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&#160;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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes of $5.9&#160;million and $5.1&#160;million for the six months ended December&#160;31, 2010 and 2009, respectively, represented estimated federal, foreign, and state taxes. The effective tax rate for the six months ended December&#160;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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Unrecognized Tax Benefits</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The total liability for gross unrecognized tax benefits increased $633,000 during the quarter ended December&#160;31, 2010 to $20.6&#160;million from $19.9&#160;million at September&#160;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&#160;30, 2010 was $1.4&#160;million. The liability for gross interest expense and penalties was increased by $171,000 to $1.5&#160;million as of December&#160;31, 2010. We classify interest and penalties, if any, as components of income tax expense. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">It is reasonably possible that the amount of the liability for unrecognized tax benefits may change within the next 12&#160;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&#160;months cannot be reasonably estimated at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On December&#160;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&#160;1, 2010. 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We generate our revenue from two broad product categories: the personal computing, or PC, market and digital lifestyle product market. 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