Business and Significant Accounting Policies | 12 Months Ended |
Jun. 28, 2014 |
Business and Significant Accounting Policies [Abstract] | ' |
BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ' |
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
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Pericom Semiconductor Corporation (the “Company” or “Pericom”) was incorporated in June 1990 in the state of California. The Company designs, manufactures and markets high performance digital, analog and mixed-signal integrated circuits (“ICs”) and frequency control products (“FCPs”) used for the transfer, routing, and timing of digital and analog signals within and between computer, networking, datacom and telecom systems. |
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USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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BASIS OF PRESENTATION — These consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Global Limited (“PGL”), PSE Technology Corporation (“PSE-TW”), and Pericom Asia Limited (“PAL”). PGL has two wholly-owned subsidiaries, Pericom International Limited (“PIL”) and Pericom Semiconductor (HK) Limited (“PHK”). In addition, PAL has three subsidiaries, PSE Technology (Shandong) Corporation (“PSE-SD”), Pericom Technology Yangzhou Corporation (“PSC-YZ”) for the Jinan, China and Yangzhou, China operations, respectively, and Pericom Technology Inc. (“PTI”). All significant intercompany balances and transactions have been eliminated in consolidation. |
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The Company has significant operations in the People’s Republic of China (“PRC”), where certain political, economic and currency restrictions may apply. Insofar as can be reasonably determined, and based on our experience to date, the effect of foreign exchange restrictions upon the consolidated financial position and results of the Company are not material. |
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FISCAL PERIOD — For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of June. The year ended July 3, 2010 contains 53 weeks, whereas all other fiscal years presented herein include 52 weeks. |
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CASH EQUIVALENTS — The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value. |
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SHORT-TERM INVESTMENTS IN MARKETABLE SECURITIES — The Company’s policy is to invest in instruments with investment grade credit ratings. The Company classifies its short-term investments as “available-for-sale” securities and the Company bases the cost of securities sold using the specific identification method. The Company accounts for unrealized gains and losses on its available-for-sale securities as a separate component of shareholders’ equity in the consolidated balance sheets in the period in which the gain or loss occurs. In prior years, the Company classified portions of its available-for-sale securities as current or noncurrent based on each security’s attributes. Effective as of June 28, 2014, all available-for-sale securities are classified as short-term investments, as we consider the entire investment portfolio to be saleable if cash is needed or if better investment opportunities arise. Prior period balance sheets have been reclassed accordingly to conform to the current year presentation. This reclass had no effect on previously reported net income (loss), comprehensive income (loss), shareholders’ equity or cash flows. |
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As of June 28, 2014 and June 29, 2013, investments, and any difference between the fair market value and the underlying amortized cost of such investments, consisted of the following: |
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Available-for-Sale Securities: |
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| | | | As of June 28, 2014 | | | | | |
(in thousands) | | | | Amortized | | Unrealized | | Unrealized | | Net | | Fair | | | | | |
Cost | Gains | Losses | Unrealized | Value | | | | | |
| | | Gains | | | | | | |
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Available-for-Sale Securities | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Time deposits | | | | $ | 17,693 | | | $ | — | | | $ | — | | | $ | — | | | $ | 17,693 | | | | | | |
Repurchase agreements | | | | | 500 | | | | — | | | | — | | | | — | | | | 500 | | | | | | |
US Treasury securities | | | | | 526 | | | | 1 | | | | — | | | | 1 | | | | 527 | | | | | | |
National government and agency securities | | | | | 4,962 | | | | 95 | | | | (2 | ) | | | 93 | | | | 5,055 | | | | | | |
State and municipal bond obligations | | | | | 7,090 | | | | 63 | | | | (4 | ) | | | 59 | | | | 7,149 | | | | | | |
Corporate bonds and notes | | | | | 42,675 | | | | 249 | | | | (143 | ) | | | 106 | | | | 42,781 | | | | | | |
Asset backed securities | | | | | 7,592 | | | | 28 | | | | (6 | ) | | | 22 | | | | 7,614 | | | | | | |
Mortgage backed securities | | | | | 4,766 | | | | 26 | | | | (7 | ) | | | 19 | | | | 4,785 | | | | | | |
Total | | | | $ | 85,804 | | | $ | 462 | | | $ | (162 | ) | | $ | 300 | | | $ | 86,104 | | | | | | |
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| | | | As of June 29, 2013 | | | | | |
(in thousands) | | | | Amortized | | Unrealized | | Unrealized | | Net | | Fair | | | | | |
Cost | Gains | Losses | Unrealized | Value | | | | | |
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| | | (Losses) | | | | | | |
Available-for-Sale Securities | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Time deposits | | | | $ | 12,087 | | | $ | — | | | $ | — | | | $ | — | | | $ | 12,087 | | | | | | |
Repurchase agreements | | | | | 1,997 | | | | — | | | | — | | | | — | | | | 1,997 | | | | | | |
National government and agency securities | | | | | 4,348 | | | | 106 | | | | (3 | ) | | | 103 | | | | 4,451 | | | | | | |
State and municipal bond obligations | | | | | 3,776 | | | | 9 | | | | (27 | ) | | | (18 | ) | | | 3,758 | | | | | | |
Corporate bonds and notes | | | | | 48,438 | | | | 71 | | | | (716 | ) | | | (645 | ) | | | 47,793 | | | | | | |
Asset backed securities | | | | | 10,063 | | | | 19 | | | | (60 | ) | | | (41 | ) | | | 10,022 | | | | | | |
Mortgage backed securities | | | | | 6,755 | | | | 26 | | | | (50 | ) | | | (24 | ) | | | 6,731 | | | | | | |
Total | | | | $ | 87,464 | | | $ | 231 | | | $ | (856 | ) | | $ | (625 | ) | | $ | 86,839 | | | | | | |
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The following tables show the gross unrealized losses and fair values of the Company’s investments that have unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 28, 2014 and June 29, 2013: |
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| | | | Continuous Unrealized Losses at June 28, 2014 | |
| | | | Less Than 12 Months | | 12 Months or Longer | | Total | |
(in thousands) | | | | Fair | | Unrealized | | Fair | | Unrealized | | Fair | | Unrealized | |
Value | Losses | Value | Losses | Value | Losses | |
National government and agency securities | | | | $ | 282 | | | $ | 1 | | | $ | 91 | | | $ | 1 | | | $ | 373 | | | $ | 2 | | |
State and municipal bond obligations | | | | | — | | | | — | | | | 695 | | | | 4 | | | | 695 | | | | 4 | | |
Corporate bonds and notes | | | | | 3,901 | | | | 11 | | | | 5,801 | | | | 132 | | | | 9,702 | | | | 143 | | |
Asset backed securities | | | | | 895 | | | | 1 | | | | 1,195 | | | | 5 | | | | 2,090 | | | | 6 | | |
Mortgage backed securities | | | | | 1,083 | | | | 3 | | | | 504 | | | | 4 | | | | 1,587 | | | | 7 | | |
| | | | $ | 6,161 | | | $ | 16 | | | $ | 8,286 | | | $ | 146 | | | $ | 14,447 | | | $ | 162 | | |
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| | | | Continuous Unrealized Losses at June 29, 2013 | |
| | | | Less Than 12 Months | | 12 Months or Longer | | Total | |
(in thousands) | | | | Fair | | Unrealized | | Fair | | Unrealized | | Fair | | Unrealized | |
Value | Losses | Value | Losses | Value | Losses | |
National government and agency securities | | | | $ | 154 | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 154 | | | $ | 3 | | |
State and municipal bond obligations | | | | | 2,364 | | | | 27 | | | | — | | | | — | | | | 2,364 | | | | 27 | | |
Corporate bonds and notes | | | | | 36,394 | | | | 626 | | | | 4,298 | | | | 90 | | | | 40,692 | | | | 716 | | |
Asset backed securities | | | | | 5,881 | | | | 51 | | | | 546 | | | | 9 | | | | 6,427 | | | | 60 | | |
Mortgage backed securities | | | | | 3,616 | | | | 13 | | | | 216 | | | | 37 | | | | 3,831 | | | | 50 | | |
| | | | $ | 48,409 | | | $ | 720 | | | $ | 5,060 | | | $ | 136 | | | $ | 53,469 | | | $ | 856 | | |
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The unrealized losses are of a temporary nature due to the Company’s intent and ability to hold the investments until maturity or until the cost is recoverable. The unrealized losses are primarily due to fluctuations in market interest rates. The Company reports unrealized gains and losses on its “available-for-sale” securities in accumulated other comprehensive income, net of tax, in shareholders’ equity. |
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The Company records gains or losses realized on sales of available-for-sale securities in interest and other income, net on its consolidated statements of operations. The cost of securities sold is based on the specific identification of the security and its amortized cost. In fiscal 2014, 2013 and 2012, realized gains on available-for-sale securities were $179,000, $1.0 million and $673,000, respectively. |
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The following table lists the fair value of the Company’s short-term investments by length of time to maturity as of June 28, 2014 and June 29, 2013: |
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(in thousands) | | | | June 28, | | June 29, | | | | | | | | | | | | | | | | | |
2014 | 2013 | | | | | | | | | | | | | | | | | |
One year or less | | | | $ | 24,963 | | | $ | 19,853 | | | | | | | | | | | | | | | | | | |
Between one and three years | | | | | 24,242 | | | | 29,525 | | | | | | | | | | | | | | | | | | |
Greater than three years | | | | | 30,449 | | | | 29,244 | | | | | | | | | | | | | | | | | | |
Multiple dates | | | | | 6,450 | | | | 8,217 | | | | | | | | | | | | | | | | | | |
| | | | $ | 86,104 | | | $ | 86,839 | | | | | | | | | | | | | | | | | | |
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Securities with maturities over multiple dates are mortgage-backed securities (“MBS”) or asset-backed securities (“ABS”) featuring periodic principle paydowns through 2041. |
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FAIR VALUE OF FINANCIAL INSTRUMENTS — The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities and/or variable interest rates. Available-for-sale investments are reported at their fair value based on quoted market prices. A further discussion of the fair value of financial instruments is detailed in Note 16 to the Consolidated Financial Statements contained in this report on Form 10-K. |
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ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company computes its allowance for doubtful accounts using a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to the Company, the Company records a specific allowance against amounts due to the Company, reducing the net recognized receivable to the amount the Company reasonably believes it will collect. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and its historical experience. |
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INVENTORIES — For IC and certain FCP products, the Company records inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. The carrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast |
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of demand over a specific future period. The semiconductor markets that the Company serves are volatile and actual results may vary from forecast or other assumptions, potentially affecting the Company’s assessment of excess and obsolete inventory, resulting in material effects on gross margin. |
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The inventories of the remainder of the FCP products are recorded at the lower of weighted-average cost, which approximates actual cost, or market value. Weighted average cost is comprised of average manufacturing costs weighted by the volume produced in each production run. Market value is defined as the net realizable value for finished goods, and replacement cost for raw materials and work in process. |
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Raw material inventory is considered slow moving and is fully reserved if it has not moved in 365 days. For assembled devices, the inventory is disaggregated by part number. The quantities on hand in each part number category are compared to the quantity that was shipped in the previous twelve months, the quantity in backlog and to the quantity expected to ship in the next twelve months. A reserve is recorded to the extent the value of each quantity on hand is in excess of the lesser of the three comparisons. The Company also periodically reviews inventory for obsolescence beyond the established formulaic tests. The Company believes this method of evaluating inventory fairly represents market conditions. |
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The Company considers the reserved material to be available for sale. The reserved inventory is not revalued should market conditions change or if a market develops for the obsolete inventory. In the past, the Company has sold obsolete inventory that was previously fully reserved. |
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PROPERTY, PLANT AND EQUIPMENT — The Company states its property, plant and equipment at cost. Cost includes purchase cost, applicable taxes, freight, installation costs and interest incurred in the acquisition of any asset that requires a period of time to make it ready for use. We compute depreciation and amortization using the straight-line method over estimated useful lives of three to eight years except for buildings, which we depreciate using the straight-line method over estimated useful lives of twenty to forty years. We depreciate leasehold improvements over the shorter of the lease term or the improvement’s estimated useful life. In addition, we capitalize the cost of major replacements, improvements and betterments, while we expense normal maintenance and repair. |
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INVESTMENTS IN UNCONSOLIDATED AFFILIATES — The Company holds or has held ownership interests in various investees. Our ownership in these affiliates has varied from 20% to approximately 49%. We classify these investments as investments in unconsolidated affiliates in our consolidated balance sheets. The Company accounts for long-term investments in companies in which it has an ownership share larger than 20% and in which it has significant influence over the activities of the investee using the equity method. We recognize our proportionate share of each investee’s income or loss in the period in which the investee reports the income or loss. We eliminate all intercompany transactions in accounting for our equity method investments. |
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OTHER ASSETS — The Company’s other assets classification includes investments in privately held companies in which we have less than a 20% interest, land use rights and deposits. The Company reports its investments in privately held companies at the lower of cost or market. The Company’s management reviews the investment in these companies for losses that may be other than temporary on a quarterly basis. Should management determine that such an impairment exists, the Company will reduce the value of the Company’s investment in the period in which management discovers the impairment and charge the impairment to the consolidated statement of operations. The Company’s management performed such an evaluation as of June 28, 2014 and determined that no impairment existed. Two of the Company’s subsidiaries, PSE-SD and PTI, hold land use rights that were acquired from the local Chinese government which entitle the Company to use the land for 15 to 50 years. The cost of the land use rights is recorded as a component of other assets and is being depreciated over 15 to 50 years, the useful life of the rights. |
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LONG-LIVED ASSETS — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the |
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undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, the Company will recognize an impairment loss as the amount of the difference between carrying value and fair value as determined by discounted cash flows. |
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INCOME TAXES — The Company accounts for income taxes following the Financial Accounting Standards Board’s (“FASB”) statements and related interpretations, which require an asset and liability approach to recording deferred taxes. We record a valuation allowance to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company’s income tax calculations are based on application of the respective U.S. federal, state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based on its estimates of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the consolidated statements of operations. |
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The Internal Revenue Service completed their examination of the Company’s federal tax returns for fiscal 2010 and 2011 during fiscal 2014, and additional tax payments of approximately $208,000 were made in fiscal 2014, including interest charges for the two years that were examined. The Company had previously accrued for this exposure. |
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FOREIGN CURRENCY TRANSLATION — The functional currency of the Company’s foreign subsidiaries is the local currency. In consolidation, the Company translates assets and liabilities at exchange rates in effect at the balance sheet date. The Company translates revenue and expense accounts at average exchange rates during the period in which the transaction takes place. Net gains or (losses) from foreign currency translation of assets and liabilities of $394,000 and $1.3 million in fiscal 2014 and 2013, respectively, are included in the cumulative translation adjustment component of accumulated other comprehensive income, net of tax, a component of shareholders’ equity. Net gains or (losses) arising from transactions denominated in currencies other than the functional currency were $(11,000), $562,000 and $334,000 in fiscal 2014, 2013 and 2012 respectively, and are included in interest and other income, net. |
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SHARE-BASED COMPENSATION — The Company recognizes employee share-based compensation through measurement at grant date based on the fair value of the award, and the fair value is recognized as an expense over the employee’s requisite service period. See Note 14 for further discussion of share-based compensation. |
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REVENUE RECOGNITION — The Company recognizes revenue from the sale of its products when: |
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• | | Persuasive evidence of an arrangement exists; | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | | Delivery has occurred; | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | | The sales price is fixed or determinable; and | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | | Collectability is reasonably assured. | | | | | | | | | | | | | | | | | | | | | | | | | |
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Generally, the Company meets these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, the Company estimates and records provisions for future returns and other charges against revenue at the time of shipment consistent with the terms of sale. |
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The Company sells products to large, domestic distributors at the price listed in its price book for that distributor. At the time of sale the Company records a sales reserve for ship from stock and debits (“SSD”s), stock rotations, return material authorizations (“RMA”s), authorized price protection programs, and any special programs approved by management. The Company offsets the sales reserve against revenues, producing the net revenue amount reported in the consolidated statements of operations. |
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The market price for the Company’s products can be significantly different from the book price at which the Company sold the product to the distributor. When the market price, as compared to the Company’s original book price, of a particular distributor’s sales opportunity to their own customer would result in low or negative margins for our distributor, the Company negotiates a ship from stock and debit with the distributor. Management analyzes the Company’s SSD history to develop current SSD rates that form the basis of the SSD sales reserve recorded each period. The Company obtains the historical SSD rates from its internal records. |
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The Company’s distribution agreements provide for semi-annual stock rotation privileges of typically 10% of net sales for the previous six-month period. The contractual stock rotation applies only to shipments at the Company’s listed book price. Asian distributors typically buy the Company’s product at less than standard price and therefore are not entitled to the 10% stock rotation privilege. In order to provide for routine inventory refreshing, for the Company’s benefit as well as theirs, the Company grants Asian distributors stock rotation privileges between 1% and 10% even though the Company is not contractually obligated to do so. Each month the Company adjusts the sales reserve for the estimated stock rotation privilege anticipated to be utilized by the distributors. |
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From time to time, customers may request to return parts for various reasons including the customers’ belief that the parts are not performing to specification. Many such return requests are the result of customers incorrectly using the parts, not because the parts are defective. Management reviews these requests and, if approved, the Company prepares a RMA. The Company is only obligated to accept defective parts returns. To accommodate the Company’s customers, the Company may approve particular return requests, even though it is not obligated to do so. Each month the Company records a sales reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns, which are the result of a part not meeting specifications or being non-functional, have been immaterial and the Company can frequently resell returned parts to other customers for use in other applications. The Company monitors and assesses RMA activity and overall materiality to assess whether a general warranty reserve has become appropriate. |
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The Company grants price protection solely at the discretion of Pericom management. The purpose of price protection is to reduce the distributor’s cost of inventory as market prices fall thus reducing SSD rates. Pericom sales management prepares price protection proposals for individual products located at individual distributors. Pericom general management reviews and approves or disapproves these proposals. If a particular price protection arrangement is approved, the Company estimates the dollar impact based on the sales price reduction per unit for the products approved and the number of units of those products in that distributor’s inventory. The Company records a sales reserve in that period for the estimated amount at the time revenue is recognized. |
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At the discretion of Pericom management, the Company may offer rebates on specific products sold to specific end customers. The purpose of the rebates is to allow for pricing adjustments for large programs without affecting the pricing the Company charges its distributor customers. The Company records the rebate at the time of shipment. |
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Pericom typically grants payment terms of between 30 and 60 days to its customers. The Company’s customers generally pay within those terms. The Company grants relatively few customers sales terms that include cash discounts. Distributors are invoiced for shipments at listed book price. When the distributors pay the Company’s invoices, they may claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, the Company processes the requests against the prior authorizations and reduces the reserve previously established for that customer. |
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The revenue the Company records for sales to its distributors is net of estimated provisions for these programs. When determining this net revenue, the Company must make significant judgments and estimates. The Company bases its estimates on historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and the Company’s estimates. The Company’s financial condition |
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and operating results depend on its ability to make reliable estimates and Pericom believes that such estimates are reasonable. |
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PRODUCT WARRANTY — The Company offers a standard one-year product replacement warranty. In the past, the Company has not had to accrue for a general warranty reserve, but assesses the level and materiality of RMAs and determines whether it is appropriate to accrue for estimated returns of defective products at the time revenue is recognized. On occasion, management may determine to accept product returns beyond the standard one-year warranty period. In those instances, the Company accrues for the estimated cost at the time management decides to accept the return. Because of the Company’s standardized manufacturing processes and product testing procedures, returns of defective product are infrequent and the quantities have not been significant. Accordingly, historical warranty costs have not been material. |
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SHIPPING COSTS — We charge shipping costs to cost of revenues as incurred. |
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CONCENTRATION OF CREDIT RISK — The Company primarily sells its products to a relatively small number of companies and generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains allowances for estimated bad debt losses. The Company also purchases substantially all of its wafers from three suppliers and purchases other manufacturing services from a relatively small number of suppliers. |
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The following table indicates the percentage of our net revenues and accounts receivable in excess of 10% with any single customer: |
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| | | | | | Percentage of | | | | | | | | | | | | | |
Fiscal Year Ended: | | | | | | Net | | Trade | | | | | | | | | | | | | |
Revenues | Accounts | | | | | | | | | | | | | |
| Receivable | | | | | | | | | | | | | |
28-Jun-14 | | | | Customer A | | | 26 | % | | | 29 | % | | | | | | | | | | | | | |
| | | | Customer B | | | 10 | | | | 8 | | | | | | | | | | | | | | |
| | | | All others | | | 64 | | | | 63 | | | | | | | | | | | | | | |
| | | | | | | 100 | % | | | 100 | % | | | | | | | | | | | | | |
29-Jun-13 | | | | Customer A | | | 21 | % | | | 28 | % | | | | | | | | | | | | | |
| | | | Customer B | | | 12 | | | | 7 | | | | | | | | | | | | | | |
| | | | All others | | | 67 | | | | 65 | | | | | | | | | | | | | | |
| | | | | | | 100 | % | | | 100 | % | | | | | | | | | | | | | |
30-Jun-12 | | | | Customer A | | | 18 | % | | | 26 | % | | | | | | | | | | | | | |
| | | | Customer B | | | 14 | | | | 6 | | | | | | | | | | | | | | |
| | | | All others | | | 68 | | | | 68 | | | | | | | | | | | | | | |
| | | | | | | 100 | % | | | 100 | % | | | | | | | | | | | | | |
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The Company maintains cash, cash equivalents and short-term investments with various high credit quality financial institutions. The Company has designed its investment policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that manage its investments. The Company is exposed to credit risk in the event of default by the financial institutions or issuers of securities to the extent of the amounts reported in the consolidated balance sheets. |
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RECLASSIFICATIONS — Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. The reclassifications had no effect on the previously reported consolidated statement of operations, comprehensive income (loss), shareholders’ equity or cash flows. |
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RECENTLY ISSUED ACCOUNTING STANDARDS — In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. ASU 2013-11 will be effective for annual reporting periods, and interim reporting periods within those years, beginning after December 15, 2013. Early adoption is permitted. Since ASU 2013-11 only impacts financial statement disclosure requirements for unrecognized tax benefits, the Company does not expect its adoption to have an impact on the Company’s financial position or results of operations. |
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In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a single comprehensive model for accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for annual and interim reporting periods beginning after December 15, 2016. The impact on our financial condition, results of operations and cash flows as a result of the adoption of ASU 2014-09 has not yet been determined. |
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EARNINGS (LOSS) PER SHARE — The Company bases its basic earnings (loss) per share upon the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. |
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Basic and diluted earnings (loss) per share for each of the three years in the period ended June 28, 2014 is as follows: |
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| | | | Fiscal Year Ended | | | | | | | | | | | | | |
(in thousands, except for per share data) | | | | June 28, | | June 29, | | June 30, | | | | | | | | | | | | | |
2014 | 2013 | 2012 | | | | | | | | | | | | | |
Net income (loss) | | | | $ | 4,124 | | | $ | (21,614 | ) | | $ | (2,068 | ) | | | | | | | | | | | | | |
Computation of common shares outstanding — basic earnings (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average shares of common stock | | | | | 22,594 | | | | 23,251 | | | | 24,094 | | | | | | | | | | | | | | |
Basic earnings (loss) per share | | | | $ | 0.18 | | | $ | (0.93 | ) | | $ | (0.09 | ) | | | | | | | | | | | | | |
Computation of common shares outstanding — diluted earnings (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average shares of common stock | | | | | 22,594 | | | | 23,251 | | | | 24,094 | | | | | | | | | | | | | | |
Dilutive shares using the treasury stock method | | | | | 203 | | | | — | | | | — | | | | | | | | | | | | | | |
Shares used in computing diluted earnings (loss) per share | | | | | 22,797 | | | | 23,251 | | | | 24,094 | | | | | | | | | | | | | | |
Diluted earnings (loss) per share | | | | $ | 0.18 | | | $ | (0.93 | ) | | $ | (0.09 | ) | | | | | | | | | | | | | |
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As the Company incurred losses for the years ended June 29, 2013 and June 30, 2012, diluted loss per share is the same as basic loss per share since the addition of any contingently issuable share would be anti-dilutive. Options to purchase 1.9 million shares of common stock, and restricted stock units of 1,138 shares were outstanding during the year ended June 28, 2014 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.4 million shares of common stock, and restricted |
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stock units of 525,000 shares were outstanding during the year ended June 29, 2013 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.5 million shares of common stock, and restricted stock units of 504,000 shares were outstanding during the year ended June 30, 2012 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. |