Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Dec. 28, 2014 |
Accounting Policies [Abstract] | |
Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies |
Business |
InvenSense, Inc. (the “Company”) was incorporated in California in June 2003 and reincorporated in Delaware in January 2004. The Company is the world’s leading provider of intelligent sensor system on chip (SoC) for Motion and Sound in consumer electronic devices. The company’s patented InvenSense Fabrication Platform and MotionFusion® technology address the emerging needs of many mass-market consumer applications via improved performance, accuracy, and intuitive motion-, gesture- and sound-based interfaces. InvenSense technology can be found in Mobile, Wearables, Smart Home, Industrial, and Automotive products. |
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended March 30, 2014 included in the Company’s Annual Report on Form 10-K filed on May 29, 2014 with the Securities and Exchange Commission (“SEC”). No material changes have been made to the Company’s significant accounting policies since the Company’s Annual Report on Form 10-K for the fiscal year ended March 30, 2014. |
Certain Significant Business Risks and Uncertainties |
The Company participates in the high-technology industry and believes that adverse changes in any of the following areas could have a material effect on the Company’s future financial position, results of operations, or cash flows: reliance on a limited number of primary customers to support the Company’s revenue generating activities; advances and trends in new technologies and industry standards; market acceptance of the Company’s products; development of sales channels; strategic relationships, including key component suppliers; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth. |
Basis of Consolidation |
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), and include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense), net, in the condensed consolidated statements of operations. |
Fiscal Year |
The Company’s fiscal year is a 52 or 53 week period ending on the Sunday closest to March 31. The Company’s most recent fiscal year (“Fiscal 2014”) ended on March 30, 2014 (“March 2014”). The third fiscal quarter in each of the two most recent fiscal years ended on December 28, 2014 (“three months ended December 28, 2014” or “December 2014”) and December 29, 2013 (“three months ended December 29, 2013” or “December 2013”), respectively, and each quarter period included 13 weeks. |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. |
|
The condensed consolidated balance sheet as of March 30, 2014, included herein was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to present fairly the Company’s financial position, results of operations, comprehensive income (loss) and cash flows for the interim periods. The results of operations for the period ended December 28, 2014 is not necessarily indicative of the results to be expected for the fiscal year ending March 29, 2015 or for any future year or interim period. |
Use of Estimates |
The preparation of the Company’s Condensed Consolidated Financial Statements and notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and notes thereto and the reported amounts of income and expenses during the reporting period. Significant estimates included in the Consolidated Financial Statements and notes thereto include income taxes, inventory valuation, stock-based compensation, goodwill, loss contingencies, warranty reserves, valuation of acquired assets and contingent consideration, and valuation of convertible senior notes, including the related convertible notes hedges and warrants. These estimates are based upon information available as of the date of the consolidated financial statements, and actual results could differ from those estimates. |
Goodwill |
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. In accordance with ASC 350, the Company reviews goodwill for impairment at the reporting unit level on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performed the first step of the two-step goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. The Company performed its annual impairment test during the quarter ended December 28, 2014 and determined that its goodwill was not impaired. |
|
Concentration of Credit Risk |
The majority of the Company’s products are shipped through its distributors or contract manufacturers, which are the legal counter-party on the sale. The Company does not refer to these intermediaries as our customers in this report. When the Company references customers in this report, the Company is referring to the manufacturers of consumer electronics devices that are the end customer that these intermediaries sell the Company’s products to or that incorporate the Company’s products into finished products. These manufacturers of consumer electronics devices are categorized as our customers. For accounting purposes, any disclosure about the composition of the Company’s accounts receivable refers to the intermediary, which is the legal counter-party in a particular contract, and any disclosure about the composition of the Company’s revenue (e.g., greater than 10% customers in the footnotes to our financial statements) refers to the end customers of both those intermediaries and the Company. Some of the Company’s intermediaries may serve as such for more than one or more of the Company’s customers. As a result, attempting to compare or correlate disclosures about our accounts receivable composition as of a particular date with the disclosures regarding revenues generated by our customers for the period ending on the same date can be difficult or misleading. |
A distributor and a customer accounted for 77% and 12% of accounts receivable, respectively, at December 28, 2014. At March 30, 2014, three customers accounted for 28%, 19% and 19% of accounts receivable. |
For the three months ended December 28, 2014, two customers accounted for 45% and 24% of net revenue. For the nine months ended December 28, 2014, two customers accounted for 29% and 28% of net revenue. For the three months ended December 29, 2013, three customers accounted for 32%, 16% and 10% of net revenue. For the nine months ended December 29, 2013, one customer accounted for 32% of net revenue. |
Warranty |
The Company’s warranty agreements are contract and component specific and can be for a period of up to three years after shipment to the customer or intermediary for selected components. The accrual includes management’s judgment regarding anticipated rates of warranty claims and associated repair costs. The following table summarizes the activity related to product warranty liability during the nine months ended December 28, 2014 and December 29, 2013: |
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended | | | | | | | | | |
| | December 28, | | | December 29, | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
| | (in thousands) | | | | | | | | | |
Beginning balance | | $ | 80 | | | $ | 123 | | | | | | | | | |
Provision for warranty | | | 60 | | | | 69 | | | | | | | | | |
Adjustments related to changes in estimate | | | 55 | | | | (73 | ) | | | | | | | | |
Less: actual warranty costs | | | (68 | ) | | | (30 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | |
Ending balance | | $ | 127 | | | $ | 89 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net Income (Loss) Per Share |
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period, which excludes dilutive unvested restricted stock. |
Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, including unvested restricted stock, certain warrants to purchase common stock and potential dilutive shares from the dilutive effect of outstanding stock options using the treasury stock method. |
|
The following table presents the calculation of basic and diluted net income (loss) per share: |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
| | December 28, | | | December 29, | | | December 28, | | | December 29, | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | (in thousands, except per share data) | |
Numerator: | | | | | | | | | | | | | | | | |
Basic and Diluted | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 10,221 | | | $ | (12,179 | ) | | $ | (1,479 | ) | | $ | 11,751 | |
| | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | |
Basic shares: | | | | | | | | | | | | | | | | |
Weighted-average shares used in computing basic net income (loss) per share | | | 89,779 | | | | 87,047 | | | | 89,026 | | | | 86,145 | |
| | | | | | | | | | | | | | | | |
Diluted shares: | | | | | | | | | | | | | | | | |
Weighted-average shares used in computing basic net income (loss) per share | | | 89,779 | | | | 87,047 | | | | 89,026 | | | | 86,145 | |
Effect of potentially dilutive securities: | | | | | | | | | | | | | | | | |
Stock options and unvested restricted stock | | | 2,557 | | | | — | | | | — | | | | 3,165 | |
Common stock warrants | | | — | | | | — | | | | — | | | | 54 | |
| | | | | | | | | | | | | | | | |
Weighted-average shares used in computing diluted net income (loss) per share | | | 92,336 | | | | 87,047 | | | | 89,026 | | | | 89,364 | |
| | | | | | | | | | | | | | | | |
Net income (loss) per share | | | | | | | | | | | | | | | | |
Basic | | $ | 0.11 | | | $ | (0.14 | ) | | $ | (0.02 | ) | | $ | 0.14 | |
Diluted | | $ | 0.11 | | | $ | (0.14 | ) | | $ | (0.02 | ) | | $ | 0.13 | |
The following summarizes the potentially dilutive securities outstanding at the end of each period that were excluded from the computation of diluted net income (loss) per share for the periods presented as their effect would have been antidilutive: |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Nine Months Ended | |
| | December 28, | | | December 29, | | | December 28, | | | December 29, | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | (in thousands) | |
Employee stock options | | | 2,785 | | | | 9,016 | | | | 8,621 | | | | 2,922 | |
Unvested restricted stock units | | | 738 | | | | 2,369 | | | | 3,637 | | | | 830 | |
| | | | | | | | | | | | | | | | |
Total antidilutive securities | | | 3,523 | | | | 11,385 | | | | 12,258 | | | | 3,752 | |
| | | | | | | | | | | | | | | | |
In November 2013, the Company issued $175.0 million aggregate principal amount of 1.75% Convertible Senior Notes due on November 1, 2018 (the “Notes”). On or after August 1, 2018 until the maturity date, the Notes may be converted at the option of the holders under certain circumstances. The conversion rate is initially 45.683 shares per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $21.89 per share of common stock), subject to certain adjustments (see Note 5). |
|
Recent Accounting Pronouncements |
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 provides guidance that companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The Company will be required to implement the new revenue recognition standard for the first quarter of fiscal year 2018. The Company is currently evaluating the impact on its consolidated financial statements. |