Summary of Significant Accounting Policies | 12 Months Ended |
Nov. 02, 2013 |
Accounting Policies [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies |
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a.Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. Certain amounts reported in previous years have been reclassified to conform to the fiscal 2013 presentation. Such reclassified amounts were immaterial. The Company’s fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal year 2013 and 2011 were 52-week periods. Fiscal year 2012 was a 53-week period. The additional week in fiscal 2012 was included in the first quarter ended February 4, 2012. |
The Company sold its baseband chipset business and related support operations (Baseband Chipset Business) to MediaTek Inc. during the first quarter of fiscal 2008. The Company has reflected the financial results of this business as discontinued operations in the consolidated statements of income for all periods presented. The historical results of operations of this business has been segregated from the Company’s consolidated financial statements and are included in income from discontinued operations, net of tax, in the consolidated statements of income. |
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b. | Cash, Cash Equivalents and Short-term Investments | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents are highly liquid investments with insignificant interest rate risk and maturities of three months or less at the time of acquisition. Cash, cash equivalents and short-term investments consist primarily of institutional money market funds, corporate obligations such as commercial paper and floating rate notes, bonds and bank time deposits. |
The Company classifies its investments in readily marketable debt and equity securities as “held-to-maturity,” “available-for-sale” or “trading” at the time of purchase. There were no transfers between investment classifications in any of the fiscal years presented. Held-to-maturity securities, which are carried at amortized cost, include only those securities the Company has the positive intent and ability to hold to maturity. Securities such as bank time deposits, which by their nature are typically held to maturity, are classified as such. The Company’s other readily marketable cash equivalents and short-term investments are classified as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related tax, reported in accumulated other comprehensive (loss) income. |
The Company’s deferred compensation plan investments are classified as trading. See Note 7 for additional information on the Company’s deferred compensation plan investments. There were no cash equivalents or short-term investments classified as trading at November 2, 2013 or November 3, 2012. |
The Company periodically evaluates its investments for impairment. There were no other-than-temporary impairments of short-term investments in any of the fiscal years presented. |
Realized gains or losses recognized in non-operating income from the sales of available-for-sale securities were not material during any of the fiscal years presented. |
Unrealized gains and losses on available-for-sale securities classified as short-term investments at November 2, 2013 and November 3, 2012 were as follows: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Unrealized gains on securities classified as short-term investments | $ | 1,137 | | | $ | 581 | | | | | | | | | | | | | | | | | |
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Unrealized losses on securities classified as short-term investments | (511 | ) | | (519 | ) | | | | | | | | | | | | | | | | |
Net unrealized gains on securities classified as short-term investments | $ | 626 | | | $ | 62 | | | | | | | | | | | | | | | | | |
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Unrealized gains and losses in fiscal years 2013 and 2012 relate to corporate obligations. |
The components of the Company’s cash and cash equivalents and short-term investments as of November 2, 2013 and November 3, 2012 were as follows: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | | | | | | | | | | | | | |
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Cash | $ | 45,637 | | | $ | 35,413 | | | | | | | | | | | | | | | | | |
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Available-for-sale | 346,452 | | | 490,904 | | | | | | | | | | | | | | | | | |
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Held-to-maturity | — | | | 2,516 | | | | | | | | | | | | | | | | | |
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Total cash and cash equivalents | $ | 392,089 | | | $ | 528,833 | | | | | | | | | | | | | | | | | |
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Short-term investments: | | | | | | | | | | | | | | | | | | | | | |
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Available-for-sale | $ | 4,290,823 | | | $ | 3,370,551 | | | | | | | | | | | | | | | | | |
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Held-to-maturity (less than one year to maturity) | — | | | 994 | | | | | | | | | | | | | | | | | |
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Total short-term investments | $ | 4,290,823 | | | $ | 3,371,545 | | | | | | | | | | | | | | | | | |
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See Note 2j for additional information on the Company’s cash equivalents and short-term investments. |
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c. | Supplemental Cash Flow Statement Information | | | | | | | | | | | | | | | | | | | | | | |
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| 2013 | | 2012 | | 2011 | | | | | | | | | | | | |
Cash paid during the fiscal year for: | | | | | | | | | | | | | | | | | | | | |
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Income taxes | $ | 36,863 | | | $ | 143,899 | | | $ | 223,716 | | | | | | | | | | | | | |
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Interest | $ | 29,354 | | | $ | 29,177 | | | $ | 16,492 | | | | | | | | | | | | | |
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d. | Inventories | | | | | | | | | | | | | | | | | | | | | | |
Inventories are valued at the lower of cost (first-in, first-out method) or market. The valuation of inventory requires the Company to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The Company employs a variety of methodologies to determine the net realizable value of its inventory. While a portion of the calculation to record inventory at its net realizable value is based on the age of the inventory and lower of cost or market calculations, a key factor in estimating obsolete or excess inventory requires the Company to estimate the future demand for its products. If actual demand is less than the Company’s estimates, impairment charges, which are recorded to cost of sales, may need to be recorded in future periods. Inventory in excess of saleable amounts is not valued, and the remaining inventory is valued at the lower of cost or market. |
Inventories at November 2, 2013 and November 3, 2012 were as follows: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Raw materials | $ | 19,641 | | | $ | 28,111 | | | | | | | | | | | | | | | | | |
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Work in process | 175,155 | | | 185,773 | | | | | | | | | | | | | | | | | |
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Finished goods | 88,541 | | | 99,839 | | | | | | | | | | | | | | | | | |
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Total inventories | $ | 283,337 | | | $ | 313,723 | | | | | | | | | | | | | | | | | |
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e. | Property, Plant and Equipment | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment is recorded at cost less allowances for depreciation. The straight-line method of depreciation is used for all classes of assets for financial statement purposes while both straight-line and accelerated methods are used for income tax purposes. Leasehold improvements are amortized based upon the lesser of the term of the lease or the useful life of the asset. Repairs and maintenance charges are expensed as incurred. Depreciation and amortization are based on the following useful lives: |
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Buildings & building equipment | Up to 25 years | | | | | | | | | | | | | | | | | | | | | | |
Machinery & equipment | 3-8 years | | | | | | | | | | | | | | | | | | | | | | |
Office equipment | 3-8 years | | | | | | | | | | | | | | | | | | | | | | |
Depreciation expense for property, plant and equipment was $110.2 million, $109.7 million and $116.9 million in fiscal 2013, 2012 and 2011, respectively. |
The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. If such assets are not impaired, but their useful lives have decreased, the remaining net book value is amortized over the revised useful life. |
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f. | Goodwill and Intangible Assets | | | | | | | | | | | | | | | | | | | | | | |
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Goodwill |
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The Company evaluates goodwill for impairment annually as well as whenever events or changes in circumstances suggest that the carrying value of goodwill may not be recoverable. The Company tests goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis on the first day of the fourth quarter (on or about August 1) or more frequently if indicators of impairment exist. For the Company’s latest annual impairment assessment that occurred on August 4, 2013, the Company identified its reporting units to be its five operating segments, which meet the aggregation criteria for one reportable segment. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company determines the fair value of its reporting units using the income approach methodology of valuation that includes the discounted cash flow method, as well as other generally accepted valuation methodologies. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill. No impairment of goodwill resulted in any of the fiscal years presented. Upon the sale of the assets and intellectual property related to the Company's microphone product line in the fourth quarter of fiscal 2013, as more fully described in Note 17, the Company assessed the goodwill of the remaining reporting unit for impairment. The Company’s next annual impairment assessment will be performed as of the first day of the fourth quarter of fiscal 2014 unless indicators arise that would require the Company to reevaluate at an earlier date. The following table presents the changes in goodwill during fiscal 2013 and fiscal 2012: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Balance at beginning of year | $ | 283,833 | | | $ | 275,087 | | | | | | | | | | | | | | | | | |
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Acquisition of Multigig, Inc. (Note 6) | — | | | 7,298 | | | | | | | | | | | | | | | | | |
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Goodwill allocated to sale of product line (Note 17) | (1,609 | ) | | — | | | | | | | | | | | | | | | | | |
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Foreign currency translation adjustment | 1,888 | | | 1,448 | | | | | | | | | | | | | | | | | |
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Balance at end of year | $ | 284,112 | | | $ | 283,833 | | | | | | | | | | | | | | | | | |
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Intangible Assets |
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The Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable. Recoverability of these assets is measured by comparison of their carrying value to future undiscounted cash flows the assets are expected to generate over their remaining economic lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique. As of November 2, 2013 and November 3, 2012, the Company’s finite-lived intangible assets consisted of the following which related to the acquisition of Multigig, Inc. See Note 6 below for further information related to the acquisition of Multigig, Inc. |
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| November 2, 2013 | | November 3, 2012 | | | | | | | | |
| Gross Carrying | | Accumulated | | Gross Carrying | | Accumulated | | | | | | | | |
Amount | Amortization | Amount | Amortization | | | | | | | | |
Technology-based | $ | 1,100 | | | $ | 348 | | | $ | 1,100 | | | $ | 128 | | | | | | | | | |
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Amortization expense related to finite-lived intangible assets was $0.2 million, $0.1 million and $1.3 million in fiscal 2013, 2012 and 2011, respectively. The remaining amortization expense will be recognized over a period of approximately 3.5 years. |
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The Company expects annual amortization expense for intangible assets to be: |
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Fiscal Year | Amortization Expense | | | | | | | | | | | | | | | | | | | | |
2014 | $ | 220 | | | | | | | | | | | | | | | | | | | | | |
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2015 | $ | 220 | | | | | | | | | | | | | | | | | | | | | |
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2016 | $ | 220 | | | | | | | | | | | | | | | | | | | | | |
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2017 | $ | 92 | | | | | | | | | | | | | | | | | | | | | |
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Indefinite-lived intangible assets are tested for impairment on an annual basis on the first day of the fourth quarter (on or about August 1) or more frequently if indicators of impairment exist. The impairment test involves the comparison of the fair values of the intangible assets with their carrying amount. No impairment of intangible assets resulted from the impairment tests in any of the fiscal years presented. |
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Intangible assets, excluding in-process research and development (IPR&D), are amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use. IPR&D assets are considered indefinite-lived intangible assets until completion or abandonment of the associated R&D efforts. Upon completion of the projects, the IPR&D assets will be amortized over their estimated useful lives. |
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Indefinite-lived intangible assets consisted of $27.8 million of IPR&D as of November 2, 2013 and November 3, 2012, respectively. |
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g. | Grant Accounting | | | | | | | | | | | | | | | | | | | | | | |
Certain of the Company’s foreign subsidiaries have received grants from governmental agencies. These grants include capital, employment and research and development grants. Capital grants for the acquisition of property and equipment are netted against the related capital expenditures and amortized as a credit to depreciation expense over the useful life of the related asset. Employment grants, which relate to employee hiring and training, and research and development grants are recognized in earnings in the period in which the related expenditures are incurred by the Company. |
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h. | Translation of Foreign Currencies | | | | | | | | | | | | | | | | | | | | | | |
The functional currency for the Company’s foreign sales and research and development operations is the applicable local currency. Gains and losses resulting from translation of these foreign currencies into U.S. dollars are recorded in accumulated other comprehensive (loss) income. Transaction gains and losses and re-measurement of foreign currency denominated assets and liabilities are included in income currently, including those at the Company’s principal foreign manufacturing operations where the functional currency is the U.S. dollar. Foreign currency transaction gains or losses included in other expenses, net, were not material in fiscal 2013, 2012 or 2011. |
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i. | Derivative Instruments and Hedging Agreements | | | | | | | | | | | | | | | | | | | | | | |
Foreign Exchange Exposure Management — The Company enters into forward foreign currency exchange contracts to offset certain operational and balance sheet exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company’s operations, assets and liabilities that are denominated in currencies other |
than the U.S. dollar, primarily the Euro; other significant exposures include the Philippine Peso, the Japanese Yen and the British Pound. These foreign currency exchange contracts are entered into to support transactions made in the normal course of business, and accordingly, are not speculative in nature. The contracts are for periods consistent with the terms of the underlying transactions, generally one year or less. Hedges related to anticipated transactions are designated and documented at the inception of the respective hedges as cash flow hedges and are evaluated for effectiveness monthly. Derivative instruments are employed to eliminate or minimize certain foreign currency exposures that can be confidently identified and quantified. As the terms of the contract and the underlying transaction are matched at inception, forward contract effectiveness is calculated by comparing the change in fair value of the contract to the change in the forward value of the anticipated transaction, with the effective portion of the gain or loss on the derivative instrument reported as a component of accumulated other comprehensive (loss) income (OCI) in shareholders’ equity and reclassified into earnings in the same period during which the hedged transaction affects earnings. Any residual change in fair value of the instruments, or ineffectiveness, is recognized immediately in other (income) expense. Additionally, the Company enters into forward foreign currency contracts that economically hedge the gains and losses generated by the re-measurement of certain recorded assets and liabilities in a non-functional currency. Changes in the fair value of these undesignated hedges are recognized in other (income) expense immediately as an offset to the changes in the fair value of the asset or liability being hedged. As of November 2, 2013 and November 3, 2012, the total notional amount of these undesignated hedges was $33.4 million and $31.5 million, respectively. The fair value of these hedging instruments in the Company’s consolidated balance sheets as of November 2, 2013 and November 3, 2012 was immaterial. |
Interest Rate Exposure Management — The Company's current and future debt may be subject to interest rate risk. The Company utilizes interest rate derivatives to alter interest rate exposure in an attempt to reduce the effects of these changes. On April 24, 2013, the Company entered into a treasury rate lock agreement with Bank of America. This agreement allowed the Company to lock a 10-year US Treasury rate of 1.7845% through June 14, 2013 for its anticipated issuance of the 2023 Notes. The Company designated this agreement as a cash flow hedge. On June 3, 2013, the Company terminated the treasury rate lock simultaneously with the issuance of the 2023 Notes which resulted in a gain of approximately $11.0 million. This gain is being amortized into interest expense over the 10-year term of the 2023 Notes. During fiscal 2013 approximately $0.5 million was amortized from OCI into interest expense and approximately $1.1 million will be amortized from OCI into interest expense within the next 12 months. |
On June 30, 2009, the Company entered into interest rate swap transactions related to its outstanding $375.0 million aggregate principal amount of 5.0% senior unsecured notes (the 2014 Notes) where the Company swapped the notional amount of its $375.0 million of fixed rate debt at 5.0% into floating interest rate debt through July 1, 2014. The Company designated these swaps as fair value hedges. The fair value of the swaps at inception was zero and subsequent changes in the fair value of the interest rate swaps were reflected in the carrying value of the interest rate swaps on the balance sheet. The carrying value of the debt on the balance sheet was adjusted by an equal and offsetting amount. The gain or loss on the hedged item (that is, the fixed-rate borrowings) attributable to the hedged benchmark interest rate risk and the offsetting gain or loss on the related interest rate swaps for fiscal year 2012 and fiscal year 2011 was as follows: |
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Statement of income classification | November 3, 2012 | | October 29, 2011 |
Loss on Swaps | | Gain on Note | | Net Income Effect | | Loss on Swaps | | Gain on Note | | Net Income Effect |
Other income | $ | (769 | ) | | $ | 769 | | | $ | — | | | $ | (4,614 | ) | | $ | 4,614 | | | $ | — | |
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The amounts earned and owed under the swap agreements were accrued each period and were reported in interest expense. There was no ineffectiveness recognized in any of the periods presented. In the second quarter of fiscal 2012, the Company terminated the interest rate swap agreement. The Company received $19.8 million in cash proceeds from the swap termination, which included $1.3 million in accrued interest. The proceeds, net of interest received, are disclosed in cash flows from financing activities in the consolidated statements of cash flows. As a result of the termination, the carrying value of the 2014 Notes was adjusted for the change in the fair value of the interest component of the debt up to the date of the termination of the swap in an amount equal to the fair value of the swap, to be amortized to earnings as a reduction of interest expense over the remaining life of the debt. During fiscal year 2013 and 2012, $4.6 million and $5.3 million, respectively, were amortized into earnings as a reduction of interest expense related to the swap termination. This amortization is reflected in the consolidated statements of cash flows within operating activities. During the third quarter of fiscal 2013, in conjunction with the redemption of the 2014 Notes, the Company recognized the remaining $8.6 million in unamortized proceeds received from the termination of the interest rate swap as other, net expense. |
The market risk associated with the Company’s derivative instruments results from currency exchange rate or interest rate movements that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to the Company’s derivative instruments consist of a number of major international financial institutions with high credit ratings. Based on the credit ratings of the Company’s counterparties as of November 2, 2013, nonperformance is not perceived to be a significant risk. Furthermore, none of the Company’s derivatives are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company’s credit ratings from any credit rating agency. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Company’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the obligations of the Company to the counterparties. As a result of the above considerations, the Company does not consider the risk of counterparty default to be significant. |
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The Company records the fair value of its derivative financial instruments in its consolidated financial statements in other current assets, other assets or accrued liabilities, depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of OCI. Changes in the fair value of cash flow hedges are recorded in OCI and reclassified into earnings when the underlying contract matures. Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur. |
The total notional amounts of forward foreign currency derivative instruments designated as hedging instruments of cash flow hedges denominated in Euros, British Pounds, Philippine Pesos and Japanese Yen as of November 2, 2013 and November 3, 2012 was $196.9 million and $151.8 million, respectively. The fair values of these hedging instruments in the Company’s consolidated balance sheets as of November 2, 2013 and November 3, 2012 were as follows: |
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| Balance Sheet Location | | November 2, 2013 | | November 3, 2012 | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts | Prepaid expenses and other current assets | | $ | 2,377 | | | $ | 1,161 | | | | | | | | | | | | | | | |
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The effect of forward foreign currency derivative instruments designated as cash-flow hedges on the consolidated statements of income and OCI for fiscal 2013 and 2012 were as follows: |
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| November 2, 2013 | | November 3, 2012 | | | | | | | | | | | | | | | | |
Loss recognized in OCI on derivatives (net of tax of $409 in 2013 and $1,233 in 2012) | $ | (2,589 | ) | | $ | (7,923 | ) | | | | | | | | | | | | | | | | |
Amounts reclassified from OCI into income (net of tax of $195 in 2013 and $1,160 in 2012) | $ | (1,479 | ) | | $ | 7,401 | | | | | | | | | | | | | | | | | |
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The amounts reclassified into earnings before tax related to forward foreign currency derivative instruments, are recognized in cost of sales and operating expenses for fiscal 2013 and fiscal 2012 were as follows: |
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| November 2, 2013 | | November 3, 2012 | | | | | | | | | | | | | | | | |
Cost of sales | $ | (967 | ) | | $ | 3,096 | | | | | | | | | | | | | | | | | |
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Research and development | $ | (551 | ) | | $ | 2,344 | | | | | | | | | | | | | | | | | |
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Selling, marketing, general and administrative | $ | (156 | ) | | $ | 3,121 | | | | | | | | | | | | | | | | | |
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The Company estimates that $1.0 million of forward foreign currency derivative instruments included in OCI will be reclassified into earnings within the next 12 months. There was no ineffectiveness during fiscal years ended November 2, 2013 and November 3, 2012. |
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Accumulated Derivative Gains or Losses |
The following table summarizes activity in accumulated other comprehensive (loss) income related to derivatives classified as cash flow hedges held by the Company during the period from October 30, 2011 through November 2, 2013: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Balance at beginning of year, net of tax | $ | 1,165 | | | $ | 1,687 | | | | | | | | | | | | | | | | | |
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Changes in fair value of derivatives — gain (loss), net of tax | 9,708 | | | (7,923 | ) | | | | | | | | | | | | | | | | |
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(Gain) loss reclassified into earnings from other comprehensive income (loss), net of tax | (1,776 | ) | | 7,401 | | | | | | | | | | | | | | | | | |
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Balance at end of year, net of tax | $ | 9,097 | | | $ | 1,165 | | | | | | | | | | | | | | | | | |
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j. | Fair Value | | | | | | | | | | | | | | | | | | | | | | |
The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). |
Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. |
Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. |
The tables below, set forth by level, the Company’s financial assets and liabilities, excluding accrued interest components, that were accounted for at fair value on a recurring basis as of November 2, 2013 and November 3, 2012. The tables exclude cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value. As of November 2, 2013 and November 3, 2012, the Company held $45.6 million and $38.9 million, respectively, of cash and held-to-maturity investments that were excluded from the tables below. |
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| November 2, 2013 | | | | | | | | |
| Fair Value measurement at | | | | | | | | | | |
Reporting Date using: | | | | | | | | |
| Quoted | | Significant | | Significant | | Total | | | | | | | | |
Prices in | Other | Other | | | | | | | | |
Active | Observable | Unobservable | | | | | | | | |
Markets | Inputs | Inputs | | | | | | | | |
for | (Level 2) | (Level 3) | | | | | | | | |
Identical | | | | | | | | | | |
Assets | | | | | | | | | | |
(Level 1) | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | |
Cash equivalents: | | | | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | | | | |
Institutional money market funds | $ | 186,896 | | | $ | — | | | $ | — | | | $ | 186,896 | | | | | | | | | |
| | | | | | | |
Corporate obligations (1) | — | | | 159,556 | | | — | | | 159,556 | | | | | | | | | |
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Short - term investments: | | | | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | | | | |
Securities with one year or less to maturity: | | | | | | | | | | | | | | | |
Corporate obligations (1) | — | | | 3,764,213 | | | — | | | 3,764,213 | | | | | | | | | |
| | | | | | | |
Floating rate notes, issued at par | — | | | 207,521 | | | — | | | 207,521 | | | | | | | | | |
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Floating rate notes (1) | — | | | 113,886 | | | — | | | 113,886 | | | | | | | | | |
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Securities with greater than one year to maturity: | | | | | | | | | | | | | | | |
Floating rate notes, issued at par | — | | | 205,203 | | | — | | | 205,203 | | | | | | | | | |
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Other assets: | | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts (2) | $ | — | | | $ | 2,267 | | | $ | — | | | $ | 2,267 | | | | | | | | | |
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Deferred compensation investments | 17,431 | | | — | | | — | | | 17,431 | | | | | | | | | |
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Total assets measured at fair value | $ | 204,327 | | | $ | 4,452,646 | | | $ | — | | | $ | 4,656,973 | | | | | | | | | |
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Liabilities | | | | | | | | | | | | | | | |
Contingent consideration | — | | | — | | | 6,479 | | | 6,479 | | | | | | | | | |
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Total liabilities measured at fair value | $ | — | | | $ | — | | | $ | 6,479 | | | $ | 6,479 | | | | | | | | | |
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-1 | The amortized cost of the Company’s investments classified as available-for-sale as of November 2, 2013 was $3,824.0 million. | | | | | | | | | | | | | | | | | | | | | | |
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-2 | The Company has a master netting arrangement by counterparty with respect to derivative contracts. As of November 2, 2013, contracts in a liability position of $2.0 million were netted against contracts in an asset position in the consolidated balance sheet. | | | | | | | | | | | | | | | | | | | | | | |
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| November 3, 2012 | | | | | | | | |
| Fair Value measurement at | | | | | | | | | | |
Reporting Date using: | | | | | | | | |
| Quoted | | Significant | | Significant | | Total | | | | | | | | |
Prices in | Other | Other | | | | | | | | |
Active | Observable | Unobservable | | | | | | | | |
Markets | Inputs | Inputs | | | | | | | | |
for | (Level 2) | (Level 3) | | | | | | | | |
Identical | | | | | | | | | | |
Assets | | | | | | | | | | |
(Level 1) | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | |
Cash equivalents: | | | | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | | | | |
Institutional money market funds | $ | 143,876 | | | $ | — | | | $ | — | | | $ | 143,876 | | | | | | | | | |
| | | | | | | |
Corporate obligations (1) | — | | | 347,028 | | | — | | | 347,028 | | | | | | | | | |
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Short - term investments: | | | | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | | | | |
Securities with one year or less to maturity: | | | | | | | | | | | | | | | |
Corporate obligations (1) | — | | | 2,818,798 | | | — | | | 2,818,798 | | | | | | | | | |
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Floating rate notes, issued at par | — | | | 280,065 | | | — | | | 280,065 | | | | | | | | | |
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Floating rate notes (1) | — | | | 234,280 | | | — | | | 234,280 | | | | | | | | | |
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Securities with greater than one year to maturity: | | | | | | | | | | | | | | | |
Floating rate notes, issued at par | — | | | 37,408 | | | — | | | 37,408 | | | | | | | | | |
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Other assets: | | | | | | | | | | | | | | | |
Forward foreign currency exchange contracts (2) | — | | | 1,061 | | | — | | | 1,061 | | | | | | | | | |
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Deferred compensation investments | 28,480 | | | — | | | — | | | 28,480 | | | | | | | | | |
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Total assets measured at fair value | $ | 172,356 | | | $ | 3,718,640 | | | $ | — | | | $ | 3,890,996 | | | | | | | | | |
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Liabilities | | | | | | | | | | | | | | | |
Contingent consideration | — | | | — | | | 12,219 | | | 12,219 | | | | | | | | | |
| | | | | | | |
Total liabilities measured at fair value | $ | — | | | $ | — | | | $ | 12,219 | | | $ | 12,219 | | | | | | | | | |
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-1 | The amortized cost of the Company’s investments classified as available-for-sale as of November 3, 2012 was $3,327.5 million. | | | | | | | | | | | | | | | | | | | | | | |
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-2 | The Company has a master netting arrangement by counterparty with respect to derivative contracts. As of November 3, 2012, contracts in a liability position of $1.9 million were netted against contracts in an asset position in the consolidated balance sheet. | | | | | | | | | | | | | | | | | | | | | | |
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: |
Cash equivalents and short-term investments — These investments are adjusted to fair value based on quoted market prices or are determined using a yield curve model based on current market rates. |
Deferred compensation plan investments — The fair value of these mutual fund, money market fund and equity investments are based on quoted market prices. |
Forward foreign currency exchange contracts — The estimated fair value of forward foreign currency exchange contracts, which includes derivatives that are accounted for as cash flow hedges and those that are not designated as cash flow hedges, is based on the estimated amount the Company would receive if it sold these agreements at the reporting date taking into consideration current interest rates as well as the creditworthiness of the counterparty for assets and the Company’s creditworthiness for liabilities. |
Contingent consideration — The fair value of the contingent consideration was estimated utilizing the income approach and is based upon significant inputs not observable in the market. The income approach is based on two steps. The first step involves a projection of the cash flows that is based on the Company’s estimates of the timing and probability of achieving the defined milestones. The second step involves converting the cash flows into a present value equivalent through discounting. The discount rate reflects the Baa costs of debt plus the relevant risk associated with the asset and the time value of money. |
The fair value measurement of the contingent consideration encompasses the following significant unobservable inputs: |
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Unobservable Inputs | Range | | | | | | | | | | | | | | | | | | | | | | |
Estimated contingent consideration payments | $7,000 | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | 8% - 10% | | | | | | | | | | | | | | | | | | | | | | |
Timing of cash flows | 1 - 23 months | | | | | | | | | | | | | | | | | | | | | | |
Probability of achievement | 100% | | | | | | | | | | | | | | | | | | | | | | |
Changes in the fair value of the contingent consideration subsequent to the acquisition date that are primarily driven by assumptions pertaining to the achievement of the defined milestones will be recognized in operating income in the period of the estimated fair value change. Significant increases or decreases in any of the inputs in isolation may result in a fluctuation in the fair value measurement. |
The following table summarizes the change in the fair value of the contingent consideration measured using significant unobservable inputs (Level 3) as of November 3, 2012 and November 2, 2013: |
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| Contingent | | | | | | | | | | | | | | | | | | | | |
Consideration | | | | | | | | | | | | | | | | | | | | |
Balance as of October 30, 2010 | $ | — | | | | | | | | | | | | | | | | | | | | | |
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Contingent consideration liability recorded | 13,790 | | | | | | | | | | | | | | | | | | | | | |
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Fair value adjustment (2) | 183 | | | | | | | | | | | | | | | | | | | | | |
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Balance as of October 29, 2011 | $ | 13,973 | | | | | | | | | | | | | | | | | | | | | |
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Payment made (1) | (2,000 | ) | | | | | | | | | | | | | | | | | | | | |
Fair value adjustment (2) | 246 | | | | | | | | | | | | | | | | | | | | | |
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Balance as of November 3, 2012 | $ | 12,219 | | | | | | | | | | | | | | | | | | | | | |
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Payment made (1) | (6,000 | ) | | | | | | | | | | | | | | | | | | | | |
Fair value adjustment (2) | 260 | | | | | | | | | | | | | | | | | | | | | |
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Balance as of November 2, 2013 | $ | 6,479 | | | | | | | | | | | | | | | | | | | | | |
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-1 | The payment is reflected in the statements of cash flows as cash used in financing activities related to the liability recognized at fair value as of the acquisition date and as cash provided by operating activities related to the fair value adjustments previously recognized in earnings. | | | | | | | | | | | | | | | | | | | | | | |
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-2 | Recorded in research and development expense in the consolidated statements of income. | | | | | | | | | | | | | | | | | | | | | | |
Financial Instruments Not Recorded at Fair Value on a Recurring Basis |
On June 30, 2009, the Company issued the 2014 Notes with semi-annual fixed interest payments due on January 1 and July 1 of each year, commencing January 1, 2010. On June 6, 2013, the Company redeemed the 2014 Notes. Based on quotes received from third-party banks, the fair value of the 2014 Notes as of November 3, 2012 was $402.5 million and is classified as a Level 1 measurement according to the fair value hierarchy. |
On April 4, 2011, the Company issued $375.0 million aggregate principal amount of 3.0% senior unsecured notes due April 15, 2016 (the 2016 Notes) with semi-annual fixed interest payments due on April 15 and October 15 of each year, commencing October 15, 2011. Based on quotes received from third-party banks, the fair value of the 2016 Notes as of November 2, 2013 and November 3, 2012 was $392.8 million and $402.3 million, respectively and is classified as a Level 1 measurement according to the fair value hierarchy. |
On June 3, 2013, the Company issued $500.0 million aggregate principal amount of 2.875% senior unsecured notes due June 1, 2023 (the 2023 Notes) with semi-annual fixed interest payments due on June 1 and December 1 of each year, commencing December 1, 2013. Based on quotes received from third-party banks, the fair value of the 2023 Notes as of November 2, 2013 was $466.0 million and is classified as a Level 1 measurement according to the fair value hierarchy. |
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k. | Use of Estimates | | | | | | | | | | | | | | | | | | | | | | |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates relate to the useful lives of fixed assets and identified intangible assets, allowances for doubtful accounts and customer returns, the net realizable value of inventory, potential reserves relating to litigation matters, accrued liabilities, accrued taxes, deferred tax valuation allowances, assumptions pertaining to share-based payments and other reserves. Actual results could differ from those estimates and such differences may be material to the financial statements. |
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l. | Concentrations of Risk | | | | | | | | | | | | | | | | | | | | | | |
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments and trade accounts receivable. |
The Company maintains cash, cash equivalents and short-term and long-term investments with high credit quality counterparties, continuously monitors the amount of credit exposure to any one issuer and diversifies its investments in order to minimize its credit risk. |
The Company sells its products to distributors and original equipment manufacturers involved in a variety of industries including industrial process automation, instrumentation, defense/aerospace, automotive, communications, computers and computer peripherals and consumer electronics. The Company has adopted credit policies and standards to accommodate growth in these markets. The Company performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, the Company may require letters of credit from customers in certain circumstances. The Company provides reserves for estimated amounts of accounts receivable that may not be collected. |
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m. | Concentration of Other Risks | | | | | | | | | | | | | | | | | | | | | | |
The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. The Company’s financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new manufacturing technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors, third-party wafer fabricators and independent distributors. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. The Company is exposed to the risk of obsolescence of its inventory depending on the mix of future business. Additionally, a large portion of the Company’s purchases of external wafer and foundry services are from a limited number of suppliers, primarily Taiwan Semiconductor Manufacturing Company (TSMC). If TSMC or any of the Company’s other key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components, on the time schedule and of the quality that the Company requires, the Company may be forced to engage additional or replacement suppliers, which could result in significant expenses and disruptions or delays in manufacturing, product development and shipment of product to the Company’s customers. Although the Company has experienced shortages of components, materials and external foundry services from time to time, these items have generally been available to the Company as needed. |
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n. | Revenue Recognition | | | | | | | | | | | | | | | | | | | | | | |
Revenue from product sales to customers is generally recognized when title passes, which for shipments to certain foreign countries is subsequent to product shipment. Title for these shipments ordinarily passes within a week of shipment. A reserve for sales returns and allowances for customers is recorded based on historical experience or specific identification of an event necessitating a reserve. |
In all regions of the world, the Company defers revenue and the related cost of sales on shipments to distributors until the distributors resell the products to their customers. As a result, the Company’s revenue fully reflects end customer purchases and is not impacted by distributor inventory levels. Sales to distributors are made under agreements that allow distributors to receive price-adjustment credits, as discussed below, and to return qualifying products for credit, as determined by the Company, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory. These agreements limit such returns to a certain percentage of the value of the Company’s shipments to that distributor during the prior quarter. In addition, distributors are allowed to return unsold products if the Company terminates the relationship with the distributor. |
Distributors are granted price-adjustment credits for sales to their customers when the distributor’s standard cost (i.e., the Company’s sales price to the distributor) does not provide the distributor with an appropriate margin on its sales to its customers. As distributors negotiate selling prices with their customers, the final sales price agreed upon with the customer will be influenced by many factors, including the particular product being sold, the quantity ordered, the particular customer, the geographic location of the distributor and the competitive landscape. As a result, the distributor may request and receive a price-adjustment credit from the Company to allow the distributor to earn an appropriate margin on the transaction. |
Distributors are also granted price-adjustment credits in the event of a price decrease subsequent to the date the product was shipped and billed to the distributor. Generally, the Company will provide a credit equal to the difference between the price paid by the distributor (less any prior credits on such products) and the new price for the product multiplied by the quantity of the specific product in the distributor’s inventory at the time of the price decrease. |
Given the uncertainties associated with the levels of price-adjustment credits to be granted to distributors, the sales price to the distributor is not fixed or determinable until the distributor resells the products to their customers. Therefore, the Company defers revenue recognition from sales to distributors until the distributors have sold the products to their customers. |
Title to the inventory transfers to the distributor at the time of shipment or delivery to the distributor, and payment from the distributor is due in accordance with the Company’s standard payment terms. These payment terms are not contingent upon the distributors’ sale of the products to their customers. Upon title transfer to distributors, inventory is reduced for the cost of goods shipped, the margin (sales less cost of sales) is recorded as “deferred income on shipments to distributors, net” and an account receivable is recorded. Shipping costs are charged to cost of sales as incurred. |
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The deferred costs of sales to distributors have historically had very little risk of impairment due to the margins the Company earns on sales of its products and the relatively long life-cycle of the Company’s products. Product returns from distributors that are ultimately scrapped have historically been immaterial. In addition, price protection and price-adjustment credits granted to distributors historically have not exceeded the margins the Company earns on sales of its products. The Company continuously monitors the level and nature of product returns and is in frequent contact with the distributors to ensure reserves are established for all known material issues. |
As of November 2, 2013 and November 3, 2012, the Company had gross deferred revenue of $309.2 million and $299.0 million, respectively, and gross deferred cost of sales of $61.8 million and $60.5 million, respectively. Deferred income on shipments to distributors increased in fiscal 2013 primarily as a result of a mix shift in favor of higher margin products sold into the channel. |
The Company generally offers a twelve-month warranty for its products. The Company’s warranty policy provides for replacement of defective products. Specific accruals are recorded for known product warranty issues. Product warranty expenses during fiscal 2013, 2012 and 2011 were not material. |
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o. | Accumulated Other Comprehensive (Loss) Income | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive (loss) income includes certain transactions that have generally been reported in the consolidated statement of shareholders’ equity. The components of accumulated other comprehensive loss at November 2, 2013 and November 3, 2012 consisted of the following, net of tax: |
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| 2013 | | 2012 | | | | | | | | | | | | | | | | |
Foreign currency translation adjustment | $ | 483 | | | $ | 982 | | | | | | | | | | | | | | | | | |
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Unrealized gains on available-for-sale securities | 953 | | | 444 | | | | | | | | | | | | | | | | | |
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Unrealized losses on available-for-sale securities | (435 | ) | | (423 | ) | | | | | | | | | | | | | | | | |
Unrealized gains on derivative instruments | 9,097 | | | 1,165 | | | | | | | | | | | | | | | | | |
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Pension plans | | | | | | | | | | | | | | | | | | | |
Prior service cost | 4,076 | | | 4,079 | | | | | | | | | | | | | | | | | |
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Transition obligation | (82 | ) | | (102 | ) | | | | | | | | | | | | | | | | |
Net actuarial loss | (94,638 | ) | | (70,539 | ) | | | | | | | | | | | | | | | | |
Total accumulated other comprehensive loss | $ | (80,546 | ) | | $ | (64,394 | ) | | | | | | | | | | | | | | | | |
As of November 2, 2013, the Company held 137 investment securities, 31 of which were in an unrealized loss position with gross unrealized losses of $0.5 million and an aggregate fair value of $972.2 million. As of November 3, 2012, the Company held 88 investment securities, 29 of which were in an unrealized loss position with gross unrealized losses of $0.5 million and an aggregate fair value of $1,214.1 million. These unrealized losses were primarily related to corporate obligations that earn lower interest rates than current market rates. None of these investments have been in a loss position for more than twelve months. As the Company does not intend to sell these investments and it is unlikely that the Company will be required to sell the investments before recovery of their amortized basis, which will be at maturity, the Company does not consider those investments to be other-than-temporarily impaired at November 2, 2013 and November 3, 2012. |
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p. | Advertising Expense | | | | | | | | | | | | | | | | | | | | | | |
Advertising costs are expensed as incurred. Advertising expense was approximately $3.3 million in fiscal 2013, $3.9 million in fiscal 2012 and $4.2 million in fiscal 2011. |
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q. | Income Taxes | | | | | | | | | | | | | | | | | | | | | | |
Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted income tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse. Additionally, deferred tax assets and liabilities are separated into current and non-current amounts based on the classification of the related assets and liabilities for financial reporting purposes. |
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r. | Earnings Per Share of Common Stock | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share is computed based only on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money and restricted stock units. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of in-the-money stock options. Potential shares related to certain of the Company’s outstanding stock options were excluded because they were anti-dilutive. Those potential shares, determined based on the weighted average exercise prices during the respective years, related to the Company’s outstanding stock options could be dilutive in the future. |
The following table sets forth the computation of basic and diluted earnings per share: |
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| 2013 | | 2012 | | 2011 | | | | | | | | | | | | |
Income from continuing operations, net of tax | $ | 673,487 | | | $ | 651,236 | | | $ | 860,894 | | | | | | | | | | | | | |
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Gain on sale of discontinued operations, net of tax | — | | | — | | | 6,500 | | | | | | | | | | | | | |
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Net income | $ | 673,487 | | | $ | 651,236 | | | $ | 867,394 | | | | | | | | | | | | | |
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Basic shares: | | | | | | | | | | | | | | | | | | | | |
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Weighted average shares outstanding | 307,763 | | | 298,761 | | | 299,417 | | | | | | | | | | | | | |
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Earnings per share-basic: | | | | | | | | | | | | | | | | | | | | |
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Income from continuing operations, net of tax | $ | 2.19 | | | $ | 2.18 | | | $ | 2.88 | | | | | | | | | | | | | |
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Total income from discontinued operations, net of tax | — | | | — | | | 0.02 | | | | | | | | | | | | | |
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Net income | $ | 2.19 | | | $ | 2.18 | | | $ | 2.9 | | | | | | | | | | | | | |
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Diluted shares: | | | | | | | | | | | | | | | | | | | | |
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Weighted average shares outstanding | 307,763 | | | 298,761 | | | 299,417 | | | | | | | | | | | | | |
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Assumed exercise of common stock equivalents | 6,278 | | | 7,430 | | | 8,819 | | | | | | | | | | | | | |
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Weighted average common and common equivalent shares | 314,041 | | | 306,191 | | | 308,236 | | | | | | | | | | | | | |
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Earnings per share-diluted: | | | | | | | | | | | | | | | | | | | | |
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Income from continuing operations, net of tax | $ | 2.14 | | | $ | 2.13 | | | $ | 2.79 | | | | | | | | | | | | | |
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Total income from discontinued operations, net of tax | — | | | — | | | 0.02 | | | | | | | | | | | | | |
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Net income | $ | 2.14 | | | $ | 2.13 | | | $ | 2.81 | | | | | | | | | | | | | |
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Anti-dilutive shares related to: | | | | | | | | | | | | | | | | | | | | |
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Outstanding stock options | 4,116 | | | 7,209 | | | 9,526 | | | | | | | | | | | | | |
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s. | Stock-Based Compensation | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation is measured at the grant date based on the grant-date fair value of the awards ultimately expected to vest, and is recognized as an expense on a straight-line basis over the vesting period, which is generally five years for stock options and three years for restricted stock units. Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates used in calculating the grant-date fair value of stock options. The Company calculates the grant-date fair value of stock options using the Black-Scholes valuation model. The use of valuation models requires the Company to make estimates and assumptions such as expected volatility, expected term, risk-free interest rate, expected dividend yield and forfeiture rates. The grant-date fair value of restricted stock units represents the value of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company's common stock prior to vesting. |
See Note 3 for additional information relating to stock-based compensation. |
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t. | New Accounting Pronouncements | | | | | | | | | | | | | | | | | | | | | | |
Standards Implemented |
Comprehensive Income |
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Presentation of Comprehensive Income (ASU No. 2011-05). ASU No. 2011-05 amended Accounting Standards Codification (ASC) 220, Comprehensive Income, to converge the presentation of comprehensive income between U.S. GAAP and IFRS. ASU No. 2011-05 requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements and requires reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement in changes of stockholders' equity. ASU No. 2011-05 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, which was the Company’s first quarter of fiscal year 2013. The adoption of ASU No. 2011-05 in the first quarter of fiscal 2013 affected the presentation of comprehensive income but did not impact the Company’s financial condition or results of operations. |
Standards to be Implemented |
Balance Sheet |
In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities (ASU No. 2011-11). ASU No. 2011-11 amended ASC 210, Balance Sheet, to converge the presentation of offsetting assets and liabilities between U.S. GAAP and IFRS. ASU No. 2011-11 requires that entities disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. ASU No. 2011-11 is effective for fiscal years, and interim periods within those years, beginning after January 1, 2013, which is the Company’s fiscal year 2014. Subsequently, in January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about offsetting Assets and Liabilities, which clarifies that the scope of ASU No. 2011-11 applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The adoption of ASU No. 2011-11 and ASU No. 2013-01 in the first quarter of fiscal 2014 will require additional disclosures related to offsetting assets and liabilities but will not impact the Company's financial condition or results of operations. |
Comprehensive Income |
In January 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income (ASU No. 2013-02), which seeks to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments in ASU No. 2013-02 supersede the presentation requirements for reclassifications out of accumulated other comprehensive income in ASU No. 2011-05, Presentation of Comprehensive Income, and ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012, which is the Company's first quarter of fiscal year 2014. The adoption of ASU No. 2013-02 in the first quarter of fiscal 2014 will affect the presentation of comprehensive income but will not impact the Company's financial condition or results of operations. |
Income Taxes |
In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU No. 2013-11). ASU No. 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, with certain exceptions. ASU No. 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, which is the Company's first quarter of fiscal year 2015. The adoption of ASU No. 2013-11 in the first quarter of fiscal 2015 will affect the presentation of our unrecognized tax benefits but will not impact the Company's financial condition or results of operations. |
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u. | Discontinued Operations | | | | | | | | | | | | | | | | | | | | | | |
In September 2007, the Company entered into a definitive agreement to sell its Baseband Chipset Business to MediaTek Inc. The decision to sell the Baseband Chipset Business was due to the Company’s decision to focus its resources in areas where its signal processing expertise can provide unique capabilities and earn superior returns. During fiscal 2008, the Company completed the sale of its Baseband Chipset Business for net cash proceeds of $269 million. The Company made cash payments of $1.7 million during fiscal 2009 related to retention payments for employees who transferred to MediaTek Inc. and for the reimbursement of intellectual property license fees incurred by MediaTek. During fiscal 2010, the Company received cash proceeds of $62 million as a result of the receipt of a refundable withholding tax and also recorded an additional gain on sale of $0.3 million, or $0.2 million net of tax, due to the settlement of certain items at less than the amounts accrued. In fiscal 2011, additional proceeds of $10 million were released from escrow and $6.5 million net of tax was recorded as additional gain from the sale of discontinued operations. The Company does not expect any additional proceeds from this sale. |
The following amounts related to the Baseband Chipset Business have been segregated from continuing operations and reported as discontinued operations. |
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| 2013 | | 2012 | | 2011 | | | | | | | | | | | | |
Gain on sale of discontinued operations before income taxes | $ | — | | | $ | — | | | $ | 10,000 | | | | | | | | | | | | | |
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Provision for income taxes | — | | | — | | | 3,500 | | | | | | | | | | | | | |
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Gain on sale of discontinued operations, net of tax | $ | — | | | $ | — | | | $ | 6,500 | | | | | | | | | | | | | |
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