Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Description of the Company | Description of the Company |
Multi-Fineline Electronix, Inc. (“MFLEX” or the “Company”) was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies. |
United Engineers Limited (“UEL”) and its wholly owned subsidiary, UE Centennial Venture Pte. Ltd (“UECV”, and together with UEL, “UE”), through its affiliates and subsidiaries, beneficially owned approximately 61%, 61% and 62% of the Company’s outstanding common stock as of December 31, 2014, September 30, 2014 and September 30, 2013, respectively. This beneficial ownership of the Company’s common stock by UE provides these entities with control over the outcome of stockholder votes at the Company, except with respect to certain related-party transactions with UE or its subsidiaries, including WBL Corporation Limited (“WBL”), which require a separate vote of the non-UE stockholders. |
Change in Fiscal Year End | Change in Fiscal Year End |
On August 4, 2014, the Board of Directors of the Company approved a change in the Company’s fiscal year end from September 30 to December 31. As a result of this change, the Company is filing a Transition Report on Form 10-K for the three-month transition period ended December 31, 2014. References to any of the Company’s fiscal years mean the fiscal year ending September 30 of that calendar year. Financial information in these notes with respect to the three months ended December 31, 2013 is unaudited. |
Principles of Consolidation | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has three wholly owned subsidiaries located in China: MFLEX Suzhou Co., Ltd. (“MFC”), formerly known as Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”) and into which Multi-Fineline Electronix (Suzhou) Co., Ltd (“MFC1” which we are in the process of de-registering) was merged in fiscal 2010, and MFLEX Chengdu Co., Ltd. (“MFLEX Chengdu”); one located in the Cayman Islands: M-Flex Cayman Islands, Inc. (“MFCI”); one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. (“MFLEX Singapore”); one located in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd. (“MFM”); one located in Cambridge, England: MFLEX UK Limited (“MFE”); one located in Arizona: Aurora Optical, Inc. (“Aurora Optical”), which was dissolved in September 2012; one located in Korea: MFLEX Korea, Ltd. (“MKR”); and one located in the Netherlands: MFLEX B.V. (“MNE”). All significant intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used, including, but not limited to, those related to inventories, income taxes, accounts receivable allowance and warranty. Actual results could differ from those estimates. |
Cash Equivalents | Cash Equivalents |
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents consisted of money market funds as of December 31, 2014, September 30, 2014 and September 30, 2013. |
Fair Value Measurements | Fair Value Measurements |
Per Financial Accounting Standards Board (“FASB”) authoritative guidance, the Company classifies and discloses the fair value of certain of its assets and liabilities in one of the following three categories: |
Level 1: quoted market prices in active markets for identical assets and liabilities |
Level 2: observable market based inputs or unobservable inputs that are corroborated by market data |
Level 3: unobservable inputs that are not corroborated by market data |
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated fair value due to their short maturities. For recognition purposes, on a recurring basis, the Company’s assets and liabilities related to money market funds and derivative financial instruments are measured at fair value at the end of each reporting period. The fair value of the Company’s money market funds were measured using Level 1 fair value inputs and the fair value of the Company’s derivative assets and liabilities were measured using Level 2 fair value inputs, which consisted of observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions. |
The Company’s assets and liabilities measured at fair value on a recurring basis subject to the disclosure requirements as defined under the FASB authoritative accounting guidance were as follows: |
|
| Fair Value Measurements of Assets and Liabilities | | | | | | | | | |
on a Recurring Basis as of December 31, 2014 | | | | | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | |
Money market funds (cash and cash equivalents) | $ | 18,208 | | | $ | — | | | $ | — | | | | | | | | | |
| $ | 18,208 | | | $ | — | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements of Assets and Liabilities | | | | | | | | | |
on a Recurring Basis as of September 30, 2014 | | | | | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | |
Money market funds (cash and cash equivalents) | $ | 19,118 | | | $ | — | | | $ | — | | | | | | | | | |
| $ | 19,118 | | | $ | — | | | $ | — | | | | | | | | | |
|
| Fair Value Measurements of Assets and Liabilities | | | | | | | | | |
on a Recurring Basis as of September 30, 2013 | | | | | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | |
Money market funds (cash and cash equivalents) | $ | 14,141 | | | $ | — | | | $ | — | | | | | | | | | |
Forward contracts (other current assets) | | — | | | | 179 | | | | — | | | | | | | | | |
Forward contracts (accrued liabilities) | | — | | | | (34 | ) | | | — | | | | | | | | | |
| $ | 14,141 | | | $ | 145 | | | $ | — | | | | | | | | | |
|
As of December 31, 2014, assets held for sale were measured at fair value on a non-recurring basis. Based on the relevant FASB authoritative guidance, the carrying value of assets held for sale was written down to $11,387 as of December 31, 2014 (refer to Note 11). The fair value of the assets was determined using Level 3 unobservable inputs not corroborated by market data, consisting of third-party offers for assets held for sale. Below is a summary of the Company’s assets measured at fair value on a non-recurring basis as of December 31, 2014 and September 30, 2014: |
|
| Fair Value Measurements of Assets | | | | | | | | | |
on a Non-Recurring Basis as of | | | | | | | | |
31-Dec-14 | | | | | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | |
Building and equipment (assets held for sale) | $ | — | | | $ | — | | | $ | 11,387 | | | | | | | | | |
| $ | — | | | $ | — | | | $ | 11,387 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements of Assets | | | | | | | | | |
on a Non-Recurring Basis as of | | | | | | | | |
30-Sep-14 | | | | | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | | | | | |
Building and equipment (assets held for sale) | $ | — | | | $ | — | | | $ | 12,219 | | | | | | | | | |
| $ | — | | | $ | — | | | $ | 12,219 | | | | | | | | | |
|
No assets or liabilities were measured at fair value on a non-recurring basis as of September 30, 2013. |
Concentrations of Credit Risk | Concentrations of Credit Risk |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash, to the extent balances exceeded limits that were insured by the Federal Deposit Insurance Corporation or the equivalent government body in other countries, and accounts receivable. Credit risk exists because the Company’s flexible printed circuit boards and related component assemblies were sold to a limited number of customers during the reporting periods herein (refer to Note 7). The Company does not require collateral and maintains reserves for potential credit losses. Such losses have historically been immaterial and have been within management’s expectations. |
Accounts Receivable | Accounts Receivable |
The Company records revenues in accordance with the terms of the sale, which is generally at shipment. Accounts receivable are recorded at the invoiced amount, and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable, and the allowance is determined based on historical write-off experience as well as specific identification of credit issues with invoices. The Company reviews the allowance for doubtful accounts monthly (or more often, as necessary), and past due balances over a specified amount are reviewed individually for collectability. All other balances are reviewed on an aggregate basis. Account balances are charged against the allowance if and when the Company determines it is probable that the receivable will not be collected. The Company does not have any off-balance sheet credit exposure related to its customers. |
Inventories | Inventories |
Inventories are stated at the lower of cost or market, with cost being determined on a first-in, first-out basis. The Company records write-downs for excess and obsolete inventory based on historical usage and expected future product demand. |
Restricted Cash | Restricted Cash |
The Company held Chinese Renminbi (“RMB”) 3,200 as of December 31, 2014 and September 30, 2014, (which were approximately $523 and $520, respectively) of cash restricted due to customs deposit requirements in China, which was segregated from cash and cash equivalents and included within other current assets. The restriction is expected to cease within twelve months. |
Property, Plant and Equipment | Property, Plant and Equipment |
Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows: |
|
Buildings and building improvement | | 20 - 39 years | | | | | | | | | | | | | | | | | |
Machinery and equipment | | 3 -10 years | | | | | | | | | | | | | | | | | |
Furniture and fixtures | | 3 - 5 years | | | | | | | | | | | | | | | | | |
Computers and capitalized software | | 3 - 5 years | | | | | | | | | | | | | | | | | |
Leasehold improvements | | Shorter of 15 years or life of lease | | | | | | | | | | | | | | | | | |
|
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets, including any cash flows upon their eventual disposition, to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. |
Land Use Rights | Land Use Rights |
Land use rights include long-term leaseholds of land for the Company’s facilities located in China. The Company paid an upfront fee for use of the land use rights and amortizes the expense through expiration. |
Long-Lived Asset Impairment | Long-Lived Asset Impairment |
The Company tests its long-lived assets for impairment whenever circumstances or events may affect the recoverability of long-lived assets. To determine if an impairment exists, the Company first determines whether there has been a change in the use or circumstance related to the assets and whether a held and used or held for sale impairment model should be used to evaluate the assets or asset group for impairment. |
If the assets are classified as held and used, the Company utilizes the forecasted undiscounted cash flows related to the asset group and compares the result to the carrying value. If the forecasted undiscounted cash flows exceed the carrying value, there is no impairment. To develop the forecasted undiscounted cash flows, the Company utilizes a number of estimates and assumptions including the internally developed business assumptions used to compute the forecasted cash flows and related terminal cash flows. If the assets meet the criteria for held for sale classification, the Company determines the estimated fair value for the assets less the applicable disposal costs and compares this value to the carrying value of the long-lived assets. If this value exceeds the carrying value, there is no impairment. In determining these fair value estimates, the Company considers internally generated information and information obtained from discussions with market participants. The determination of fair value requires significant judgment both by the Company and outside experts engaged to assist in this process, if any. Refer to Note 11 for further details. |
Goodwill | Goodwill |
The Company records the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets entails significant estimates and assumptions including, but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful completion of development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired. |
The Company reviewed the recoverability of the carrying value of goodwill on an annual basis typically during its fourth fiscal quarter, or more frequently when an event occurred or circumstances changed to indicate that an impairment of goodwill had possibly occurred. At June 30, 2013, the Company performed an interim goodwill impairment test on its single reporting unit. Upon completion of the impairment test, the Company determined that its goodwill was impaired and recorded a charge of $7,537 during the fiscal third quarter of 2013 to fully impair its goodwill, resulting in a balance of $0 as of September 30, 2013. Refer to Note 11 for further details. |
Revenue Recognition | Revenue Recognition |
The Company’s revenues, which the Company refers to as net sales, net of accounts receivable allowance, refunds and credits, are generated primarily from the sale of flexible printed circuit boards and related component assemblies, which are sold to original equipment manufacturers and electronic manufacturing services providers to be included in other electronic products. The Company recognizes revenue when there is persuasive evidence of an arrangement with the customer that states a fixed or determinable sales price, when title and risk of loss transfers, when delivery of the product has occurred in accordance with the terms of the sale and collectability of the related accounts receivable is reasonably assured. The Company does not have any post-shipment obligations (e.g., installation or training) or multiple-element arrangements. The Company’s remaining obligation to its customer after delivery is limited to warranty on its product. |
All non-income government-assessed taxes (sales and value added taxes) collected from customers and remitted to governmental agencies are recorded on a net basis (excluded from net sales) in the accompanying consolidated financial statements. Such taxes are recorded in accrued liabilities until they are remitted to the appropriate governmental agencies. |
Product Warranty Accrual | Product Warranty Accrual |
The Company typically warrants its products for up to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical amounts incurred for warranty expense and historical warranty return rates as well as an evaluation of the expected future warranty return rates. If actual warranty return rates differ from the estimated trends based on our historical experience, the Company may adjust the warranty accrual to reflect the actual results. The warranty accrual is included in accrued liabilities in the accompanying Consolidated Balance Sheets. |
Changes in the product warranty accrual for the three months ended December 31, 2014 and fiscal years ended September 30, 2014, 2013 and 2012, were as follows: |
|
| Balance at | | | Warranty | | | Provision for | | | Balance at | | | | | |
Beginning | Expenditures | Estimated | End | | | | |
of Period | | Warranty Cost | of Period | | | | |
Three Months Ended December 31, 2014 | $ | 997 | | | $ | (467 | ) | | $ | 483 | | | $ | 1,013 | | | | | |
Fiscal Year Ended September 30, 2014 | $ | 1,076 | | | $ | (4,570 | ) | | $ | 4,491 | | | $ | 997 | | | | | |
Fiscal Year Ended September 30, 2013 | $ | 346 | | | $ | (3,469 | ) | | $ | 4,199 | | | $ | 1,076 | | | | | |
Fiscal Year Ended September 30, 2012 | $ | 279 | | | $ | (991 | ) | | $ | 1,058 | | | $ | 346 | | | | | |
|
Research and Development | Research and Development |
Research and development costs are incurred in the development of new products and processes, including significant improvements and refinements to existing products and processes and are expensed as incurred. |
Restructuring Charges | Restructuring Charges |
The Company recognizes restructuring charges related to plans to close or consolidate duplicate manufacturing and administrative facilities. In connection with these activities, the Company records restructuring charges for employee termination and relocation costs and other exit-related costs. |
The recognition of restructuring charges requires making certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent that actual results differ from these estimates and assumptions, the Company may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated financial statements. At the end of each reporting period, the Company evaluates the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans. During the three months ended December 31, 2014, the Company recorded restructuring charges of $1,420. During the fiscal years ended September 30, 2014, 2013 and 2012, the Company recorded restructuring charges (recoveries) of $15,698, $0 and $(2,468), respectively. Refer to Note 11 for further details. |
Income Taxes | Income Taxes |
Income taxes are computed using the asset and liability method. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the tax bases and financial reporting amounts of existing assets and liabilities. Valuation allowances are established when it is more likely than not that such deferred tax assets will not be realized. The Company does not file a consolidated return with its foreign wholly owned subsidiaries. |
The Company has a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefit in income tax expense. |
Foreign Currency | Foreign Currency |
The functional currency of the Company’s foreign subsidiaries is either the local currency or if the predominant transaction currency is the U.S. dollar, then the U.S. dollar will be the functional currency. Balances are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and an average exchange rate for each period for income statement amounts. Currency translation adjustments are recorded in accumulated other comprehensive income, a component of stockholders’ equity. |
Foreign currency transactions occur primarily when there is a receivable or payable denominated in other than the respective entity’s functional currency. The Company records the changes in the exchange rate for these transactions in the Consolidated Statements of Comprehensive Income. For the three months ended December 31, 2014, foreign exchange transaction gains and losses were included in other income (expense), net and were net gains of $75. For the fiscal years ended September 30, 2014, 2013 and 2012, they were net gains (losses) of $605, $348 and $(69), respectively. |
Derivative Financial Instruments | Derivative Financial Instruments |
The Company’s derivative financial instruments are designated to economically hedge the exposure of future cash flows denominated in non-U.S. dollar currency. Derivative financial instruments are measured at fair value and are recorded in the Consolidated Balance Sheets as either assets or liabilities. Changes in the fair value of the derivative financial instruments are recorded each period in the Consolidated Statements of Comprehensive Income, depending on whether the derivative instruments are designated as part of the hedge transaction, and if so, the type of hedge transaction. |
The Company evaluates its derivative financial instruments as either cash flow hedges (forecasted transactions), fair value hedges (changes in fair value related to recognized assets or liabilities) or derivative financial instruments that do not qualify for hedge accounting. To qualify for hedge accounting, a derivative financial instrument must be highly effective in mitigating the designated risk of the hedged item. For derivative financial instruments that do not qualify for hedge accounting, changes in the fair value are reported in current period earnings. |
The Company designates its derivative financial instruments as non-hedge derivatives and records its foreign currency forward contracts as either assets or liabilities in the Consolidated Balance Sheets. Changes in the fair value of the derivative financial instruments that arise due to fluctuations in the forward exchange rates are recognized in earnings each period as other income (expense), net in the Consolidated Statements of Comprehensive Income. Realized gains (losses) are recognized at maturity as other income (expense), net in the Consolidated Statements of Comprehensive Income. The cash flows from derivative financial instruments are classified as cash flows from operating activities in the Consolidated Statements of Cash Flows. Refer to Note 10 for further information on derivative financial instruments. |
Accounting for Stock-Based Compensation | Accounting for Stock-Based Compensation |
The Company recognizes stock-based compensation expense for all stock-based payment arrangements, net of an estimated forfeiture rate and generally recognizes expense for those shares expected to vest over the requisite service period of the award. For stock options and stock appreciation rights, the Company determines the grant date fair value using the Black-Scholes option-pricing model which requires the input of certain assumptions, including the expected life of the stock-based payment awards, stock price volatility and interest rates. For the service-based restricted stock units, the Company determines the fair value using the closing price of the Company’s common stock on the date of grant. For the performance-based restricted stock units, the Company determines the fair value using a Monte Carlo simulation model based on the underlying common stock closing price as of the grant performance date, the expected term, stock price volatility, and risk-free interest rates. |
Net Income Per Share-Basic and Diluted | Net Income Per Share—Basic and Diluted |
Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method. |
The following table presents a reconciliation of basic and diluted shares: |
|
| Three Months Ended December 31, | | | Fiscal Years Ended September 30, | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | | | 2012 | |
Basic weighted-average number of common shares outstanding | | 24,267,567 | | | | 24,083,932 | | | | 24,122,843 | | | | 23,897,651 | | | | 23,782,540 | |
Dilutive effect of potential common shares | | 356,801 | | | | — | | | | — | | | | — | | | | 294,939 | |
Diluted weighted-average number of common and potential common shares outstanding | | 24,624,368 | | | | 24,083,932 | | | | 24,122,843 | | | | 23,897,651 | | | | 24,077,479 | |
Potential common shares excluded from the per share computations their inclusion would be anti-dilutive | | 721,098 | | | | 811,774 | | | | 897,201 | | | | 903,263 | | | | 372,530 | |
|
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
During May 2014, the FASB issued revised authoritative guidance that requires a reporting 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. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The amendment is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact of its pending adoption of this guidance on its financial position, results of operations and cash flows. |
During July 2013, the FASB issued revised authoritative guidance that requires the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in the financial statements when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 (which was October 1, 2014 for the Company). The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
During February 2013, the FASB issued revised authoritative guidance that requires the presentation in a single location, either in a note or parenthetically on the face of the financial statements, of the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. This guidance is effective prospectively for annual periods beginning after December 15, 2012 (which was October 1, 2013 for the Company). The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
During July 2012, the FASB issued revised authoritative guidance that is intended to reduce the cost and complexity of the impairment test for indefinite-lived intangible assets by providing an entity with the option to first assess qualitatively whether it is necessary to perform the impairment test that is currently in place. An entity would not be required to quantitatively calculate the fair value of an indefinite-lived intangible asset unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments are effective for interim and annual periods beginning after September 15, 2012 (which was October 1, 2012 for the Company). The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
During December 2011, the FASB issued revised authoritative guidance that requires an entity to disclose information about offsetting and related arrangements on its financial position. This includes the effect or potential effect of rights of offset associated with an entity’s recognized assets and recognized liabilities and requires improved information about financial instruments and derivative instruments that are subject to an enforceable master netting arrangement or similar arrangement. During January 2013, the FASB issued an amendment to this guidance, which limits the scope to derivatives, repurchase agreements and securities lending transactions. The amendments are effective for annual periods beginning on or after January 1, 2013 (which was October 1, 2013 for the Company) and retrospective disclosure is required for all comparative periods presented. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
During June 2011, the FASB issued revised authoritative guidance that requires all non-owner changes in stockholder’s equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income and the total of comprehensive income. The amendments were effective for annual periods beginning after December 15, 2011 (which was October 1, 2012 for the Company) and were applied retrospectively. The guidance was adopted by the Company in fiscal 2012 and did not have a material impact on its consolidated financial position, results of operations or cash flows. |
During May 2011, the FASB issued revised authoritative guidance that resulted in common principles and requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value” in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments were effective for interim and annual periods beginning after December 15, 2011 (which was January 1, 2012 for the Company) and were to be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
Reclassifications | Reclassifications |
During the fourth fiscal quarter of 2012, the Company effectively changed its accounting policy with regard to freight out costs. Freight out costs were previously classified as cost of sales but, going forward, are classified as sales and marketing. For the nine months ended June 30, 2012, freight out costs of $2,164 were included in cost of sales. For the three months ended September 30, 2012, freight out costs of $880 were included in sales and marketing. Given the immateriality of these costs, the Company prospectively began reflecting freight out costs in sales and marketing beginning July 1, 2012. The Company evaluated the materiality of such change from both a quantitative and qualitative basis and concluded that reclassification of such costs on a prior year basis was immaterial and, accordingly, did not reclassify such costs that were previously included in cost of sales for periods previously reported prior to the change. For the fiscal year ended September 30, 2013, freight out costs of $2,706 were included in sales and marketing. |