UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
|
|
|
(Mark One)
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the fiscal year ended
January 3,
2010
|
OR
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Commission file number 0-21970
ACTEL CORPORATION
(Exact name of Registrant as
specified in its charter)
|
|
|
California
(State or other jurisdiction
of
incorporation or organization)
|
|
77-0097724
(I.R.S. Employer
Identification No.)
|
2061 Stierlin Court
Mountain View, California
(Address of principal
executive offices)
|
|
94043-4655
(Zip
Code)
|
(650) 318-4200
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $.001 par value
Preferred Stock Purchase Rights
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Note Checking the box above will not relieve any
registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Annual Report on
Form 10-K
or any amendment to this Annual Report on
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated
filer o
|
|
Accelerated
filer þ
|
|
Non-accelerated
filer o
|
|
Smaller reporting company o
|
|
|
(Do not check if a smaller reporting
company)
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of voting and non voting common
equity held by non affiliates of the Registrant was
approximately $288 million as of July 2, 2009, based
upon the closing price on the NASDAQ Global Market reported for
such date. Shares held by each officer and director and each
person owning more than 10% of the outstanding voting and
non-voting stock have been excluded from this calculation
because such persons may be deemed to be affiliates of the
Registrant. This calculation does not reflect a determination
that certain persons are affiliates of the Registrant for any
other purpose. The number of shares outstanding of the
Registrants Common Stock on March 10, 2010, was
26,429,647 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report
on
Form 10-K
is incorporated by reference to the registrants proxy
statement for its 2010 annual meeting of shareholders, which
proxy statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year
covered by this Annual Report on
Form 10-K.
PART I
In this Annual Report on
Form 10-K,
Actel Corporation and its consolidated subsidiaries are referred
to as we, us, our, The
Company or Actel. You should read the
information in this Annual Report with the Risk Factors in
Item 1A. Unless otherwise indicated, the information in
this Annual Report is given as of March 15, 2010, and we
undertake no obligation to update any of the information,
including forward-looking statements. All forward-looking
statements are made under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Statements
containing words such as anticipates,
believes, estimates,
expects, intends, plans,
seeks, and variations of such words and similar
expressions are intended to identify the forward-looking
statements. Actual results could differ materially from those
projected in the forward-looking statements due to the risks
identified in the Risk Factors or for other reasons.
Actel Corporation is the leading supplier of low-power
field-programmable gate arrays (FPGAs), mixed-signal
FPGAs, and system-critical FPGAs. Delivering the lowest power
consumption of any comparably sized FPGAs at both the chip and
the system level, the Companys flash- and antifuse-based
FPGA solutions enable power-efficient design. In support of our
FPGAs, we offer design and development software and tools to
optimize power consumption; power-smart intellectual property
(IP) cores, including industry-standard processor
technologies; the industrys smallest footprint packaging;
programming hardware and starter kits; and a variety of design
services. We target a wide range of applications in the
aerospace, avionics, communications, consumer, industrial and
military markets that require low power consumption, high
reliability, or other attributes of our nonvolatile flash-and
antifuse-based technologies that have an inherent competitive
advantage over traditional SRAM-based FPGAs.
In April 2008, Actel and Pigeon Point Systems, the leading
provider of Telecommunications Computer Architecture
(TCA) management components, announced a partnership
to develop and market solutions based on the Actel Fusion
mixed-signal FPGAs to speed the design of AdvancedTCA blade and
AdvancedMC carrier blade management controllers. In a strategic
move to strengthen its market position, Actel acquired Pigeon
Point Systems in July 2008. The two companies combined
portfolio of reference designs, development kits, easy-to-use
development environments, and expert design services gives
designers the capability to address system and power management
issues throughout the design process.
The Company was founded and incorporated in California in 1985.
Actels Common Stock trades on the NASDAQ Global Market
under the symbol ACTL. Our corporate headquarters are located at
2061 Stierlin Court, Mountain View, Calif., 94043, and our
Website address is www.actel.com. We provide access free of
charge, through a link on our Website, to our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
and Current Reports on
Form 8-K,
as well as amendments to those reports, as soon as reasonably
practicable after the reports are electronically filed with or
furnished to the Securities and Exchange Commission
(SEC). The Actel, Actel Fusion, IGLOO, Axcelerator,
FlashLock, FuseLock, Libero, ProASIC, and
ProASICPLUS
names and logos are registered trademarks of Actel. This Annual
Report also includes unregistered trademarks of Actel as well as
registered and unregistered trademarks of other companies.
Industry
Overview
Three principal types of integrated circuits (ICs)
are used in nearly every electronic system: processors, which
are used for control and computing tasks; memory devices, which
are used to store program instructions and data; and logic
devices, which are used to adapt these processing and storage
capabilities to a specific application. The logic market is
highly fragmented and includes application-specific integrated
circuits (ASICs) and programmable logic devices
(PLDs). FPGAs are one type of PLD. Price,
performance, reliability, power consumption, security, density,
features,
ease-of-use,
and time to market determine the degree to which logic devices
compete for specific applications. Unlike ASICs, which are
customized for use in a specific application at the time of
manufacture, FPGAs and complex PLDs (CPLDs) are
manufactured as standard components and customized in the
field, allowing the same device type to be used for many
different applications. Using software
1
tools, users program their design into a PLD, resulting in lower
development costs and inventory risks, shorter design cycles,
and faster time to market.
Traditionally, ASICs and CPLDs have addressed the low-power
needs of portable consumer applications. However, with long
design cycles and little flexibility to address changing
standards and late-stage design modifications, ASICs are riskier
and often impractical for portable applications with short
product-life cycles. Moreover, CPLDs are becoming less
attractive in some low-power applications due mainly to
increasing demand for high-end features. As a result, FPGAs are
becoming the preferred solution as competition intensifies and
time to market has an increasing impact on the success of
portable, battery-powered products. Of course, FPGAs must meet
the potential customers other design requirements,
including cost, performance, size and security.
FPGAs based on static random access memory (SRAM)
technology have inherently high static power consumption
compared with antifuse- or flash-based FPGAs. This is because
the SRAM cells must always be minimally turned on in order to
maintain their memory state, whereas antifuse- or flash-based
FPGAs can maintain their programmed state with power completely
off. Even low-power SRAM-based FPGAs draw on the
order of ten times more power for typical battery-operated
applications. SRAM-based FPGAs also experience power surges at
start-up
that drain batteries and can cause system-initialization
failures. Compounding the problem, each process node
shrink increases the static power consumption of
transistor-heavy SRAM-based FPGAs. The power problem becomes
further complicated with respect to SRAM-based solutions that
utilize flash technology to program the devices SRAM
architecture. Though marketed as flash-based devices, these
solutions add flash circuitry to the power-draining SRAM FPGA
fabric, so they have inherently high static power consumption
like a standard SRAM-based FPGA.
The Actel
Advantage
To a great extent, the characteristics of an FPGA are dictated
by the technology used to make the device programmable. Devices
based on nonvolatile flash or antifuse programming elements
offer significant power, security, and neutron-immunity
advantages over volatile FPGAs based on SRAM technology. Our
strategy is to offer our FPGAs to markets in which our
nonvolatile flash- and antifuse-based technologies have an
inherent competitive advantage.
Low Power and Small Footprint
Because they dont use power-draining SRAM configuration
bit cells, nonvolatile flash-based FPGAs have significantly
lower static power than SRAM-based solutions, making them
optimal for low-power applications. In addition, some of our
flash-based FPGAs have been designed specifically for low-power
applications. When compared with high density SRAM FPGAs,
Actels flash FPGAs use up to 1700 times less static power.
When compared with low density CPLDs, flash FPGAs use up to 25
times less power. We also offer the industrys smallest
micro chip scale package and the largest selection of small
footprint packages. The low power combined with small packages
create new opportunities for designers of battery-powered
handheld applications with strict board space requirements.
Security
Once programmed, our nonvolatile single-chip devices retain
configuration indefinitely without requiring an external
configuration device. With no bitstream susceptible to
interception, our nonvolatile solutions eliminate the potential
for in-system errors or data erasures that might occur during
download. For our flash-based devices, we offer the Actel
FlashLock feature, which provides a unique combination of
reprogrammability and design security without external overhead.
Our flash-based devices with AES-based security permit secure,
remote field updates of both system design and flash memory
content. For our antifuse-based FPGAs, we offer the Actel
FuseLock feature, which is designed to prevent unauthorized
users from reading back the contents.
Reliability (Radiation Tolerant)
Our flash- and antifuse-based devices are not subject to
configuration upsets caused by high-energy neutrons naturally
present in the earths atmosphere. SRAM-based FPGAs, on the
other hand, are vulnerable to neutron-
2
induced configuration loss not only under high-altitude
conditions, as traditionally believed, but also in ground-based
applications. The energy of the collision can change the state
of the SRAM FPGAs configuration cell and thereby cause an
unpredictable change in FPGA functionality. These errors, which
are very difficult to prevent in SRAM FPGAs, can result in
failure-in-time
(FIT) rates in the thousands and complete system
failures.
Single Chip
Unlike volatile SRAM-based FPGAs, our nonvolatile FPGAs do not
require additional system components, such as configuration
serial nonvolatile memory or a flash-based microcontroller, to
configure the device at every system
power-up. By
eliminating the support devices required by volatile SRAM-based
FPGAs, our nonvolatile single-chip FPGAs reduce the direct costs
of the bill of materials. In addition, our nonvolatile flash-
and antifuse-based FPGAs lower associated total system costs by
reducing design complexity, increasing reliability, and
simplifying materials management.
Live At
Power-Up
Our nonvolatile devices are live at
power-up
(LAPU): as soon as system power is applied to the
board and normal operating specifications are achieved, our
devices are working. The LAPU feature greatly simplifies total
system design and often permits the removal of expensive
power-sequencing, voltage-monitor, and brownout-detection
devices from the board. Simplifying the system design reduces
total system cost and design risk while increasing system
reliability and improving system initialization time.
Products
We offer customers a range of low-power flash-based solutions to
address design challenges in the military and aerospace,
communications, consumer and industrial markets. With densities
ranging from 10,000 to 3,000,000 system gates, our
reprogrammable product families exploit the inherent benefits of
our nonvolatile flash technology: low power, security, neutron
immunity, single chip, small footprint, and LAPU. Our
flash-based solutions include the IGLOO, ProASIC3, Actel Fusion
and recently introduced SmartFusion mixed-signal FPGA families
as well as those families optimized for an ARM Cortex-M1
processor: the M1 IGLOO, M1 ProASIC3/E, and M1 Fusion families.
In addition we have expanded our flash product lines into the
military and aerospace markets with our RT ProASIC3 space flight
FPGAs and our military-qualified ProASIC3L and ProASIC3EL FPGAs.
We also offer a broad portfolio of nonvolatile antifuse-based
FPGAs. Ranging in density from 3,000 to 4,000,000 system gates,
our single-chip solutions include FPGAs qualified to commercial,
industrial, and military specifications as well as
radiation-tolerant devices. Spanning six process geometries, our
antifuse-based solutions include the RTAX-DSP, RTAX-S, RTAX-SL,
Axcelerator, eX, SX-A, MX, and the legacy SX, ACT 3, ACT 2, and
ACT 1 families. We still ship many legacy antifuse FPGAs to
customers with products having long life-cycles.
To meet the diverse requirements of our customers, we offer
almost all our products in a variety of speed grades, package
types,
and/or
ambient (environmental) temperature tolerances. We also offer
green, lead-free, and RoHS-compliant packages, which
provide the necessary mechanical and environmental protection
while ensuring consistent reliability and performance.
The families discussed below are currently being designed by
customers into their next-generation applications. Although our
more mature product families have been excluded from this
discussion, they continue to generate significant revenues.
IGLOO FPGAs
The lowest-power FPGAs
Since its introduction in 2006, designers of portable and
handheld applications have taken note of our 10,000 to 3,000,000
system gate IGLOO family due to its unprecedented low power. The
family offers quick and easy power control with flexible
implementation options, including the Flash*Freeze, low-power
active, and sleep modes, and is the only truly low-power FPGA
solution to support 1.2 V core operation. We provide designers
with
3
comprehensive solutions for IGLOO, including storage, display,
and control-related development boards, reference designs, and
IP cores, to enable rapid design of their portable and
power-sensitive applications.
|
|
|
|
|
IGLOO PLUS I/O-optimized FPGAs introduced in 2008
|
|
|
|
|
|
30,000 to 125,000 system gates
|
|
|
|
|
|
IGLOO nano for high-volume, portable consumer market introduced
in 2008
|
|
|
|
|
|
10,000 to 250,000 system gates
|
|
|
|
Power consumption as low as 2 microWatts
|
|
|
|
Package size as small as 3 x 3 mm
|
|
|
|
|
|
January 2009, IGLOO awarded Best All Around FPGA in Penton
Medias 2008 Best Electronic Design Competition
|
|
|
|
April 2009, IGLOO nano FPGAs voted best product of the year by
Electronic Products China
|
|
|
|
November 2009 IGLOO nano FPGAs received Leading Product Award in
Electronic Design News China
|
ProASIC3/E FPGAs
Low power FPGAs
With densities ranging from 10,000 to 3,000,000 system gates,
our ProASIC3/E FPGAs are commercially qualified and shipping to
customers worldwide for high-volume applications in the
communications, consumer and industrial markets. Optimized for
cost, our reprogrammable ProASIC3 family also delivers high
performance to power-conscious applications. ProASIC3/E devices
support free implementation of the ARM Cortex-M1 soft processor
IP core, offering the benefits of programmability and time to
market at an ASIC-like unit cost.
|
|
|
|
|
ProASIC3L for high-performance, power-conscious systems
introduced in 2008
|
|
|
|
|
|
250,000 to 3,000,000 system gates
|
|
|
|
reduced power consumption with up to 350MHz operation
|
|
|
|
|
|
ProASIC3 nano for high-volume, portable consumer market
introduced in 2008
|
|
|
|
|
|
10,000 to 250,000 system gates
|
|
|
|
Packages as small as 3 x 3 mm
|
|
|
|
|
|
January 2009, ProASIC3 awarded Best All Around FPGA in Penton
Medias 2008 Best Electronic Design Competition
|
Actel Fusion and SmartFusion Intelligent Mixed-Signal
FPGAs
Actel Fusion, the worlds first mixed-signal FPGA
integrates configurable analog, flash memory and flash-based
programmable logic in a monolithic device. With densities
ranging from 90,000 to 1,500,000 system gates our Fusion FPGAs
have been designed by a broad spectrum of customers for use in a
wide range of applications. The Actel Fusion mixed-signal FPGA
system management functionality, which includes power and
thermal management, data logging, and system diagnostics, gives
us the opportunity to win numerous designs in high-volume
applications. Fusion FPGAs can integrate system and power
management functions and provide programmable flexibility in a
single chip, resulting in potential cost, power, and space
savings of 50 percent or more, relative to current
implementations. To provide templates for the customization of
system management functions and to speed development time, we
also offer the System Management Development Kit, a complete
prototyping and development kit. In addition, we have introduced
several Fusion-based reference designs addressing the xTCA
standards based on the Pigeon Point portfolio of system
management solutions.
The recent introduction of the SmartFusion intelligent
mixed-signal FPGAs greatly expands our ability to compete in the
embedded market space, allowing us to pursue designs not
previously available to FPGAs. With
4
densities ranging from 60,000 to 500,000 system gates,
SmartFusion devices integrate FPGA fabric, an ARM Cortex-M3
processor and programmable analog, providing full customization,
IP protection and
ease-of-use.
The combination of a microcontroller, analog peripherals,
embedded flash and programmable logic with single-chip operation
offers levels of integration previously only available in custom
solutions. In-application programming enables real-time updates
and reprogramming of the complete chip, and without the
restrictions of traditional fixed-function microcontrollers,
SmartFusion devices offer the flexibility of a true
system-on-a-chip
solution. The synthesis of these three areas also increases
security by keeping all data transfers within the chip and
preventing interception. Additionally, the inherent security of
our flash technology combined with encrypted in-system
programming and the FlashLock key controlling access to the
security settings of the device ensures IP protection.
RTAX-S, RTAX-SL, RTAX-DSP, and RT-ProASIC3 FPGAs
Designers utilizing our RTAX-S FPGAs value their radiation
tolerance, high reliability, firm-error immunity and
programmability. RTAX-S FPGAs, with densities ranging from
250,000 to 4,000,000 system gates, are not subject to the high
up-front tooling charges and long lead-times associated with
radiation-hardened ASICs, giving us development-cost and
time-to-market
advantages. In addition, our RTAX-S devices have built
in triple module redundancy (TMR), a single event upset
(SEU) mitigation technique. Competing high-density FPGA
solutions require TMR to be instantiated by the user, which can
consume more than two-thirds of the FPGAs available logic.
We believe no other FPGA delivers the density, radiation
tolerance and reliability of our 4,000,000 system-gate RTAX4000S
device, which significantly expanded the number of space
applications that can be supported by our RTAX-S family.
|
|
|
|
|
RTAX-SL devices, the lowest-power FPGAs for flight applications,
introduced in 2009
|
|
|
|
RTAX-DSP space-flight FPGAs introduced in 2008
|
|
|
|
|
|
2,000,000 to 4,000,000 system gates
|
|
|
|
Digital signal processing capability in excess of
15 billion multiplications per second
|
|
|
|
RTAX-DSP prototype FPGAs available in September 2009, for
hardware demonstration and timing validation of designs targeted
to Actels RTAX-DSP space-flight FPGAs
|
|
|
|
|
|
RT ProASIC3 radiation-tolerant, flash-based FPGAs for space
flight applications introduced in 2008
|
|
|
|
|
|
600,000 to 3,000,000 system gates
|
|
|
|
power supplies ranging from 1.2 to 1.5V allow balancing of power
consumption and performance
|
|
|
|
|
|
In January 2009, RTAX-DSP FPGAs selected by EDN as one of
the Hot 100 Electronic Products of 2008
|
Supporting
Products and Services
In support of our low-power FPGAs and power-efficient
mixed-signal FPGAs, we offer power-optimized design and
development software and tools, power-smart IP cores,
programming hardware and starter kits, and a variety of services
that enable our customers to implement their designs in our
products.
Design and Development Software and Tools
The Actel Libero integrated design environment (IDE)
seamlessly integrates
best-in-class
design tools from Mentor Graphics and Synopsys with
Actel-developed custom tools into a single FPGA development
package. Emphasizing power-conscious design, the Actel Libero
IDE includes power-driven layout and advanced power-analysis
capabilities, allowing users to optimize their systems for low
power consumption. We also offer a comprehensive development
environment, boards, and reference designs to enable customers
to get system-level products to market quickly and reduce cost
and risk.
IP Cores
With more than 180 IP products designed and optimized to work
with Actel devices, our IP cores support the aerospace,
avionics, communications, consumer and industrial markets. Our
IP solutions streamline designs, enable
5
faster
time-to-market,
and minimize design costs and risks. We supply IP, components,
tools, and complete reference designs. This allows the system
designer to focus on adding value to the design. Our IP is
optimized and verified for use with Actel FPGAs, so designers
can spend time developing and verifying the system instead of
the IP blocks. We also offer a range of processor
technologies from our small CoreABC to the
high-performance, industry-standard ARM Cortex-M1
processor allowing designers to select an
appropriate processor for their application. In 2008, we
broadened our support for industry-standard processors.
Complementing the existing Libero IDE, we added new software
drivers and real-time operating system support. In combination
with development boards, these offerings further enhance a
designers ability to use processor technology in our
low-power and mixed-signal FPGAs. In 2009, The Athena Group,
Inc. joined our CompanionCore program and announced the
availability of its silicon-proven cryptography cores for our
IGLOO and ProASIC3 FPGAs.
Programming Hardware
We offer several programming options, including Silicon Sculptor
3 and the FlashPro series, for designers utilizing our
nonvolatile FPGAs. Our Silicon Sculptor 3 is a compact,
high-speed, single-device programmer for all Actel devices. Up
to 12 Silicon Sculptor 3 programmers can be connected to a
single PC using nested USB hubs. FlashPro4 is a compact and
cost-effective programmer for our flash-based devices. With its
in-system programming capability, this programmer limits
incompatibility problems and expensive redesign costs and offers
faster time to market. FlashPro4 programmers support
SmartFusion, Fusion, IGLOO, and ProASIC3/E devices and are
powered from the USB port. We also offer programming adapter
modules, surface-mount sockets, prototyping adapter boards and
mechanical packages, and accessories.
Starter Kits
In addition to demonstration and evaluation boards, we offer
starter kits for all of our key FPGA families including IGLOO,
M1 IGLOO, SmartFusion, Fusion, M1 Fusion, ProASIC3, M1 ProASIC3,
ProASICPLUS,
and Axcelerator. Low-cost starter kits, which include design and
programming software and device programmers, are a quick and
cost-effective way to assess an FPGA technology. We also offer a
battery-powered IGLOO-based Icicle Kit to demonstrate extended
battery life for portable designs.
The recently released SmartFusion Evaluation Kit, SmartFusion
Development Kit, and the Fusion Advanced Development Kit include
a Mixed-Signal Power Manager that enables designers to control
and reduce power at the system level. Additionally, Pigeon Point
Systems offers a range of SmartFusion and Fusion-based xTCA
benchtop Board Management Reference (BMR) kits.
Vertical
Markets and Applications
FPGAs are used in a broad range of applications across nearly
all electronic system market segments. Our products serve a wide
range of customers within the communications, consumer,
industrial, and military and aerospace markets. We target
applications that require low power or other attributes of our
nonvolatile flash and antifuse-based technologies that have an
inherent competitive advantage.
Communications
Pigeon Point Systems, a wholly owned subsidiary of Actel
Corporation, delivers world-class management components for
modular platforms based on the AdvancedTCA, AdvancedMC, and
MicroTCA architectures (collectively referred to as
xTCA) to leading companies worldwide. Pigeon Point
Systems is the leading provider of xTCA management components
and offers a comprehensive solution for proprietary and
standards-based system management implementations in the
industrial, military and telecommunications markets.
Current system management implementations often require numerous
discrete components (sometimes numbering in the hundreds) that
occupy large amounts of board space and are difficult to change.
In the communications market, increased costs and risks are
driving the rapid adoption of standards for remotely managed
systems, such as AdvancedTCA and MicroTCA. Management subsystems
based on mixed-signal FPGAs can integrate the functionality of
many of the discrete components, thereby reducing cost and board
space, while simultaneously increasing flexibility and reducing
risk.
6
We believe that widely used and proven reference designs for
xTCA management controllers will be very attractive to product
designers in the rapidly growing xTCA-focused portion of the
communications infrastructure market. In addition, these
reference designs can provide management controller foundation
technology for developers who are building proprietary systems
for the much larger non-xTCA communications infrastructure
market. In 2009, Pigeon Point Systems introduced several
management controller reference designs supporting Fusion.
Currently, multiple companies are either shipping products or
are in the process of developing products based on these designs.
With the introduction of the SmartFusion intelligent
mixed-signal FPGA, Pigeon Point Systems is working to add
SmartFusion variants of all its xTCA management controller
solutions. SmartFusion is designed to support hardware
management applications. Pigeon Point Systems management
products can leverage the microcontroller, programmable analog,
and flash FPGA fabric subsystems of a SmartFusion device. Based
on the success that we have already demonstrated with Fusion, we
believe that management controller solutions built with
SmartFusion will be even more compelling.
To support these system management applications of our
mixed-signal FPGAs, we also offer a portfolio of IP cores for
processing, analog, memory interface and communications. Sample
communications applications include:
Mid- and high-end routers and switches
Access systems (cable and DSL)
Metropolitan and optical networks
Multi-Service provisioning platforms
Wireless base stations and backhaul
Consumer
For designers of battery-operated portable and consumer
applications, the goal is to achieve the lowest power possible
in order to extend the battery life by using low static and
dynamic power and by allowing the system to enter and exit
low-power modes quickly. Other considerations include design
security, flexibility and modularity, small footprint, design
reuse, and field upgradeability. We have a detailed strategy and
multi-phased plan to increase market penetration for our
industry leading lowest-power IGLOO FPGAs in the rapidly-growing
portable market. More specifically, the increasing popularity of
personal media players, portable navigation devices, displays,
and wireless electronics and the convergence of multiple
features has created a tremendous demand for processor
interfaces such as storage, display control, motor control and
human interface control. In 2008, we introduced nano versions of
our IGLOO and ProASIC3 low power FPGAs, targeted at the
high-volume, portable markets. IGLOO nano products offer
groundbreaking possibilities in power, size, lead-times,
operating temperature, and cost. Available in logic densities
from 10,000 to 250,000 gates, the 1.2 V to 1.5 V IGLOO nano
devices have been designed for high-volume applications where
power and size are key decision criteria. IGLOO and ProASIC3
nano devices bring a new level of value and flexibility to the
high-volume and portable markets. When measured against the
typical project metrics of performance, cost, flexibility and
time to market, the nano devices provide an attractive
alternative to ASICs and application-specific standard products
(ASSPs) in fast moving or highly competitive
markets. Sample consumer applications include:
GPS devices
Home networking
Multimedia entertainment systems PDAs
Portable gaming
Set-top boxes
Smart phones
Digital TV accessories
Industrial
Recent advances in electronic component performance and
integration at lower price points have spurred the proliferation
of electronic control units. Crossing many technologies and
applications, from automated industrial
7
manufacturing lines to instrumentation systems to medical
equipment, the focus is on increasing power efficiency while
reducing total system cost. For many industrial applications,
the Actel Fusion mixed-signal FPGA can offer unprecedented
integration in a single-chip, replacing a host of discrete
components at less than half the cost and board space while
maintaining system reliability. Mixed-signal FPGAs with analog
interface and flash memory enable designers to integrate a
processor, run directly from on-chip memory, and tightly couple
control logic, analog input/output and processing needs, while
the range of peripherals SmartFusion offers for its hard
Cortex-M3 processor and the flexibility of its FPGA fabric make
the device a good fit for industrial automation. Our nanoPower
IGLOO FPGA, with its ultra low power Flash*Freeze mode, can
offer designers orders of magnitude lower power consumption than
competing programmable solutions. In an insulin pump, for
example, our ultra low power IGLOO FPGAs can integrate glue
logic and multiple functions from human machine
interface (HMI), display, storage and communication
control to microcontroller functions into a single
chip, thereby reducing the bill of materials, board area, power
consumption and cost. Sample industrial applications include:
Instrumentation and test equipment
Point of sale
RFID readers
Surveillance and automation systems
Industrial motor control
Security camera
Portable medical instruments
Clinical equipment
Imaging and scanning equipment
Diagnostic lab equipment
Home infusion pumps
Patient monitor
Military
and Aerospace
With a focus on stringent quality and reliability requirements,
military and aerospace designers have long recognized the
inherent advantages of nonvolatile FPGA technologies for
applications that require high reliability, firm-error immunity,
low power consumption, small footprint (single chip), and design
security. Thousands of our radiation-tolerant and
radiation-hardened FPGAs have performed mission- or
flight-critical functions aboard manned space vehicles,
earth-orbiting satellites, and deep space probes. Over the last
decade, Actel FPGAs have been onboard more than 100 launches and
flown on over 300 satellites and spacecraft, including GPS-2RM,
Mars Reconnaissance Orbiter, Mars Explorer Rovers 1 and 2
(Spirit and Opportunity), Echostar, and Globalstar. We are the
leading supplier of aerospace PLDs. In 2009, we added
sophisticated digital signal processing capabilities to our
industry-leading radiation-tolerant RTAX-S space flight FPGAs.
These RTAX-DSP FPGAs add embedded radiation-tolerant
multiply-accumulate blocks to the industry-standard RTAX-S
product family, resulting in a dramatic increase in device
performance and utilization when implementing arithmetic
functions, such as those encountered in DSP algorithms, without
sacrificing reliability or radiation tolerance. We also
introduced RT ProASIC3 devices for space flight applications.
The reprogrammability of the new low-power RT ProASIC3 devices
simplifies prototyping and eases hardware timing validation
while offering critical immunity to radiation-induced
configuration upsets. These new products broaden our
industry-leading space-flight offering and give designers the
reliable, flexible solutions they need to design next-generation
space-flight systems.
ProASIC3 and ProASIC3EL FPGAs are also offered as
military-qualified product offerings, extending our low-power
leadership and the reliability benefits of our flash-based FPGA
technologies. Verified to operate across the full military
temperature range and ranging in density from 600,000 to
3,000,000 system gates, the new low-power devices are immune to
neutron-induced configuration upsets, saving board space and
minimizing complexity in the system. With lower power, increased
gate density, and improved performance, we enable designers to
eliminate the higher power consumption and failure risks often
associated with SRAM-based FPGAs for a wide range of military,
aerospace, and avionics applications.
8
Sample aerospace and military applications include:
Attitude and orbit control
Camera electronics
Command and data handling
Instrumentation
Management of spacecraft power and environmental controls
Navigation and guidance
Propulsion system electronics
Radio communication
Sensor control
Sensor data processing
Telemetry
ProASIC3 and
ProASICPLUS
FPGAs have been designed into flight-critical applications on
the new Boeing 787 Dreamliner commercial airliner, which
successfully completed its maiden test flight in December 2009.
Sales and
Distribution
We maintain a worldwide, multi-tiered selling organization that
includes a direct sales force, independent sales representatives
(in North America), electronics distributors, and value-added
resellers.
Our North American sales force consists of sales and
administrative personnel and field application engineers
(FAEs) operating from offices located in major
metropolitan areas. Direct sales personnel call on assigned
accounts, typically large, direct original equipment
manufacturers (OEMs). Our sales managers oversee the
activities of our direct sales personnel as well as those of our
sales representatives and distributors. Our sales
representatives are independent companies operating under
contract with us to sell our products in assigned geographic
regions. The sales representatives concentrate on selling to
major industrial companies in North America. We take direct
orders from a small number of large, strategic customers and
fulfill those orders with direct shipments. To support order
fulfillment for the vast majority of customers, we have
distribution agreements with Avnet, Inc. (Avnet)
Future Electronics, Inc. (Future Electronics) and
Mouser Electronics, Inc. (Mouser). The sales forces
of these distributors also call on the engineering departments
of the many smaller, geographically dispersed accounts in North
America that our sales representatives do not focus on.
We generate a significant portion of our revenues from
international sales. Sales to European customers accounted for
25% of net revenues in 2009, while sales to Pan Asian and Rest
of the World (ROW) customers accounted for 23%. Our
European and Pan Asian/ROW sales organization consists of
employees operating from various sales offices and distributors.
Outside North America, we do not utilize independent sales
representative companies. In those geographic areas, our
distributors perform the role of both sales representative and
distributor. Avnet and Future Electronics are also franchised
distributors for Actel in most countries outside North America,
and we also utilize local and regional distributors in many
European and Asian markets.
Sales made through distributors accounted for 70% of our net
revenues in 2009. As is common in the semiconductor industry, we
generally grant price protection to distributors. Under this
policy, distributors are granted a credit upon an approved price
reduction for the difference between their original purchase
price for products in inventory and the reduced price. From time
to time, distributors are also granted credit on an individual
basis for approved price reductions on specific transactions to
meet competition. We also generally grant distributors limited
rights to return products. Because of our price protection and
return policies, we generally do not recognize revenue on
products sold to distributors until the products are resold to
end customers.
Backlog
Our backlog was $64.2 million at January 3, 2010
compared with $54.0 million at January 4, 2009. We
include in our backlog all OEM orders scheduled for delivery
over the next nine months and all distributor orders scheduled
for delivery over the next six months. Our business, and to a
great extent that of the entire semiconductor industry, is
characterized by short-term order and shipment schedules rather
than volume purchase contracts. In accordance
9
with industry practice, our backlog generally may be cancelled
or rescheduled by the customer on short notice without
significant penalty. In addition, a significant part of our
business consists of orders that are received and shipped within
a quarter. As a result, our backlog may not be indicative of
actual sales and therefore should not be used as a measure of
future revenues.
Customer
Service and Support
We believe that premier customer service and technical support
are essential for success in the FPGA market. Our customer
service organization emphasizes dependable, prompt, accurate
responses to questions about product delivery and order status.
Our FAEs are strategically located around the world to provide
technical support to our worldwide customer base. This network
of experts is augmented by FAEs working for our sales
representatives and distributors throughout the world. Customers
in any stage of design may also obtain assistance from our
technical support hotline or our online interactive automated
technical support system. In addition, we offer technical
seminars, training classes, and failure analysis services. Many
of our customers regularly measure the most significant areas of
customer service and technical support.
We generally warrant that our FPGAs will be free from defects in
material and workmanship for one year, and that our software
will conform to published specifications for 90 days. To
date, we have not experienced significant warranty returns.
Manufacturing
and Assembly
Our strategy is to utilize third-party manufacturers for our
wafer requirements, which permits us to allocate our resources
to product design, development, and marketing. Our FPGAs in
production are manufactured by:
|
|
|
|
|
GlobalFoundries Inc. (Chartered Semiconductor Manufacturing Ltd
was acquired by Advanced Technology Investment Company LLC,
which owns GlobalFoundries, in December 2009) in Singapore
using 0.45- and 0.35-micron design rules;
|
|
|
|
Infineon Technologies AG in Germany using 0.25- and 0.13-micron
design rules;
|
|
|
|
Panasonic Corporation (formerly Matsushita Electric Industrial
Co. Ltd.) in Japan using 1.0-, 0.9-, 0.8-and 0.25-micron design
rules; and
|
|
|
|
UMC (United Microelectronics Corporation) in Taiwan using
0.25/0.22-, 0.15-, and 0.13-micron and 65nm design rules.
|
In March 2009, Panasonic informed us of its intention to cease
production of Actels legacy ACT products. In order to
support our customers future demands for the ACT products,
we committed to purchase from Panasonic approximately
$8 million of last-time-buy wafers relating to our ACT
products. As of January 3, 2010, we had purchased
approximately $3.8 million of last-time-buy wafers from
Panasonic.
Wafers purchased from our suppliers are assembled, tested,
marked, and inspected by Actel
and/or our
subcontractors before shipment to customers. We assemble most of
our plastic commercial products in China, Hong Kong, the
Philippines, Singapore, and South Korea. Hermetic package
assembly, which is often required for military applications, is
performed at one or more subcontractor manufacturing facilities,
usually in the United States.
We invest resources in the continual improvement of our
products, processes, and systems. We strive to ensure that our
quality and reliability systems conform to standards that have
worldwide recognition for improving an organizations
capabilities. We have has obtained the following quality
certifications: ISO9001:2000 (Quality Management Systems),
ISO/TS16949:2002 (Automotive standard), and AS9100:2004
(Aerospace standard). We are also QML (Qualified Manufacturers
List) certified by the Defense Supply Center Columbus
(DSCC). Our QML certification confirms that our
quality management procedures, processes, and controls comply
with MIL-PRF-38535, the performance specification used by the
U.S. Department of Defense for monolithic ICs. QML
certification demonstrates our capability to produce quality
products for all types of high reliability, military, and space
applications. The ISO9001, ISO/TS16949, AS9100, and QML
certifications demonstrate that our quality
10
systems conform with internationally-valued standards and
confirm our commitment to supply top-quality FPGAs to a diverse
customer base.
Research
and Development
Our research and development expenditures are divided among
circuit design, software development, IP development, and
process technology activities, all of which are involved in the
development of new products based on existing or emerging
technologies. In the areas of circuit design and process
technology, our research and development activities also involve
continuing efforts to reduce the power and cost and improve the
performance of current products, including shrinks
of the design rules under which such products are manufactured.
Emphasizing power conscious design, our software research and
development activities include enhancing the functionality,
usability, and availability of high-level design and development
tools and IP cores in a complete and automated desktop design
environment.
In 2009, 2008, and 2007, our research and development expenses
were $60.7 million, $65.7 million and
$63.7 million, respectively. We believe technical
leadership and innovation are essential to our future success
and we are committed to continuing a significant level of
research and development effort.
Competition
We believe that the increasing costs associated with the use of
advanced chip manufacturing technology are driving the
development and use of PLDs. Also driving the use of PLDs are
the increasingly stringent criteria for power, cost, footprint,
features, design reuse, reliability, and security.
Competition is intense and we expect that to increase as the
market grows. We believe our products and technologies are
superior to competitive products for many applications requiring
low power, nonvolatility or high reliability and security.
However, our primary competitors, Xilinx and Altera, are
substantially larger than Actel, offer products to a more
extensive customer base, and have substantially greater
financial, technical, sales, and other resources. We also expect
continued competition from ASIC suppliers and from new companies
that may enter the PLD or mixed-signal markets.
We believe that the important competitive factors in our market
are power consumption; price; performance; capacity (total
number of usable gates); density (concentration of usable
gates);
ease-of-use
and functionality of development tools; installed base of
development tools; reprogrammability; strength of sales
organization and channels; reliability; security; adaptability
of products to specific applications and IP; ease, speed, cost,
and consistency of programming; length of research and
development cycle (including migration to finer process
geometries); number of I/Os; reliability; wafer fabrication and
assembly capacity; availability of packages, adapters, sockets,
programmers, and IP; technical service and support; and
utilization of intellectual property laws.
This Annual Report on
Form 10-K,
including any information incorporated by reference herein,
contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange
Act). In some cases, you can identify forward looking
statements by terms such as may, will,
should, expect, plan,
intend, forecast,
anticipate, believe,
estimate, predict,
potential, continue or the negative of
these terms or other comparable terminology. The forward looking
statements contained in this
Form 10-K
involve known and unknown risks, uncertainties, and situations
that may cause our or our industrys actual results, level
of activity, performance, or achievements to be materially
different from any results, levels of activity, performance, or
achievements expressed or implied by these statements. These
factors include those listed below in this Item 1A and
those discussed elsewhere in this
Form 10-K.
We encourage investors to review these factors carefully. We may
from time to time make additional written and oral forward
looking statements, including statements contained in our
filings with the SEC. We do not undertake to update any forward
looking statement that may be made from time to time by or on
behalf of us, whether as a result of new information, future
events, or otherwise, except as required by law.
11
Before deciding to purchase, hold, or sell our securities,
you should be aware that our business faces numerous financial
and market risks, including those described below, as well as
general economic and business risks. The following discussion
provides information concerning the material risks and
uncertainties that we have identified and believe may adversely
affect our business, our financial condition, and our results of
operations. Before deciding to purchase, hold, or sell our
securities, you should carefully consider these risks and
uncertainties, together with all of the other information
included in this Annual Report on
Form 10-K.
Risks
Related to Our Failure to Meet Expectations
Our quarterly revenues and operating results fluctuate due to
general economic conditions and a variety of risks specific to
Actel or characteristic of the semiconductor industry, including
booking and shipment uncertainties, supply problems, and price
erosion. These and other factors make it difficult for us to
accurately predict quarterly revenues and operating results,
which may fail to meet our expectations. When we fall short of
our quarterly revenue expectations, our operating results will
probably also be adversely affected because the majority of our
expenses are fixed and therefore do not vary with revenues. Any
failure to meet expectations could cause our stock price to
decline, perhaps significantly.
The
current economic environment makes quarterly revenues difficult
to predict.
Our quarterly revenues and operating results are affected, both
positively and negatively, by fluctuations in general economic
conditions and in the semiconductor industry. Overall conditions
in the worldwide economy and financial markets in general, and
in the semiconductor industry in particular, have improved since
the second half of 2008, but visibility continues to be limited
and forecasting remains extremely difficult. Our failure, or the
failure of our distributors, to accurately forecast customer
demand for our products could adversely (and perhaps materially)
affect our operating efficiencies and quarterly financial
results.
We
derive a significant percentage of our quarterly revenues from
bookings received during the quarter, making quarterly revenues
difficult to predict.
We generate a significant percentage of our quarterly revenues
from orders received during the quarter and turned
for shipment within the quarter. Any shortfall in expected
turns orders will adversely affect quarterly
revenues. There are many factors that can cause a shortfall in
turns orders, including declines in general economic conditions
or the businesses of our customers, excess inventory in the
channel, and conversion of our products to ASICs or other
competing products for price or other reasons. In addition, we
sometimes book a disproportionately large percentage of turns
orders during the final weeks of the quarter. Any failure to
receive, or delay in receiving, expected turns orders would
adversely (and perhaps materially) affect quarterly revenues.
We
sometimes derive a significant percentage of our quarterly
revenues from shipments made in the final weeks of the quarter,
making quarterly revenues difficult to predict.
We sometimes ship a disproportionately large percentage of our
quarterly revenues during the final weeks of the quarter, and
any delays in making those shipments are more likely to cause
them to slip into the following quarter. Any failure to effect
scheduled shipments by the end of a quarter would adversely (and
perhaps materially) affect quarterly revenues.
Our
military and aerospace shipments tend to be large and are
subject to complex scheduling uncertainties, making quarterly
revenues and operating results difficult to
predict.
Orders from our military and aerospace customers tend to be
large monetarily and irregular, which contributes to
fluctuations in our net revenues and gross margins. These sales
are also subject to more extensive governmental regulations,
including greater export restrictions. Historically, it has been
difficult to predict if and when export licenses will be
granted, if required. In addition, products for military and
aerospace applications require processing and testing that is
more lengthy and stringent than for commercial applications,
which increases the complexity of scheduling and forecasting as
well as the risk of failure. It is often impossible to determine
before the end of processing and testing whether products
intended for military or aerospace applications will pass and,
if not, it is
12
generally not possible for replacements to be processed and
tested in time for shipment during the same quarter. Any failure
to effect scheduled shipments by the end of a quarter would
adversely (and perhaps materially) affect quarterly revenues.
We
derive a majority of our quarterly revenues from products resold
by our distributors, making quarterly revenues difficult to
predict.
We generate the majority of our quarterly revenues from sales
made through distributors. Since we generally do not recognize
revenue on the sale of a product to a distributor until the
distributor resells the product, our quarterly revenues are
dependent on, and subject to fluctuations in, shipments by our
distributors. We are therefore highly dependent on the accuracy
of shipment forecasts from our distributors in setting our
quarterly revenue expectations. Any failure by our distributors
to effect scheduled shipments by the end of a quarter would
adversely (and perhaps materially) affect our quarterly
revenues. We are also highly dependent on the timeliness and
accuracy of resale reports from our distributors. Late or
inaccurate resale reports, particularly in the last month of a
quarter, contribute to our difficulty in predicting and
reporting our quarterly revenues
and/or
operating results.
An
unanticipated shortage of products available for sale may cause
our quarterly revenues and/or operating results to fall short of
expectations.
In a typical semiconductor manufacturing process, silicon wafers
produced by a foundry are sorted and cut into individual die,
which are then assembled into individual packages and tested.
The manufacture, assembly, and testing of semiconductor products
is highly complex and subject to a wide variety of risks,
including defects in photomasks, impurities in the materials
used, contaminants in the environment, and performance failures
by personnel and equipment. In addition, we may not discover
defects or other errors in new products until after we have
commenced volume production. Semiconductor products intended for
military and aerospace applications and new products, such as
our Fusion, SmartFusion, ProASIC 3, and Igloo FPGAs, are often
more complex and more difficult to produce, increasing the risk
of manufacturing- and design-related defects. Our failure to
effect scheduled shipments by the end of a quarter due to
production difficulties or other unexpected supply constraints
would adversely (and perhaps materially) affect our quarterly
revenues.
Unanticipated
increases, or the failure to achieve anticipated reductions, in
the cost of our products may cause our quarterly operating
results to fall short of expectations.
As is also common in the semiconductor industry, our independent
wafer suppliers from time to time experience lower than
anticipated yields of usable die. Wafer yields can decline
without warning and may take substantial time to analyze and
correct, particularly for a company like Actel that utilizes
independent foundries, almost all of which are offshore. Yield
problems are most common at new foundries (particularly when new
technologies are involved) or on new processes or new products
(particularly when new products and new processes are both
involved). Our FPGAs are also manufactured using customized
processing steps, which may increase the incidence of production
yield problems as well as the amount of time needed to achieve
satisfactory, sustainable wafer yields on new processes and new
products. Lower than expected yields of usable die or other
unanticipated increases in the cost of our products could reduce
our gross margin, which would adversely affect (and perhaps
materially) our quarterly operating results. In addition, in
order to win designs, we generally must price new products on
the assumption that manufacturing cost reductions will be
achieved, which often do not occur as soon as expected. We also
seek to reduce costs by negotiating price reductions with
suppliers, increasing the level and efficiency of our testing
and packaging operations, achieving economies of scale by means
of higher production levels, and shrinking the die size of our
products. The failure to achieve expected manufacturing or other
cost reductions during a quarter could reduce our gross margin,
which would adversely (and perhaps materially) affect our
quarterly operating results. Also, if we discover defects or
other errors in a new product that require us to
re-spin some or all of the products photomask
set, we must write-off the photomasks that are replaced. This
type of expense is becoming more significant as the cost of
photomasks continues to increase. The write-off of any
photomasks will adversely, and perhaps materially, affect our
operating results for the quarter in which the write-off is
taken. The same is true of any other property and equipment
write-offs. During the second quarter of 2009, for
13
example, we recorded non-cash asset impairment charges totaling
$5.5 million for certain manufacturing fixed assets that
were determined to be excess of current and expected future
manufacturing requirements.
Unanticipated
reductions in the average selling prices of our products may
cause our quarterly revenues and operating results to fall short
of expectations.
The semiconductor industry is characterized by intense price
competition. The average selling price of a product typically
declines significantly between introduction and maturity. We
sometimes are required by competitive pressures to reduce the
prices of our new products more quickly than cost reductions can
be achieved. We also sometimes approve price reductions on
specific direct sales for strategic or other reasons, and
provide price concessions to our distributors for a portion of
their original purchase price in order to permit them to address
individual negotiations involving high-volume or competitive
situations. Typically, a customer purchasing a small quantity of
product for prototyping or development from a distributor will
pay list price. However, a customer using our products in volume
production will often negotiate a substantial price discount
from the distributor. Under such circumstances, the distributor
will in turn often negotiate and receive a price concession from
Actel. This is a standard practice in the semiconductor industry
and we provide some level of price concession to every
distributor. We have also sometimes offered price reductions on
certain products to reduce inventory levels. Unanticipated
declines in the average selling prices of our products could
cause our quarterly revenues
and/or gross
margin to fall short of expectations, which would adversely (and
perhaps materially) affect our quarterly financial results.
In
preparing our financial statements, we make good faith estimates
and judgments that may change or turn out to be erroneous,
making our financial results difficult to predict.
In preparing our financial statements in conformity with
accounting principles generally accepted in the United States,
we must make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses and the
related disclosure of contingent assets and liabilities. The
most difficult estimates and subjective judgments that we make
concern goodwill and
long-lived
asset impairment, income taxes, inventories, legal matters and
loss contingencies, revenues, and stock-based compensation
expense. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates. If
these estimates or their related assumptions change, our
operating results for the periods in which we revise our
estimates or assumptions could be adversely (and perhaps
materially) affected. For example, during the second quarter of
2009, we determined (on the basis of our forecast of future
taxable income and other relevant factors) that it was more
likely than not that we would not be able to realize any of our
net deferred tax assets. As a result, we recorded a tax
provision for the second quarter of $23.8 million on a
second quarter pre-tax loss of $21.4 million, the
difference being due primarily to the valuation allowance
recorded against 100% of our net deferred tax assets during the
second quarter.
Our net inventories were $37.3 million at the end of 2009
compared with $60.6 million at end of 2008 and
$35.6 million at the end of 2007. The $25.0 million
(or 70%) increase in our net inventory during 2008 was due to a
build-up of
our new flash products, including Fusion, Igloo, and ProASIC3.
We have historically
built-up
inventories of new products early in their life cycles, but the
build-up in
inventory for the new flash products during 2008 was
particularly pronounced due to a conscious effort to support
increased turns business and shorter lead times for the consumer
products at which the new flash products are targeted. We
experienced very strong booking for these products in the first
half of 2008 and accordingly initiated a
ramp-up in
manufacturing. However, a significant amount of these orders
were cancelled in the second half of 2008 as a result of the
worldwide economic crisis. Beginning in August 2008, we reduced
our wafer starts for flash products to the lowest levels
practicable and have continued to restrict flash wafer starts
based on inventory levels and forecast sales of flash products.
However, in order to preserve our relationships with our
foundries, we must continue to build certain minimum levels of
flash products, so an extended period of time will probably be
necessary in order to draw down inventory levels closer to
historical norms. We believe our flash products are still
attractive to our targeted customer base. We continue to focus
our efforts on growing the flash business and are aggressively
marketing our flash products in an effort to reduce our
inventory. This may include promotional pricing for certain
large volume orders, which may negatively
14
affect our gross margins. We are also monitoring market trends
and significant events that may have an adverse effect on the
carrying value of our inventory. Although we have been able to
reduce some of our flash inventory in recent quarters, we
determined (as part of our normal quarterly inventory review)
that additional reserves for excess inventory of
$13.3 million, $0.6 million, and $1.2 million
were required as of the end of the second, third, and fourth
quarters of 2009, respectively. If we conclude in the future
that additional inventory write-downs are required, our
operating results for the periods in which the write-downs occur
would also be adversely (and perhaps materially) affected.
Risks
Related to Our Business Strategies
Our short- and long-term revenues and operating results are
dependent in large part upon the success of our business
strategies, which include developing and offering FPGAs to
markets in which we believe our technologies have a competitive
advantage, such as the mixed-signal and value-based FPGA
markets, and conducting more of our operations offshore (i.e.,
overseas) in order to reduce costs. Our failure to execute any
of our business strategies, or the failure of any of our
business strategies to achieve the desired results, could (and
probably would) have an adverse (and perhaps material) effect on
our business, financial condition,
and/or
operating results.
In order for us to sell an FPGA, our customer must incorporate
our FPGA into the customers product in the design phase.
We devote substantial resources, which we may not recover
through product sales, to persuade potential customers to
incorporate our FPGAs into new or updated products and to
support their design efforts (including, among other things,
providing design and development software). These efforts
usually precede by many months (and often a year or more) the
generation of FPGA sales, if any. In addition, the value of any
design win depends in large part upon the ultimate success of
our customers product in its market. Our failure to win
sufficient designs, or the failure of the designs we win to
generate sufficient revenues, could have a materially adverse
effect on our business, financial condition, and/or operating
results.
The
products that we develop may fail to adequately address the
markets at which they are targeted, or the markets that we
target may fail to emerge or grow as much as we project, which
might prevent us from winning sufficient customer designs to
maintain or expand our business.
The market for our products is characterized by rapid
technological change, product obsolescence, and price erosion,
making the timely introduction of new or improved products
critical to our success. Our product development and marketing
strategy is to define, develop, and offer FPGAs to markets in
which we believe that our nonvolatile flash- and antifuse-based
technologies have a competitive advantage. Our strategy involves
considerable risk because our unique technologies and products
can take years to develop (if at all), and markets that we
target may fail to develop as we predict. Our failure to design,
develop, market, and sell new or improved products that satisfy
customer needs, compete effectively, and generate acceptable
margins may adversely (and perhaps materially) affect our
business, financial condition,
and/or
operating results.
The
Actel Fusion and SmartFusion mixed-signal FPGAs present numerous
significant challenges.
Our experience generally suggests that the development and
market risks related to new products are greatest when we
attempt to develop products based in whole or in part on
technologies with which we have limited experience. During 2005,
we introduced our Actel Fusion mixed-signal technology, which
integrates analog capabilities, flash memory, and FPGA fabric
into a single mixed-signal FPGA that may be used with soft
processor cores. Before the development of Actel Fusion
mixed-signal FPGAs, we had limited experience with analog
circuitry and soft processor cores and no experience with
mixed-signal FPGAs. As our experience also suggests, the
development and market risks related to the second-generation
product, SmartFusion, ought to be significantly lower.
To realize the advantages of being the initial entrant in the
mixed-signal FPGA market, we needed to understand the market,
the competition, and the value proposition; identify the early
adopters and understand their buying process, decision criteria,
and support requirements; and select the appropriate sales
channels and provide the appropriate customer service,
logistical, and technical support, including training. Meeting
these challenges has been a priority for Actel generally and for
our sales and marketing organizations in particular. While Actel
Fusion
15
has achieved limited success, a great deal of understanding and
experience has been gained, which have been or are being applied
to SmartFusion. Nonetheless, the risks associated with the
market acceptance of SmartFusion are still substantial. When
entering a new market, the first-mover typically faces the
greatest technological and market challenges, and that remains
true of the mixed-signal FPGA market. Our failure to meet these
challenges could have a materially adverse effect on our
business, financial condition,
and/or
operating results.
Our
gross margin may decline as we increasingly compete with ASICs
and serve the value-based market.
The price we can charge for our products is constrained
principally by our competition. While it has always been
intense, we believe that price competition for new designs is
increasing. This may be due in part to the transition toward
high-level design methodologies. Designers can now wait until
later in the design process before selecting a PLD or ASIC and
it is easier to convert between competing PLDs or between a PLD
and an ASIC. The increased price competition may also be due in
part to the increasing penetration of PLDs into price-sensitive
markets previously dominated by ASICs. We have strategically
targeted many of our products at the value-based market, which
is defined primarily by low prices. If our strategy is
successful, we will generate an increasingly greater percentage
of our net revenues from low-price products, which may make it
more difficult to maintain gross margin at our historic levels.
In addition, gross margins on new products are generally lower
than on mature products. Thus, if we generate a greater
percentage of our net revenues from new products, our overall
gross margin could be adversely affected. We have also sometimes
offered price reductions on certain products to reduce inventory
levels. Any long-term decline in our overall gross margin may
have an adverse effect on our operating results.
Our
restructuring plan may not properly realign our cost structure
and our increased reliance on offshore and outsourced operations
may adversely affect our business, financial condition, and/or
operating results.
During the first quarter of 2009, we announced a Company-wide
restructuring plan that, in conjunction with cost-reduction
initiatives taken in the fourth quarter of 2008, is expected to
result in a quarterly reduction in expenses of approximately
$6.5 million in the third quarter of 2010 compared with the
third quarter of 2008. We estimate that approximately
$4.5 million of the quarterly reductions will be in
operating spending and that the balance of savings will be in
cost of goods sold. To date, we have recorded approximately
$5.0 million for severance and other costs related to
reductions in force and $5.5 million in other restructuring
costs. We expect to record additional charges of approximately
$0.5 million by the third quarter of 2010, when the
restructuring will be substantially complete. If we experience
expenses in excess of what we anticipate in connection with
these restructuring activities (such as unanticipated costs
associated with closing a facility), or if we experience
unanticipated inefficiencies as a result of these restructuring
activities (such as excessive delays in developing new products
caused by reduced headcount), our business, financial condition,
and/or
operating results could be adversely (and perhaps materially)
affected.
In addition, part of our restructuring plan involves increased
offshoring and outsourcing, which involves numerous risks,
including operational business issues such as productivity,
efficiency, and quality; geographic, cultural, and communication
issues; and information security, intellectual property
protection, and other legal issues. The increased offshoring and
outsourcing activities will also be subject to the general
uncertainties associated with international business operations,
including trade barriers and other restrictions; governmental
regulations (including taxation) and changes in governmental
regulations (including trade policies); currency exchange
fluctuations; war and other military activities; terrorism;
changes in social, political, or economic conditions; and other
disruptions or delays in production or shipments. Any of these
risks could render our offshoring and outsourcing plans
ineffective, which could have an adverse (and perhaps material)
effect on our business, financial condition,
and/or
operating results.
Risks
Related to Defective Products
Our products are complex and may contain errors, manufacturing
defects, design defects, or otherwise fail to comply with our
specifications, particularly when first introduced or as new
versions are released. Our new products are being designed to
use ever more advanced manufacturing processes, adding cost,
complexity, and elements of
16
experimentation to the development, particularly in the areas of
mixed-voltage and mixed-signal design. We rely primarily on our
in-house personnel to design test operations and procedures to
detect any errors prior to delivery of our products to customers.
Any
error or defect in our products could have a material adverse
effect on our business, financial condition, and operating
results.
If problems occur in the operation or performance of our
products, we may experience delays in meeting key introduction
dates or scheduled delivery dates to our customers, in part
because our products are manufactured by third parties. These
problems could also cause us to incur significant re-engineering
costs, divert the attention of our engineering personnel from
our product development efforts, and cause significant
customer-relations problems and impair our business reputation.
Any error or defect might require product replacement or recall
or obligate us to accept product returns. Any of the foregoing
could have an adverse (and perhaps material) effect on our
financial results and business in the short
and/or long
term.
Any
product liability claim could pose a significant risk to our
business, financial condition, and operating
results.
Product liability claims may be asserted with respect to our
products. Our products are typically sold at prices that are
significantly lower than the cost of the end-products into which
they are incorporated. A defect or failure in our product could
cause failure in our customers end-product, so we could
face claims for damages that are much higher than the revenues
and profits we receive from the products involved. In addition,
product liability risks are particularly significant with
respect to aerospace, automotive, and medical applications
because of the risk of serious harm to users of those products.
Any product liability claim, whether or not determined in our
favor, can result in significant expense, divert the efforts of
our technical and management personnel, and harm our business.
In the event of an adverse settlement of any product liability
claim or an adverse ruling in any product liability litigation,
we could incur significant monetary liabilities, which may not
be covered by any insurance that we carry and might have a
materially adverse effect on our financial condition
and/or
operating results.
Risks
Related to New Products
The market for our products is characterized by rapid
technological change, product obsolescence, and price erosion,
making the timely introduction of new or improved products
critical to our success. Our failure to design, develop, market,
and sell new or improved products that satisfy customer needs,
compete effectively, and generate acceptable margins may
adversely affect our business, financial condition,
and/or
operating results.
Numerous
factors can cause the development or introduction of new
products to fail or be delayed.
To develop and introduce a product, we must successfully
accomplish all of the following:
|
|
|
|
|
anticipate future customer demand and the technology that will
be available to meet the demand;
|
|
|
|
define the product and its architecture, including the
technology, silicon, programmer, IP, software, and packaging
specifications;
|
|
|
|
obtain access to advanced manufacturing process technologies;
|
|
|
|
design and verify the silicon;
|
|
|
|
develop and release evaluation software;
|
|
|
|
layout the FPGA and other functional blocks along with the
circuitry required for programming;
|
|
|
|
integrate the FPGA block with the other functional blocks;
|
|
|
|
simulate (i.e., test) the design of the product;
|
|
|
|
tapeout the product (i.e., compile a database containing the
design information about the product for use in the preparation
of photomasks);
|
17
|
|
|
|
|
generate photomasks for use in manufacturing the product and
evaluate the software;
|
|
|
|
manufacture the product at the foundry;
|
|
|
|
verify the product; and
|
|
|
|
qualify the process, characterize the product, and release
production software.
|
Each of these steps is difficult and subject to failure or
delay, and the failure or delay of any step can cause the
failure or delay of the entire development and introduction. In
addition to failing to meet our development and introduction
schedules for new products or the supporting software or
hardware, our new products may not gain market acceptance, and
we may not respond effectively to new technological changes or
new product announcements by others. Any failure to successfully
define, develop, market, manufacture, assemble, test, or program
competitive new products could have a materially adverse effect
on our business, financial condition,
and/or
operating results.
New
products are subject to greater design and operational
risks.
Our future success is highly dependent upon the timely
development and introduction of competitive new products at
acceptable margins. However, there are greater design and
operational risks associated with new products. The inability of
our wafer suppliers to produce advanced products; delays in
commencing or maintaining volume shipments of new products; the
discovery of product, process, software, or programming defects
or failures; and any related product returns could each have a
materially adverse effect on our business, financial condition,
and/or
results of operation.
New
products are subject to greater technology risks.
As is common in the semiconductor industry, we have experienced,
and expect to experience in the future, difficulties and delays
in achieving satisfactory, sustainable yields on new products.
The fabrication of antifuse and flash wafers is complex,
requiring a high degree of technical skill,
state-of-the-art
equipment, and effective cooperation between Actel and the
foundry to produce acceptable yields. Minute impurities, errors
in any step of the fabrication process, defects in the
photomasks used to print circuits on a wafer, and other factors
can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be non-functional. Yield problems
increase the cost of our new products as well as time it takes
us to bring them to market, which can create inventory shortages
and dissatisfied customers. Any prolonged inability to obtain
adequate yields or make deliveries of new products could have a
materially adverse effect on our business, financial condition,
and/or
operating results.
New
products generally have lower gross margins.
Our gross margin is the difference between the amount it costs
us to make our products and the revenues we receive from the
sale of those products. One of the most important variables
affecting the cost of our products is manufacturing yields. With
our customized antifuse and flash manufacturing process
requirements, we almost invariably experience difficulties and
delays in achieving satisfactory, sustainable yields on new
products. Until satisfactory yields are achieved, gross margins
on new products are generally lower than on mature products. We
have also sometimes offered price reductions on certain products
to reduce inventory levels. The lower gross margins typically
associated with new products could have a materially adverse
effect on our operating results.
Risks
Related to Competitive Disadvantages
The semiconductor industry is intensely competitive. Our
competitors include suppliers of ASICs, CPLDs, and FPGAs. Our
biggest direct competitors are Xilinx, Altera, and Lattice, all
of which are suppliers of CPLDs and SRAM-based FPGAs. Altera and
Lattice have announced the development of FPGAs manufactured on
embedded flash processes. We also directly compete with
QuickLogic, a supplier of antifuse-based FPGAs. In addition, we
face competition from suppliers of logic products based on new
or emerging technologies. While we seek to monitor developments
in existing and emerging technologies, our technologies may not
remain competitive. We also face competition from companies that
specialize in converting our products into ASICs.
18
Many
of our current and potential competitors are larger and have
more resources.
We are much smaller than Xilinx and Altera, which have broader
product lines, more extensive customer bases, and substantially
greater financial and other resources. Additional competition is
also possible from major domestic and international
semiconductor suppliers, all of which are larger and have
broader product lines, more extensive customer bases, and
substantially greater financial and other resources than Actel,
including the capability to manufacture their own wafers. We may
not be able to overcome these competitive disadvantages.
Our
antifuse technology is not reprogrammable, which is a
competitive disadvantage in most cases.
All existing FPGAs not based on antifuse technology and certain
CPLDs are reprogrammable. The one-time programmability of our
antifuse FPGAs is necessary or desirable in some applications,
but logic designers generally prefer to prototype with a
reprogrammable logic device. This is because the designer can
reuse the device if an error is made. The visibility associated
with discarding a one-time programmable device often causes
designers to select a reprogrammable device even when an
alternative one-time programmable device offers significant
advantages. This bias in favor of designing with reprogrammable
logic devices appears to increase as the size of logic devices
increase. We have attempted to overcome this competitive
disadvantage by offering reprogrammable flash devices, but
antifuse FPGAs account for the bulk of our revenues and will
continue to do so for some time.
Our
flash and antifuse technologies are not manufactured on standard
processes, which is a competitive disadvantage.
Our antifuse-based FPGAs and (to a lesser extent) flash-based
FPGAs are manufactured using customized steps that are added to
otherwise standard manufacturing processes of independent wafer
suppliers. There is considerably less operating history for the
customized process steps than for the foundries standard
manufacturing processes. Our dependence on customized processing
steps means that, in contrast with competitors using standard
manufacturing processes, we generally have more difficulty
establishing relationships with independent wafer manufacturers;
take longer to qualify a new wafer manufacturer; take longer to
achieve satisfactory, sustainable wafer yields on new processes;
may experience a higher incidence of production yield problems;
must pay more for wafers; and may not obtain early access to the
most advanced processes. Any of these factors could be a
material disadvantage against competitors using standard
manufacturing processes. As a result of these factors, our
products typically have been fabricated using processes at least
one generation behind the processes used by competing products.
As a consequence, we generally have not fully realized the
benefits of our technologies. Although we generally attempt to
obtain earlier access to advanced processes, we may not be able
to overcome these competitive disadvantages.
Risks
Related to Events Beyond Our Control
Our performance is subject to events or conditions beyond our
control, and the performance of each of our foundries,
suppliers, subcontractors, distributors, agents, and customers
is subject to events or conditions beyond their control. These
events or conditions include labor disputes, acts of terrorists,
war or other military conflicts, blockades, insurrections,
riots, epidemics, quarantine restrictions, landslides,
lightning, earthquakes, fires, storms, floods, washouts,
arrests, civil disturbances, restraints by or actions of
governmental bodies (including export, import, and security
restrictions on information, material, personnel, equipment,
software, and the like), breakdowns of plant or machinery, and
inability to obtain transport or supplies. These events or
conditions could impair our operations, which may have a
materially adverse effect on our business, financial condition,
and/or
operating results.
Our
operations and those of our partners are located in areas
subject to volatile natural, economic, social, and political
conditions.
Our corporate offices are located in California, which has been
subject to power outages and shortages. More extensive power
shortages in the state could disrupt our operations and
interrupt our research and development activities. Our foundry
partners in Asia as well as our operations in California are
located in areas that have been seismically active in the recent
past. In addition, many of the countries outside of the United
States in which our
19
foundry partners and assembly and other subcontractors are
located have unpredictable and potentially volatile economic,
social,
and/or
political conditions. The occurrence of these or similar events
or circumstances could disrupt our operations and may have a
materially adverse effect on our business, financial condition,
and/or
operating results.
We
have only limited insurance coverage.
Our insurance policies provide coverage for only certain types
of losses and may not be adequate to fully offset even covered
losses. If we were to incur substantial liabilities not
adequately covered by insurance, our business, financial
condition,
and/or
operating results could be adversely (and perhaps materially)
affected.
Risks
Related to Dependence on Third Parties
We rely heavily on, but generally have little control over, our
independent foundries, suppliers, subcontractors, and
distributors, whose interests may diverge from our interests.
Our
independent wafer manufacturers may be unable or unwilling to
satisfy our needs in a timely manner, which could harm our
business.
We do not manufacture any of the semiconductor wafers used in
the production of our FPGAs. Our wafers are currently
manufactured by GlobalFoundries Inc. (formerly Chartered
Semiconductor Manufacturing Ltd) in Singapore, Infineon
Technologies AG in Germany, Panasonic Corporation (formerly
Matsushita Electric Industrial Co. Ltd.) in Japan, and United
Microelectronics Corporation (UMC) in Taiwan. Our reliance on
independent wafer manufacturers to fabricate our wafers involves
significant risks, including lack of control over capacity
allocation, delivery schedules, the resolution of technical
difficulties limiting production or reducing yields, and the
development of new processes. Although we have supply agreements
with some of our wafer manufacturers, a shortage of raw
materials or production capacity could lead any of our wafer
suppliers to allocate available capacity to other customers, or
to internal uses in the case of Infineon, which could impair our
ability to meet our product delivery obligations and may have a
materially adverse effect on our business, financial condition,
and/or
operating results.
Our
limited volume and customized process requirements generally
make us less attractive to independent wafer
manufacturers.
The semiconductor industry has from time to time experienced
shortages in manufacturing capacity. When production capacity is
tight, the relatively small number of wafers that we purchase
from any foundry and the customized process steps that are
necessary for our technologies put us at a disadvantage to
foundry customers who purchase more wafers manufactured on
standard processes. Our capability to shrink the die size of our
FPGAs is dependent on the availability of more advanced
manufacturing processes. Due to the customized steps involved in
manufacturing our FPGAs, we typically obtain access to new
manufacturing processes later than our competitors using
standard manufacturing processes. No assurance can be given that
our efforts to reduce costs by improving wafer yields will be
successful. To secure an adequate supply of wafers, we may
consider various transactions, including the use of substantial
nonrefundable deposits, contractual purchase commitments, equity
investments, or the formation of joint ventures. Any of these
transactions could have a materially adverse effect on our
business, financial condition,
and/or
operating results.
Identifying
and qualifying new independent wafer manufacturers is difficult
and might be unsuccessful.
If our current independent wafer manufacturers were unable or
unwilling to manufacture our products as required, we would need
to identify and qualify additional foundries. No additional
wafer foundries may be able or willing to satisfy our
requirements on a timely basis. Even if we were able to identify
a new third-party manufacturer, the costs associated with
manufacturing our products may increase. In any event, the
qualification process typically takes one year or longer, which
could cause product shipment delays, and qualification may not
be successful. Any of these developments could have a materially
adverse effect on our business, financial condition,
and/or
operating results.
20
Our
independent assembly subcontractors may be unable or unwilling
to meet our requirements, which could delay product shipments
and result in the loss of customers or revenues.
We rely primarily on foreign subcontractors for the assembly and
packaging of our products and, to a lesser extent, for the
testing of our finished products. Our reliance on independent
subcontractors involves certain risks, including lack of control
over capacity allocation and delivery schedules. We generally
rely on one or two subcontractors to provide particular services
for each product and from time to time have experienced
difficulties with the timeliness and quality of product
deliveries. We have no long-term contracts with our
subcontractors and certain of those subcontractors sometimes
operate at or near full capacity. Any significant disruption in
supplies from, or degradation in the quality of components or
services supplied by, our subcontractors could have a materially
adverse effect on our business, financial condition,
and/or
operating results.
Our
independent software and hardware developers and suppliers may
be unable or unwilling to satisfy our needs in a timely manner,
which could impair the introduction of new products or the
support of existing products.
We are dependent on independent software and hardware developers
for the design, development, supply, maintenance, and support of
some of our analog capabilities, IP cores, design and
development software, programming hardware, design diagnostics
and debugging tool kits, and demonstration boards (or certain
elements of those products). Our reliance on independent
developers involves certain risks, including lack of control
over delivery schedules and customer support. Any failure of or
significant delay by our independent developers to complete
software
and/or
hardware under development in a timely manner could disrupt the
release of our software
and/or the
introduction of our new products, which might be detrimental to
the capability of our new products to win designs. Any failure
of or significant delay by our independent suppliers to provide
updates or customer support could disrupt our ability to ship
products or provide customer support services, which might
result in the loss of revenues or customers. Any of these
disruptions could have a materially adverse effect on our
business, financial condition,
and/or
operating results.
Our
future performance will depend in part on the effectiveness of
our independent distributors in marketing, selling, and
supporting our products.
In 2009, sales made through distributors accounted for 70% of
our net revenues, compared with 74% for 2008 and 77% for 2007.
Our distributors offer products of several different companies,
so they may reduce their efforts to win new designs or sell our
products or give higher priority to other products. This is
particularly a concern with respect to any distributor that also
sells products of our direct competitors. A reduction in design
wins or sales effort, termination of relationship, failure to
pay for products, or discontinuance of operations because of
financial difficulties or for other reasons by one or more of
our current distributors could have a materially adverse effect
on our business, financial condition,
and/or
operating results.
Distributor
contracts generally can be terminated on short
notice.
Although we have contracts with our distributors, the agreements
are terminable by either party on short notice. Avnet accounted
for 35% of our net revenues in 2009 compared with 36% in 2008
and 40% in 2007. The loss of Avnet as a distributor, or a
significant reduction in the level of design wins or sales
generated by Avnet, could have a materially adverse effect on
our business, financial condition,
and/or
operating results.
Fluctuations
in inventory levels at our distributors can affect our operating
results.
Our distributors occasionally build inventories in anticipation
of significant growth in sales and, when such growth does not
occur as rapidly as anticipated, substantially reduce the amount
of product ordered from us in subsequent quarters. Such a
slowdown in orders generally reduces our gross margin because we
are unable to take advantage of any manufacturing cost
reductions while the distributor depletes its inventory.
21
Risk
Related to the Conduct of International Business
Substantially all of our operations, an increasing proportion of
our internal functions, and a significant portion of our sales
are subject to the uncertainties associated with international
business operations.
We
depend on international operations for almost all of our
products and will become increasingly dependent on international
employees and contractors for many of our
functions.
We purchase all of our wafers from foreign foundries and have
almost all of our commercial products assembled, packaged, and
tested by subcontractors located outside of the United States.
In addition, beginning in the fourth quarter of fiscal 2008, we
initiated a restructuring program in order to reduce our
operating costs and focus our resources on key strategic
priorities. A part of our restructuring plan involves increased
offshoring, as a result of which many of our internal
engineering, marketing, sales, and support functions will be
conducted by employees located outside of the United States, and
increased outsourcing, as a result of which many of our
operational functions will be conducted by contractors located
outside of the United States. These activities are subject to
the uncertainties associated with international business
operations, including trade barriers and other restrictions,
changes in trade policies, governmental regulations, currency
exchange fluctuations, reduced protection for intellectual
property, war and other military activities, terrorism, changes
in social, political, or economic conditions, and other
disruptions or delays in production or shipments, any of which
could have a materially adverse effect on our business,
financial condition,
and/or
operating results. Our employees and facilities located outside
of the United States are also subject to local regulation.
We
depend on international sales for a substantial portion of our
revenues.
Sales to customers outside North America accounted for 48% of
net revenues in 2009, compared with 51% in 2008 and 50% in 2007,
and we expect that international sales will continue to
represent a significant portion of our total revenues.
International sales are subject to the risks described above as
well as generally longer payment cycles, greater difficulty
collecting accounts receivable, and currency restrictions. We
also maintain foreign sales offices to support our international
customers, distributors, and sales representatives, which are
subject to local regulation.
In addition, international sales are subject to the export,
import, and other security laws and regulations of the United
States and other countries. Unlike our older RTSX-S space-grade
FPGAs, our newer RTAX-S space-grade FPGAs are subject to the
International Traffic in Arms Regulations (ITAR), which are
administered by the U.S. Department of State. ITAR controls
not only the export of products, but also the export of related
technical data and defense services as well as foreign
production. While we believe that we have obtained and will
continue to obtain all required licenses for RTAX-S FPGA
exports, we have undertaken corrective actions with respect to
the other ITAR controls and are implementing improvements in our
internal compliance program. If the corrective actions and
improvements were to fail or be ineffective for a prolonged
period of time, it could have a materially adverse effect on our
business, financial condition,
and/or
operating results. Changes in United States export laws or
regulations (or in the administration of such laws and
regulations) that require us to obtain additional export
licenses can cause significant shipment delays, as was the case
in connection with a recent determination by the
U.S. Department of State that our RTSX-SU space-grade FPGAs
(a slightly modified version of our RTSX-S FPGAs manufactured
for Actel by UMC in Taiwan) are subject to the ITAR. In
addition, the fact that our RTAX-S and RTAX-SU space-grade FPGAs
are ITAR-controlled make them less attractive to foreign
customers, which could have a materially adverse effect on our
business, financial condition,
and/or
operating results. Any future restrictions or assessments
imposed by the United States or any other country on our
international sales or sales offices could have a materially
adverse effect on our business, financial condition,
and/or
operating results.
Risk
Related to Economic and Market Fluctuations
We have experienced substantial
period-to-period
fluctuations in revenues and operating results due to conditions
in the overall economy, in the general semiconductor industry,
in our major markets, and at our major customers. We may again
experience these fluctuations, which could be adverse and may be
severe.
22
Our
business has been, and may in the future be, adversely affected
by economic downturns.
During the second half of 2008, the global economy experienced a
downturn due to the subprime lending crisis, general credit
market crisis, collateral effects on the finance and banking
industries, concerns about liquidity, slower economic activity,
increased unemployment rates, decreased consumer confidence,
reduced corporate profits and capital spending, and generally
adverse business conditions. The worldwide economic crisis
caused many of our customers to curtail their spending, which in
turn caused sharp declines in our revenues and operating
results. Any future downturns in the global economy may have
similar adverse effects on our business, financial condition,
and/or
operating results.
Our
revenues and operating results may be adversely affected by
future downturns in the semiconductor industry.
The semiconductor industry historically has been cyclical and
periodically subject to significant economic downturns, which
are characterized by diminished product demand, accelerated
price erosion, and overcapacity. Beginning in the fourth quarter
of 2000, we experienced (and the semiconductor industry in
general experienced) reduced bookings and backlog cancellations
due to excess inventories at communications, computer, and
consumer equipment manufacturers and a general softening in the
overall economy. During this downturn, which was severe and
prolonged, we experienced lower revenues, which had a
substantial negative effect on our operating results. Any future
downturns in the semiconductor industry may have a similar
adverse effect on our business, financial condition,
and/or
operating results.
Our
revenues and operating results may be adversely affected by
future downturns in the military and aerospace
market.
We estimate that sales of our products to customers in the
military and aerospace industries, which carry higher overall
gross margins than sales of products to other customers,
accounted for 41% of our net revenues in 2009 compared with 38%
in 2008 and 32% in 2007. Any future downturn in the military and
aerospace market could have a materially adverse effect on our
revenues
and/or
operating results.
Our
revenues and/or operating results may be adversely affected by
future downturns at any of our major customers.
A relatively small number of customers are responsible for a
significant portion our net revenues. We have experienced
periods in which sales to one or more of our major customers
declined significantly as a percentage of our net revenues. We
believe that sales to a limited number of customers will
continue to account for a substantial portion of net revenues in
future periods. The loss of a major customer, or decreases or
delays in shipments to major customers, could have a materially
adverse effect on our business, financial condition,
and/or
operating results.
We are
exposed to fluctuations in the market values of our investment
portfolio.
Our investments are subject to interest rate and other risks.
Our investment portfolio consists primarily of asset-backed
obligations, corporate bonds, floating-rate notes, and federal
and municipal obligations. An increase in interest rates could
subject us to a decline in the market value of our investments.
This risk is mitigated by our ability to hold these investments
for a period of time sufficient to recover the carrying value of
the investment, which may not be until maturity. In addition, if
the issuers of our investment securities default on their
obligations, or their credit ratings are negatively affected by
liquidity, credit deterioration or losses, financial results, or
other factors, the value of our investments could decline and
result in a material impairment. To mitigate these risks, we
invest only in high credit quality debt securities with average
maturities (when purchased) of less than two years. We also
limit, as a percentage of total investments, our investment in
any one issuer and in corporate issuers as a group.
In the event that the carrying value of the investment exceeds
its fair value and the decline in value is determined to be
other than temporary, the carrying value is reduced to its
current fair market value. Due to the sale of a bond in January
2010 at a loss of $0.3 million, we recognized an investment
loss of $0.3 million as of January 3, 2010. We
continue to monitor our investments closely to determine if
additional information becomes available that may have an
adverse impact on the fair value and ultimate realizability of
our investments. If we concluded that any
23
of our remaining investments were
other-than-temporarily
impaired, our financial results for the periods in which the
write-downs occurred would be adversely (and perhaps materially)
affected.
Other
Risks
We may
be materially and adversely affected by changing rules and
practices.
Pending or new accounting pronouncements, corporate governance
or public disclosure requirements, or tax laws or regulatory
rulings, environmental or safety regulations, or rulings, or
other federal, state, local, or foreign laws, regulations,
rulings, or practices could have an effect, possibly material
and adverse, on our business, financial condition,
and/or
operating results. Any change in accounting pronouncements,
corporate governance or public disclosure requirements, taxation
or other rules or practices, as well as any change in the
interpretation of existing pronouncements, requirements, or
rules or practices, may call into question our SEC or tax
filings or other compliance efforts and could affect our
treatment and reporting of transactions completed before the
change.
We may
be unable to comply with the requirements of the Sarbanes-Oxley
Act of 2002 and more recent related corporate governance and
public disclosure requirements.
We are committed to maintaining high standards of corporate
governance and public disclosure, and therefore have invested
the resources necessary to comply with the evolving laws,
regulations, and standards. This investment has resulted in
increased general and administrative expenses as well as a
diversion of management time and attention from
revenue-generating activities to compliance activities. If our
efforts to comply with new or changed laws, regulations, and
standards differ from the activities intended by regulatory or
governing bodies, we might be subject to lawsuits or sanctions
or investigation by regulatory authorities, such as the SEC or
The Nasdaq Global Market, and our reputation may be harmed.
We evaluated our internal controls systems in order to allow
management to report on, and our independent public accountants
to attest to, our internal controls as required by
Section 404 of the Sarbanes-Oxley Act. In performing the
system and process evaluation and testing required to comply
with the management certification and auditor attestation
requirements of Section 404, we incurred significant
additional expenses, which adversely affected our operating
results and financial condition and diverted a significant
amount of managements time. While we believe that our
internal control procedures are adequate, we may not be able to
continue complying with the requirements relating to internal
controls or other aspects of Section 404 in a timely
fashion. If we were not able to comply with the requirements of
Section 404 in a timely manner in the future, we may be
subject to lawsuits or sanctions or investigation by regulatory
authorities. Any such action could adversely affect our
financial results and the market price of our Common Stock. In
any event, we expect that we will continue to incur significant
expenses and diversion of managements time to comply with
the management certification and auditor attestation
requirements of Section 404.
Any
acquisition we make may harm our business, financial condition,
and/or operating results.
In pursuing our business strategy, we may acquire other
products, technologies, or businesses from third parties.
Identifying and negotiating these acquisitions may divert
substantial management time away from our operations. An
acquisition could absorb substantial cash resources, require us
to incur or assume debt obligations,
and/or
involve the issuance of Actel equity or debt securities. The
issuance of additional equity securities may dilute, and could
represent an interest senior to, the rights of the holders of
our Common Stock. An acquisition would involve subsequent
deal-related expenses and could involve significant write-offs
(possibly resulting in a loss for the fiscal year(s) in which
taken) and would require the amortization of any identifiable
intangibles over a number of years, which would adversely affect
earnings in those years. Any acquisition would require attention
from our management to integrate the acquired entity into our
operations, may require us to develop expertise outside our
existing business, and could result in departures of management
from either Actel or the acquired entity. An acquired entity
could have unknown liabilities, and our business may not achieve
the results anticipated at the time of the acquisition. The
occurrence of any of these circumstances could disrupt our
operations and may have a materially adverse effect on our
business, financial condition,
and/or
operating results.
24
We may
face significant business and financial risk from claims of
intellectual property infringement asserted against us, and we
may be unable to adequately obtain or enforce our own
intellectual property rights.
As is typical in the semiconductor industry, we are notified
from time to time of claims that we may be infringing patents or
other intellectual property rights owned by others. As we
sometimes have in the past, we may obtain licenses under patents
or other intellectual property rights that we are alleged to
infringe. Although holders of patents or other intellectual
property rights commonly offer licenses to alleged infringers,
we may not be offered a license for patents or other
intellectual property rights that we are alleged to infringe or
we may not find the terms of any offered licenses acceptable. We
may not be able to resolve any claim of infringement, and the
ultimate resolution of any claim may have a materially adverse
effect on our business, financial condition,
and/or
operating results.
Our failure to resolve any claim of infringement could result in
litigation or arbitration. In addition, we have agreed to defend
our customers from and indemnify them against claims that our
products infringe the patent or other intellectual rights of
third parties. All litigation and arbitration proceedings,
whether or not determined in our favor, can result in
significant expense and divert the efforts of our technical and
management personnel. In the event of an adverse ruling in any
litigation or arbitration involving intellectual property, we
could suffer significant (and possibly treble) monetary damages,
which could have a materially adverse effect on our business,
financial condition,
and/or
operating results. We may also be required to discontinue the
use of infringing processes; cease the manufacture, use, and
sale or licensing of infringing products; expend significant
resources to develop non-infringing technology; or obtain
licenses under patents or other intellectual property rights
that we are infringing. In the event of a successful claim
against us, our failure to develop or license a substitute
technology on commercially reasonable terms could also have a
materially adverse effect on our business, financial condition,
and/or
operating results.
We have devoted significant resources to research and
development and believe that the intellectual property derived
from such research and development is a valuable asset important
to the success of our business. We rely primarily on patent and
trade secret laws to protect the intellectual property developed
as a result of our research and development efforts. As part of
the Companys cost-reduction efforts, we expect to reduce
our rate of patent application filings in 2010. Every year we
abandon some of our existing U.S. and foreign patents and
pending applications that we perceive to have lesser value. As
part of the Companys cost-reduction efforts, we expect to
increase the number of existing patents and pending patent
applications that we abandon in 2010. These cost-reduction
measures may reduce our ability to protect our products by
enforcing, or defend the Company by asserting, our intellectual
property rights against others.
In addition to patent and trade secret laws, we rely on
trademark and copyright laws in combination with nondisclosure
agreements and other contractual provisions to protect our
proprietary rights. The steps we have taken may not be adequate
to protect our proprietary rights. In addition, the laws of
certain territories in which our products are developed,
manufactured, or sold, including Asia and Europe, may not
protect our products and intellectual property rights to the
same extent as the laws of the United States. Our failure to
enforce our patents, trademarks, or copyrights or to protect our
trade secrets could have a materially adverse effect on our
business, financial condition,
and/or
operating results.
We may
be unable to attract or retain the personnel necessary to
successfully develop our technologies, design our products, or
operate, manage, or grow our business.
Our success is dependent in large part on our ability to attract
and retain key managerial, engineering, marketing, sales, and
support employees. Particularly important are highly skilled
design, process, software, and test engineers involved in the
manufacture of existing products and the development of new
products and processes. Our failure to recruit employees with
the necessary technical or other skills or the loss of key
employees could have a materially adverse effect on our
business, financial condition,
and/or
operating results.
From time to time we have experienced growth in the number of
our employees and the scope of our operations, resulting in
increased responsibilities for management personnel. To manage
future growth effectively, we will need to attract, hire, train,
motivate, manage, and retain a growing number of employees.
During strong
25
business cycles, we expect to experience difficulty in filling
our needs for qualified engineers and other personnel. In
addition, part of our restructuring plan involves increased
offshoring, which will require us to attract and retain key
managerial, engineering, marketing, sales, and support employees
outside of the United States. Any failure to attract and retain
qualified employees, or to manage our growth effectively, could
delay product development and introductions or otherwise have a
materially adverse effect on our business, financial condition,
and/or
operating results.
In February 2010, we announced that John C. East will retire as
President and Chief Executive Officer of the Company and as a
member of the Board of Directors. He will remain in his current
role until a new Chief Executive Officer is in place, and will
then serve as a consultant until August 2, 2011. Our Board
of Directors has formed a committee to conduct a search for a
new President and Chief Executive Officer. Mr. East will
participate in the search, which will include both internal and
external candidates. Our Board may not be able to identify and
hire a suitable successor in the anticipated time period and the
succession process may cause disruptions to our business.
We
have some arrangements that may not be neutral toward a
potential change of control and our Board of Directors could
adopt others.
We have adopted an Employee Retention Plan that provides for
payment of a benefit to our employees who hold unvested stock
options, stock appreciation rights (SARs) or restricted stock
units (RSUs) in the event of a change of control. Payment is
contingent upon the employee remaining employed for six months
after the change of control (unless the employee is terminated
without cause during the six months). Each of our executive
officers has also entered into a Management Continuity
Agreement, which provides for the acceleration of stock options,
SARs, and RSUs unvested at the time of a change of control in
the event the executive officers employment is actually or
constructively terminated other than for cause following the
change of control. While these arrangements are intended to make
executive officers and other employees neutral towards a
potential change of control, they could have the effect of
biasing some or all executive officers or employees in favor of
a change of control.
Our Articles of Incorporation authorize the issuance of up to
5,000,000 shares of blank check Preferred Stock
with designations, rights, and preferences determined by our
Board of Directors. Accordingly, our Board is empowered, without
approval by holders of our Common Stock, to issue Preferred
Stock with dividend, liquidation, redemption, conversion,
voting, or other rights that could adversely affect the voting
power or other rights of the holders of our Common Stock.
Issuance of Preferred Stock could be used to discourage, delay,
or prevent a change in control. In addition, issuance of
Preferred Stock could adversely affect the market price of our
Common Stock.
On October 17, 2003, our Board of Directors adopted a
Shareholder Rights Plan. Under the Plan, we issued a dividend of
one right for each share of Common Stock held by shareholders of
record as of the close of business on November 10, 2003.
The provisions of the Plan can be triggered only in certain
limited circumstances following the tenth day after a person or
group announces acquisitions of, or tender offers for, 15% or
more of our Common Stock. The Shareholder Rights Plan is
designed to guard against partial tender offers and other
coercive tactics to gain control of Actel without offering a
fair and adequate price and terms to all shareholders.
Nevertheless, the Plan could make it more difficult for a third
party to acquire Actel, even if our shareholders support the
acquisition.
Our
stock price may decline significantly, possibly for reasons
unrelated to our operating performance.
The stock markets broadly, technology companies generally, and
our Common Stock in particular have historically experienced
price and volume volatility. Our Common Stock may continue to
fluctuate substantially on the basis of many factors, including:
|
|
|
|
|
quarterly fluctuations in our financial results or the financial
results of our competitors or other semiconductor companies;
|
|
|
|
changes in the expectations of analysts regarding our financial
results or the financial results of our competitors or other
semiconductor companies;
|
|
|
|
announcements of new products or technical innovations by Actel
or by our competitors; or
|
|
|
|
general conditions in the semiconductor industry, financial
markets, or economy.
|
26
Like many other stocks, the price of our Common Stock was
adversely affected by the global economic crisis, and our stock
price may similarly be subject to future declines.
If our
stock price declines sufficiently, we may write down our
goodwill, which could have a materially adverse affect on our
operating results.
We account for goodwill and other intangible assets under FASB
ASC 350, Goodwill and Other Intangible Assets.
Under this standard, goodwill is tested for impairment annually
or more frequently if certain events or changes in circumstances
indicate that the carrying amount of goodwill exceeds its
implied fair value. The two-step impairment test identifies
potential goodwill impairment and measures the amount of a
goodwill impairment loss to be recognized (if any). The first
step of the goodwill impairment test, used to identify potential
impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. We are a single reporting
unit under FASB ASC 350, so we use an enterprise approach
to determine our total fair value. Since the best evidence of
fair value is quoted market prices in active markets, we start
with our market capitalization as the initial basis for the
analysis. We also consider other factors including control
premiums from observable transactions involving controlling
interests in comparable companies as well as overall market
conditions. As long as we determine our total enterprise fair
value is greater than our book value and we remain a single
reporting unit, our goodwill will be considered not impaired,
and the second step of the impairment test under FASB ASC 350
will be unnecessary. If our total enterprise fair value were to
fall below our book value, we would proceed to the second step
of the goodwill impairment test, which measures the amount of
impairment loss by comparing the implied fair value of our
goodwill with the carrying amount of our goodwill. As a result
of this analysis, we may be required to write down our goodwill,
and recognize a goodwill impairment loss, equal to the
difference between the book value of goodwill and its implied
fair value.
If our
long-lived assets become impaired, our operating results will be
adversely affected.
FASB ASC 350 also requires that intangible assets with
definite lives be amortized over their estimated useful lives
and reviewed for impairment whenever events or changes in
circumstances indicate an assets carrying value may not be
recoverable in accordance with FASB ASC 360, Impairment
or Disposal of Long Live Assets. During the second quarter
of 2009, we recorded non-cash asset impairment charges totaling
$5.5 million for certain manufacturing fixed assets that
were determined to be in excess of current and expected future
manufacturing requirements. Circumstances may arise in the
future, such as a sustained decline in our forecasted cash
flows, indicating that the carrying value of other long-lived
assets may be impaired. If we are required to record a charge to
earnings because an impairment of our long-lived assets is
determined, our operating results will be adversely effected.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
Our principal facilities and executive offices are located in
Mountain View, California, in two buildings that comprise
approximately 158,000 square feet. These buildings are
leased through January 2014. We have two renewal options to
extend the lease term by five years. In addition to our facility
in Mountain View, we also lease sales offices in various
countries around the world to support our worldwide customer
base. We believe our facilities are adequate for our current
requirements and the foreseeable future.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
None.
27
|
|
ITEM 4A.
|
EXECUTIVE
OFFICERS OF THE REGISTRANT
|
Executive
Officers
The following table identifies each of our executive officers:
|
|
|
|
|
|
|
Name(1)
|
|
Age
|
|
Position
|
|
John C. East
|
|
|
65
|
|
|
President and Chief Executive Officer
|
Maurice E. Carson
|
|
|
52
|
|
|
Executive Vice President and Chief Financial Officer
|
Esmat Z. Hamdy
|
|
|
60
|
|
|
Senior Vice President of Technology and Operations
|
Jay A. Legenhausen
|
|
|
43
|
|
|
Senior Vice President of Worldwide Sales
|
Fares N. Mubarak
|
|
|
48
|
|
|
Senior Vice President of Engineering & Marketing
|
Anthony Farinaro
|
|
|
47
|
|
|
Vice President & General Manager of Design Services
|
Barbara L. McArthur
|
|
|
59
|
|
|
Vice President of Human Resources
|
David L. Van De Hey
|
|
|
54
|
|
|
Vice President & General Counsel and Secretary
|
Mr. East has served as our President and Chief Executive
Officer since December 1988. From April 1979 until joining us,
Mr. East served in various positions with Advanced Micro
Devices, a semiconductor manufacturer, including Senior Vice
President of Logic Products from November 1986 to November 1988.
From December 1976 to March 1979, he served as Operations
Manager for Raytheon Semiconductor. From September 1968 to
December 1976, Mr. East served in various marketing,
manufacturing, and engineering positions for Fairchild Camera
and Instrument Corporation, a semiconductor manufacturer.
Mr. Carson joined Actel in August 2009. Mr. Carson
comes to Actel following a six-year tenure as senior vice
president and CFO of Kulicke & Soffa, a global leader
in the design and manufacture of semiconductor assembly
equipment. Prior to that, he served as Vice President of Finance
and Corporate Controller for Cypress Semiconductor. He also held
various financial positions at Ephigraphx, Kraft Foodservice and
Motorola Corporation.
Dr. Hamdy, one of our founders, was our Vice President of
Technology from August 1991 to March 1996 and Senior Vice
President of Technology from March 1996 to September 1996, and
has been our Senior Vice President of Technology and Operations
since September 1996. From November 1985 to July 1991, he held a
number of management positions with our technology and
development group. From January 1981 to November 1985,
Dr. Hamdy held various positions at Intel Corporation, a
semiconductor manufacturer, lastly as project manager.
Mr. Mubarak joined Actel in November 1992, was our Director
of Product and Test Engineering until October 1997, and became
our Vice President of Engineering in October 1997, our Senior
Vice President of Engineering in February 2006, and our Senior
Vice President of Engineering & Marketing in October
2007. From 1989 until joining us, he held various engineering
and engineering management positions with Samsung Semiconductor
Inc., a semiconductor manufacturer, and its spin-off, IC Works,
Inc. From 1984 to 1989, Mr. Mubarak held various
engineering, product planning, and engineering management
positions with Advanced Micro Devices, a semiconductor
manufacturer.
Mr. Legenhausen joined Actel in October 2007 as Senior Vice
President of Worldwide Sales. From 1990 until joining us, he
held various management, sales, marketing and engineering
positions with Cypress Semiconductor, a semiconductor
manufacturer, with the most recent position of Vice President of
Sales, Americas.
Mr. Farinaro joined Actel in August 1998 as Vice
President & General Manager of Design Services. From
February 1990 until joining us, he held various engineering and
management positions with GateField (formally Zycad Corporation
until 1997), a semiconductor company, with the most recent
position of Vice President of Application & Design
Services. From 1985 to 1990, Mr. Farinaro held various
engineering and management positions at Singer Kearfott, an
aerospace electronics company, and its spin-off, Plessey
Electronic Systems Corporation.
28
Ms. McArthur joined Actel in July of 2000 as Vice President
of Human Resources. From 1997 until joining us, she was Vice
President of Human Resources at Talus Solutions. Before that,
Ms. McArthur held senior human resource positions at
Applied Materials from 1993 to 1997, at 3Com Corporation from
1987 to 1993, and at Saga Corporation from 1978 to 1986.
Mr. Van De Hey joined Actel in July 1993 as Corporate
Counsel, became our Secretary in May 1994, and has been our Vice
President & General Counsel since August 1995. From
November 1988 to September 1993, he was an associate with
Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, a law firm in Palo Alto, California, and our
outside legal counsel. From August 1985 until October 1988, he
was an associate with the Cleveland office of Jones Day, a law
firm.
Our executive officers are appointed by, and serve at the
discretion of, our board of directors, subject to their rights
under any contract of employment or other agreement. There are
no immediate family relationships between or among any of our
directors or our executive officers.
PART II
|
|
ITEM 5.
|
MARKET
FOR THE REGISTRANTS COMMON STOCK, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our Common Stock has been traded on the Nasdaq Global Market
under the symbol ACTL since our initial public
offering on August 2, 1993. The following table sets forth,
for the fiscal quarters indicated, the high and low sale prices
per share of our Common Stock as reported on the Nasdaq Global
Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
12.40
|
|
|
$
|
8.24
|
|
|
$
|
15.70
|
|
|
$
|
10.27
|
|
Second Quarter
|
|
|
13.12
|
|
|
|
9.88
|
|
|
|
18.79
|
|
|
|
14.54
|
|
Third Quarter
|
|
|
12.43
|
|
|
|
10.03
|
|
|
|
17.28
|
|
|
|
10.75
|
|
Fourth Quarter
|
|
|
13.31
|
|
|
|
10.83
|
|
|
|
12.72
|
|
|
|
6.75
|
|
The closing sale price of our Common Stock was $13.77 on
March 10, 2010, and according to the records of our
transfer agent, there were 113 shareholders of record on
that date. A substantially greater number of holders of our
stock are street name or beneficial holders, whose
shares are held of record by banks, brokers, and other financial
institutions.
Dividend
Policy
We have never declared or paid a cash dividend on our Common
Stock. Any future declaration of dividends is within the
discretion of our Board of Directors and will be dependent on
our earnings, financial condition, and capital requirements as
well as any other factors deemed relevant by our Board of
Directors.
29
Company
Stock Performance
The following information shall not be deemed to be
soliciting material or to be filed with
the SEC or subject to Regulations 14A or 14C, or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that Actel specifically requests that such
information be treated as soliciting material or specifically
incorporates it by reference into a filing under the Securities
Act or the Exchange Act.
The following graph shows a comparison of cumulative total
return for Common Stock, The Nasdaq Stock Market (US), and
Nasdaq Electronic Component Stocks. In preparing the graph, we
assumed that $100 was invested on December 31, 2004, in
(i) Actels Common Stock, (ii) The Nasdaq Stock
Market (US) index, and (iii) the Nasdaq Electronic
Component Stocks index, and that all dividends were reinvested.
Comparison
of Cumulative Total Return
Shareholder returns over the indicated period should not be
considered indicative of future shareholder returns. The closing
sale price of our Common Stock on December 31, 2009, was
$11.88. The closing sale price of our Common Stock on
March 10, 2010, was $13.77.
30
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The information set forth below is not necessarily indicative of
results of future operations, and should be read in conjunction
with Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and the consolidated financial statements and related notes
thereto included in Item 8 of this
Form 10-K
to fully understand factors that may affect the comparability of
the information presented below.
ACTEL
CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
Dec. 31,
|
|
|
Jan. 1
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2006
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
190,633
|
|
|
$
|
218,406
|
|
|
$
|
197,043
|
|
|
$
|
191,499
|
|
|
$
|
178,947
|
|
Costs and expenses:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues(3)
|
|
|
90,855
|
|
|
|
89,714
|
|
|
|
82,363
|
|
|
|
75,618
|
|
|
|
73,282
|
|
Research and development(3)(6)
|
|
|
60,718
|
|
|
|
65,658
|
|
|
|
63,726
|
|
|
|
56,926
|
|
|
|
48,242
|
|
Selling, general, and administrative(3)(4)(5)
|
|
|
54,746
|
|
|
|
63,145
|
|
|
|
63,053
|
|
|
|
67,959
|
|
|
|
49,649
|
|
Restructuring charge(7)(8)
|
|
|
8,090
|
|
|
|
2,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangibles(2)
|
|
|
771
|
|
|
|
796
|
|
|
|
|
|
|
|
15
|
|
|
|
1,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
215,180
|
|
|
|
221,737
|
|
|
|
209,142
|
|
|
|
200,518
|
|
|
|
173,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(24,547
|
)
|
|
|
(3,331
|
)
|
|
|
(12,099
|
)
|
|
|
(9,019
|
)
|
|
|
5,866
|
|
Interest income and other, net of expense
|
|
|
3,263
|
|
|
|
5,433
|
|
|
|
8,607
|
|
|
|
7,128
|
|
|
|
3,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before tax provision (benefit)
|
|
|
(21,284
|
)
|
|
|
2,102
|
|
|
|
(3,492
|
)
|
|
|
(1,891
|
)
|
|
|
9,778
|
|
Tax provision (benefit)(9)(10)
|
|
|
24,945
|
|
|
|
13,827
|
|
|
|
(588
|
)
|
|
|
264
|
|
|
|
2,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
|
$
|
(2,155
|
)
|
|
$
|
7,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
26,106
|
|
|
|
25,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
26,106
|
|
|
|
25,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
Dec. 31,
|
|
|
Jan. 1,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2006
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
166,579
|
|
|
$
|
169,723
|
|
|
$
|
207,910
|
|
|
$
|
191,278
|
|
|
$
|
177,491
|
|
Total assets
|
|
|
307,002
|
|
|
|
343,261
|
|
|
|
363,616
|
|
|
|
368,922
|
|
|
|
343,196
|
|
Total shareholders equity
|
|
|
233,463
|
|
|
|
268,325
|
|
|
|
291,492
|
|
|
|
290,616
|
|
|
|
276,057
|
|
|
|
|
(1) |
|
During the second quarter of fiscal 2009, in accordance with our
normal quarterly inventory review, we performed an in-depth
analysis of our inventory levels and in particular our flash
inventory levels to determine whether additional reserves for
excess quantities should be established. The Company determined
that |
31
|
|
|
|
|
additional reserves of $13.3 million for excess inventory
would be required as of the end of the second quarter of fiscal
2009. |
|
(2) |
|
At December 31, 2004, we had identified intangible assets
arising from prior business acquisitions with a net book value
of $1.9 million which were being amortized on a straight
line basis over their estimated lives. These intangible assets
were fully amortized in 2005. |
|
|
|
During the third quarter of fiscal 2008, we acquired
$5.4 million of identified intangible assets in connection
with our acquisition of Pigeon Point Systems. As a result, we
recorded $0.8 million for both 2009 and 2008 relating to
amortization of identified intangible assets. |
|
(3) |
|
On January 2, 2006, we adopted FASB ASC 718,
Compensation Stock Compensation, which
requires us to measure all employee stock-based compensation
awards using a fair value method and record such expense in our
consolidated financial statements. As a result, we recorded
pre-tax stock based compensation expense of $7.6 million,
$9.1 million, $7.9 million and $11.0 million for
fiscal 2009, 2008, 2007 and 2006, respectively, under ASC 718. |
|
(4) |
|
During fiscal 2006, we recorded charges of $10.4 million in
connection with the settlement of certain patent and license
infringement claims. |
|
(5) |
|
During fiscal 2008, 2007 and 2006, we incurred
$1.6 million, $5.5 million and $2.0 million,
respectively, of legal and accounting costs in connection with
the Companys stock options investigation that was
initiated during the fourth quarter of fiscal 2006. |
|
(6) |
|
During fiscal 2007, we recorded a $3.7 million charge for
certain prepaid wafer costs due to changes in the Companys
product plans. |
|
(7) |
|
In the fourth quarter of fiscal 2008, we initiated a
restructuring program in order to reduce our operating costs.
During fiscal 2009 and fiscal 2008, we recorded charges of
$2.6 million and $2.4 million relating to a reduction
in force. Approximately 73 and 60 positions were eliminated
during 2009 and 2008, respectively. |
|
(8) |
|
During the second quarter of fiscal 2009, we recorded non-cash
asset impairment charges totaling $5.5 million for certain
manufacturing fixed assets that were determined to be in excess
of current and expected future manufacturing requirements. |
|
(9) |
|
During fiscal 2008, we recorded a valuation allowance of
$12.7 million against a portion of the Companys
deferred tax assets. The increase in the valuation allowance
results from uncertainties surrounding the nature and timing of
the taxable income required to realize certain tax credits and
net operating loss carry forwards. |
|
(10) |
|
During the second quarter of fiscal 2009, the Company recorded a
tax provision of $23.8 million on a second quarter pre-tax
loss of $21.4 million. The increase in the tax provision
during the quarter is primarily due to the valuation allowance
recorded against 100% of the net deferred tax assets during the
current period. The increase in the valuation allowance results
from the uncertainty surrounding the nature and timing of the
taxable income required to realize deferred tax assets. |
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
You should read the following discussion of our financial
condition and results of operations in conjunction with our
Consolidated Financial Statements and the related Notes to
Consolidated Financial Statements, Financial
Statement Schedules, and Supplementary Financial
Data included in this Annual Report on
Form 10-K.
This Annual Report on
Form 10-K,
including the Managements Discussion and Analysis of
Financial Condition and Results of Operations, contains
forward-looking statements regarding future events and the
future results of our Company that are based on current
expectations, estimates, forecasts, and projections about the
industry in which we operate and the beliefs and assumptions of
our management. Words such as expects,
anticipates, targets, goals,
projects, intends, plans,
believes, seeks, estimates,
variations of such words, and similar expressions are intended
to identify such forward-looking statements. These
forward-looking statements are only predictions and are subject
to risks, uncertainties, and assumptions that are difficult to
predict. Therefore, actual results may differ materially and
adversely from those expressed in any forward-looking
statements. These forward looking statements are made in
reliance upon the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. Factors that might
cause or contribute to such differences include, but are
32
not limited to, those discussed in Item 1A of
Part I of this Annual Report under the heading Risk
Factors. We undertake no obligation to revise or update
publicly any forward-looking statements for any reason.
Overview
The purpose of this overview is to provide context for the
discussion and analysis of our financial statements that follows
by briefly summarizing the most important known trends and
uncertainties, as well as the key performance indicators, on
which our executives are primarily focused for both the short
and long term.
Actel Corporation designs, manufactures, and sells a range of
FPGAs serving customers in the aerospace, avionics,
communications, consumer, industrial and military markets. As
the leading supplier of nonvolatile, low-power programmable
technologies, Actel offers the industrys lowest power
FPGAs and unique mixed-signal FPGAs along with supporting tools
to enable power-efficient design. Further, the security and
reliability inherent to flash and antifuse technologies give
Actel devices a competitive advantage in system critical
applications.
|
|
|
|
|
Low-power flash-based FPGAs for portable and power-conscious
electronics
|
|
|
|
Mixed-signal flash-based FPGAs with programmable logic, flash
memory, analog and embedded ARM Cortex-M3 microcontroller
sub-system
on a single chip for system management and industrial control
applications
|
|
|
|
Radiation-tolerant antifuse and flash-based FPGAs for
system-critical designs
|
|
|
|
Development software for power-conscious design
|
|
|
|
Intellectual property cores to implement standard functions and
streamline designs
|
Semiconductor
Industry
According to the Semiconductor Industry Association
(SIA), total sales for 2009 were $226.3 billion
compared with $248.6 billion reported for 2008 and a 2009
SIA forecast of $219.7 billion. According to the SIA, a
strong focus on inventories throughout the supply chain
mitigated the impact of the worldwide economic downturn and
positioned the industry for growth as the global economy
recovers. SIA projects that 2010 sales will grow by
10.2 percent to $242.1 billion in 2010 and by
8.4 percent to $262.3 billion in 2011.
Logic
Market
The logic market is highly fragmented and includes ASICs and
PLDs. FPGAs are one type of PLD. Price, performance,
reliability, power consumption, security, density, features,
ease of use, and time to market determine the degree to which
PLDs compete for specific applications. Unlike ASICs, which are
customized for use in a specific application at the time of
manufacture, PLDs are manufactured as standard components and
customized in the field, allowing the same device
type to be used for many different applications. Using software
tools, users program their design into a PLD, resulting in lower
development costs and inventory risks, shorter design cycles,
and faster time to market.
Technology
To a great extent, the characteristics of an FPGA are dictated
by the technology used to make the device programmable. Devices
based on nonvolatile flash or antifuse programming elements
offer significant power, single-chip,
live-at-power-up,
security, and firm-error immunity advantages over volatile FPGAs
based on SRAM technology.
Flash
We believe that our long-term future lies with flash technology,
which permits us to make FPGAs that are both nonvolatile and
reprogrammable. Perhaps the single most important benefit of a
nonvolatile flash-based FPGA is significantly reduced power
consumption. While our flash technology is unique, the process
is similar to standard embedded flash processes, so we are able
to share much of the burden of developing and proving the
process. We were the first, and are still the only, company to
develop and sell flash-based FPGAs. Several suppliers of
SRAM-based FPGAs claim to offer single-chip,
flash-based solutions. However, many of these
hybrid solutions are
33
merely combinations of flash memory components with the
underlying SRAM FPGA technology. True flash-based FPGAs, like
the ones we offer, have many significant advantages over
SRAM-based devices including standby power, security,
reliability, firm-error immunity, live at power up, and
integration opportunities not available with standard SRAM
technology such as embedded flash memory and high voltage analog.
Antifuse
Antifuse FPGAs offer excellent advantages for system-critical
military and aerospace applications in which reprogrammability
is not required. For almost two decades, Actel FPGAs have been
used in mission-critical applications, Earth-orbiting satellites
and space exploration vehicles, and, our antifuse FPEAs continue
to be designed into such systems.
Strategy
Our strategy is to offer FPGAs to those markets in which our
nonvolatile flash- and antifuse-based technologies have an
inherent competitive advantage. Our strategy involves
considerable risk as unique technologies and products can take
years to develop, if at all, and markets that we target may fail
to emerge. However, in addition to single-chip,
live-at-power-up,
security, and firm-error immunity benefits, we believe that our
nonvolatile FPGA solutions offer substantial low-power
advantages over volatile devices based on SRAM technology and we
plan to exploit those advantages.
Key
Indicators
Although we measure the condition and performance of our
business in numerous ways, the key quantitative indicators that
we generally use to manage the business are bookings, design
wins, margins, yields, and backlog. We also carefully monitor
the progress of our product development efforts. Of these, we
think that bookings and backlog are the best indicators of
short-term
performance and that designs wins and product development
progress are the best indicators of
long-term
performance.
Our bookings (measured as end-customer and distributor orders
placed on us) were lower in 2009 compared with 2008 by an amount
commensurate with the
year-to-year
revenue decline. However, our bookings increased
quarter-over-quarter
in the fourth quarter, indicating expected higher revenues
exiting 2009. Our backlog (which may be cancelled or rescheduled
by customers on short notice without significant penalty)
increased throughout the year and was at its highest point of
the year as we exited 2009. The number of design wins achieved
in 2009 was roughly flat compared with 2008, despite the adverse
economic conditions in 2009. In addition, the estimated revenue
per design win increased for the second consecutive year,
indicating that we are winning more designs at larger, more
strategic customers.
Results
of Operations
The following table sets forth certain financial data from the
Consolidated Statements of Operations expressed as a percentage
of net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of revenues
|
|
|
47.7
|
|
|
|
41.1
|
|
|
|
41.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
52.3
|
|
|
|
58.9
|
|
|
|
58.2
|
|
Research and development
|
|
|
31.9
|
|
|
|
30.1
|
|
|
|
32.3
|
|
Selling, general, and administrative
|
|
|
28.7
|
|
|
|
28.9
|
|
|
|
32.0
|
|
Restructuring charge
|
|
|
4.2
|
|
|
|
1.1
|
|
|
|
0.0
|
|
Amortization of acquisition-related intangibles
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from operations
|
|
|
(12.9
|
)
|
|
|
(1.5
|
)
|
|
|
(6.1
|
)
|
Interest income and other, net
|
|
|
1.7
|
|
|
|
2.5
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before tax provision (benefit)
|
|
|
(11.2
|
)
|
|
|
1.0
|
|
|
|
(1.8
|
)
|
Tax provision (benefit)
|
|
|
13.1
|
|
|
|
6.4
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
(24.3
|
)%
|
|
|
(5.4
|
)%
|
|
|
(1.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
Net
Revenues
We derive our revenues primarily from the sale of FPGAs, which
accounted for over 92% of net revenues in 2009, 95% in 2008 and
96% in 2007. Non-FPGA revenues are derived from our Protocol
Design Services organization, royalties, and the licensing of
software and sale of hardware used to design and program our
FPGAs.
The Company generally does not use average selling price (ASP)
as an internal measure due to the fact that, even within product
families, there is a wide dispersion of selling prices and
averages move as much from changes in the mix of customers and
products as from actual changes in selling prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
% Change
|
|
|
2007
|
|
|
% Change
|
|
|
Flash
|
|
$
|
49,110
|
|
|
$
|
57,011
|
|
|
|
(13.9
|
)%
|
|
$
|
41,019
|
|
|
|
39.0
|
%
|
Antifuse
|
|
|
126,812
|
|
|
|
150,263
|
|
|
|
(15.6
|
)%
|
|
|
148,788
|
|
|
|
1.0
|
%
|
Non-Silicon
|
|
|
14,711
|
|
|
|
11,132
|
|
|
|
32.2
|
%
|
|
|
7,236
|
|
|
|
53.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
190,633
|
|
|
$
|
218,406
|
|
|
|
(12.7
|
)%
|
|
$
|
197,043
|
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in 2009 were $190.6 million, a 12.7% decline
from 2008. This decrease was largely due to the worldwide
economic downturn that affected all aspects of the semiconductor
industry. The key drivers for the 12.7% decrease in net revenues
were decreased volume for antifuse products and decreased
selling prices for flash products, partially offset by increased
volume for flash products and better pricing/mix for antifuse
products.
Net revenues in 2008 were $218.4 million, a 10.8% increase
over 2007. This increase was driven by a strong economy and an
increased focus on selling products into the consumer market.
The key drivers were increases in flash volume and antifuse
pricing offset by decreases in antifuse volume and flash pricing.
We recognized approximately 70% of our net revenues through the
distribution sales channel in 2009 compared with 74% in 2008 and
77% in 2007. We generally do not recognize revenue on product
shipped to a distributor until the distributor resells the
product to its customer.
Sales to customers outside the United States accounted for 48%
of net revenues in 2009, 51% in 2008 and 50% in 2007 with
European customers representing 25% of net revenues in 2009
compared with 27% of net revenues for 2008 and 29% for 2007.
Gross
Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
2007
|
|
Change
|
|
Revenue
|
|
$
|
190,633
|
|
|
$
|
218,406
|
|
|
$
|
(27,773
|
)
|
|
$
|
197,043
|
|
|
$
|
21,363
|
|
Cost of revenue
|
|
|
90,855
|
|
|
|
89,714
|
|
|
|
1,141
|
|
|
|
82,363
|
|
|
|
7,351
|
|
Gross profit
|
|
|
99,778
|
|
|
|
128,692
|
|
|
|
(28,914
|
)
|
|
|
114,680
|
|
|
|
14,012
|
|
Gross margin
|
|
|
52.3
|
%
|
|
|
58.9
|
%
|
|
|
(6.6
|
)%
|
|
|
58.2
|
%
|
|
|
0.7
|
%
|
Gross profit dollars dropped $28.9 million from 2008 to
2009. This was primarily due to two factors: the revenue
reduction of $27.8 million and an inventory write off of
$13.3 million dollars. The revenue decline was driven by
the worldwide economic downturn. The inventory write down was
also related to the worldwide economic downturn as we built
inventory during 2008 to support business that did not
materialize. Gross margin percent fell by 660 basis points,
almost all due to the inventory write down.
Gross profit dollars increased by $14.0 million dollars
from 2007 to 2008. This was largely driven by the revenue
increase of $21.4 million dollars. Gross margin percent
increased by 70 basis points.
We seek to reduce costs and improve gross margins by improving
wafer yields, negotiating price reductions with suppliers,
increasing the level and efficiency of our testing and packaging
operations, achieving economies of scale by means of higher
production levels, and increasing the number of die produced per
wafer, principally by shrinking the die size of our products.
35
Research
and Development (R&D)
R&D expenditures were $60.7 million, or 31.9% of net
revenues, in 2009 compared with $65.7 million, or 30.1% of
net revenues, in 2008 and $63.7 million, or 32.3% of net
revenues, in 2007. R&D spending in 2009 decreased due to
decreases in salaries, payroll taxes and benefits as a result of
the reductions in force of $1.7 million; the absence of
bonus payouts of $1.2 million; and lower costs associated
with material purchases of $1.9 million. R&D spending
in 2008 included generally higher costs associated with expanded
R&D efforts and increased headcount. Stock-based
compensation expenses were $3.8 million in 2009 compared
with $4.1 million in 2008 and $4.0 million in 2007.
Our R&D consists of circuit design, software development,
and process technology activities. We believe that continued
substantial investment in R&D is critical to maintaining a
strong technological position in the industry. Since our FPGAs
are manufactured using customized processes that require a
substantial time to develop, our R&D expenditures will
probably always be higher as a percentage of net revenues than
that of our major competitors using standard manufacturing
processes.
Selling,
General and Administrative (SG&A)
SG&A expenses in 2009 were $54.7 million, or 28.7% of
net revenues, compared with $63.1 million, or 28.9% of net
revenues, in 2008 and $63.1 million, or 32.0% of net
revenues, in 2007. Costs associated with the Companys
stock option investigation and restatements were $0 in 2009,
$1.6 million in 2008 and $5.5 million in 2007.
SG&A costs decreased in 2009 due to decreases in salaries,
payroll taxes and benefits as a result of the reductions in
force of $2.8 million; lower selling costs, commissions and
incentive compensation associated with the decrease in net
revenues of $1.5 million; lower costs for outside services
of $0.6 million; reduced spending due to cost-saving
initiatives of $0.4 million; savings in stock compensation
expenses of $1.0 million; and savings in professional fees of
$1.6 million which related to the Companys stock
option investigation and restatements. Excluding the impact of
the stock option investigation costs of $1.6 million in
2008 compared with $5.5 million in 2007, SG&A costs
increased in 2008 due to higher selling costs, commissions and
incentive compensation associated with the increase in net
revenues. Stock-compensation expenses were $3.4 million in
2009 compared with $4.5 million in 2008 and
$3.3 million in 2007.
Restructuring
Charge
During the first quarter of 2009, we announced a Company-wide
restructuring plan that, in conjunction with cost-reduction
initiatives taken in the fourth quarter of 2008, is expected to
result in a quarterly reduction in expenses of approximately
$6.5 million in the third quarter of 2010 compared with the
third quarter of 2008. From the fourth quarter of 2008 through
fiscal 2009, we have incurred approximately $5.0 million
for severance and other costs related to reductions in force. In
addition, the Company has recorded $5.5 million in
restructuring costs related to asset impairments. The Company
expects to record additional reduction in force charges of
approximately $0.5 million during fiscal 2010 through the
beginning of the third quarter of 2010, when the restructuring
will be substantially complete. As of January 3, 2010,
approximately $0.6 million in restructuring charges remain
on our consolidated balance sheet and are included in
Accounts payable and Accrued compensation and
employee benefits.
Restructuring and asset impairment charges in 2009 were
$8.1 million, or 4.2% of net revenues, compared with
$2.4 million, or 1.1% of net revenues, in 2008. We recorded
restructuring charges totaling $2.6 million and
$2.4 million relating to termination benefits in 2009 and
2008, respectively. We recorded non-cash asset impairment
charges totaling $5.5 million in 2009 for certain
manufacturing fixed assets that were determined to be in excess
of current and expected future manufacturing requirements.
Amortization
of Other Acquisition-Related Intangibles
Amortization of other acquisition-related intangibles was
$0.8 million in both 2009 and 2008 and $0 in 2007. During
the third quarter of fiscal 2008, the Company acquired
$5.4 million of identified intangible assets in connection
with the acquisition of Pigeon Point Systems.
36
Interest
Income and Other, Net
Interest income and other, net, was $3.3 million,
$5.4 million and $8.6 million in 2009, 2008 and 2007,
respectively. Our average investment portfolio balance was
$141.2 million in 2009 compared with $155.0 million in
2008 and $162.9 million in 2007. For 2009, our average
investment portfolio return was 2.8% compared with 4.7% in 2008
and 4.8% in 2007, resulting in lower interest income during
fiscal 2009 as compared with prior years. As of January 3,
2010, the Company assessed its investments to determine if there
were any other than temporary impairments (OTTI) apart from the
OTTI recorded in fiscal 2009 relating to a corporate bond
investment. As a result of the sale of a bond in January 2010 at
a realized loss of $0.3 million, the Company recorded an
OTTI loss of $0.3 million as of January 3, 2010.
During 2008, we determined that one of our corporate bonds was
other-than-temporarily
impaired and therefore wrote down the investment to its fair
market value. The impairment charge of $0.9 million was
included in interest income and other, net, on our consolidated
statement of operations for the year ended January 4, 2009.
This contributed to the lower interest income recorded in 2008
compared with 2007. We invest funds not immediately required for
operations in investment portfolios consisting primarily of
corporate bonds, floating rate notes, and federal and municipal
obligations. In periods where market interest rates are falling,
and for some time after rates stabilize, we typically experience
declines in interest income as our older debt investments at
higher interest rates mature and are replaced by new investments
at the lower rates available in the market.
Tax
Provision (Benefit)
Significant components affecting the effective tax rate include
pre-tax net income or loss, federal R&D tax credits,
non-deductible stock-based compensation, the state composite tax
rate, and recognition of a valuation allowance against deferred
tax assets.
Our tax provision for 2009 was $24.9 million based on
pretax losses of $21.3 million. The difference between the
effective tax rate and the statutory tax rate is due primarily
to recognition of a valuation allowance of $31.6 million
against the Companys deferred tax assets and
non-deductible stock-based compensation offset by research tax
credits. The increase in the valuation allowance results from
uncertainties surrounding the nature and timing of the taxable
income required to realize deferred tax assets.
Our tax provision for 2008 was $13.8 million based on
income before income taxes of $2.1 million. The difference
between the effective tax rate and the statutory tax rate is due
primarily to recognition of a valuation allowance of
$12.7 million against a portion of the Companys
deferred tax assets, non-deductible stock-based compensation
partially offset by research tax credits and state tax benefits.
The increase in the valuation allowance results from
uncertainties surrounding the nature and timing of the taxable
income required to realize certain tax credits and net operating
loss carry forwards.
Our tax benefit for 2007 was $0.6 million representing an
effective tax rate of 17%. The difference between the effective
tax rate and the statutory tax rate is due primarily to
non-deductible stock-based compensation partially offset by
research tax credits and state tax benefits.
Financial
Condition
Our total assets were $307.0 million at the end of 2009
compared with $343.3 million at the end of 2008. The
decrease in total assets was attributable principally to
decreases in inventory, deferred tax assets and property and
equipment, which were partially offset by an increase in cash,
cash equivalents, accounts receivable and other assets. The
following table sets forth certain financial data from the
consolidated balance sheets expressed as the percentage change
from January 4, 2009, to January 3, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Jan. 3,
|
|
As of Jan. 4,
|
|
|
|
|
|
|
2010
|
|
2009
|
|
$ Change
|
|
% Change
|
|
|
In thousands
|
|
Cash and cash equivalents, short and long-term investments
|
|
$
|
152,664
|
|
|
$
|
146,557
|
|
|
$
|
6,107
|
|
|
|
4
|
%
|
Accounts receivable, net
|
|
$
|
19,112
|
|
|
$
|
11,596
|
|
|
$
|
7,516
|
|
|
|
65
|
%
|
Inventories
|
|
$
|
37,324
|
|
|
$
|
60,630
|
|
|
$
|
(23,306
|
)
|
|
|
(38
|
)%
|
37
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Jan. 3,
|
|
Jan. 4,
|
|
|
2010
|
|
2009
|
|
|
In thousands
|
|
Net cash provided by operating activities
|
|
$
|
8,271
|
|
|
$
|
9,830
|
|
Net cash provided by (used in) investing activities
|
|
$
|
(14,241
|
)
|
|
$
|
28,629
|
|
Net cash used in financing activities
|
|
$
|
2,325
|
|
|
$
|
(18,939
|
)
|
Cash,
Cash Equivalents, and Investments
Our cash, cash equivalents, and short-term investments were
$152.7 million at the end of 2009 compared with
$146.6 million at the end of 2008. This increase of
$6.1 million from the end of 2008 was due to
$8.3 million of net cash provided by operating activities
combined with $2.3 million of cash provided by financing
activities, and $1.9 million of changes in short and long
term investments which were partially offset by
$5.8 million of cash used to purchase property and
equipment.
Cash provided by operating activities for 2009 included
adjustments for non-cash charges of $50.7 million for
depreciation and amortization, asset impairment charges, stock
based compensation costs and deferred income taxes and. These
were partially offset by a net loss of $46.2 million;
increases in accounts receivables of $75 million; increases
in other assets, net, of $5.9 million; decreases in
inventory of $23.3 million; decreases in accounts payable
and other liabilities of $3.7 million; and decreases in
deferred income of $1.4 million.
Cash provided by operating activities for 2008 included
adjustments for non-cash charges of $21.7 million for
depreciation and amortization and for non-cash stock
compensation. These were partially offset by a net loss of
$11.7 million; decreases in accounts receivable of
$7.4 million; decreases in deferred tax assets of
$12.8 million; increase in accounts payable and other
liabilities of $5.7 million; increases in inventory of
$24.6 million; increases in other assets, net, of
$3.8 million; and decreases in deferred income of
$1.9 million. The increase in inventory relates to the
build-up of
flash products.
Cash provided by operating activities for 2007 included non-cash
charges of $22.0 million for depreciation and amortization,
non-cash stock compensation and a charge against certain wafer
prepayments. These were partially offset by a net loss of
$2.9 million; decreases in accounts receivable of
$3.9 million; decreases in inventory of $3.5 million;
decreases in accounts payable and other liabilities of
$8.6 million; increases in license obligations of
$1.9 million; and decreases in deferred income of
$3.2 million. The decreases in accounts payable and other
liabilities is due primarily to payments made under accrued
license obligations and payments of accruals for legal
settlements recorded in 2006. Spending on property and equipment
amounted to $13.0 million in 2007.
Cash proceeds from the issuance of Common Stock under employee
stock plans amounted to $2.8 million in 2009 and
$6.5 million in 2008.
Accounts
Receivable
Our net accounts receivable was $19.1 million at the end of
2009 compared with $11.6 million at the end of 2008.
Typically, shipments are higher in the last month of a quarter
but shipments were lower in December 2008, due to the Company
having a two week shutdown. The shutdown in December 2009 was
shorter than the shutdown in December 2008 and as a result
shipments were higher in December 2009 compared with December
2008. As a result of the increased shipments in December 2009,
net accounts receivable represented 37 days of sales
outstanding at the end of fiscal 2009 compared with 19 days
at the end of fiscal 2008.
Inventories
Our net inventories were $37.3 million at the end of 2009
compared with $60.6 million at end of 2008. Net inventories
are stated at the lower of cost
(first-in,
first-out) or market (net realizable value). We believe that a
certain level of inventory must be carried to maintain an
adequate supply of product for customers. We typically
build-up
inventories of new products early in their life cycles in order
to support anticipated demand and to provide stock inventory to
distributors to support initial sales of the product. We
typically do not establish excess inventory
38
reserves for newer products until we have developed sufficient
trend information to support reasonable assumptions regarding
acceptance of the product and future demand trends. Once the
product has been available on the market for a sufficient period
of time, generally two years or more, we will begin to assess
the need for reserves for excess inventory based on history and
forecasted demand.
The build-up
in inventory beginning in the second quarter of 2008 for our new
flash products was particularly pronounced due to a conscious
effort to support increased turns business and shorter lead
times for the end consumer products at which the flash products
are targeted. In an effort to reduce our inventory levels, we
will continue to restrict flash wafer starts based on inventory
levels and forecast sales of flash products. However, in order
to preserve our relationships with our foundries, we will
continue to build certain minimum levels of flash products
during 2010 and thereafter, so an extended period of time will
probably be necessary in order to draw down inventory levels
closer to historical norms. We believe our flash products are
still attractive to our targeted customer base. We continue to
focus our efforts on growing the flash business and are
aggressively marketing our flash products in an effort to reduce
our inventory. This may include certain promotional pricing for
large volume orders, which may negatively affect our gross
margins. We are also monitoring market trends and significant
events that may have an adverse impact on the carrying value of
our inventory.
In accordance with our normal quarterly inventory review, during
the second quarter of 2009, we performed an in-depth analysis of
our inventory levels, and in particular our flash inventory
levels to determine whether additional reserves for excess
quantities should be established. Some of the newer flash
product lines were then in production for two years or more,
which triggered our initial analysis of potential excess
inventory. The analysis took into consideration the general
acceptance of the products on the market, short and mid-term
forecasted demand, the high levels of flash inventory on hand
relative to the historical norms, and the results of recent
promotional efforts to reduce inventory levels of flash
products. Although we have been able to reduce some of our flash
inventory in recent quarters, we determined, as part of our
normal quarterly inventory review, that additional reserves of
$13.3 million, $0.6 million and $1.2 million for
excess inventory were required as of the end of the second,
third and fourth quarters of 2009, respectively.
We continue to hold material from last time buy
inventory purchases made in 2003, 2005, 2007 and 2009 from
certain wafer manufacturers for some of our mature product
families. Last time buys occur when a wafer supplier is about to
shut down the manufacturing line used to make a product and we
believe that our then-current inventories are insufficient to
meet foreseeable future demand. In March 2009, Panasonic
informed us of their intention to cease production of
Actels legacy ACT products. In order to support our
customers future demands for the ACT products, we commit
to purchase from Panasonic approximately $8.0 million of
last-time-buy wafers. As of the end of fiscal 2009, we had
purchased approximately $3.8 million of last-time-buy
wafers from Panasonic. Inventory purchased in last-time-buy
transactions is evaluated on an ongoing basis for indications of
excess or obsolescence based on rates of actual sell through,
expected future demand for those products, and any other
qualitative factors that may indicate the existence of excess or
obsolete inventory. Inventory at January 3, 2010, included
$5.1 million of inventory purchased in last-time buys, of
which $3.8 million relates to the Panasonic last-time-buy
wafers. Inventory at January 4, 2009, included
$1.4 million of inventory purchased in last-time buys.
There were no write downs of last-time-buy inventory during
2009. During 2008, we recorded a write down against
last-time-buy
inventory of $0.5 million.
Our FPGAs are manufactured using customized steps that are added
to the standard manufacturing processes of our independent wafer
suppliers, so our manufacturing cycle is generally longer and
more difficult to adjust in response to changing demands or
delivery schedules than our competitors using standard
processes. Accordingly, our inventory levels will probably
always be higher than that of our major competitors using
standard processes.
Property
and Equipment
Our net property and equipment was $23.0 million at the end
of 2009 compared with $34.7 million at the end of 2008. We
invested $5.8 million in property and equipment in 2009
compared with $21.4 million in 2008. The decrease in
capital expenditures for 2009 was due primarily to purchases
made in 2008 relating to additional offshore testing and
manufacturing equipment and the installation of solar panels at
the Companys headquarters in Mountain View, California. We
recorded non-cash asset impairment charges totaling
$5.5 million for certain
39
manufacturing fixed assets that were determined to be in excess
of current and expected future manufacturing requirements in
2009. Capital expenditures during the past two years have been
primarily for engineering, manufacturing, and office equipment.
Depreciation of property and equipment was $12.1 million in
2009 compared with $11.9 million in 2008. We currently
expect to incur capital expenditures of approximately
$5.3 million in 2010.
Goodwill
and Other Intangible Assets, Net
Our net goodwill and other intangible assets were
$34.9 million at the end of 2009 and $35.5 million at
the end of 2008. The slight decrease is due to the realization
of certain net operating loss carry forwards associated with our
acquisition of Gatefield Corporation in 2000. We had originally
established a valuation allowance for a portion of the net
operating loss carry forwards acquired in connection with the
acquisition of Gatefield. FASB ASC 805 Business Combinations,
which became effective on the first day of our 2009 fiscal
year, changes how business acquisitions are accounted for and
affects financial statements both on the acquisition date and in
subsequent periods. Under FASB ASC 805, the release of any
valuation allowance for acquired tax attributes related to
Gatefield will now result in a tax benefit as opposed to an
adjustment to the carrying amount of goodwill.
During the third quarter of fiscal 2008, we acquired
$5.4 million of identified intangible assets in connection
with the acquisition of Pigeon Point Systems. As a result of
this, we recorded $0.8 million for both 2009 and 2008
relating to amortization of identified intangible assets.
Goodwill is recorded when consideration paid in an acquisition
exceeds the fair value of the net tangible and intangible assets
acquired. We account for goodwill in accordance with FASB ASC
350 Goodwill and Other Intangible Assets, which addresses
the financial accounting and reporting standards for goodwill
and other intangible assets subsequent to their acquisition.
Under FASB ASC 350, we do not amortize goodwill, but instead
test for impairment annually or more frequently if certain
events or changes in circumstances indicate that the carrying
value may not be recoverable. We completed our annual goodwill
impairment tests during the fourth quarters of 2009 and 2008 and
noted no indicators of impairment.
Other
Assets, Net
Our other assets, net, were $30.1 million at the end of
2009 compared with $22.0 million at the end of 2008. The
increase was due primarily to an increase of $6.0 million
in license obligations and an increase in deferred compensation
plan assets of $1.4 million.
Current
Liabilities
Our total current liabilities were $51.8 million at the end
of 2009 compared with $59.5 million at the end of 2008. The
decrease was due primarily to a decrease in accounts payable of
$4.4 million, a decrease in accrued compensation and
employee benefits of $3.0 million and a decrease in
deferred income on shipments to distributors of
$1.4 million, which were partially offset by an increase in
accrued license obligations of $1.0 million.
Shareholders
Equity
Shareholders equity was $233.5 million at the end of
2009 compared with $268.3 million at the end of 2008. The
decrease in 2009 was due mostly to the net loss of
$46.2 million. This was partially offset by stock-based
compensation charges of $7.6 million, issuances of Common
Stock under our employee stock plans of $2.3 million, net
of tax withholding on restricted stock units and changes in
unrealized gain on investments of $1.4 million.
In 2009, our Board of Directors adopted a plan under
Rule 10b5-1
promulgated by the Securities and Exchange Commission under the
Exchange Act that will permit us to purchase shares of our
Common Stock under our stock repurchase program at any time the
criteria under the
Rule 10b5-1
plan are met. In February 2009, our Board of Directors amended
the criteria for the Company to purchase shares under the
Rule 10b5-1
plan.
Liquidity
and Capital Resources
We meet all of our funding needs for ongoing operations with
internally generated cash flows from operations and with
existing cash and short-term investment balances. We believe
that existing cash, cash equivalents, and
40
short-term investments, together with cash generated from
operations, will be sufficient to meet our cash requirements for
the following twelve months. A portion of available cash may be
used for investment in or acquisition of complementary
businesses, products, or technologies. Wafer manufacturers have
at times demanded financial support from customers in the form
of equity investments and advance purchase price deposits, which
in some cases have been substantial. If we require additional
capacity, we may be required to incur significant expenditures
to secure such capacity.
The following represents contractual commitments associated with
operating leases and capital leases ($0.4 million relates
to a capital lease which runs through 2013 and is not shown
separately) as of January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
Total
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
and Later
|
|
|
|
(In thousands)
|
|
|
Operating and capital leases(1)
|
|
$
|
14,750
|
|
|
$
|
3,740
|
|
|
$
|
3,411
|
|
|
$
|
3,402
|
|
|
$
|
3,474
|
|
|
$
|
539
|
|
|
$
|
184
|
|
Inventory purchase obligations relating to last-time-buy
inventory
|
|
|
4,200
|
|
|
|
4,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit
|
|
|
1,400
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
20,350
|
|
|
$
|
9,340
|
|
|
$
|
3,411
|
|
|
$
|
3,402
|
|
|
$
|
3,474
|
|
|
$
|
539
|
|
|
$
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes
sub-lease
income of $56,163 per month from October 2010 through January
2014 attributed to a
sub-lease
agreement executed in February 2010. |
Purchase orders or contracts for the purchase of raw materials,
apart from the last-time-buy inventory disclosed above, and
other goods and services are not included in the table above. We
are not able to determine the aggregate amount of such purchase
orders that represent contractual obligations because as
purchase orders may represent authorizations to purchase rather
than binding agreements. In order to support our customers
future demands for the ACT products, we entered into a
commitment to purchase from Panasonic approximately
$8 million of
last-time-buy
wafers relating to our ACT products. As of fiscal 2009, we have
purchased approximately $3.8 million of last-time-buy
wafers from Panasonic.
We believe that the availability of adequate financial resources
is a substantial competitive factor. To take advantage of
opportunities as they arise, or to withstand adverse business
conditions when they occur, it may become prudent or necessary
for us to raise additional capital. No assurance can be given
that additional capital would become available on acceptable
terms if needed, if available at all.
Impact of
Recently Issued Accounting Standards
In January 2010, the FASB issued Accounting Standards Update
(ASU)
2010-06
relating to FASB ASC 820 Fair Value Measurements and
Disclosures. ASU
2010-06
provides amendments to topic
820-10
requiring new disclosures regarding transfers in and out of
Levels 1 and 2 and guidance regarding disclosure of
activity in Level 3 fair value measurements using
significant unobservable inputs. This ASU also provides
amendments to topic
820-10 that
clarify existing disclosures regarding level of disaggregation
and disclosures relating to inputs and valuation techniques. The
new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning
after December 15, 2009, except for disclosures relating to
activity in Level 3, which are effective for fiscal years
beginning after December 15, 2010, and for interim periods
within those fiscal years. The adoption of this ASU in the first
fiscal quarter of 2010 is not expected to have a significant
impact on our consolidated financial statements.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States
(GAAP). The preparation of these financial
statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues,
and expenses and the related disclosure of contingent assets and
liabilities. The U.S. Securities and Exchange Commission
has defined critical accounting policies as
41
those that are most important to the portrayal of our financial
condition and results and also require us to make the most
difficult, complex and subjective judgments, often as a result
of the need to make estimates about the effect of matters that
are inherently uncertain. Based upon this definition, our most
critical policies include revenue recognition, inventories,
stock-based compensation, legal matters, goodwill and long-lived
asset impairment and income taxes. These policies, as well as
the estimates and judgments involved, are discussed below. We
also have other key accounting policies that either do not
generally require us to make estimates and judgments that are as
difficult or as subjective or are less likely to have a material
impact on our reported results of operations for a given period.
We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ materially from these estimates. In addition, if
these estimates or their related assumptions change in the
future, it could result in material expenses being recognized on
the consolidated statements of operations.
Revenues
We sell our products to OEMs and to distributors who resell our
products to OEMs or their contract manufacturers. We recognize
revenue on products sold to our OEMs upon shipment. Revenues
generated by the Protocol Design Services organization are
recognized as the services are performed. Because sales to our
distributors are generally made under agreements allowing for
price adjustments, credits, and right of return under certain
circumstances, we generally defer recognition of revenue on
products sold to distributors until the products are resold by
the distributor and price adjustments are determined, at which
time our final net sales price is fixed. Deferred revenue net of
the corresponding deferred cost of sales are recorded in the
caption deferred income on shipments to distributors
in the liability section of the consolidated balance sheet.
Deferred income effectively represents the gross margin on the
sale to the distributor; however, the amount of gross margin we
recognize in future periods will be less than the originally
recorded deferred income as a result of negotiated price
concessions. Distributors resell our products to end customers
at various negotiated price points that vary by end customer,
product, quantity, geography and competitive pricing
environments. When a distributors resale is priced at a
discount from list price, we credit back to the distributor a
portion of their original purchase price after the resale
transaction is complete. Thus, a portion of the deferred income
on shipments to distributors balance will be credited back to
the distributor in the future. Based upon historical trends and
inventory levels on hand at each of our distributors as of
January 3, 2010, we currently estimate that approximately
$7.1 million of the deferred income on shipments to
distributors on the Companys consolidated balance sheet as
of January 3, 2010, will be credited back to the
distributors in the future. In other words, we expect that this
amount will not be recognized as revenue and gross margin in our
consolidated statement of operations. Since we expect our
distributors to turn their inventory balances five
to six times a year, we expect that a majority of the inventory
held by our distributors at the end of any quarter will be
resold to end customers over the next two quarters.
Revenue recognition depends on notification from the distributor
that product has been resold. This reported information includes
product resale price, quantity, and end customer information as
well as inventory balances on hand. Our revenue reporting is
dependent on us receiving timely and accurate data from our
distributors. In determining the appropriate amount of revenue
to recognize, we use this data from our distributors and apply
judgment in reconciling differences between their reported
inventory and sell-through activities. Because of the time
involved in collecting, assimilating and analyzing the data
provided by our distributors, we receive actual
sell-through
revenue one month in arrears. This practice requires us to make
an estimate of one months distributor
sell-through
activity at the end of each fiscal quarter. This estimate is
adjusted the following month to reflect actual sell through
activity reported by our distributors.
We record a provision for price adjustments on unsold
merchandise shipped to distributors in the same period as the
related revenues are recorded. If market conditions were to
decline, we may need to take action with our distributors to
ensure the sell-through of inventory already in the channel.
These actions during a market downturn could result in
incrementally greater reductions to net revenues than otherwise
would be expected. We also record a provision for estimated
sales returns on products shipped directly to end customers in
the same period as the related revenues are recorded. The
provision for sales returns is based on historical sales
returns, analysis of credit memo
42
data, and other factors. If our calculation of these estimates
does not properly reflect future return patterns, future net
revenues could be materially different.
Inventories
We believe that a certain level of inventory must be carried to
maintain an adequate supply of product for customers. This
inventory level may vary based upon orders received from
customers or internal forecasts of demand for these products.
Other considerations in determining inventory levels include the
stage of products in the product life cycle, design win
activity, manufacturing lead times, customer demand, strategic
relationships with foundries, and competitive situations in the
marketplace. If any of these factors develop other than
anticipated, inventory levels may be materially and adversely
affected.
We write down our inventory for estimated obsolescence or lack
of sales activity equal to the difference between the cost of
inventory and the estimated realizable value based upon
assumptions about future demand and market conditions. To
address this difficult, subjective, and complex area of
judgment, we apply a methodology that includes assumptions and
estimates to arrive at the net realizable value. First, we
identify any inventory that has been previously written down in
prior periods. Second, we examine inventory line items that may
have some form of non-conformance with electrical and mechanical
standards. Third, we assess the inventory not otherwise
identified to be written down against product history and
forecasted demand. Finally, we analyze the result of this
methodology in light of the product life cycle, design win
activity, and competitive situation in the marketplace to derive
an outlook for consumption of the inventory and the
appropriateness of the resulting inventory levels. If actual
future demand or market conditions are less favorable than those
we have projected, additional inventory write-downs may be
required.
We typically
build-up
inventories of new products early in their life cycles in order
to support anticipated demand and to provide stock inventory to
distributors respond quickly to sales of the product.
Accordingly, we typically do not establish excess inventory
reserves for newer products until we have developed sufficient
trend information to support reasonable assumptions regarding
acceptance of the product and future demand trends. After the
product has been available on the market for a sufficient period
of time, generally two years or more, the Company will begin to
assess the need for excess inventory reserves based on history
and forecasted demand as noted above.
We continue to hold material from last time buy
inventory purchases made in 2003, 2005, 2007 and 2009 from two
wafer manufacturers for some of our mature product families.
Last time buys occur when a wafer supplier is about to shut down
the manufacturing line used to make a product and we believe
that our then-current inventories are insufficient to meet
foreseeable future demand.. In March 2009, Panasonic informed us
of their intention to cease production of Actels legacy
ACT products. In order to support our customers future
demands for the ACT products, we committed to purchase from
Panasonic approximately $8 million of last-time-buy wafers.
As of the end of fiscal 2009, we had purchased approximately
$3.8 million of last-time-buy wafers from Panasonic.
Inventory purchased in last-time-buy transactions is evaluated
on an ongoing basis for indications of excess or obsolescence
based on rates of actual sell through, expected future demand
for those products, and any other qualitative factors that may
indicate the existence of excess or obsolete inventory.
Inventory at January 3, 2010, and January 4, 2009,
included $5.1 million and $1.4 million, respectively,
of inventory purchased in last-time-buys. Last-time-buy
inventory as of January 3, 2010, includes approximately
$3.8 million of Panasonic last-time-buy wafers. There were
no write downs of last-time-buy inventory during 2009. During
2008, we recorded a write down against
last-time-buy
inventory of $0.5 million.
Legal
Matters and Loss Contingencies
From time to time we are notified of claims, including claims
that we may be infringing patents owned by others, or otherwise
become aware of conditions, situations, or circumstances
involving uncertainty as to the existence of a liability or the
amount of a loss. When probable and reasonably estimable, we
make provisions for estimated liabilities. As we sometimes have
in the past, we may settle disputes
and/or
obtain licenses under patents that we are alleged to infringe.
We can offer no assurance that any pending or threatened claim
or other loss contingency will be resolved or that the
resolution of any such claim or contingency will not have a
materially
43
adverse effect on our business, financial condition,
and/or
results of operations. Our failure to resolve a claim could
result in litigation or arbitration, which can result in
significant expense and divert the efforts of our technical and
management personnel, whether or not determined in our favor.
Our evaluation of the impact of these claims and contingencies
could change based upon new information. Subject to the
foregoing, we do not believe that the resolution of any pending
or threatened legal claim or loss contingency is likely to have
a materially adverse effect on our financial position at
January 3, 2010 or results of operations or cash flow for
the year then ended.
Income
Taxes
We account for income taxes in accordance with FASB ASC 740,
Accounting for Income Taxes, which requires that deferred
tax assets and liabilities be recognized using enacted tax rates
for the effect of temporary differences between the book and tax
bases of recorded assets and liabilities. ASC 740 also requires
that deferred tax assets be reduced by a valuation allowance if
it is more likely than not that some or all of the deferred tax
assets will not be realized. We are required to evaluate the
realizability of our deferred tax assets by assessing our
valuation allowance and, if necessary, adjusting the amount of
such allowance. The factors used to assess the likelihood of
realization include our forecast of future taxable income and
available tax planning strategies that could be implemented to
realize the net deferred tax assets. We assessed the realization
of our deferred tax assets quarterly throughout 2009 and
recorded a full valuation allowance against our deferred tax
assets at the end of the second quarter. For the remainder of
2009, we continued to record a full valuation allowance against
our deferred tax assets because it was more likely than not that
we would not be able to realize these deferred tax assets based
upon our forecast of future taxable income and other relevant
factors. The valuation allowance at the end of 2009 was $52.8
million. We currently intend to maintain a full valuation
allowance against our deferred tax assets. If factors change
that affect our forecast of future taxable income in determining
the realizability of our net deferred tax assets, adjustments
will be made to the amount of the valuation allowance in future
periods.
Stock-Based
Compensation Expense
We account for stock-based compensation in accordance with FASB
ASC 718, Compensation Stock Compensation.
Under the fair value recognition provisions of FASB ASC 718, we
estimate the fair value of our employee stock awards at the date
of grant using the Black-Scholes-Merton option pricing model,
which requires the use of certain subjective assumptions. The
most significant of these assumptions are our estimates of
expected volatility of the market price of our stock and the
expected term of the stock award. We have determined that
historical volatility is the best predictor of expected
volatility and the expected term of our awards was determined
taking into consideration the vesting period of the award, the
contractual term and our historical experience of employee stock
option exercise behavior. As required under the accounting
rules, we review our valuation assumptions at each grant date
and, as a result, we could change our assumptions used to value
employee stock-based awards granted in future periods. In
addition, we are required to estimate the expected forfeiture
rate and only recognize expense for those awards expected to
vest. If our actual forfeiture rate were materially different
from our estimate, the stock-based compensation expense would be
different from what we have recorded in the current period. The
fair value of restricted stock units is calculated based upon
the fair value of our Common Stock at the date of grant.
Further, FASB ASC 718 requires that employee stock-based
compensation costs be recognized over the vesting period of the
award and we have elected the straight-line method as the basis
for recording our expense.
The Company recorded $7.6 million, $9.1 million, and
$7.9 million of stock-based compensation expense for the
years ended January 3, 2010, January 4, 2009, and
January 6, 2008, respectively. As required by FASB ASC 718,
Compensation Stock Compensation, management
made an estimate of expected forfeitures and is recognizing
compensation costs only for those equity awards expected to
vest. As of January 3, 2010, the total compensation cost
related to options and nonvested stock granted to employees
under the Companys stock option plans but not yet
recognized was $11.5 million, net of estimated forfeitures
of $1.4 million. This cost will be amortized over a
weighted-average period of 1.87 years and will be adjusted
for subsequent changes in estimated forfeitures. As of
January 3, 2010, the total compensation cost related to
options to purchase shares of the Companys Common Stock
under the Employee Stock Purchase Plan (ESPP) but not yet
recognized was approximately $0.3 million. This cost will
be amortized over a weighted-average period of 1.25 years.
44
Long-Lived
Asset Impairment
We review property and equipment and intangible assets,
excluding goodwill, for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not
be recoverable. If property and equipment or intangible assets
are considered to be impaired, the impairment recognized equals
the amount by which the carrying value of the asset exceeds its
fair market value. During the first quarter of 2008, we began to
experience significant increases in bookings for flash product
families that include Fusion, Igloo and ProASIC3. To support the
expected ramp up in manufacturing, we ordered additional testing
and sorting equipment. However, as a result of the worldwide
economic crisis, a significant number of these product orders
were cancelled in the second half of 2008 and the new product
sale opportunities did not materialize in the volumes originally
anticipated. As a result, the Company recorded a non-cash
impairment charge of $5.5 million during the second quarter
of 2009, for certain manufacturing fixed assets that were
determined to be in excess of current and expected future
manufacturing requirements and those assets were taken out of
service.
We account for goodwill and other intangible assets under FASB
ASC 350, Goodwill and Other Intangible Assets. Under this
standard, goodwill is tested for impairment annually or more
frequently if certain events or changes in circumstances
indicate that the carrying amount of goodwill exceeds its
implied fair value. The two-step impairment test identifies
potential goodwill impairment and measures the amount of a
goodwill impairment loss to be recognized (if any). The first
step of the goodwill impairment test, used to identify potential
impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. We are a single reporting
unit under FASB ASC 350 and we use an enterprise approach to
determine our total fair value. Since the best evidence of fair
value is quoted market prices in active markets, we start with
our market capitalization as the initial basis for the analysis.
We also consider other factors including control premiums from
observable transactions involving controlling interests in
comparable companies as well as overall market conditions. As
long as we determine our total enterprise fair value is greater
than our book value and we remain a single reporting unit, our
goodwill will be considered not impaired, and the second step of
the impairment test under FASB ASC 350 will be unnecessary. If
our total enterprise fair value were to fall below our book
value, we would proceed to the second step of the goodwill
impairment test, which measures the amount of impairment loss by
comparing the implied fair value of our goodwill with the
carrying amount of our goodwill. As a result of this analysis we
may be required to write down our goodwill, and recognize a
goodwill impairment loss, equal to the difference between the
book value of goodwill and its implied fair value.
FASB ASC 350 also requires that intangible assets with definite
lives be amortized over their estimated useful lives and
reviewed for impairment whenever events or changes in
circumstances indicate an assets carrying value may not be
recoverable in accordance with FASB ASC 360, Impairment or
Disposal of Long Live Assets. Currently, we amortize our
acquired intangible assets with definite lives over periods
ranging primarily from one to seven years.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
As of January 3, 2010, our investment portfolio consisted
primarily of asset backed obligations, corporate bonds, floating
rate notes, and federal and municipal obligations. The principal
objectives of our investment activities are to preserve
principal, meet liquidity needs, and maximize yields. To meet
these objectives, we invest funds not immediately required for
operations only in high credit quality debt securities with
average maturities of less than two years. We also limit the
percentage of total investments that may be invested in any one
issuer. Corporate investments as a group are also limited to a
maximum percentage of our investment portfolio.
Our investments in debt securities, which totaled
$115.9 million at January 3, 2010, are subject to
interest rate risk. An increase in interest rates could subject
us to a decline in the market value of our investments. These
risks are mitigated by our ability to hold these investments for
a period of time sufficient to recover the carrying value of the
investment, which may not be until maturity. A hypothetical
100 basis point increase in interest rates compared with
interest rates at January 3, 2010, and January 4,
2009, would result in a reduction of approximately
$0.8 million and $1.2 million, respectively, in the
fair value of our
available-for-sale
debt securities held at January 3, 2010, and
January 4, 2009, respectively.
45
In addition to interest rate risk, we are subject to market risk
on our investments. We monitor all of our investments for
impairment on a periodic basis. In the event that the carrying
value of the investment exceeds its fair value and the decline
in value is determined to be other than temporary, the carrying
value is reduced to its current fair market value. In the
absence of other overriding factors, we consider a decline in
market value to be a potential indicator of an other than
temporary impairment when a publicly traded stock or a debt
security has traded below amortized cost for a consecutive
six-month period. If an investment continues to trade below
amortized cost for more than six months, and mitigating factors
such as general economic and industry specific trends, including
the creditworthiness of the issuer are not present, this
investment would be evaluated for impairment and written down to
a balance equal to the estimated fair value at the time of
impairment, with the amount of the write-down recorded in
Interest income and other, net, on the consolidated statements
of operations. If management concludes it does not intend to
sell an impaired debt security and it is not more likely than
not it will be required to sell the debt security before the
recovery of its amortized cost basis, and the issuers of the
securities are creditworthy, no
other-than-temporary
impairment is deemed to exist.
As of January 3, 2010, the Company assessed its investments
to determine if there were any other than temporary impairments
(OTTI) apart from the OTTI recorded in fiscal 2008 relating to a
corporate bond investment. As a result of the sale of a bond in
January 2010, at a realized loss of $0.3 million the
Company recorded an OTTI loss of $0.3 million as of
January 3, 2010. We invest funds not immediately required
for operations in investment portfolios consisting primarily of
corporate bonds, floating rate notes, and federal and municipal
obligations. In periods when market interest rates are falling,
and for some time after rates stabilize, we typically experience
declines in interest income as our older debt investments at
higher interest rates mature and are replaced by new investments
at the lower rates available in the market.
46
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
ACTEL
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
45,994
|
|
|
$
|
49,639
|
|
Short-term investments
|
|
|
106,007
|
|
|
|
89,111
|
|
Accounts receivable, net
|
|
|
19,112
|
|
|
|
11,596
|
|
Inventories
|
|
|
37,324
|
|
|
|
60,630
|
|
Deferred income taxes
|
|
|
1,729
|
|
|
|
11,313
|
|
Prepaid expenses and other current assets
|
|
|
8,166
|
|
|
|
6,888
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
218,332
|
|
|
|
229,177
|
|
Long-term investments
|
|
|
663
|
|
|
|
7,807
|
|
Property and equipment, net
|
|
|
22,969
|
|
|
|
34,747
|
|
Goodwill and other intangible assets, net
|
|
|
34,939
|
|
|
|
35,540
|
|
Deferred income taxes
|
|
|
|
|
|
|
13,968
|
|
Other assets, net
|
|
|
30,099
|
|
|
|
22,022
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
307,002
|
|
|
$
|
343,261
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
10,262
|
|
|
$
|
14,672
|
|
Accrued compensation and employee benefits
|
|
|
8,206
|
|
|
|
11,240
|
|
Accrued licenses and lease obligations
|
|
|
4,996
|
|
|
|
3,952
|
|
Other accrued liabilities
|
|
|
5,422
|
|
|
|
5,274
|
|
Deferred income on shipments to distributors
|
|
|
22,867
|
|
|
|
24,316
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
51,753
|
|
|
|
59,454
|
|
Deferred compensation plan liability
|
|
|
5,470
|
|
|
|
4,086
|
|
Deferred rent liability
|
|
|
1,590
|
|
|
|
1,449
|
|
Accrued sabbatical compensation
|
|
|
2,805
|
|
|
|
2,739
|
|
Other long-term liabilities, net
|
|
|
11,921
|
|
|
|
7,208
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
73,539
|
|
|
|
74,936
|
|
Commitments and contingencies (Note 4)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value per share;
4,500,000 shares authorized; none issued or outstanding
|
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.001 par value per share;
500,000 shares authorized; none issued or outstanding
|
|
|
|
|
|
|
|
|
Common Stock, $0.001 par value; 55,000,000 shares
authorized; 26,200,052 shares and 25,777,128 shares
issued and outstanding at January 3, 2010, and
January 4, 2009
|
|
|
26
|
|
|
|
25
|
|
Additional paid-in capital
|
|
|
242,109
|
|
|
|
232,168
|
|
(Accumulated deficit)/Retained earnings
|
|
|
(9,250
|
)
|
|
|
36,979
|
|
Accumulated other comprehensive income (loss)
|
|
|
578
|
|
|
|
(847
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
233,463
|
|
|
|
268,325
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
307,002
|
|
|
$
|
343,261
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
47
ACTEL
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended,
|
|
|
|
Jan. 3, 2010
|
|
|
Jan. 4, 2009
|
|
|
Jan. 6, 2008
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
190,633
|
|
|
$
|
218,406
|
|
|
$
|
197,043
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
90,855
|
|
|
|
89,714
|
|
|
|
82,363
|
|
Research and development
|
|
|
60,718
|
|
|
|
65,658
|
|
|
|
63,726
|
|
Selling, general, and administrative
|
|
|
54,746
|
|
|
|
63,145
|
|
|
|
63,053
|
|
Restructuring charge
|
|
|
8,090
|
|
|
|
2,424
|
|
|
|
|
|
Amortization of acquisition-related intangibles
|
|
|
771
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
215,180
|
|
|
|
221,737
|
|
|
|
209,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(24,547
|
)
|
|
|
(3,331
|
)
|
|
|
(12,099
|
)
|
Interest income and other, net
|
|
|
3,263
|
|
|
|
5,433
|
|
|
|
8,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before tax provision (benefit)
|
|
|
(21,284
|
)
|
|
|
2,102
|
|
|
|
(3,492
|
)
|
Tax provision (benefit)
|
|
|
24,945
|
|
|
|
13,827
|
|
|
|
(588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
48
ACTEL
CORPORATION
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
(Accumulated
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Stock
|
|
|
Deficit)/Retained
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
(In thousands, except share amounts)
|
|
|
Balance at December 31, 2006
|
|
$
|
26
|
|
|
$
|
226,443
|
|
|
$
|
|
|
|
$
|
64,578
|
|
|
$
|
(431
|
)
|
|
$
|
290,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,904
|
)
|
|
|
|
|
|
|
(2,904
|
)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain on investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,217
|
|
|
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,687
|
)
|
Cumulative effect adoption of FASB ASC 710
Compensation General, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,485
|
)
|
|
|
|
|
|
|
(2,485
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
7,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,508
|
|
Tax withholding on restricted stock units
|
|
|
|
|
|
|
(2,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,798
|
)
|
Receipt of price differential for remeasured options
|
|
|
|
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 6, 2008
|
|
|
26
|
|
|
|
231,491
|
|
|
|
|
|
|
|
59,189
|
|
|
|
786
|
|
|
|
291,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,725
|
)
|
|
|
|
|
|
|
(11,725
|
)
|
Other comprehensive (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,633
|
)
|
|
|
(1,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,358
|
)
|
Issuance of 569,033 shares of Common Stock under employee
stock plans
|
|
|
|
|
|
|
6,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,540
|
|
Repurchase of Common Stock
|
|
|
(1
|
)
|
|
|
(14,456
|
)
|
|
|
|
|
|
|
(10,485
|
)
|
|
|
|
|
|
|
(24,942
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
9,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,130
|
|
Tax benefit on stock option exercises
|
|
|
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266
|
|
Tax withholding on restricted stock units
|
|
|
|
|
|
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 4, 2009
|
|
|
25
|
|
|
|
232,168
|
|
|
|
|
|
|
|
36,979
|
|
|
|
(847
|
)
|
|
|
268,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,229
|
)
|
|
|
|
|
|
|
(46,229
|
)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain on investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,425
|
|
|
|
1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,804
|
)
|
Issuance of 342,721 shares of Common Stock under employee
stock plans
|
|
|
1
|
|
|
|
2,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,811
|
|
Stock-based compensation
|
|
|
|
|
|
|
7,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,618
|
|
Tax withholding on restricted stock units
|
|
|
|
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2010
|
|
$
|
26
|
|
|
$
|
242,109
|
|
|
$
|
|
|
|
$
|
(9,250
|
)
|
|
$
|
578
|
|
|
$
|
233,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
49
ACTEL
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended,
|
|
|
|
Jan. 3, 2010
|
|
|
Jan. 4, 2009
|
|
|
Jan 6, 2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities, net of effects of acquired business:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
12,896
|
|
|
|
12,645
|
|
|
|
10,373
|
|
Asset impairment charges
|
|
|
5,461
|
|
|
|
244
|
|
|
|
|
|
Investment impairment
|
|
|
286
|
|
|
|
907
|
|
|
|
|
|
Stock compensation costs
|
|
|
7,644
|
|
|
|
9,096
|
|
|
|
7,872
|
|
Wafer prepayment charge
|
|
|
|
|
|
|
|
|
|
|
3,700
|
|
Deferred income taxes
|
|
|
24,712
|
|
|
|
12,783
|
|
|
|
(1,210
|
)
|
Excess tax benefits on option exercises
|
|
|
|
|
|
|
(266
|
)
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(7,516
|
)
|
|
|
7,362
|
|
|
|
3,901
|
|
Inventories
|
|
|
23,280
|
|
|
|
(24,612
|
)
|
|
|
3,491
|
|
Prepaid expenses and other current assets
|
|
|
(1,278
|
)
|
|
|
3,320
|
|
|
|
(767
|
)
|
Other assets, net
|
|
|
(5,860
|
)
|
|
|
(3,709
|
)
|
|
|
(1,909
|
)
|
Accounts payable, accrued compensation and employee benefits,
and other accrued liabilities
|
|
|
(3,675
|
)
|
|
|
5,682
|
|
|
|
(8,595
|
)
|
Deferred income on shipments to distributors
|
|
|
(1,449
|
)
|
|
|
(1,897
|
)
|
|
|
(3,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
8,272
|
|
|
|
9,830
|
|
|
|
10,764
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(5,808
|
)
|
|
|
(21,422
|
)
|
|
|
(13,020
|
)
|
Purchases of
available-for-sale
securities
|
|
|
(80,067
|
)
|
|
|
(69,009
|
)
|
|
|
(44,264
|
)
|
Sales of
available-for-sale
securities
|
|
|
11,511
|
|
|
|
61,563
|
|
|
|
6,934
|
|
Maturities of
available-for-sale
securities
|
|
|
60,834
|
|
|
|
66,043
|
|
|
|
38,545
|
|
Acquisition of Pigeon Point, net of cash acquired
|
|
|
|
|
|
|
(8,350
|
)
|
|
|
|
|
Changes in other long term assets
|
|
|
(711
|
)
|
|
|
(196
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(14,241
|
)
|
|
|
28,629
|
|
|
|
(11,884
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock under employee stock plans
|
|
|
2,811
|
|
|
|
6,540
|
|
|
|
|
|
Excess tax benefit on option exercises
|
|
|
|
|
|
|
266
|
|
|
|
|
|
Tax withholding on restricted stock units
|
|
|
(487
|
)
|
|
|
(803
|
)
|
|
|
(2,798
|
)
|
Receipt of price differential for remeasured options
|
|
|
|
|
|
|
|
|
|
|
338
|
|
Repurchase of Common Stock
|
|
|
|
|
|
|
(24,942
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
2,324
|
|
|
|
(18,939
|
)
|
|
|
(2,460
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(3,645
|
)
|
|
|
19,520
|
|
|
|
(3,580
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
49,639
|
|
|
|
30,119
|
|
|
|
33,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
45,994
|
|
|
$
|
49,639
|
|
|
$
|
30,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes, net
|
|
$
|
589
|
|
|
$
|
447
|
|
|
$
|
428
|
|
Supplemental schedule of non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual of long-term license obligations
|
|
$
|
10,443
|
|
|
$
|
8,201
|
|
|
$
|
3,451
|
|
See Notes to Consolidated Financial Statements
50
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Organization
and Summary of Significant Accounting Policies
|
Actel Corporation is the leading supplier of low-power
field-programmable gate arrays (FPGAs) and
mixed-signal FPGAs. In support of our FPGAs, we offer design and
development software and tools to optimize power consumption;
power-smart intellectual property (IP) cores,
including industry-standard processor technologies; the
industrys smallest footprint packaging; programming
hardware and starter kits; and a variety of design services. We
target a wide range of applications in the aerospace,
automotive, avionics, communications, consumer, industrial and
military markets that require low power consumption or other
attributes of our nonvolatile flash and antifuse-based
technologies that have an inherent competitive advantage over
traditional SRAM-based FPGAs.
Basis
of Presentation and Consolidation
The consolidated financial statements include the accounts of
Actel Corporation and our wholly owned subsidiaries. The
U.S. Dollar is the functional currency in our foreign
operations. Assets and liabilities that are not denominated in
the functional currency are re-measured into U.S. Dollars
and the resulting gains or losses are included in interest
income and other, net of expense. All intercompany accounts and
transactions have been eliminated in consolidation.
Our fiscal year ends on the first Sunday after
December 30th. Fiscal 2009 ended on January 3, 2010,
fiscal 2008 ended on January 4, 2009, and fiscal 2007 ended
on January 6, 2008. Fiscal 2009 consisted of 52 weeks,
fiscal 2008 consisted of 52 weeks and fiscal 2007 consisted
of 53 weeks.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues, and expenses
and the related disclosure of contingent assets and liabilities.
We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ materially from these estimates. In addition, any
change in these estimates or their related assumptions could
have a materially adverse effect on our operating results.
Advertising
and Promotion Costs
Our policy is to expense advertising and promotion costs as they
are incurred. Our advertising and promotion expenses were
approximately $2.9 million in 2009, $3.5 million in
2008 and $3.4 million in 2007 and are included in selling,
general and administrative expenses in the accompanying
consolidated statements of operations.
Cash
Equivalents and Investments
We consider all highly liquid debt instruments with
insignificant interest rate risk and a maturity of three months
or less when purchased to be cash equivalents. Cash equivalents
consist primarily of cash deposits in money market mutual funds
that are available for withdrawal without restriction.
Investments consist principally of corporate, federal, state,
and local municipal obligations. See Note 3 for further
information regarding short-term investments.
We account for our investments in accordance with the provisions
of FASB ASC 320, Accounting for Certain Investments in Debt
and Equity Securities. We determine the appropriate
classification of debt securities at the time of purchase and
re-evaluate such designation as of each balance sheet date. We
may also make long-term equity investments for the promotion of
business and strategic objectives.
51
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We monitor all of our investments for impairment on a periodic
basis. In the event that the carrying value of the investment
exceeds its fair value and the decline in value is determined to
be other than temporary, the carrying value is reduced to its
current fair market value. In the absence of other overriding
factors, we consider a decline in market value to be a potential
indicator of an other than temporary impairment when a publicly
traded stock or a debt security has traded below amortized cost
for a consecutive six-month period. If an investment continues
to trade below amortized cost for more than six months, and
mitigating factors such as general economic and industry
specific trends (including the creditworthiness of the issuer)
are not present, the investment would be evaluated for
impairment and written down to a balance equal to the estimated
fair value at the time of impairment, with the amount of the
write-down recorded in Interest income and other, net, on the
consolidated statements of operations. If management concludes
it does not intend to sell an impaired debt security and it is
not more likely than not it will be required to sell the debt
security before the recovery of its amortized cost basis, and
the issuer of the security is creditworthy, no
other-than-temporary
impairment is deemed to exist. See Note 3 for further
information regarding investments.
Available-for-sale
securities are carried at fair value, with the unrealized gains
and losses reported as a component of accumulated other
comprehensive income in shareholders equity. The amortized
cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity.
Such amortization and accretion is included in interest and
other income, net of expense. The cost of securities sold is
based on the specific identification method. Interest and
dividends on securities classified as
available-for-sale
are included in interest income and other.
We maintain trading assets to generate returns that offset
changes in liabilities related to our deferred compensation
plan. The trading assets consist of insurance contracts, which
are stated at fair value, and our Common Stock contributed to
the plan by participants, which is stated at historical value.
Recognized gains and losses are included in interest income and
other, net of expense, and generally offset the change in the
deferred compensation liability, which is also included in
interest income and other, net of expense. We recorded a gain on
the trading asset portfolio of $0.6 million in 2009. For
2008 and 2007, we recorded net losses on the trading asset
portfolio of $0.3 million and $0.1 million,
respectively. The deferred compensation assets, included under
other assets in the consolidated balance sheets, were
$5.4 million in 2009 and $3.9 million in 2008 and the
deferred compensation liabilities were $5.5 million in 2009
and $4.1 million in 2008.
Concentration
of Credit Risk
Financial instruments that potentially subject us to
concentrations of credit risk consist principally of cash
equivalents, short-term and long-term investments, and trade
receivables. We limit our exposure to credit risk by investing
funds not immediately required for operations only in securities
of A, A1, or P1 grade or better at the time of initial
investment. Subsequent to purchasing these securities we may,
from time to time, experience a downgrade in the ratings of our
securities. When securities are downgraded, we reassess the
securities and take necessary actions to sell or hold these
securities to recovery based on the information available to us.
As of January 3, 2010, we had $4.8 million recorded in
short-term investments and $0.6 million recorded in
long-term investments that had fallen below our initial
investment rating guidelines. We are exposed to credit risks in
the event of default by the financial institutions or issuers of
investments to the extent of amounts recorded on the
consolidated balance sheets.
We sell our products to customers in diversified industries. We
are exposed to credit risks in the event of non-payment by
customers to the extent of amounts recorded on the balance
sheet. We limit our exposure to credit risk by performing
ongoing credit evaluations of our customers financial
condition but we generally require no collateral. We are exposed
to credit risks in the event of insolvency by our customers and
manage such exposure to losses by limiting the amount of credit
extended whenever deemed necessary. Our distributors accounted
for approximately 70% of our revenues in 2009, 74% of our
revenues in 2008 and 77% in 2007. Avnet, Inc.
(Avnet) accounted for 35% of our net revenues in
2009 and 36% in 2008 and 40% in 2007. The loss of Avnet as a
distributor
52
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
could have a material adverse effect on our business, financial
condition and results of operations. In December 2008, the
Company added Future Electronics as an additional North American
distributor.
As of January 3, 2010, we had accounts receivable totaling
$19.1 million, net of an allowance for doubtful accounts of
$0.2 million. Of the $19.1 million in net accounts
receivable, Avnet accounted for 63%. We maintain an allowance
for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. The
allowance for doubtful accounts is based on past payment history
with the customer, analysis of the customers current
financial condition, outstanding invoices older than
90 days, and other known factors.
Fair
Value of Financial Instruments
We use the following methods and assumptions in estimating our
fair value disclosures for financial instruments:
Accounts
Payable and Accrued Liabilities
The carrying amount reported in the balance sheets for accounts
payable approximates fair value because of relatively short
payment terms.
Cash
Equivalents
The carrying amounts reported in the balance sheets for cash
equivalents approximate fair value because of the relatively
short time to maturity.
Accounts
Receivable
The carrying amount reported in the balance sheets for accounts
receivable approximates fair value because of relatively short
collection terms.
Insurance
Contracts
The fair value of our insurance contracts (entered into in
connection with our deferred compensation plan) is based upon
cash surrender value.
Investment
Securities
FASB ASC 820, Fair Value Measurements and Disclosures,
requires us to determine the fair value of financial assets and
liabilities using a specified fair-value hierarchy. The
objective of the fair-value measurement of our financial
instruments is to reflect the hypothetical amounts at which we
could sell an asset or transfer a liability in an orderly
transaction between market participants at the measurement date
(exit price). FASB ASC 820 describes three levels of inputs that
may be used to measure fair value, as follows:
|
|
|
|
|
Level 1 inputs are quoted prices in active markets for
identical assets or liabilities that the reporting entity has
the ability to access at the measurement date.
|
|
|
|
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.
|
|
|
|
Level 3 inputs are unobservable inputs for the asset or
liability that are supported by little or no market activity and
that are significant to the fair value of the underlying asset
or liability.
|
Our
available-for-sale
securities are classified within Level 1 or Level 2 of
the fair-value hierarchy. The types of securities valued based
on Level 1 inputs include money market securities. The
types of securities valued based on Level 2 inputs include
U.S. government agency notes, corporate and municipal
bonds, and asset-backed obligations.
53
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Sabbatical
Leave
In June 2006, the FASB ratified the consensus reached in FASB
ASC 710 Compensation General specifically
relating to subtopics
10-25-1
Compensated Absences and
10-25-4
Sabbatical Leave Benefits. This consensus provides that
sabbatical leave or other similar benefits provided to an
employee shall be accrued over the requisite service period as
described in subtopic
10-25-5.
This FASB ASC 710 was effective for fiscal years beginning after
December 15, 2006, and was adopted by Actel in the first
quarter of fiscal 2007. Actel recorded a $2.5 million
cumulative adjustment, net of tax, to decrease the
January 1, 2007, balance of retained earnings. Actel
adjusts the sabbatical leave accrual based on the estimated
vested benefit.
Impact
of Recently Issued Accounting Standards
In January 2010, the FASB issued Accounting Standards Update
(ASU)
2010-06
relating to FASB ASC 820 Fair Value Measurements and
Disclosures. ASU
2010-06
provides amendments to topic
820-10 which
requires new disclosures regarding transfers in and out of
Levels 1 and 2 and guidance regarding disclosure of
activity in Level 3 (fair value measurements using
significant unobservable inputs). This ASU also provides
amendments to topic
820-10 that
clarify existing disclosures regarding level of disaggregation
and disclosures relating to inputs and valuation techniques. The
new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning
after December 15, 2009, except for disclosures relating to
activity in Level 3, which are effective for fiscal years
beginning after December 15, 2010, and for interim periods
within those fiscal years. The adoption of this ASU in the first
fiscal quarter of 2010 is not expected to have a significant
impact on our consolidated financial statements.
Income
Taxes
We account for income taxes in accordance with FASB ASC 740,
Accounting for Income Taxes, which requires that deferred
tax assets and liabilities be recognized using enacted tax rates
for the effect of temporary differences between the book and tax
bases of recorded assets and liabilities. ASC 740 also requires
that deferred tax assets be reduced by a valuation allowance if
it is more likely than not that some or all of the deferred tax
assets will not be realized. We are required to evaluate the
realizability of our deferred tax assets by assessing our
valuation allowance and, if necessary, adjusting the amount of
such allowance. The factors used to assess the likelihood of
realization include our forecast of future taxable income and
available tax planning strategies that could be implemented to
realize the net deferred tax assets. We assessed the realization
of our deferred tax assets quarterly throughout 2009 and
recorded a full valuation allowance against our deferred tax
assets at the end of the second quarter. For the remainder of
2009, we continued to record a full valuation allowance against
our deferred tax assets because it was more likely than not that
we would not be able to realize these deferred tax assets based
upon our forecast of future taxable income and other relevant
factors. The valuation allowance at the end of 2009 was $52.8
million. We currently intend to maintain a full valuation
allowance against our deferred tax assets. If factors change
that affect our forecast of future taxable income in determining
the realizability of our net deferred tax assets, adjustments
will be made to the amount of the valuation allowance in future
periods.
Inventories
Inventories are stated at the lower of cost
(first-in,
first-out) or market (net realizable value). We believe that a
certain level of inventory must be carried to maintain an
adequate supply of product for customers. This inventory level
may vary based upon orders received from customers or internal
forecasts of demand for these products. Other considerations in
determining inventory levels include the stage of products in
the product life cycle, design win activity, manufacturing lead
times, customer demand, strategic relationships with foundries,
and competitive situations in the marketplace. If any of these
factors develop other than anticipated, inventory levels may be
materially and adversely affected.
54
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We write down our inventory for estimated obsolescence or lack
of sales activity equal to the difference between the cost of
inventory and the estimated realizable value based upon
assumptions about future demand and market conditions. To
address this difficult, subjective, and complex area of
judgment, we apply a methodology that includes assumptions and
estimates to arrive at the net realizable value. First, we
identify any inventory that has been previously written down in
prior periods. Second, we examine inventory line items that may
have some form of non-conformance with electrical and mechanical
standards. Third, we assess the inventory not otherwise
identified to be written down against product history and
forecasted demand. Finally, we analyze the result of this
methodology in light of the product life cycle, design win
activity, and competitive situation in the marketplace to derive
an outlook for consumption of the inventory and the
appropriateness of the resulting inventory levels. If actual
future demand or market conditions are less favorable than those
we have projected, additional inventory write-downs may be
required.
We typically
build-up
inventories of new products early in their life cycles in order
to support anticipated demand and to provide stock inventory to
distributors to support initial sales of the product. The
Company will also establish sufficient inventory levels of new
products to respond quickly to new customer orders. Accordingly,
we typically do not establish excess inventory reserves for
newer products until we have developed sufficient trend
information to support reasonable assumptions regarding
acceptance of the product and future demand trends. After the
product has been available on the market for a sufficient period
of time, generally two years or more, we will begin to assess
the need for excess inventory reserves based on history and
forecasted demand, as noted above.
We continue to hold material from last time buy
inventory purchases made in 2003, 2005, 2007 and 2009 from
certain wafer manufacturers for some of our mature product
families. Last time buys occur when a wafer supplier is about to
shut down the manufacturing line used to make a product and we
believe that our then-current inventories are insufficient to
meet foreseeable future demand. In March 2009, Panasonic
informed us of its intention to cease production of our legacy
ACT products. In order to support our customers future
demands for the ACT products, we entered into a commitment to
purchase from Panasonic approximately $8 million of
last-time-buy wafers relating to our ACT products. As of the end
of fiscal 2009, we had purchased approximately $3.8 million
of last-time-buy wafers from Panasonic. Inventory purchased in
last-time-buy transactions is evaluated on an ongoing basis for
indications of excess quantities or obsolescence based on rates
of actual sell-through, expected future demand for those
products, and any other qualitative factors that may indicate
the existence of excess or obsolete inventory. Inventory at
January 3, 2010 and January 4, 2009, included
$5.1 million and $1.4 million, respectively, of
inventory purchased in last-time-buys. There were no write downs
of last-time-buy inventory during 2009. During 2008, we recorded
a write down against last-time-buy inventory of
$0.5 million.
Property
and Equipment
Property and equipment is carried at cost less accumulated
depreciation and amortization. Depreciation and amortization
have been provided on a straight-line basis over the following
estimated useful lives:
|
|
|
Equipment
|
|
2 to 5 years
|
Furniture and fixtures
|
|
3 to 5 years
|
Leasehold improvements
|
|
Shorter of useful life or remaining term of lease
|
See Note 2 for information on property and equipment
amounts.
Long-Lived
Asset Impairment
We review property and equipment and intangible assets,
excluding goodwill, for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not
be recoverable. If property and equipment and intangible assets
are considered to be impaired, the impairment recognized equals
the amount by which the carrying value of the asset exceeds its
fair market value. During the first quarter of 2008, we began to
experience significant increases in bookings for our flash
product families that includes Fusion, Igloo and
55
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ProASIC3. To support the expected ramp up in manufacturing, we
ordered additional testing and sorting equipment. However, as a
result of the worldwide economic crisis, a significant number of
these product orders were cancelled in the second half of 2008
and the new product sale opportunities did not materialize in
the volumes originally anticipated. As a result, the Company
recorded a non-cash impairment charge of $5.5 million
during the second quarter of 2009 for certain manufacturing
fixed assets that were determined to be in excess of current and
expected future manufacturing requirements and those assets were
taken out of service.
We account for goodwill and other intangible assets under FASB
ASC 350, Goodwill and Other Intangible Assets. Under this
standard, goodwill is tested for impairment annually or more
frequently if certain events or changes in circumstances
indicate that the carrying amount of goodwill exceeds its
implied fair value. The two-step impairment test identifies
potential goodwill impairment and measures the amount of a
goodwill impairment loss to be recognized (if any). The first
step of the goodwill impairment test, used to identify potential
impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. We are a single reporting
unit under FASB ASC 350 and we use an enterprise approach to
determine our total fair value. Since the best evidence of fair
value is quoted market prices in active markets, we start with
our market capitalization as the initial basis for the analysis.
We also consider other factors including control premiums from
observable transactions involving controlling interests in
comparable companies as well as overall market conditions. As
long as we determine our total enterprise fair value is greater
than our book value and we remain a single reporting unit, our
goodwill will be considered not impaired, and the second step of
the impairment test under FASB ASC 350 will be unnecessary. If
our total enterprise fair value were to fall below our book
value, we would proceed to the second step of the goodwill
impairment test, which measures the amount of impairment loss by
comparing the implied fair value of our goodwill with the
carrying amount of our goodwill. As a result of this analysis,
we may be required to write down our goodwill, and recognize a
goodwill impairment loss, equal to the difference between the
book value of goodwill and its implied fair value.
FASB ASC 350 also requires that intangible assets with definite
lives be amortized over their estimated useful lives and
reviewed for impairment whenever events or changes in
circumstances indicate an assets carrying value may not be
recoverable in accordance with FASB ASC 360, Impairment or
Disposal of Long Live Assets. Currently, we amortize our
acquired intangible assets with definite lives over periods
ranging primarily from one to seven years.
Revenue
Recognition
We sell our products to OEMs and to distributors who resell our
products to OEMs or their contract manufacturers. We recognize
revenue on products sold to our OEMs upon shipment. Revenues
generated by the Protocol Design Services organization are
recognized as the services are performed. Because sales to our
distributors are generally made under agreements allowing for
price adjustments, credits, and right of return under certain
circumstances, we generally defer recognition of revenue on
products sold to distributors until the products are resold by
the distributor and price adjustments are determined, at which
time our final net sales price is fixed. Deferred revenue net of
the corresponding deferred cost of sales is recorded in the
caption. Deferred income on shipments to distributors, in the
liability section of the consolidated balance sheet. Deferred
income effectively represents the gross margin on the sale to
the distributor, however, the amount of gross margin we
recognize in future periods will be less than the originally
recorded deferred income as a result of negotiated price
concessions. Distributors resell our products to end customers
at various negotiated price points, which vary based on end
customer, product, quantity, geography and competition. When a
distributors resale is priced at a discount from list
price, we credit back to the distributor a portion of its
original purchase price after the resale transaction is
complete. Thus, a portion of the deferred income on shipments to
distributors balance will be credited back to the distributor in
the future. Based upon historical trends and inventory levels on
hand at each of our distributors as of January 3, 2010, we
currently estimate that approximately $7.1 million of the
deferred income on shipments to distributors on the
Companys consolidated balance sheet as of January 3,
2010, will be credited back to the distributors in the future.
In other words, we expect that this amount will not be
recognized as revenue and gross margin in our
56
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated statement of operations. Since we expect our
distributors to turn their inventory balances five
to six times a year, we expect that a majority of the inventory
held by our distributors at the end of any quarter will be
resold to end customers over the next two quarters.
Revenue recognition depends on notification from the distributor
that product has been resold. This reported information includes
product resale price, quantity, and end customer information as
well as inventory balances on hand. Our revenue reporting is
dependent on us receiving timely and accurate data from our
distributors. In determining the appropriate amount of revenue
to recognize, we use this data from our distributors and apply
judgment in reconciling differences between their reported
inventory and sell-through activities. Because of the time
involved in collecting, assimilating and analyzing the data
provided by our distributors, we receive actual
sell-through
revenue one month in arrears. This practice requires us to make
an estimate of one months distributor
sell-through
activity at the end of each fiscal quarter. This estimate is
adjusted the following month to reflect actual
sell-through
activity reported by our distributors.
We record a provision for price adjustments on unsold
merchandise shipped to distributors in the same period as the
related revenues are recorded. If market conditions were to
decline, we may need to take action with our distributors to
ensure the sell-through of inventory already in the channel.
These actions during a market downturn could result in
incrementally greater reductions to net revenues than otherwise
would be expected. We also record a provision for estimated
sales returns on products shipped directly to end customers in
the same period as the related revenues are recorded. The
provision for sales returns is based on historical sales
returns, analysis of credit memo data, and other factors. If our
estimates do not properly reflect future return patterns, future
net revenues could be materially different.
Stock-Based
Compensation
We account for stock-based compensation in accordance with FASB
ASC 718, Compensation Stock Compensation.
Under the provisions of FASB ASC 718, stock-based compensation
cost is estimated at the grant date based on the awards
fair value and is recognized as expense over the requisite
service period.
Valuation and amortization method The Company
estimates the fair value of stock options granted using the
Black-Scholes-Merton option-pricing formula (BSM
model) and multiple option award approach. This fair value
is then amortized on a straight-line basis over the requisite
service periods of the awards, which is generally the vesting
period. The BSM model requires various highly judgmental
assumptions including volatility and expected term. If any of
the assumptions used in the BSM model changed significantly,
stock-based compensation expense may differ materially in the
future from that recorded in the current period. In addition, we
are required to estimate the expected forfeiture rate and only
recognize expense for those shares expected to vest. We estimate
the forfeiture rate based on historical experience. To the
extent our actual forfeiture is different from our estimate,
stock based compensation expense is adjusted accordingly.
Expected Term The Companys expected
term represents the period that the Companys stock-based
awards are expected to be outstanding and was determined based
on our historical experience of similar awards, giving
consideration to the contractual terms of the stock-based
awards, vesting schedules and expectations of future employee
behavior as influenced by changes in the terms of stock-based
awards.
Expected Volatility The Company places
exclusive reliance on historical stock price volatility that
corresponds to the period of expected term as the Company has no
reason to believe that the future stock price volatility over
the expected term is likely to differ from past stock price
volatility.
Expected Dividend The BSM model calls for a
single expected dividend yield as an input. The dividend yield
is determined by dividing the expected per share dividend during
the coming year by the grant date stock price. The expected
dividend assumption is based on the Companys historical
dividend policy, which was to not pay dividends to its
shareholders.
57
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Risk-Free Interest Rate The Company bases the
risk-free interest rate used on the implied yield currently
available on U.S. Treasury zero-coupon issues with a
remaining term equivalent to the expected life of the award.
When the expected term of the Companys stock-based awards
do not correspond with the terms for which interest rates are
quoted, the Company performs a straight-line interpolation to
determine the rate from the available term maturities.
Fair Value The fair values of the
Companys stock options granted to employees and stock
purchase rights under the Companys Employee Stock Purchase
Plan for the years ended January 3, 2010, January 4,
2009, and January 6, 2008, were estimated using the
following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan, 3, 2010
|
|
Jan, 4, 2009
|
|
Jan. 6, 2008
|
|
Option Plan Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected term (in years)
|
|
|
5.44
|
|
|
|
5.48
|
|
|
|
4.72
|
|
Volatility
|
|
|
50.9
|
%
|
|
|
39.8
|
%
|
|
|
42.3
|
%
|
Risk-free interest rate
|
|
|
2.5
|
%
|
|
|
2.9
|
%
|
|
|
4.0
|
%
|
Weighted-average grant date fair value
|
|
$
|
5.72
|
|
|
$
|
5.66
|
|
|
$
|
4.90
|
|
ESPP Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected term (in years)
|
|
|
1.25
|
|
|
|
1.25
|
|
|
|
|
|
Volatility
|
|
|
62.0
|
%
|
|
|
42.0
|
%
|
|
|
|
|
Risk-free interest rate
|
|
|
0.6
|
%
|
|
|
2.1
|
%
|
|
|
|
|
Weighted-average grant date fair value
|
|
$
|
4.36
|
|
|
$
|
4.01
|
|
|
$
|
|
|
Due to a stock option backdating investigation, during the
fourth quarter of fiscal 2006 the Company suspended further
contributions to the Amended and Restated 1993 Employee Stock
Purchase Plan (ESPP) and refunded all contributions remaining in
the plan. The ESPP remained suspended throughout the fiscal year
ended January 6, 2008, and recommenced in February 2008.
|
|
|
|
|
|
|
|
|
|
|
Jan. 3, 2010
|
|
|
Jan. 4, 2009
|
|
|
|
(In thousands)
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
19,319
|
|
|
$
|
11,952
|
|
Allowance for doubtful accounts
|
|
|
(207
|
)
|
|
|
(356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,112
|
|
|
$
|
11,596
|
|
|
|
|
|
|
|
|
|
|
We sell a majority of our products to distributors who in turn
resell our products to OEMs or their contract manufacturers. Our
payment terms generally require the distributor to settle
amounts owed to us based on list price, which typically is
higher than the final price as a result of negotiated price
adjustments and credits. Accordingly, we typically credit back
to the distributor a portion of their original purchase price,
usually within 30 days after the resale transaction has
been reported to the Company. This practice has an adverse
impact on the working capital of our distributors since they are
required to pay the full list price to us and receive a
subsequent discount only after the product has been resold to a
third party. To mitigate the adverse impact, we have entered
into written arrangements with certain distributors under which
we issue advance credits to the distributors. The advance
credits are updated and settled on a quarterly basis. The
advance credits have no impact on our revenue recognition since
revenue from distributors is not recognized until the
distributor sells the product, but the advance credits reduce
our accounts receivable and our deferred income on shipments to
distributors reflected in our consolidated balance sheets. The
amount of the advance credit as of January 3, 2010, and
January 4, 2009, was $6.7 million and
$6.0 million, respectively.
58
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Jan. 3, 2010
|
|
|
Jan. 4, 2009
|
|
|
|
(In thousands)
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Purchased parts and raw materials
|
|
$
|
8,948
|
|
|
$
|
14,372
|
|
Work-in-process
|
|
|
16,743
|
|
|
|
28,913
|
|
Finished goods
|
|
|
11,633
|
|
|
|
17,345
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,324
|
|
|
$
|
60,630
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
Equipment(1)
|
|
$
|
110,254
|
|
|
$
|
105,895
|
|
Furniture and fixtures
|
|
|
923
|
|
|
|
846
|
|
Leasehold improvements
|
|
|
7,132
|
|
|
|
6,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,309
|
|
|
|
113,544
|
|
Accumulated depreciation
|
|
|
(95,340
|
)
|
|
|
(78,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,969
|
|
|
$
|
34,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $0.5 million of equipment purchased under a
capital lease agreement as of January 3, 2010, and
January 4, 2009. |
Depreciation expense was $12.1 million in 2009,
$11.9 million in 2008 and $10.4 million in 2007, and
is included with amortization expense in the Consolidated
Statements of Cash Flows. Amortization of assets under capital
lease agreements was not material in fiscal 2009 and fiscal 2008.
Goodwill
and other intangible assets, net
Our net goodwill and other intangible assets were
$34.9 million at the end of 2009 and $35.5 million at
the end of 2008. The slight decrease was due to the realization
of certain net operating loss carry forwards associated with our
acquisition of Gatefield Corporation in 2000. We had originally
established a valuation allowance for a portion of the net
operating loss carry forwards acquired in connection with the
acquisition of Gatefield. To the extent such valuation allowance
is subsequently reversed as a result of the realization of the
deferred tax asset, FASB ASC 805, Business Combinations,
requires that the offsetting credit be recognized first as a
reduction of goodwill (which the Company reflects as an increase
in the accumulated goodwill amortization relating to the
valuation allowance).
During fiscal 2008, we acquired $5.4 million of identified
intangible assets in connection with our acquisition of Pigeon
Point Systems. As a result of this, we recorded an amortization
expense of $0.8 million relating to identified intangible
assets for both 2009 and 2008.
59
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill and identified intangible assets as of January 3,
2010, and January 4, 2009, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
|
|
|
|
Assets
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
January 3, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
30,946
|
|
|
$
|
|
|
|
$
|
30,946
|
|
Acquisition-related developed technology
|
|
|
15,123
|
|
|
|
(12,239
|
)
|
|
|
2,884
|
|
Other acquisition-related intangibles
|
|
|
3,044
|
|
|
|
(1,935
|
)
|
|
|
1,109
|
|
Acquired patents
|
|
|
1,842
|
|
|
|
(1,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and identified intangible assets
|
|
$
|
71,152
|
|
|
$
|
(36,213
|
)
|
|
$
|
34,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
|
|
|
|
Assets
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
January 4, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
30,776
|
|
|
$
|
|
|
|
$
|
30,776
|
|
Acquisition-related developed technology
|
|
|
15,123
|
|
|
|
(11,715
|
)
|
|
|
3,408
|
|
Other acquisition-related intangibles
|
|
|
3,044
|
|
|
|
(1,688
|
)
|
|
|
1,356
|
|
Acquired patents
|
|
|
1,842
|
|
|
|
(1,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and identified intangible assets
|
|
$
|
70,982
|
|
|
$
|
(35,442
|
)
|
|
$
|
35,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to identifiable intangible assets
was $0.8 million, $0.8 million and $0 for fiscal 2009,
2008 and 2007, respectively. Identifiable intangible assets
amortized during the year ended January 3, 2010 relate to
the acquisition of Pigeon Point Systems. See Note 13.
Amortization of identifiable intangible assets is expected to be
approximately $0.8 million during 2010 and 2011,
$0.7 million during 2012, $0.6 million during 2013 and
2014, $0.3 million during 2015 and $0.1 million
thereafter.
|
|
|
|
|
|
|
|
|
|
|
Jan. 3, 2010
|
|
|
Jan. 4, 2009
|
|
|
|
(In thousands)
|
|
|
Other Assets, net:
|
|
|
|
|
|
|
|
|
Prepaid long-term license fees
|
|
$
|
23,595
|
|
|
$
|
17,624
|
|
Deferred compensation plan assets
|
|
|
5,352
|
|
|
|
3,920
|
|
Other
|
|
|
1,152
|
|
|
|
478
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,099
|
|
|
$
|
22,022
|
|
|
|
|
|
|
|
|
|
|
Pursuant to FASB ASC 820, Fair Value Measurements and
Disclosures, our
available-for-sale
securities are classified within Level 1 or Level 2 of
the fair-value hierarchy. The types of securities valued based
on Level 1 inputs include money market securities. The
types of securities valued based on Level 2 inputs include
U.S. government agency notes, corporate and municipal
bonds, and asset-backed obligations.
60
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes our financial instruments
measured at fair value on a recurring basis in accordance with
FASB ASC 820 as of January 3, 2010, and January 4,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable Inputs
|
|
|
Unobservable
|
|
Description
|
|
Total
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
January 3, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
17,147
|
|
|
$
|
17,147
|
|
|
|
|
|
|
|
|
|
Asset backed obligations
|
|
|
11,208
|
|
|
|
|
|
|
$
|
11,208
|
|
|
|
|
|
Commercial paper
|
|
|
9,583
|
|
|
|
|
|
|
|
9,583
|
|
|
|
|
|
Corporate bonds
|
|
|
27,662
|
|
|
|
|
|
|
|
27,662
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
7,210
|
|
|
|
|
|
|
|
7,210
|
|
|
|
|
|
U.S. government agency securities
|
|
|
25,781
|
|
|
|
|
|
|
|
25,781
|
|
|
|
|
|
Bonds issued by foreign countries
|
|
|
10,483
|
|
|
|
|
|
|
|
10,483
|
|
|
|
|
|
Municipal bonds
|
|
|
7,090
|
|
|
|
|
|
|
|
7,090
|
|
|
|
|
|
Certificate of Deposit
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
Floating rate notes
|
|
|
15,838
|
|
|
|
|
|
|
|
15,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
133,002
|
|
|
$
|
17,147
|
|
|
$
|
115,855
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable Inputs
|
|
|
Unobservable
|
|
Description
|
|
Total
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
Inputs (Level 3)
|
|
|
January 4, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
36,580
|
|
|
$
|
36,580
|
|
|
|
|
|
|
|
|
|
Asset backed obligations
|
|
|
23,671
|
|
|
|
|
|
|
$
|
23,671
|
|
|
|
|
|
Corporate bonds
|
|
|
36,799
|
|
|
|
|
|
|
|
36,799
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
3,572
|
|
|
|
|
|
|
|
3,572
|
|
|
|
|
|
U.S. government agency securities
|
|
|
31,375
|
|
|
|
|
|
|
|
31,375
|
|
|
|
|
|
Floating rate notes
|
|
|
1,501
|
|
|
|
|
|
|
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
133,498
|
|
|
$
|
36,580
|
|
|
$
|
96,918
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2009, we evaluated indicators of impairment during our
review of our investment portfolio. With respect to determining
an
other-than-temporary
impairment charge, our evaluation included reviewing:
|
|
|
|
|
If it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of a debt
security not impaired at acquisition;
|
61
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
If the decline in a securitys value is due to an increase
in market interest rates or a change in foreign exchange rates
since acquisition (examples of when a decline in the fair value
of a debt security may be other than temporary include
situations where the security will be disposed of before it
matures or the investment is not realizable);
|
|
|
|
If the Company has decided to sell an impaired
available-for-sale
security and does not expect the fair value of the security to
fully recover before the expected time of sale, the security
shall be deemed
other-than-temporarily
impaired in the period in which the decision to sell is made;
|
|
|
|
If the Company intends to sell a specifically identified
available-for-sale
debt or equity security at a loss shortly after the balance
sheet date, the Company shall recognize an
other-than-temporary
impairment; and
|
|
|
|
If the Company does not intend to sell (debt) securities and it
is determined that it is not more likely than not that the
Company will be required to sell the security before recovery of
its amortized cost basis less any current-period credit loss,
then any recognized
other-than-temporary
impairment shall be separated into both of the following:
(a) the amount representing the credit loss; and
(b) the amount related to all other factors.
|
As of January 3, 2010, the Company assessed its investments
to determine if there were any other than temporary impairments
(OTTI) apart from the OTTI recorded in fiscal 2008 relating to a
corporate bond investment. As a result of the sale of a bond in
January 2010 at a realized loss of $0.3 million, the
Company recorded an OTTI loss of $0.3 million as of
January 3, 2010. We invest funds not immediately required
for operations in investment portfolios consisting primarily of
corporate bonds, floating rate notes, and federal and municipal
obligations. During periods when market interest rates are
falling, and for some time after rates stabilize, we typically
experience declines in interest income as our older debt
investments at higher interest rates mature and are replaced by
new investments at the lower rates available in the market.
Although the current credit environment continues to be volatile
and uncertain, we do not believe that sufficient evidence exists
at this point in time to conclude that any of our remaining
investments experienced an OTTI in the twelve months ended
January 3, 2010. We continue to monitor our investments
closely to determine if additional information becomes available
that may have an adverse effect on the fair value and ultimate
realizability of our investments.
Realized gains and losses from sales of
available-for-sale
securities included in net income (loss) for the periods
presented are reported in interest income and other, net of
expense, on the consolidated statements of operations, as
follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Jan. 3,
|
|
Jan. 4,
|
|
|
2010
|
|
2009
|
|
|
(In thousands)
|
|
Gross realized gains
|
|
$
|
42
|
|
|
$
|
154
|
|
Gross realized losses
|
|
$
|
(367
|
)
|
|
$
|
(299
|
)
|
62
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of
available-for-sale
securities at January 3, 2010, and January 4, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Values
|
|
|
|
(In thousands)
|
|
|
January 3, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
17,147
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,147
|
|
Asset backed obligations
|
|
|
11,437
|
|
|
|
214
|
|
|
|
(443
|
)
|
|
|
11,208
|
|
Commercial paper
|
|
|
9,582
|
|
|
|
1
|
|
|
|
|
|
|
|
9,583
|
|
Corporate bonds
|
|
|
27,184
|
|
|
|
512
|
|
|
|
(34
|
)
|
|
|
27,662
|
|
U.S. Treasury obligations
|
|
|
7,140
|
|
|
|
73
|
|
|
|
(3
|
)
|
|
|
7,210
|
|
U.S. government agency securities
|
|
|
25,285
|
|
|
|
516
|
|
|
|
(20
|
)
|
|
|
25,781
|
|
Bonds issued by foreign countries
|
|
|
10,418
|
|
|
|
77
|
|
|
|
(12
|
)
|
|
|
10,483
|
|
Municipal bonds
|
|
|
7,062
|
|
|
|
31
|
|
|
|
(3
|
)
|
|
|
7,090
|
|
Certificate of Deposit
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Floating rate notes
|
|
|
15,779
|
|
|
|
63
|
|
|
|
(4
|
)
|
|
|
15,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
132,034
|
|
|
$
|
1,487
|
|
|
$
|
(519
|
)
|
|
$
|
133,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,332
|
|
Included in short term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,007
|
|
Included in long term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
133,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Values
|
|
|
|
(In thousands)
|
|
|
January 4, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
36,580
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
36,580
|
|
Asset backed obligations
|
|
|
25,559
|
|
|
|
5
|
|
|
|
(1,893
|
)
|
|
|
23,671
|
|
Corporate bonds
|
|
|
37,032
|
|
|
|
198
|
|
|
|
(431
|
)
|
|
|
36,799
|
|
U.S. Treasury obligations
|
|
|
3,549
|
|
|
|
23
|
|
|
|
|
|
|
|
3,572
|
|
U.S. government agency securities
|
|
|
30,629
|
|
|
|
746
|
|
|
|
|
|
|
|
31,375
|
|
Floating rate notes
|
|
|
1,500
|
|
|
|
1
|
|
|
|
|
|
|
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
134,849
|
|
|
$
|
973
|
|
|
$
|
(2,324
|
)
|
|
$
|
133,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,580
|
|
Included in short term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,111
|
|
Included in long term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
133,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of
available-for-sale
securities that were in an unrealized loss position as of
January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
Aggregate
|
|
|
Value of
|
|
Fair Value
|
|
|
Unrealized
|
|
of
|
|
|
Loss
|
|
Investments
|
|
|
(In thousands)
|
|
Unrealized loss position for less than twelve months
|
|
$
|
(15
|
)
|
|
$
|
9,883
|
|
Unrealized loss position for greater than twelve months
|
|
$
|
(443
|
)
|
|
$
|
663
|
|
The following is a summary of
available-for-sale
securities that were in an unrealized loss position as of
January 4, 2009:
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
Aggregate
|
|
|
Value of
|
|
Fair Value
|
|
|
Unrealized
|
|
of
|
|
|
Loss
|
|
Investments
|
|
|
(In thousands)
|
|
Unrealized loss position for less than twelve months
|
|
$
|
(675
|
)
|
|
$
|
32,646
|
|
Unrealized loss position for greater than twelve months
|
|
$
|
(1,649
|
)
|
|
$
|
10,051
|
|
At January 3, 2010 and January 4, 2009, we classified
$0.7 million and $7.8 million, respectively, of the
investments we intend to hold to recovery as long-term because
they have been in an unrealized loss position for greater than
six months and carry maturity dates greater than twelve months
from the balance sheet date. It is our intention and within our
ability, as necessary, to hold these securities in an unrealized
loss position for a period of time sufficient to allow for an
anticipated recovery of fair value up to (or greater than) the
cost of the investment. In addition, we have assessed the
creditworthiness of the issuers of these securities and have
concluded, based upon all these factors, that an
other-than-temporary
impairment of these securities does not exist at January 3,
2010.
The adjustments to unrealized gains (losses) on investments, net
of taxes, included as a separate component of shareholders
equity totaled $1.4 million for the year ended
January 3, 2010, $(1.6) million for the year ended
January 4, 2009, and $1.2 million for the year ended
January 6, 2008. See Note 7 for information regarding
other comprehensive income (loss).
The expected maturities of our investments in debt securities at
January 3, 2010, and January 4, 2009, are shown below.
Expected maturities can differ from contractual maturities
because the issuers of the securities may have the right to
prepay obligations without prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Available-for-sale
debt securities:
|
|
|
|
|
|
|
|
|
Due in less than one year
|
|
$
|
65,238
|
|
|
$
|
52,384
|
|
Due in one to five years
|
|
|
50,059
|
|
|
|
44,534
|
|
Due in five to ten years
|
|
|
|
|
|
|
|
|
Due greater than ten years
|
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
115,855
|
|
|
$
|
96,918
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Commitments
and Contingencies
|
Commitments
We lease our facilities under non-cancelable lease agreements.
The current primary facilities lease agreement expires in
January 2014 and includes an annual increase in lease payments
of three percent per year. We have two renewal options for five
year extensions of the lease term. In addition to our facility
in Mountain View,
64
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
California, we also lease sales offices in various countries
around the world to support our worldwide customer base.
Facilities lease expense is recorded on a straight-line basis
over the term of the lease, including the impact of scheduled
rent increases. Our facilities and non-Mountain View equipment
leases are accounted for as operating leases and require us to
pay property taxes, insurance and maintenance, and repair costs.
Rental expense under operating leases was approximately
$4.1 million for 2009, $4.0 million for 2008, and
$3.8 million for 2007.
In November 2008, we entered into an agreement to lease certain
office equipment in our Mountain View, California, facility
under a non-cancelable capital lease agreement that expires in
November 2013. The equipment under the lease is included on our
consolidated balance sheet, net of accumulated depreciation, in
Property and equipment, net and is being amortized
over the term of the agreement. The corresponding liability is
included in Accrued licenses and lease obligations
and Other long-term liabilities, net on our
consolidated balance sheet as of January 3, 2010.
As of January 3, 2010, the Company has approximately
$14.4 million of non-cancelable obligations to providers of
electronic design automation (EDA) software expiring at various
dates through 2012. The current portion of these license
obligations of $4.9 million is recorded in Accrued
licenses and lease obligations and the long-term portion
of these obligations of $9.5 million is recorded at net
present value in Other long-term liabilities on our
consolidated balance sheet. Interest expense implicit in these
long-term license obligations is being amortized to the
consolidated statements of operations. The assets related to
these commitments of $23.6 million are recorded in the
Other assets, net line of our consolidated balance
sheet as of January 3, 2010. The license fees are amortized
on a straight-line basis over the term of the respective
licensing agreements and were approximately $3.8 million in
2009 and $4.6 million for both 2008 and 2007. We recorded
$0.1 million for both 2009 and 2008 and $0.2 million
in 2007 for interest expense related to these obligations.
The following represents contractual commitments associated with
our operating leases and capital leases ($0.4 million
relates to capital lease and the related interest portion is
immaterial) at January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
Total
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
and Later
|
|
|
|
(In thousands)
|
|
|
Operating and capital leases(1)
|
|
$
|
14,750
|
|
|
$
|
3,740
|
|
|
$
|
3,411
|
|
|
$
|
3,402
|
|
|
$
|
3,474
|
|
|
$
|
539
|
|
|
$
|
184
|
|
Inventory purchase obligations relating to last-time-buy
inventory
|
|
|
4,200
|
|
|
|
4,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit
|
|
|
1,400
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
20,350
|
|
|
$
|
9,340
|
|
|
$
|
3,411
|
|
|
$
|
3,402
|
|
|
$
|
3,474
|
|
|
$
|
539
|
|
|
$
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes sublease income of $56,163 per month from October 2010
through January 2014 attributable to a sublease agreement
executed in February 2010. |
Purchase orders or contracts for the purchase of raw materials,
apart from the last-time-buy inventory disclosed above, and
other goods and services are not included in the table above. We
are not able to determine the aggregate amount of such purchase
orders that represent contractual obligations as purchase orders
may represent authorizations to purchase rather than binding
agreements. In order to support our customers future
demands for the ACT products, we committed to purchase from
Panasonic approximately $8 million of last-time-buy wafers.
As of January 3, 2010, we had purchased approximately
$3.8 million of last-time-buy wafers from Panasonic.
65
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Contingencies
We have an irrevocable standby letter of credit in favor of
Britannia Hacienda in care of Britannia Management Services in
the amount of $0.5 million pursuant to the terms and
conditions of the lease for our principal facilities and
executive offices located in Mountain View, California. In
addition, we have established two irrevocable letters of credit
in favor of:
|
|
|
|
|
Panasonic Corporation (formerly Matsushita Electric Industrial
Co. Ltd.), one of our foundry partners, in the amount of
Japanese Yen 60 million (approximately
$0.7 million), and
|
|
|
|
Employment Development Department of the State of California in
the amount $0.2 million.
|
Our agreement with Wells Fargo Bank under which these letters of
credit were issued requires us to maintain certain financial
ratios and levels of net worth. At January 3, 2010, we were
in compliance with the covenants for the letters of credit.
|
|
5.
|
Defined
Contribution Plan
|
Effective December 10, 1987, we adopted a defined
contribution plan (commonly known as a 401(k) plan) for the
benefit of qualified employees. The plan is designed to provide
employees with an accumulation of funds at retirement. Employees
may elect at any time to have salary reduction contributions
made to the plan.
We may make contributions to the plan at the discretion of the
Board of Directors. We made no contribution to the plan in 2009,
2008 or 2007. Company contributions vest annually, retroactively
from an eligible employees date of hire, at the rate of
25% per year. In addition, contributions become fully vested
upon retirement from Actel at age 65. There is no guarantee
we will make any contributions to the plan in the future,
regardless of our financial performance.
|
|
6.
|
Stock
Based Compensation
|
Stock-Based
Compensation Expense
The Company recorded $7.6 million, $9.1 million and
$7.9 million of stock-based compensation expense for the
years ended January 3, 2010, January 4, 2009, and
January 6, 2008, respectively. The following table
summarizes the distribution of stock-based compensation expense
for the years ended January 3, 2010, January 4, 2009,
and January 6, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of revenues
|
|
$
|
479
|
|
|
$
|
410
|
|
|
$
|
554
|
|
Research and development
|
|
|
3,765
|
|
|
|
4,146
|
|
|
|
4,024
|
|
Selling, general, and administrative
|
|
|
3,400
|
|
|
|
4,540
|
|
|
|
3,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense, before income taxes
|
|
|
7,644
|
|
|
|
9,096
|
|
|
|
7,872
|
|
Tax benefit
|
|
|
|
|
|
|
(1,796
|
)
|
|
|
(1,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense, net of income taxes
|
|
$
|
7,644
|
|
|
$
|
7,300
|
|
|
$
|
6,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense for 2008 includes
$0.1 million associated with the reduction in force during
the fourth quarter. The Company accelerated the vesting and
extended the life of certain stock options through
December 15, 2008, for employees terminated as part of the
reduction in force. The acceleration and extension represented
modifications to these options that resulted in the additional
stock-based compensation charge.
Stock-based compensation expense for 2007 includes
$1.0 million associated with the extension of employee
options that were scheduled to expire during 2007 during the
stock option backdating investigation and related
66
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
employee trading blackout period. The Company agreed to extend
the life of the expiring options for continuing employees until
30 days following the end of the blackout period. This
extension represented a modification to these options, which
resulted in an additional charge during 2007 of
$0.7 million. In addition, the Company agreed to extend the
life of expiring options for certain terminated employees until
30 days following the end of the blackout period. This
extension represented a modification to these options that
resulted in an additional stock-based compensation charge during
2007 of $0.3 million.
In addition, stock-based compensation costs of $0.2 million
for the years ended January 3, 2010, and January 4,
2009, and $0.1 million for year ended January 6, 2008,
were included in inventory respectively.
As of January 3, 2010, the total compensation cost related
to options and restricted stock units granted to employees under
the Companys stock option plans but not yet recognized was
$12.0 million. This cost will be amortized over a
weighted-average period of 1.87 years.
As of January 3, 2010, the total compensation cost related
to options to purchase shares of the Companys Common Stock
under the ESPP but not yet recognized was $0.3 million.
This cost will be amortized over a weighted-average period of
1.16 years.
The total fair value of shares vested during the years ended
January 3, 2010, January 4, 2009, and January 6,
2008 were $7.6 million, $7.7 million and
$6.1 million, respectively.
Cash received from exercises of stock options for the year ended
January 3, 2010, was $0.6 million and
$4.4 million for the year ended January 4, 2009. Cash
received from purchases of stock under our employee stock
purchase plan for the year ended January 3, 2010, was
$2.2 million and $2.1 million for the year ended
January 4, 2009. There were no exercises of stock options
or purchases of stock under our employee stock purchase plan for
the year ended January 6, 2008, due to the stock option
investigation and related suspension of our ESPP.
Under FASB ASC 718, Compensation Stock
Compensation, the benefits of tax deductions in excess of
recognized compensation cost is to be reported as a financing
cash flow rather than as an operating cash flow. The future
realizability of tax benefits related to stock compensation is
dependent upon the timing of employee exercises and future
taxable income, among other factors. For the fiscal years ended
January 3, 2010, January 4, 2009, and January 6,
2008, we recognized $0, $0.3 million and $0 in tax
benefits, respectively.
Stock
Option Plans
We have adopted stock option plans under which officers,
employees, and consultants may be granted incentive stock
options, nonqualified options or stock appreciation rights to
purchase shares of our Common Stock. At January 3, 2010,
16,810,789 shares of Common Stock were reserved for
issuance under these plans, of which 3,776,575 were available
for grant. There were no options granted to consultants in 2009,
2008 or 2007.
We also have a Directors Stock Option Plan under which
directors who are not employees of Actel may be granted
nonqualified options to purchase shares of our Common Stock. At
January 3, 2010, 500,000 shares of Common Stock were
reserved for issuance under such plan, of which 137,500 were
available for grant.
We generally grant stock options or stock appreciation rights
under our plans at a price equal to the fair value of our Common
Stock on the date of grant. Subject to continued service,
options generally vest over a period of four years and expire
ten years from the date of grant.
67
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company issues shares of Common Stock upon the exercise of
stock options. The following table summarizes our stock option
(including stock appreciation rights) activity and related
information for the three years ended January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
of Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Outstanding at December 31, 2006
|
|
|
5,664,854
|
|
|
$
|
16.71
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
978,595
|
|
|
|
11.84
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(770,023
|
)
|
|
|
15.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 6, 2008
|
|
|
5,873,426
|
|
|
|
16.07
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,207,743
|
|
|
|
13.93
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(362,805
|
)
|
|
|
12.07
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(370,633
|
)
|
|
|
17.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 4, 2009
|
|
|
6,347,731
|
|
|
|
16.05
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,012,305
|
|
|
|
11.85
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(54,330
|
)
|
|
|
11.08
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(1,076,262
|
)
|
|
|
15.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 3, 2010
|
|
|
6,229,444
|
|
|
$
|
15.50
|
|
|
|
6.00
|
|
|
$
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at January 3, 2010
|
|
|
6,131,190
|
|
|
$
|
15.55
|
|
|
|
5.95
|
|
|
$
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at January 3, 2010
|
|
|
4,070,665
|
|
|
$
|
16.97
|
|
|
|
4.57
|
|
|
$
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value is calculated as the difference
between the cash exercise price of the underlying awards and the
quoted price of the Companys Common Stock for all options
outstanding that were
in-the-money
at January 3, 2010. During the years ended January 3,
2010, January 4, 2009, and January 6, 2008, the
aggregate intrinsic value of options exercised under the
Companys stock option plans were $0.1 million,
$1.5 million and $0, respectively, determined as of the
date of option exercise. There were no options exercised under
the Companys stock option plans during the year ended
January 6, 2008.
68
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes information about stock options
(including stock appreciation rights) outstanding at
January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2010
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Contract
|
|
Average
|
|
|
|
Average
|
|
|
Number of
|
|
Life
|
|
Exercise
|
|
Number of
|
|
Exercise
|
Range of Exercise Prices
|
|
Shares
|
|
(In Years)
|
|
Price
|
|
Shares
|
|
Price
|
|
$ 0.07 - 11.05
|
|
|
820,666
|
|
|
|
8.17
|
|
|
$
|
10.85
|
|
|
|
380,944
|
|
|
$
|
10.83
|
|
11.07 - 12.46
|
|
|
969,277
|
|
|
|
9.14
|
|
|
|
12.16
|
|
|
|
135,760
|
|
|
|
12.13
|
|
12.51 - 13.08
|
|
|
655,631
|
|
|
|
7.66
|
|
|
|
12.94
|
|
|
|
118,080
|
|
|
|
12.73
|
|
13.48 - 14.77
|
|
|
806,925
|
|
|
|
5.88
|
|
|
|
14.47
|
|
|
|
743,834
|
|
|
|
14.48
|
|
14.78 - 15.49
|
|
|
716,145
|
|
|
|
4.19
|
|
|
|
15.19
|
|
|
|
595,241
|
|
|
|
15.13
|
|
15.70 - 15.99
|
|
|
674,372
|
|
|
|
5.10
|
|
|
|
15.73
|
|
|
|
662,894
|
|
|
|
15.73
|
|
16.08 - 19.05
|
|
|
670,684
|
|
|
|
5.70
|
|
|
|
17.40
|
|
|
|
518,168
|
|
|
|
17.50
|
|
19.73 - 24.76
|
|
|
648,094
|
|
|
|
2.47
|
|
|
|
22.35
|
|
|
|
648,094
|
|
|
|
22.35
|
|
25.00 - 35.50
|
|
|
261,650
|
|
|
|
0.67
|
|
|
|
29.99
|
|
|
|
261,650
|
|
|
|
29.98
|
|
36.00 - 36.00
|
|
|
6,000
|
|
|
|
0.76
|
|
|
|
36.00
|
|
|
|
6,000
|
|
|
|
36.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,229,444
|
|
|
|
6.00
|
|
|
$
|
15.50
|
|
|
|
4,070,665
|
|
|
$
|
16.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 4, 2009, 4,266,175 outstanding options and stock
appreciation rights were exercisable.
Employee
Stock Purchase Plan
The ESPP gives employees the opportunity to purchase shares of
Common Stock through payroll deductions. The ESPP consists of
continuous and overlapping
24-month
offering periods commencing on or about February 1 and August 1
of each year. Each offering period consists of four six-month
purchase periods in which shares are purchased on an
employees behalf. To participate in the ESPP, eligible
employees authorize payroll deductions not to exceed 15% of a
participants compensation during the offering period and
$10,000 in any calendar year. At the end of each purchase
period, shares are purchased on an employees behalf at a
purchase price equal to 85% of the lesser of the fair market
value of the Common Stock on (i) the first trading day of
the offering period or (ii) the last day of the purchase
period. At January 3, 2010, and January 4, 2009,
2,000,370 and 288,576 shares of Common Stock were available
for issuance under the ESPP, respectively. There were 288,206
and 206,228 issued under the Companys ESPP in 2009 and
2008, respectively. There were no shares issued in 2007 under
the ESPP. The Company recorded $1.5 million and
$2.7 million of stock-based compensation expense relating
to the ESPP for the years ended January 3, 2010, and
January 4, 2009, respectively.
Due to the stock option backdating investigation, the Company
suspended further contributions to the ESPP during the fourth
quarter of fiscal 2006 and refunded all contributions remaining
in the plan. Accordingly, there were no ESPP options outstanding
at January 6, 2008. In connection with the ESPP suspension,
the Company recorded a charge of $1.0 million for the year
ended January 6, 2008, which represented the remaining
unamortized fair value of the ESPP options canceled.
During the years ended January 3, 2010, January 4,
2009, and January 6, 2008, the aggregate intrinsic value of
shares purchased under the Companys ESPP were
$0.4 million, $0.4 million and $0 million,
respectively. There were no shares purchased under the
Companys ESPP during the year ended January 6, 2008.
69
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted
Stock Units (RSUs)
On December 1, 2005, Actel offered to certain employees the
opportunity to participate in an employee Stock
Option/Restricted Stock Unit Exchange Program (the
Exchange Program). Under the Exchange Program,
employees were allowed to exchange eligible stock
options for restricted stock units.
Eligible stock options were all unexercised stock
options (whether vested or unvested) with an exercise price per
share of $19.73 or more. The number of restricted stock units
that an employee would receive in exchange for the eligible
stock options, as well as the vesting schedule of the restricted
stock units, depended on the number and exercise price of the
eligible stock options exchanged.
During fiscal years 2009, 2008, and 2007, we granted RSUs to
certain US employees as part of our long-term equity incentive
program. The RSUs granted under this program vest over a period
of four years. As of January 3, 2010, the total
compensation cost not yet recognized related to RSUs granted
subsequent to January 3, 2006, was $2.6 million with a
weighted average period of 2.4 years. The Company issues
shares of Common Stock upon the vesting of RSUs. The following
is a summary of RSU activity through January 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at December 31, 2006
|
|
|
810,686
|
|
|
$
|
13.48
|
|
Granted
|
|
|
127,523
|
|
|
|
11.05
|
|
Vested
|
|
|
(535,136
|
)
|
|
|
13.17
|
|
Forfeited
|
|
|
(59,713
|
)
|
|
|
13.65
|
|
|
|
|
|
|
|
|
|
|
Nonvested at January 6, 2008
|
|
|
343,360
|
|
|
$
|
13.03
|
|
Granted
|
|
|
133,638
|
|
|
|
13.00
|
|
Vested
|
|
|
(145,930
|
)
|
|
|
13.85
|
|
Forfeited
|
|
|
(40,620
|
)
|
|
|
12.89
|
|
|
|
|
|
|
|
|
|
|
Nonvested at January 4, 2009
|
|
|
290,448
|
|
|
$
|
12.63
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
158,308
|
|
|
|
12.18
|
|
Vested
|
|
|
(120,667
|
)
|
|
|
12.14
|
|
Forfeited
|
|
|
(20,162
|
)
|
|
|
12.64
|
|
|
|
|
|
|
|
|
|
|
Nonvested at January 3, 2010
|
|
|
307,927
|
|
|
$
|
12.58
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
Comprehensive
Income (Loss)
|
The components of comprehensive income (loss), net of tax, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
Change in gain (loss) on
available-for-sale
securities, net of tax of $769 in 2009, $(1,429) in 2008, and
$768 in 2007
|
|
|
1,224
|
|
|
|
(2,279
|
)
|
|
|
1,224
|
|
Reclassification adjustment for gains or losses included in net
income (loss), net of tax of $125 in 2009, $405 in 2008, and
($4) in 2007
|
|
|
200
|
|
|
|
646
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax of $894 in 2009,
$(1,024) in 2008, and $764 in 2007
|
|
|
1,424
|
|
|
|
(1,633
|
)
|
|
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$
|
(44,805
|
)
|
|
$
|
(13,358
|
)
|
|
$
|
(1,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accumulated other comprehensive loss for 2009, 2008 and 2007 is
presented on the consolidated balance sheets and consists solely
of the accumulated net unrealized gain or loss on
available-for-sale
securities.
The following table summarizes the activity related to our
unrecognized tax benefits for the years ended January 4,
2009, and January 3, 2010 (in thousands):
|
|
|
|
|
January 4, 2009
|
|
|
|
|
Balance at January 6, 2008
|
|
$
|
3,233
|
|
Increases relating to current year provisions
|
|
|
629
|
|
|
|
|
|
|
Ending balance at January 4, 2009
|
|
$
|
3,862
|
|
|
|
|
|
|
January 3, 2010
|
|
|
|
|
Balance at January 4, 2009
|
|
$
|
3,862
|
|
Decreases related to prior years provision
|
|
|
(97
|
)
|
Increases relating to current year provisions
|
|
|
806
|
|
|
|
|
|
|
Ending balance at January 3, 2010
|
|
$
|
4,571
|
|
|
|
|
|
|
Of the $4.6 million of unrecognized tax benefits,
$0.7 million, if recognized, would affect the effective tax
rate. We expect a portion of the unrecognized tax benefit to be
settled within the next 12 months.
We file income tax returns in the U.S. federal
jurisdiction, California, and various state and foreign tax
jurisdictions in which we have a subsidiary or branch operation.
The tax years 2003 to 2009 remain open to examination by
U.S. and state tax authorities, and the tax years 2004 to
2009 remain open to examination by foreign tax authorities.
Our policy is to recognize interest and penalties accrued on any
uncertain tax positions as a component of income tax expense. As
of January 3, 2010, we had $0.1 million of accrued
interest and penalties associated with uncertain tax positions.
The components of income (loss) before income taxes were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
U.S.
|
|
$
|
(21,570
|
)
|
|
$
|
812
|
|
|
$
|
(4,002
|
)
|
Foreign
|
|
|
286
|
|
|
|
1,290
|
|
|
|
510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(loss) before tax provision (benefit)
|
|
$
|
(21,284
|
)
|
|
$
|
2,102
|
|
|
$
|
(3,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax provision (benefit) consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Federal current
|
|
$
|
(1,027
|
)
|
|
$
|
222
|
|
|
$
|
|
|
Federal deferred
|
|
|
21,726
|
|
|
|
7,675
|
|
|
|
(232
|
)
|
State current
|
|
|
832
|
|
|
|
284
|
|
|
|
50
|
|
State deferred
|
|
|
2,660
|
|
|
|
5,135
|
|
|
|
(770
|
)
|
Foreign current
|
|
|
754
|
|
|
|
511
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,945
|
|
|
$
|
13,827
|
|
|
$
|
(588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax provision (benefit) reconciles to the amount computed by
multiplying income before tax by the U.S. statutory rate as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Tax provision (benefit) at federal statutory rate
|
|
$
|
(7,449
|
)
|
|
$
|
736
|
|
|
$
|
(1,222
|
)
|
Federal research credits
|
|
|
(554
|
)
|
|
|
(1,008
|
)
|
|
|
(481
|
)
|
State taxes, net of federal benefit
|
|
|
13
|
|
|
|
(527
|
)
|
|
|
(469
|
)
|
Non-deductible stock compensation
|
|
|
921
|
|
|
|
1,459
|
|
|
|
1,380
|
|
Non-deductible meals and entertainment expenses
|
|
|
135
|
|
|
|
204
|
|
|
|
80
|
|
Foreign tax rate differential
|
|
|
|
|
|
|
|
|
|
|
185
|
|
Valuation allowance
|
|
|
31,611
|
|
|
|
12,747
|
|
|
|
|
|
Other
|
|
|
268
|
|
|
|
216
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax provision (benefit)
|
|
$
|
24,945
|
|
|
$
|
13,827
|
|
|
$
|
(588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of our deferred tax assets and
liabilities for federal and state income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Deferred income on shipments to distributors
|
|
$
|
8,821
|
|
|
$
|
9,376
|
|
Intangible assets
|
|
|
1,310
|
|
|
|
1,763
|
|
Inventories
|
|
|
10,643
|
|
|
|
6,709
|
|
Net operating losses
|
|
|
11,252
|
|
|
|
8,422
|
|
Capitalized research and development expenses
|
|
|
572
|
|
|
|
495
|
|
Research and development and other tax credits
|
|
|
15,617
|
|
|
|
14,217
|
|
Stock options
|
|
|
3,243
|
|
|
|
2,244
|
|
Compensation and sabbatical accrual
|
|
|
1,406
|
|
|
|
2,908
|
|
Non-deductible accruals and other, net
|
|
|
437
|
|
|
|
173
|
|
Depreciation
|
|
|
|
|
|
|
550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,301
|
|
|
|
46,857
|
|
Valuation allowance for deferred taxes
|
|
|
(52,808
|
)
|
|
|
(21,576
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
493
|
|
|
$
|
25,281
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
(493
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
25,281
|
|
|
|
|
|
|
|
|
|
|
The valuation allowance increased by $31.2 million in 2009
and $11.8 million in 2008 but decreased by
$0.1 million in 2007. The 2008 and 2009 increases in the
valuation allowances are the result of uncertainties surrounding
the nature and timing of the taxable income required to realize
temporary differences, tax credits and net operating loss carry
forwards. As a result of these uncertainties, a valuation
allowance was recorded against all of the Companys
deferred tax assets.
72
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company is tracking the portion of its deferred tax assets
attributable to stock option benefits in accordance with FASB
ASC 718; therefore, these amounts are no longer included in the
Companys gross or net deferred tax assets. The tax benefit
of stock options total $9.4 million at January 3,
2010, and will only be recorded when they reduce cash taxes
payable.
We have a federal net operating loss carryforward of
approximately $55.9 million that will expire at various
times beginning in 2010; federal research and development and
other credits of approximately $4.9 million that will
expire at various times beginning in 2013; state operating loss
carry forwards of approximately $30.8 million that will
begin to expire in 2012; state research and development and
other credits of approximately $14.7 million that have no
expiration; and foreign tax credits of approximately
$2.3 million that begin to expire in 2015. Utilization of
the Companys net operating loss and credit carry forwards
may be subject to annual limitations due to ownership change
limitations provided by the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation may result in
the expiration of net operating losses and credits before
utilization.
Preferred
Stock
Our Articles of Incorporation authorize the issuance of up to
5,000,000 shares of blank check Preferred Stock
with designations, rights, and preferences determined by our
Board of Directors.
Stock
Repurchase
Our Board of Directors authorized a stock repurchase program in
September 1998 whereby shares of our Common Stock may be
purchased from time to time in the open market at the discretion
of management. Additional shares were authorized for repurchase
in each of 1999, 2002, 2004, 2005 and 2008. There were no
repurchases under the plan in 2009, 2007 and 2006. In 2008, we
repurchased 1,937,061 shares for $24.9 million. As of
January 3, 2010, we have remaining authorization to
repurchase up to 1,673,742 shares.
In 2009, our Board of Directors adopted a plan under
Rule 10b5-1
promulgated by the Securities and Exchange Commission under the
Exchange Act that will permit us to purchase shares of our
Common Stock under our stock repurchase program at any time when
the criteria under the
Rule 10b5-1
plan are met. In February 2010, our Board of Directors
amended the criteria for the Company to purchase shares under
the Rule 1065-1 plan. See Note 15, Subsequent Events,
for information about our stock repurchase activity since
January 3, 2010.
Shareholder Rights Plan
Our Board of Directors adopted a Shareholder Rights Plan in
October 2003. Under the Plan, we issued a dividend of one right
for each share of our Common Stock held by shareholders of
record as of the close of business on November 10, 2003.
Each right entitles the shareholder to purchase a fractional
share of our Preferred Stock for $220. However, the rights will
become exercisable only if a person or group acquires, or
announces a tender or exchange offer that would result in the
acquisition of, 15% or more of our Common Stock while the Plan
remains in place. Then, unless we redeem the rights for $0.001
per right, each right will become exercisable by all rights
holders (except the acquiring person or group) for shares of
Actel (or shares of the third party acquirer) having a value
equal to twice the rights then-current exercise price.
We operate in a single operating segment: designing, developing,
and marketing FPGAs and related services. FPGA sales accounted
for 92% of net revenues in 2009, 95% in 2008, and 96% in 2007.
We derive non-FPGA revenues from our Protocol Design Services
organization, royalties, and the licensing of software and the
sale of hardware that is used to design and program our FPGAs.
Our Protocol Design Services organization accounted for 1% of
our net revenues in 2009, 2008 and 2007.
73
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We market our products in the United States and in foreign
countries through our sales personnel, independent sales
representatives, and distributors. Our geographic sales based on
shipping locations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
January 3,
|
|
|
January 4,
|
|
|
January 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except percentages)
|
|
|
United States
|
|
$
|
99,225
|
|
|
|
52
|
%
|
|
$
|
107,253
|
|
|
|
49
|
%
|
|
$
|
98,394
|
|
|
|
50
|
%
|
Export:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
48,034
|
|
|
|
25
|
%
|
|
|
59,800
|
|
|
|
27
|
%
|
|
|
56,820
|
|
|
|
29
|
%
|
Japan
|
|
|
9,590
|
|
|
|
5
|
%
|
|
|
14,784
|
|
|
|
7
|
%
|
|
|
10,003
|
|
|
|
5
|
%
|
Other international
|
|
|
33,784
|
|
|
|
18
|
%
|
|
|
36,569
|
|
|
|
17
|
%
|
|
|
31,826
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
190,633
|
|
|
|
100
|
%
|
|
$
|
218,406
|
|
|
|
100
|
%
|
|
$
|
197,043
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our property and equipment is located primarily in the United
States. Property and equipment information is based on the
physical location of the assets at the end of each of the fiscal
years. Net property and equipment by geographic region were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
21,491
|
|
|
$
|
34,043
|
|
Europe
|
|
|
616
|
|
|
|
628
|
|
Japan
|
|
|
17
|
|
|
|
23
|
|
Other international
|
|
|
845
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,969
|
|
|
$
|
34,747
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the computation of basic and
diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
Jan. 3,
|
|
|
Jan. 4,
|
|
|
Jan. 6,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per
|
|
|
|
share amounts)
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
Net effect of dilutive stock options based on the treasury stock
method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income per share
|
|
|
26,134
|
|
|
|
25,851
|
|
|
|
26,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(46,229
|
)
|
|
$
|
(11,725
|
)
|
|
$
|
(2,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(1.77
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the years ended January 3, 2010, January 4, 2009,
and January 6, 2008, we incurred a net loss and the
inclusion of stock options in the shares used for computing
diluted earnings per share would have been anti-dilutive and
would have reduced the net loss per share. Accordingly, all
Common Stock equivalents (such as stock options) have been
excluded from the shares used to calculate diluted earnings per
share for those periods.
From time to time we are notified of claims, including claims
that we may be infringing patents owned by others, or otherwise
become aware of conditions, situations, or circumstances
involving uncertainty as to the existence of a liability or the
amount of a loss. When probable and reasonably estimable, we
make provisions for estimated liabilities. As we sometimes have
in the past, we may settle disputes
and/or
obtain licenses under patents that we are alleged to infringe.
We can offer no assurance that any pending or threatened claim
or other loss contingency will be resolved or that the
resolution of any such claim or contingency will not have a
materially adverse effect on our business, financial condition,
and/or
results of operations. Our failure to resolve a claim could
result in litigation or arbitration, which can result in
significant expense and divert the efforts of our technical and
management personnel, whether or not determined in our favor.
Our evaluation of the impact of these claims and contingencies
could change based upon new information. Subject to the
foregoing, we do not believe that the resolution of any pending
or threatened legal claim or loss contingency is likely to have
a materially adverse effect on our financial position as of
January 3, 2010, or results of operations or cash flows for
the year then ended.
On July 9, 2008, the Company acquired 100% of the stock of
Pigeon Point Systems for a total purchase price of
$11.7 million, including acquisition costs. Of this
purchase price, a cash payment of $8.4 million was made at
closing, no equity interests were issued and contingent payments
of up to $3.0 million may be made through 2010. As a result
of the stock purchase, Pigeon Point Systems became a
wholly-owned subsidiary of the Company. The results of
operations for Pigeon Point Systems since the date of
acquisition have been included in our consolidated financial
statements.
The purchase price allocation relating to the tangible and
intangible assets acquired and liabilities assumed, based on
their respective estimated fair values on the acquisition date,
are as follows (in thousands):
|
|
|
|
|
Tangible assets acquired and liabilities assumed
|
|
$
|
728
|
|
Identifiable intangible assets
|
|
|
5,440
|
|
In-process research and development
|
|
|
120
|
|
Goodwill
|
|
|
2,399
|
|
|
|
|
|
|
Total purchase price, excluding contingent payments
|
|
$
|
8,687
|
|
|
|
|
|
|
Pigeon Point Systems in-process research and development
valued at $120,000 as of the acquisition date was written off in
the period of acquisition as it had not yet reached
technological feasibility and had no alternative future use.
This amount was included in amortization expense in our
consolidated statements of operations for the year ended
January 4, 2009. All of the goodwill recorded is expected
to be deductible for tax purposes. The contingent payment amount
of $3.0 million relates to securing the representations,
warranties and indemnities of the shareholders of Pigeon Point
Systems. Half of this amount was paid in July 2009 and the other
remaining half, less any permissible deductions, will be paid in
July 2010, subject to the continuing employment of certain key
Pigeon Point Systems employees. Since these payments are
contingent on continuing employment, such amounts have been and
will be recorded as compensation expense as service is rendered
over the two year contingent payment period. Supplemental
proforma information for Pigeon Point Systems is not material to
Actels consolidated financial statements and therefore is
not presented.
75
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The recorded values and estimated useful lives of the
intangibles acquired from Pigeon Point Systems were:
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair Value
|
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
(In years)
|
|
|
Existing technology
|
|
$
|
3,670
|
|
|
|
7
|
|
Customer relationships Support
|
|
|
490
|
|
|
|
7
|
|
Customer relationships Consulting
|
|
|
220
|
|
|
|
4
|
|
Customer backlog
|
|
|
290
|
|
|
|
0.5
|
|
Trade name
|
|
|
470
|
|
|
|
10
|
|
Other
|
|
|
300
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total acquired identifiable intangible assets
|
|
$
|
5,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
Restructuring
and Asset Impairment
|
Reductions in Force
In the fourth quarter of fiscal 2008, we initiated a
restructuring program in order to reduce our operating costs and
focus our resources on key strategic priorities. The
restructuring affected a total of 73 full-time positions
globally in 2009 and 60 full-time positions globally in the
fourth quarter of 2008. In connection with this restructuring
plan, we recorded restructuring charges totaling
$2.6 million and $2.4 million in 2009 and the fourth
quarter of 2008, respectively, relating to termination benefits
in accordance with FASB ASC 420, Accounting for Costs
Associated with Exit of Disposal Activities. Restructuring
charges primarily related to employee compensation and related
charges, including stock compensation expenses.
The following represents a summary of our restructuring activity:
|
|
|
|
|
|
|
Restructuring
|
|
|
|
Liabilities
|
|
|
|
(In thousands)
|
|
|
Restructuring charges for 2008
|
|
$
|
2,424
|
|
Payments
|
|
|
(1,224
|
)
|
|
|
|
|
|
Balance at January 4, 2009
|
|
|
1,200
|
|
Restructuring charges
|
|
|
2,593
|
|
Payments
|
|
|
(3,150
|
)
|
|
|
|
|
|
Balance at January 3, 2010
|
|
$
|
643
|
|
|
|
|
|
|
Impairment of Long-Lived Assets
During the first quarter of 2008, we began to experience
significant increases in bookings for our flash product families
that include Fusion, Igloo and ProASIC3. To support the expected
ramp up in manufacturing, we ordered additional testing and
sorting equipment. However, as a result of the worldwide
economic crisis, a significant number of these product orders
were cancelled in the second half of 2008 and the new product
sale opportunities did not materialize in the volumes originally
anticipated. As a result, the Company recorded a non-cash
impairment charge of $5.5 million for certain manufacturing
fixed assets that were determined during the second quarter of
2009 to be in excess of current and expected future
manufacturing requirements and those assets were taken out of
service.
Stock Repurchase
In 2009, our Board of Directors adopted a plan under
Rule 10b5-1
promulgated by the Securities and Exchange Commission under the
Exchange Act that will permit us to purchase shares of our
Common Stock under our stock
76
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
repurchase program at any time the criteria under the
Rule 10b5-1
plan are met. In February 2010, our Board of Directors amended
the criteria for the Company to purchase shares under the
Rule 10b5-1
plan. During the current fiscal year through March 10,
2010, we repurchased 148,272 shares for $1.9 million.
Mountain View Headquarters
On February 18, 2010, the Company entered into a sublease
agreement, under which a commercial tenant will occupy
approximately 44,900 square feet of the total of
approximately 158,400 square feet currently leased by the
Company at its headquarters facility in Mountain View,
California. The sublease anticipates that the tenant will occupy
the leased facilities from October 1, 2010, through the end
of the Companys initial lease term (January 31, 2014)
and will pay a monthly base rent of $56,163 (or a total of
$2.25 million) plus a pro rata share of the pass-through
expenses over the 40 months. The Company expects to spend
approximately $1.6 million in leasehold improvements
through September 30, 2010.
CEO Transition
On February 4, 2010, we announced that John East will
retire as President and Chief Executive Officer of the Company
and as a member of the Board of Directors. The Board has formed
a committee to conduct a search for a new President and Chief
Executive Officer (CEO). John East will remain in his current
role until a new CEO is in place and will continue as a
consultant until August 2011.
|
|
16.
|
Unaudited
Quarterly Information
|
The following tables set forth selected unaudited condensed
consolidated statement of operations data for each of the eight
quarters ended January 3, 2010. Operating results for any
quarter are not necessarily indicative of results for any future
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 3, 2010
|
|
|
|
Fourth Quarter
|
|
|
Third Quarter
|
|
|
Second Quarter
|
|
|
First Quarter
|
|
|
|
(Unaudited, in thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
49,699
|
|
|
$
|
47,248
|
|
|
$
|
45,227
|
|
|
$
|
48,459
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues(2)
|
|
|
18,715
|
|
|
|
18,760
|
|
|
|
32,595
|
|
|
|
20,785
|
|
Research and development
|
|
|
14,160
|
|
|
|
14,839
|
|
|
|
15,326
|
|
|
|
16,393
|
|
Selling, general, and administrative
|
|
|
14,401
|
|
|
|
13,196
|
|
|
|
13,659
|
|
|
|
13,490
|
|
Restructuring charges(3)(4)
|
|
|
1,202
|
|
|
|
175
|
|
|
|
5,594
|
|
|
|
1,119
|
|
Amortization of acquisition related intangibles
|
|
|
193
|
|
|
|
193
|
|
|
|
192
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
48,671
|
|
|
|
47,163
|
|
|
|
67,366
|
|
|
|
51,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
1,028
|
|
|
|
85
|
|
|
|
(22,139
|
)
|
|
|
(3,521
|
)
|
Interest income and other, net of expense
|
|
|
71
|
|
|
|
664
|
|
|
|
776
|
|
|
|
1,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before tax provision
|
|
|
1,099
|
|
|
|
749
|
|
|
|
(21,363
|
)
|
|
|
(1,769
|
)
|
Tax provision(5)
|
|
|
137
|
|
|
|
(157
|
)
|
|
|
23,778
|
|
|
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
962
|
|
|
$
|
906
|
|
|
$
|
(45,141
|
)
|
|
$
|
(2,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 3, 2010
|
|
|
|
Fourth Quarter
|
|
|
Third Quarter
|
|
|
Second Quarter
|
|
|
First Quarter
|
|
|
|
(Unaudited, in thousands, except per share amounts)
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
(1.73
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(1)
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
(1.73
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,203
|
|
|
|
26,160
|
|
|
|
26,146
|
|
|
|
26,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(1)
|
|
|
26,362
|
|
|
|
26,247
|
|
|
|
26,146
|
|
|
|
26,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For the first and second quarters of 2009, we incurred a
quarterly net loss and the inclusion of stock options in the
shares used for computing diluted earnings per share would have
been anti-dilutive and reduced the loss per share. Accordingly,
all Common Stock equivalents (such as stock options) have been
excluded from the shares used to calculate diluted earnings per
share for those periods. |
|
(2) |
|
In accordance with our normal quarterly inventory review, we
perform an in-depth analysis of our inventory levels to
determine whether additional excess reserves should be
established. We determined that additional reserves of
$13.3 million for excess inventory were required as of the
end of the second quarter of fiscal 2009. |
|
(3) |
|
During fiscal 2009, we recorded charges of $2.6 million
related to reductions in force to improve our operating results.
Approximately 73 positions were eliminated during 2009. |
|
(4) |
|
During the second quarter of 2009, we recorded non-cash asset
impairment charges totaling $5.5 million for certain
manufacturing fixed assets that were determined to be in excess
of current and expected future manufacturing requirements. |
|
(5) |
|
During the second quarter of fiscal 2009, we recorded a tax
provision of $23.8 million on a second quarter pre-tax loss
of $21.4 million. The difference in the tax provisions is
primarily due to the valuation allowance recorded against 100%
of the net deferred tax assets during the second quarter. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 4, 2009
|
|
|
|
Fourth Quarter
|
|
|
Third Quarter
|
|
|
Second Quarter
|
|
|
First Quarter
|
|
|
|
(Unaudited, in thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
52,786
|
|
|
$
|
53,215
|
|
|
$
|
57,649
|
|
|
$
|
54,756
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
21,598
|
|
|
|
22,343
|
|
|
|
23,035
|
|
|
|
22,738
|
|
Research and development
|
|
|
14,851
|
|
|
|
16,995
|
|
|
|
17,103
|
|
|
|
16,709
|
|
Selling, general, and administrative
|
|
|
15,714
|
|
|
|
15,038
|
|
|
|
15,613
|
|
|
|
16,780
|
|
Restructuring charges(1)
|
|
|
2,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition related intangibles
|
|
|
338
|
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
54,925
|
|
|
|
54,834
|
|
|
|
55,751
|
|
|
|
56,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
ACTEL
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 4, 2009
|
|
|
|
Fourth Quarter
|
|
|
Third Quarter
|
|
|
Second Quarter
|
|
|
First Quarter
|
|
|
|
(Unaudited, in thousands, except per share amounts)
|
|
|
Income (loss) from operations
|
|
|
(2,139
|
)
|
|
|
(1,619
|
)
|
|
|
1,898
|
|
|
|
(1,471
|
)
|
Interest income and other, net of expense
|
|
|
1,335
|
|
|
|
465
|
|
|
|
1,701
|
|
|
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before tax provision
|
|
|
(804
|
)
|
|
|
(1,154
|
)
|
|
|
3,599
|
|
|
|
461
|
|
Tax provision(2)
|
|
|
11,688
|
|
|
|
219
|
|
|
|
1,635
|
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(12,492
|
)
|
|
$
|
(1,373
|
)
|
|
$
|
1,964
|
|
|
$
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.48
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.08
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(3)
|
|
$
|
(0.48
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.08
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,784
|
|
|
|
25,726
|
|
|
|
25,408
|
|
|
|
26,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(3)
|
|
|
25,784
|
|
|
|
25,726
|
|
|
|
26,155
|
|
|
|
26,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the fourth quarter of fiscal 2008, we initiated a
restructuring program in order to reduce our operating costs and
recorded a charge of $2.4 million related to a reduction in
force. Approximately 60 positions were eliminated. |
|
(2) |
|
During the fourth quarter of 2008, we recorded a valuation
allowance of $12.7 million against a portion of our
deferred tax assets. The increase in the valuation allowance
results from uncertainties surrounding the nature and timing of
the taxable income required to realize certain tax credits and
net operating loss carry forwards. |
|
(3) |
|
For the third and fourth quarters of 2008, we incurred a
quarterly net loss and the inclusion of stock options in the
shares used for computing diluted earnings per share would have
been anti-dilutive and reduced the loss per share. Accordingly,
all Common Stock equivalents (such as stock options) have been
excluded from the shares used to calculate diluted earnings per
share for those periods. |
79
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Actel Corporation
We have audited the accompanying consolidated balance sheets of
Actel Corporation as of January 3, 2010 and January 4,
2009, and the related consolidated statements of operations,
shareholders equity and accumulated other comprehensive
income (loss), and cash flows for each of the three years in the
period ended January 3, 2010. Our audits also included the
financial statement schedule listed in item 15 (a)(2).
These financial statements and schedule are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Actel Corporation at January 3, 2010
and January 4, 2009, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended January 3, 2010, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Actel
Corporations internal control over financial reporting as
of January 3, 2010, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated March 15, 2010 expressed an unqualified
opinion thereon.
San Jose, California
March 15, 2010
80
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Actel Corporation
We have audited Actel Corporations internal control over
financial reporting as of January 3, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Actel
Corporations management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Actel Corporation maintained, in all material
respects, effective internal control over financial reporting as
of January 3, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Actel Corporation as of
January 3, 2010 and January, 4, 2009, and the related
consolidated statements of operations, shareholders equity
and accumulated other comprehensive income (loss), and cash
flows for each of the three years in the period ended
January 3, 2010 and our report dated March 15, 2010
expressed an unqualified opinion thereon.
San Jose, California
March 15, 2010
81
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Effectiveness of Disclosure Controls and Procedures
Our management evaluated, with the participation of our Chief
Executive Officer and our Chief Financial Officer, the
effectiveness of our disclosure controls and procedures (as
defined in
Rule 13a-15(e)
under the Exchange Act) as of the end of the period covered by
this Annual Report on
Form 10-K.
Based on this evaluation, our Chief Executive Officer and our
Chief Financial Officer have concluded that our disclosure
controls and procedures are effective as of the end of the
period covered by this Annual Report on
Form 10-K
to provide reasonable assurance that information we are required
to disclose in reports that we file or submit under the Exchange
Act is (i) recorded, processed, summarized, and reported
within the time periods specified in Securities and Exchange
Commission rules and forms and (ii) accumulated and
communicated to our management, including our Chief Executive
Officer and our Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.
Managements
Annual Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over our financial reporting. In order
to evaluate the effectiveness of internal control over financial
reporting, as required by Section 404 of the Sarbanes-Oxley
Act, management has conducted an assessment, including testing,
using the criteria in Internal Control Integrated
Framework, issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Our system of
internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.
Based on its assessment, management has concluded that our
internal control over financial reporting was effective at the
reasonable assurance level as of January 3, 2010, based on
criteria in Internal Control Integrated Framework,
issued by the COSO. The effectiveness of our internal control
over financial reporting as of January 3, 2010, has been
audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report,
which is included herein.
Inherent
Limitations of Internal Controls
Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
|
|
|
|
|
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
|
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of
our assets that could have a material effect on the financial
statements.
|
Management does not expect that our internal controls will
prevent or detect all errors and all fraud. A control system, no
matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the
82
objectives of the control system are met. Further, the design of
a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of internal controls can
provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. Also, any evaluation of
the effectiveness of controls in future periods are subject to
the risk that those internal controls may become inadequate
because of changes in business conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Changes
in Internal Control over Financial Reporting
There were no changes to our internal controls during the
quarter ended January 3, 2010 that have materially
affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
On March 6, 2009, Actel and Ramius LLC, which then
beneficially owned approximately 8.8% of Actels
outstanding shares of Common Stock, entered into an agreement
under which Actel added to its Board of Directors three new
independent Directors designated by Ramius (the First
Agreement). Under the First Agreement, Actel also agreed
(among other things) to reduce the size of its Board to eight
members at Actels 2009 Annual Meeting of Shareholders (the
2009 Annual Meeting) and to nominate, recommend, and
solicit proxies in favor of the election of Ramiuss
designees at the 2009 Annual Meeting; and Ramius agreed (among
other things) to vote its shares in support of all of
Actels Director nominees at the 2009 Annual Meeting and to
abide by certain other standstill provisions. The First
Agreement expired on January 31, 2010.
On March 9, 2010, Actel and Ramius, which beneficially
owned approximately 9.2% of Actels outstanding shares of
Common Stock, entered into a substantially similar agreement
(the Second Agreement). Under the Second Agreement,
Actel agreed (among other things) to nominate Patrick W.
Little, Jeffrey C. Smith, and Eric J. Zahler for
election to the Board at Actels 2010 Annual Meeting of
Shareholders (the 2010 Annual Meeting), to recommend
in Actels definitive proxy statement the election of such
nominees, and to use reasonable efforts to solicit and obtain
proxies in favor of the election of such nominees. Ramius agreed
(among other things) to vote its shares in support of all of
Actels Director nominees at the 2010 Annual Meeting and to
abide by certain other standstill provisions. The 2010 Annual
Meeting is currently scheduled for May 24, 2010. The Second
Agreement will expire before Actels 2011 Annual Meeting of
Shareholders.
The foregoing summary of the Second Agreement is qualified in
its entirety by the full terms and conditions of the Second
Agreement, which is filed as Exhibit 10.20 to this Annual
Report on Form 10-K.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Except as set forth below, information required by this Item
regarding directors, executive officers, Section 16 filings
and the Registrants Audit Committee is incorporated herein
by reference from our Proxy Statement to be filed in connection
with our 2010 Annual Meeting of the Shareholders.
Code of
Ethics
We have a Code of Business Conduct and Ethics for all of our
directors, officers, and employees. Our Code of Business Conduct
and Ethics is available on our website at
http://www.actel.com.
To date, there have been no waivers under our Code of Business
Conduct and Ethics. We will post any waivers, if and when
granted, of our Code of Business Conduct and Ethics on our
website at
http://www.actel.com
on the Investor Relations page
(http://media.corporate-ir.net/media
files/irol/11/112185/pdfs/CodeEthics.pdf).
This website address is intended to be an inactive, textual
reference only. None of the material on this website is part of
this Annual Report on
Form 10-K.
83
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information required for this Item is incorporated by
reference from our Proxy Statement to be filed in connection
with our 2010 Annual Meeting of Shareholders.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information required for this Item is incorporated by
reference from our Proxy Statement to be filed in connection
with our 2010 Annual Meeting of Shareholders.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information required for this Item is incorporated by
reference from our Proxy Statement to be filed in connection
with our 2010 Annual Meeting of Shareholders.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The information required for this Item is incorporated by
reference from our Proxy Statement to be filed in connection
with our 2010 Annual Meeting of Shareholders.
84
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
(a) The following documents are filed as part of this
Annual Report on
Form 10-K:
(1) Financial Statements. The following
consolidated financial statements of Actel Corporation are filed
in Item 8 of this Annual Report on
Form 10-K:
(2) Financial Statement Schedule. The
financial statement schedule listed under 15(c) hereof is filed
with this Annual Report on
Form 10-K.
All other schedules are omitted since the information required
is not applicable or is shown in the Consolidated Financial
Statements or notes thereto.
(3) Exhibits. The exhibits listed under
Item 15(b) hereof are filed with, or incorporated by
reference into, this Annual Report on
Form 10-K.
(b) Exhibits. The following exhibits are
filed as part of, or incorporated by reference into, this Report
on
Form 10-K:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Restated Articles of Incorporation, as amended (filed as
Exhibit 3.1 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
3
|
.2
|
|
Amended and Restated Bylaws (filed as Exhibit 3.1 to the
Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
March 12, 2009).
|
|
3
|
.3
|
|
Certificate of Amendment to Certificate of Determination of
Rights, Preferences and Privileges of Series A
Participating Preferred Stock of Actel Corporation (filed as
Exhibit 3.3 to the Registrants Registration Statement
on
Form 8-A
(File
No. 000-2197),
filed on October 24, 2003).
|
|
4
|
.1
|
|
Preferred Stock Rights Agreement, dated as of October 17,
2003, between the Registrant and Wells Fargo Bank, MN N.A.,
including the Certificate of Amendment of Certificate to
Determination, the form of Rights Certificate and the Summary of
Rights attached thereto as Exhibits A, B, and C,
respectively (filed as Exhibit 4.1 to the Registrants
Registration Statement on
Form 8-A
(File
No. 000-2197),
filed on October 24, 2003).
|
|
10
|
.1(1)
|
|
Form of Indemnification Agreement for directors and officers
(filed as Exhibit 10.1 to the Registrants
Registration Statement on
Form S-1
(File
No. 33-64704),
declared effective on August 2, 1993).
|
|
10
|
.2(1)
|
|
Amended and Restated 1986 Equity Incentive Plan (filed as
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 3, 2005).
|
|
10
|
.3(1)
|
|
2003 Director Stock Option Plan (filed as Exhibit 4.4
to the Registrants Registration Statement on
Form S-8
(File
No. 333-112215),
declared effective on January 26, 2004).
|
|
10
|
.4(1)
|
|
Amended and Restated 1993 Employee Stock Purchase Plan (filed as
Exhibit 10.2 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal quarter ended July 3, 2005).
|
|
10
|
.5
|
|
1995 Employee and Consultant Stock Plan, as amended and restated
(filed as Exhibit 10.2 to the Registrants Quarterly
Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 7, 2002).
|
|
10
|
.6(1)
|
|
Amended and Restated Employee Retention Plan (filed as
Exhibit 10.6 to the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
December 5, 2005).
|
|
10
|
.7(1)
|
|
Deferred Compensation Plan, as amended and restated (filed as
Exhibit 10.7 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended December 31, 2000).
|
|
10
|
.8
|
|
Form of Distribution Agreement (filed as Exhibit 10.13 to
the Registrants Registration Statement on
Form S-1
(File
No. 33-64704),
declared effective on August 2, 1993).
|
85
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.10
|
|
Manufacturing Agreement dated February 3, 1994 between the
Registrant and Chartered Semiconductor Manufacturing Pte Ltd
(filed as Exhibit 10.17 to the Registrants Annual
Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 2, 1994).
|
|
10
|
.11
|
|
Foundry Agreement dated as of June 29, 1995, between the
Registrant and Matsushita Electric Industrial Co., Ltd and
Matsushita Electronics Corporation (filed as Exhibit 10.25
to the Registrants Quarterly Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 2, 1995).
|
|
10
|
.12
|
|
Asset Purchase Agreement dated as of March 16, 2007,
between the Registrant and BTR, Inc., Advantage Logic Inc.,
Benjamin Ting, Peter Pani, and Richard Abraham Ltd (filed as
Exhibit 10.12 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended December 31, 2006).
|
|
10
|
.13
|
|
Patent Cross License Agreement dated August 25, 1998,
between the Registrant and QuickLogic Corporation. (filed as
Exhibit 10.19 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 3, 1999).
|
|
10
|
.14
|
|
Development Agreement by and between the Registrant and Infineon
Technologies AG effective as of June 6, 2002 (filed as
Exhibit 10.19 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
10
|
.15
|
|
Supply Agreement by and between the Registrant and Infineon
Technologies AG effective as of June 6, 2002 (filed as
Exhibit 10.20 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
10
|
.16
|
|
Office Lease Agreement for the Registrants facilities in
Mountain View, California, dated February 27, 2003 (filed
as Exhibit 10.21 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
10
|
.17(1)
|
|
Employment Agreement dated as of August 17, 2009, by and
between the Registrant and Maurice E. Carson (filed as
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
August 14, 2009).
|
|
10
|
.18(1)
|
|
Transition Agreement dated February 2, 2010, by and between
the Registrant and John C. East (filed as Exhibit 10.1 to
the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
February 4, 2010).
|
|
10
|
.19
|
|
Sublease dated as of February 18, 2010, by and between the
Registrant and LinkedIn Corporation.
|
|
10
|
.20
|
|
Agreement by and between the Registrant and the Ramius Group
dated as of March 9, 2010.
|
|
14
|
|
|
Code of Ethics for Principal Executive and Senior Financial
Officers (filed as Exhibit 14 to the Registrants
Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 4, 2004).
|
|
21
|
|
|
Subsidiaries of Registrant.
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
24
|
|
|
Power of Attorney.
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer.
|
|
31
|
.2
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer.
|
|
32
|
|
|
Section 1350 Certifications
|
|
|
|
(1) |
|
This Exhibit is a management contract or compensatory plan or
arrangement. |
(c) Financial Statement Schedule. The
following financial statement schedule of Actel Corporation is
filed as part of this Report on
Form 10-K
and should be read in conjunction with the Consolidated
Financial Statements of Actel Corporation, including the notes
thereto, and the Report of Independent Registered Public
Accounting Firm with respect thereto:
|
|
|
|
|
|
|
|
|
Schedule
|
|
Description
|
|
Page
|
|
|
|
|
Valuation and qualifying accounts
|
|
|
|
88
|
|
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ACTEL CORPORATION
John C. East
President and Chief Executive Officer
Date: March 15, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this Annual Report on
Form 10-K
has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ John
C. East
(John
C. East)
|
|
President and Chief Executive Officer (Principal Executive
Officer) and
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Maurice
E. Carson
(Maurice
E. Carson)
|
|
Executive Vice President and
Chief Financial Officer
(as Principal Financial and
Accounting Officer)
|
|
March 15, 2010
|
|
|
|
|
|
/s/ James
R. Fiebiger
(James
R. Fiebiger)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Jacob
S. Jacobsson
(Jacob
S. Jacobsson)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Patrick
W. Little
(Patrick
W. Little)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ J.
Daniel McCranie
(J.
Daniel McCranie)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Jeffrey
C. Smith
(Jeffrey
C. Smith)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Robert
G. Spencer
(Robert
G. Spencer)
|
|
Director
|
|
March 15, 2010
|
|
|
|
|
|
/s/ Eric
J. Zahler
(Eric
J. Zahler)
|
|
Director
|
|
March 15, 2010
|
87
SCHEDULE II
ACTEL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
Balance at
|
|
|
Beginning
|
|
Provision/
|
|
|
|
End of
|
|
|
of Period
|
|
(Reversal)
|
|
Write-Offs
|
|
Period
|
|
|
(In thousands)
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January 6, 2008
|
|
$
|
614
|
|
|
$
|
80
|
|
|
|
|
|
|
$
|
694
|
|
Year ended January 4, 2009
|
|
|
694
|
|
|
|
(338
|
)
|
|
|
|
|
|
|
356
|
|
Year ended January 3, 2010
|
|
|
356
|
|
|
|
(149
|
)
|
|
|
|
|
|
|
207
|
|
88
Exhibit Index
|
|
|
|
|
Exhibit
|
|
|
Number.
|
|
Description
|
|
|
3
|
.1
|
|
Restated Articles of Incorporation, as amended (filed as
Exhibit 3.1 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
3
|
.2
|
|
Amended and Restated Bylaws (filed as Exhibit 3.1 to the
Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
March 12, 2009).
|
|
3
|
.3
|
|
Certificate of Amendment to Certificate of Determination of
Rights, Preferences and Privileges of Series A
Participating Preferred Stock of Actel Corporation (filed as
Exhibit 3.3 to the Registrants Registration Statement
on
Form 8-A
(File
No. 000-2197),
filed on October 24, 2003).
|
|
4
|
.1
|
|
Preferred Stock Rights Agreement, dated as of October 17,
2003, between the Registrant and Wells Fargo Bank, MN N.A.,
including the Certificate of Amendment of Certificate to
Determination, the form of Rights Certificate and the Summary of
Rights attached thereto as Exhibits A, B, and C,
respectively (filed as Exhibit 4.1 to the Registrants
Registration Statement on
Form 8-A
(File
No. 000-2197),
filed on October 24, 2003).
|
|
10
|
.1(1)
|
|
Form of Indemnification Agreement for directors and officers
(filed as Exhibit 10.1 to the Registrants
Registration Statement on
Form S-1
(File
No. 33-64704),
declared effective on August 2, 1993).
|
|
10
|
.2(1)
|
|
Amended and Restated 1986 Equity Incentive Plan (filed as
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 3, 2005).
|
|
10
|
.3(1)
|
|
2003 Director Stock Option Plan (filed as Exhibit 4.4
to the Registrants Registration Statement on
Form S-8
(File
No. 333-112215),
declared effective on January 26, 2004).
|
|
10
|
.4(1)
|
|
Amended and Restated 1993 Employee Stock Purchase Plan (filed as
Exhibit 10.2 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal quarter ended July 3, 2005).
|
|
10
|
.5
|
|
1995 Employee and Consultant Stock Plan, as amended and restated
(filed as Exhibit 10.2 to the Registrants Quarterly
Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 7, 2002).
|
|
10
|
.6(1)
|
|
Amended and Restated Employee Retention Plan (filed as
Exhibit 10.6 to the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
field with the Securities and Exchange Commission on
December 5, 2005).
|
|
10
|
.7(1)
|
|
Deferred Compensation Plan, as amended and restated (filed as
Exhibit 10.7 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended December 31, 2000).
|
|
10
|
.8
|
|
Form of Distribution Agreement (filed as Exhibit 10.13 to
the Registrants Registration Statement on
Form S-1
(File
No. 33-64704),
declared effective on August 2, 1993).
|
|
10
|
.10
|
|
Manufacturing Agreement dated February 3, 1994 between the
Registrant and Chartered Semiconductor Manufacturing Pte Ltd
(filed as Exhibit 10.17 to the Registrants Annual
Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 2, 1994).
|
|
10
|
.11
|
|
Foundry Agreement dated as of June 29, 1995, between the
Registrant and Matsushita Electric Industrial Co., Ltd and
Matsushita Electronics Corporation (filed as Exhibit 10.25
to the Registrants Quarterly Report on
Form 10-Q
(File
No. 0-21970)
for the fiscal quarter ended July 2, 1995).
|
|
10
|
.12
|
|
Asset Purchase Agreement dated as of March 16, 2007,
between the Registrant and BTR, Inc., Advantage Logic Inc.,
Benjamin Ting, Peter Pani, and Richard Abraham Ltd (filed as
Exhibit 10.12 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended December 31, 2006).
|
|
10
|
.13
|
|
Patent Cross License Agreement dated August 25, 1998,
between the Registrant and QuickLogic Corporation. (filed as
Exhibit 10.19 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 3, 1999).
|
|
10
|
.14
|
|
Development Agreement by and between the Registrant and Infineon
Technologies AG effective as of June 6, 2002 (filed as
Exhibit 10.19 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
10
|
.15
|
|
Supply Agreement by and between the Registrant and Infineon
Technologies AG effective as of June 6, 2002 (filed as
Exhibit 10.20 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
89
|
|
|
|
|
Exhibit
|
|
|
Number.
|
|
Description
|
|
|
10
|
.16
|
|
Office Lease Agreement for the Registrants facilities in
Mountain View, California, dated February 27, 2003 (filed
as Exhibit 10.21 to the Registrants Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 5, 2003).
|
|
10
|
.17(1)
|
|
Employment Agreement dated as of August 17, 2009, by and
between the Registrant and Maurice E. Carson (filed as
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
August 14, 2009).
|
|
10
|
.18(1)
|
|
Transition Agreement dated February 2, 2010, by and between
the Registrant and John C. East (filed as Exhibit 10.1 to
the Registrants Current Report on
Form 8-K
(File
No. 0-21970)
filed with the Securities and Exchange Commission on
February 4, 2010).
|
|
10
|
.19
|
|
Sublease dated as of February 18, 2010, by and between the
Registrant and LinkedIn Corporation.
|
|
10
|
.20
|
|
Agreement by and between the Registrant and the Ramius Group
dated as of March 9, 2010.
|
|
14
|
|
|
Code of Ethics for Principal Executive and Senior Financial
Officers (filed as Exhibit 14 to the Registrants
Annual Report on
Form 10-K
(File
No. 0-21970)
for the fiscal year ended January 4, 2004).
|
|
21
|
|
|
Subsidiaries of Registrant.
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
24
|
|
|
Power of Attorney.
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer.
|
|
31
|
.2
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer.
|
|
32
|
|
|
Section 1350 Certifications.
|
|
|
|
(1) |
|
This Exhibit is a management contract or compensatory plan or
arrangement. |
90