Attached files
| file | filename |
|---|---|
| EX-32.3 - EXHIBIT 32.3 - INTEGRATED DEVICE TECHNOLOGY INC | idti-12282014xex32310qa.htm |
| EX-31.4 - EXHIBIT 31.4 - INTEGRATED DEVICE TECHNOLOGY INC | idti-12282014xex31410qa.htm |
| EX-31.3 - EXHIBIT 31.3 - INTEGRATED DEVICE TECHNOLOGY INC | idti-12282014xex31310qa.htm |
| EX-32.4 - EXHIBIT 32.4 - INTEGRATED DEVICE TECHNOLOGY INC | idti-12282014xex32410qa.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q/A
(Amendment No. 1)
______________________________
(Mark One)
/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE (State or Other Jurisdiction of Incorporation or Organization) | 94-2669985 (I.R.S. Employer Identification No.) |
6024 SILVER CREEK VALLEY ROAD, SAN JOSE, CALIFORNIA (Address of Principal Executive Offices) | 95138 (Zip Code) |
Registrant's Telephone Number, Including Area Code: (408) 284-8200
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 ý 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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
ý Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No ý
The number of outstanding shares of the registrant's Common Stock, $.001 par value, as of January 31, 2015 was approximately 148,288,258.
EXPLANATORY NOTE
Integrated Device Technology, Inc. is filing this Amendment No. 1 (the Amendment) to its Quarterly Report on Form 10-Q (Quarterly Report) for the three months ended December 28, 2014, as filed with the Securities and Exchange Commission on February 4, 2015, to correct a typographical error regarding the percentage of net revenue for product groups under the Computing and Consumer segment contained in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
In the table titled “Product groups representing greater than 10% of net revenues” under “Results of Continuing Operations - Revenues” of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the percentages of net revenues for “Memory interface products” and “All others less than 10% individually”, with regards to Computing and Consumer, for the three months ended December 28, 2014, should be 28% and 8%, respectively. Except as set forth in the preceding sentence, no other changes are being made to the Quarterly Report, which continues to speak as of the dates set forth therein.
This Amendment should be read in conjunction, and as if filed concurrently, with the Quarterly Report. Except as expressly set forth in this Explanatory Note, this Amendment does not modify or update disclosures contained in the Quarterly Report, and this Amendment, therefore does not reflect events occurring after the filing of the Quarterly Report.
INTEGRATED DEVICE TECHNOLOGY, INC.
QUARTERLY REPORT ON FORM 10-Q/A
TABLE OF CONTENTS
PART I-FINANCIAL INFORMATION | ||
PART II-OTHER INFORMATION | ||
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This Amendment contains the complete text of the original report with the corrected information appearing in ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking. Forward-looking statements, which are generally identified by words such as “anticipates,” “expects,” “plans,” “intends,” “seeks,” “targets,” “believes,” “can,” “may,” “might,” “could,” “should,” “would,” “will” and similar terms, include statements related to, among others, revenues and gross profit, research and development activities, selling, general and administrative expenses, restructuring costs, intangible expenses, interest income and other, taxes, capital spending and financing transactions, as well as statements regarding successful development and market acceptance of new products, industry and overall economic conditions and demand, and capacity utilization. Forward-looking statements are based upon current expectations, estimates, forecasts and projections that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to: global business and economic conditions; operating results; new product introductions and sales; competitive conditions; capital expenditures and resources; manufacturing capacity utilization; customer demand and inventory levels; product performance; intellectual property matters; mergers and acquisitions and integration activities; and the risk factors set forth in Part II, Item 1A, “Risk Factors” to this Quarterly Report on Form 10-Q. As a result of these risks and uncertainties, actual results could differ significantly from those expressed or implied in the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly revise these statements for future events or new information after the date of this Quarterly Report on Form 10-Q.
This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes included in this report and the Audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended March 30, 2014 filed with the SEC. Operating results for the three and nine months ended December 28, 2014 are not necessarily indicative of operating results for an entire fiscal year.
Critical Accounting Policies
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates and assumptions are based on historical experience and other factors that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates and assumptions.
For a discussion of our critical accounting policies, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 30, 2014. We believe that these accounting policies are "critical," as defined by the SEC, in that they are both highly important to the portrayal of our financial condition and results, and they require difficult management judgments, estimates and assumptions about matters that are inherently uncertain. We believe that there have been no significant changes during the three and nine months ended December 28, 2014 to the items that we disclosed as our critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended March 30, 2014.
Business Overview
We develop a broad range of low-power, high-performance mixed-signal semiconductor solutions that optimize our customers’ applications in key markets. In addition to our market-leading timing products, we offer semiconductors targeting communications infrastructure - both wired and wireless - high-performance computing and power management. These products are used for next-generation development in areas such as 4G infrastructure, network communications, cloud data centers and power management for computing and mobile devices.
Our top talent and technology paired with an innovative product-development philosophy allows us to solve complex customer problems when designing communications, computing and consumer applications. Through system-level analog and digital innovation, we consistently deliver extraordinary value to our customers.
For more information on our business, please see Part I, Item 1, “Business,” in our Annual Report on Form 10-K for the fiscal year ended March 30, 2014.
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Recent developments
Discontinued Operations - High-Speed Converter ("HSC") Business
In the third quarter of fiscal 2014, we initiated a project to divest our HSC business. We believe that this divestiture will allow us to strengthen our focus on analog-intensive mixed-signal, timing and synchronization, and interface and connectivity solutions. We envision fully divesting our HSC business before the end of first quarter of fiscal year 2016 and have classified these assets as held for sale and accordingly these assets are no longer being depreciated or amortized.
The HSC business includes the assets of NXP B.V.’s Data Converter Business and Alvand Technologies, Inc., which we acquired during fiscal 2013. The total purchase consideration we paid to acquire Alvand Technologies, Inc. included a liability representing the fair value of contingent cash consideration which is paid based upon the achievement of future product development milestones to be completed within 3 years following the acquisition date. During the first quarter of fiscal 2015, the Company paid $1.6 million and released the remaining contingent consideration of $0.5 million to discontinued operations, as the remaining future milestones will not be achieved as a result of the asset sale discussed below.
On May 30, 2014, we completed the sale of certain assets related to the Alvand portion of the HSC business pursuant to an Asset Purchase Agreement. Upon the closing of the transaction, the buyer paid the Company $18.0 million in cash consideration, of which $2.7 million will be held in an escrow account for a period of 18 months. During the first quarter of fiscal 2015, we recorded a gain of $16.8 million related to this divestiture.
Following the sale of assets related to the Alvand portion of the HSC business, the business had remaining long-lived assets classified as held for sale amounting to $8.5 million, which consisted of $2.9 million in fixed assets and $5.6 million in intangible assets. We evaluated the carrying value of these assets and determined that it exceeded estimated fair value based on estimated selling price less cost to sell. Accordingly, we recorded total impairment charge of $8.5 million during the first quarter of fiscal 2015.
The HSC business was included in the Company’s Communications reportable segment. For financial statements purposes, the results of operations for the HSC business have been segregated from those of the continuing operations and are presented in the Company's condensed consolidated financial statements as discontinued operations.
Restructuring - HSC Business
In the second quarter of fiscal 2015, we prepared a workforce-reduction plan (the Plan) with respect to employees of our HSC business in France and the Netherlands. The Plan sets forth the general parameters, terms and benefits for employee dismissals. The Plan which required consultation with the French Works Council, was submitted to the French Works Council but had not been approved as of September 28, 2014. No works council consultation was required in the Netherlands. However, as of September 28, 2014, the Plan had not been communicated to the affected employees in the Netherlands and negotiations with the labor union and employee representative group were yet to be conducted. We have not historically offered similar termination benefits as defined in the Plan for these locations. However, the local laws in France and the Netherlands require payment of certain minimum statutory termination benefits. Accordingly, in situations where minimum statutory termination benefits must be paid to the affected employees, we record employee severance costs associated with these activities in accordance with ASC 712, Compensation - Nonretirement Post Employment Benefits. During the quarter ended September 28, 2014, we recorded to discontinued operations in the Condensed Consolidated Statement of Operations, approximately $6.8 million related to the minimum statutory termination benefits for a total of 53 employees in France and the Netherlands combined.
During the third quarter of fiscal 2015, the Plan was approved by the French Works Council and the related Plan details were communicated to the affected employees in France and the Netherlands. The Plan identified the number of employees to be terminated, their job classification or function, their location and the date that the Plan was expected to be completed. The Plan also established the terms of the benefit arrangement in sufficient detail to enable the employees to determine the type and amount of benefits that they would receive if terminated. In addition, the actions required to complete the Plan indicated that it was unlikely that substantial changes to the Plan would be made after communication to the employees. Accordingly, we recorded restructuring charges in addition to the minimum statutory amount as discussed above, in accordance with ASC 420, Exit or Disposal Cost Obligations. The additional restructuring charges recorded to discontinued operations in the Condensed Consolidated Statement of Operations were approximately $11.9 million for the quarter ended December 28, 2014, for a total of 53 employees in France and the Netherlands combined.
We expect to make payments related to these termination benefits and complete the restructuring action by the first quarter of fiscal 2016.
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Overview
The following table and discussion provides an overview of our operating results from continuing operations for the three and nine months ended December 28, 2014 and December 29, 2013:
Three Months Ended | Nine Months Ended | ||||||||||||||
(in thousands, except for percentage) | December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | |||||||||||
Revenues | $ | 151,160 | $ | 124,628 | $ | 414,555 | $ | 366,139 | |||||||
Gross profit | $ | 91,364 | $ | 74,939 | $ | 247,249 | $ | 211,822 | |||||||
As a % of revenues | 60 | % | 60 | % | 60 | % | 58 | % | |||||||
Operating income | $ | 31,374 | $ | 20,189 | $ | 72,213 | $ | 26,057 | |||||||
As a % of revenues | 21 | % | 16 | % | 17 | % | 7 | % | |||||||
Net income from continuing operations | $ | 32,841 | $ | 17,339 | $ | 74,198 | $ | 106,251 | |||||||
As a % of revenues | 22 | % | 14 | % | 18 | % | 29 | % | |||||||
Our revenues increased by $26.5 million, or 21%, to $151.2 million in the quarter ended December 28, 2014 compared to the quarter ended December 29, 2013. The increase was primarily due to increased unit shipments in our Computing and Consumer segment as we continued to experience increased demand for our memory interface products. This was partly offset by the loss of revenue from the sale of our Audio business during the quarter ended December 29, 2013. Gross profit percentage improved for the nine months ended December 28, 2014 compared to the same period in fiscal 2014 primarily due to an improved shipment mix of higher margin products, reduced manufacturing costs and improved inventory management. Net income from continuing operations was $32.8 million in the third quarter of fiscal 2015 as compared to $17.3 million in the third quarter of fiscal 2014. The increase in net income was primarily due to increased revenues and gross margin combined with decreased operating expenses.
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Results of Continuing Operations
Revenues
Revenues by segment: | Three Months Ended | Nine Months Ended | |||||||||||||
(in thousands) | December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | |||||||||||
Communications | $ | 79,288 | $ | 75,227 | $ | 240,046 | $ | 215,260 | |||||||
Computing and Consumer | 71,872 | 49,401 | 174,509 | 150,879 | |||||||||||
Total revenues | $ | 151,160 | $ | 124,628 | $ | 414,555 | $ | 366,139 | |||||||
Product groups representing greater than 10% of net revenues: | Three Months Ended | Nine Months Ended | |||||||||
As a percentage of net revenues | December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | |||||||
Communications: | |||||||||||
Communications timing products | 21 | % | 23 | % | 23 | % | 24 | % | |||
Serial RapidIO products | 17 | % | 17 | % | 19 | % | 15 | % | |||
All others less than 10% individually | 14 | % | 20 | % | 16 | % | 20 | % | |||
Total communications | 52 | % | 60 | % | 58 | % | 59 | % | |||
Computing and Consumer: | |||||||||||
Consumer and computing timing products | 12 | % | 18 | % | 15 | % | 18 | % | |||
Memory interface products | 28 | % | 16 | % | 21 | % | 16 | % | |||
All others less than 10% individually | 8 | % | 6 | % | 6 | % | 7 | % | |||
Total computing and consumer | 48 | % | 40 | % | 42 | % | 41 | % | |||
Total | 100 | % | 100 | % | 100 | % | 100 | % | |||
Communications Segment
Revenues in our Communications segment increased $4.1 million, or 5%, to $79.3 million in the quarter ended December 28, 2014 as compared to the quarter ended December 29, 2013. The increase was primarily due to a $4.7 million increase in shipments of our RapidIO switching solutions products combined with a $3.0 million increase in radio frequency product revenues, offset in part by lower revenue from legacy products.
Revenues in our Communications segment increased $24.8 million, or 12%, to $240.0 million in the nine months ended December 28, 2014 as compared to the nine months ended December 29, 2013. The increase was primarily due to a $23.7 million increase in shipments of our RapidIO switching solutions products combined with $7.8 million increase in radio frequency product revenues, offset in part by lower revenue from legacy products.
Computing and Consumer Segment
Revenues in our Computing and Consumer segment increased $22.5 million, or 45% to $71.9 million in the quarter ended December 28, 2014 as compared to the quarter ended December 29, 2013. The increase was primarily due to a $22.9 million increase in memory interface product revenues as a result of higher demand combined with a $3.2 million increase in shipments of wireless power products. This was offset in part by the loss of revenue amounting to $1.8 million from the sale of our Audio business during the quarter ended December 29, 2013 and $3.6 million decrease in timing product revenues.
Revenues in our Computing and Consumer segment increased $23.6 million, or 16% in the nine months ended December 28, 2014 as compared to the nine months ended December 29, 2013. The increase was primarily due to a $29.5 million increase in memory interface product revenues as a result of higher demand combined with a $6.8 million increase in shipments of wireless power products. This was partly offset by the loss of revenue amounting to $10.8 million from the sale of our Audio business and PCIe enterprise flash controller business in fiscal 2014.
Revenues by Region
Revenues in the quarter ended December 28, 2014 increased primarily in APAC (Asia Pacific region excluding Japan) as compared to the quarter ended December 29, 2013. Revenues in APAC, the Americas, Japan and Europe accounted for 74%,
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10%, 6% and 10%, respectively, of consolidated revenues in the quarter ended December 28, 2014 compared to 66%, 14%, 9% and 11% of our consolidated revenues in the quarter ended December 29, 2013. The APAC region continues to be our strongest region, as many of our largest customers utilize manufacturers in that region.
For the nine months ended December 28, 2014, revenue increased primarily in APAC (Asia Pacific region excluding Japan) as compared to the nine months ended December 29, 2013. For the nine months ended December 28, 2014, revenues in APAC region, Americas, Japan and Europe accounted for 68%, 13%, 7% and 12%, respectively, of consolidated revenues as compared to 64%, 15%, 8% and 13% respectively for the first nine months of fiscal 2014.
Gross Profit
Three Months Ended | Nine Months Ended | ||||||||||||||
December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | ||||||||||||
Gross Profit (in thousands) | $ | 91,364 | $ | 74,939 | $ | 247,249 | $ | 211,822 | |||||||
Gross Profit Percentage | 60.4 | % | 60.1 | % | 59.6 | % | 57.9 | % | |||||||
Gross profit increased $16.4 million and $35.4 million in the three and nine months ended December 28, 2014 compared to the three and nine months ended December 29, 2013, respectively, as a result of increased revenues combined with a higher gross margin percentage. Gross profit as a percentage of revenues increased 0.3% and 1.7% in the three and nine months ended December 28, 2014 compared to the three and six months ended December 29, 2013, respectively. Gross profit percentage improved primarily due to higher revenue, reduced manufacturing costs and improved inventory management. During the fourth quarter of fiscal 2012, we completed the transition of wafer fabrication activities from our Oregon fab to third party foundries. As of December 28, 2014 and March 30, 2014, the balance of net buffer stock inventory which was built in anticipation of the transition of wafer fabrication activities to third party foundries totaled approximately $0.4 million and $1.0 million, respectively.
Operating Expenses
The following table presents our operating expenses for the three and nine months ended December 28, 2014 and December 29, 2013:
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | ||||||||||||||||||||||||
(in thousands, except for percentages) | Dollar Amount | % of Net Revenue | Dollar Amount | % of Net Revenue | Dollar Amount | % of Net Revenues | Dollar Amount | % of Net Revenues | |||||||||||||||||||
Research and development | $ | 32,825 | 22 | % | $ | 31,063 | 25 | % | $ | 95,617 | 23 | % | $ | 107,939 | 29 | % | |||||||||||
Selling, general and administrative | $ | 27,165 | 18 | % | $ | 23,687 | 19 | % | $ | 79,419 | 19 | % | $ | 77,826 | 21 | % | |||||||||||
Research and Development (R&D)
R&D expense increased $1.8 million, or 5.7%, to $32.8 million in the quarter ended December 28, 2014 compared to the quarter ended December 29, 2013. The increase was primarily due to $1.9 million increase in accrued employee bonus expense and a $1.0 million increase in stock-based compensation. These increases were partly offset by a $0.5 million decrease in engineering design tool license costs, a $0.3 million decrease in outside services and a $0.3 million decrease in R&D labor and benefit related costs.
R&D expense decreased $12.3 million, or 11.4%, to $95.6 million in the nine months ended December 28, 2014 compared to the nine months ended December 29, 2013. The decrease was primarily due to a $8.0 million decrease in R&D labor and benefits related costs, a $6.8 million decrease in engineering design tool license costs resulting from the divestitures of our Audio business and PCIe enterprise flash controller business, and $2.7 million decrease in severance costs as a result of headcount reduction actions taken in fiscal 2014. Other significant decreases included $1.8 million in outside services and $1.2 million in R&D materials. These decreases were partly offset by a $6.2 million increase in accrued employee bonus expense and a $3.0 million increase in stock-based compensation.
Selling, General and Administrative (SG&A)
SG&A expense increased $3.5 million, or 14.7%, to $27.2 million in the quarter ended December 28, 2014 as compared to the quarter ended December 29, 2013. The increase was primarily driven by a $1.7 million increase in accrued employee bonus
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expense, a $1.5 million increase in stock-based compensation and $0.9 million increase in medical claims and insurance-related expense. These increases were partly offset by $0.5 million lower amortization of intangible assets.
SG&A expense increased $1.6 million, or 2.0%, to $79.4 million in the nine months ended December 28, 2014 compared to the six months ended December 29, 2013. The increase was primarily driven by a $4.4 million increase in accrued employee bonus expense and a $2.9 million increase in stock-based compensation. These increases were partly offset by reduced headcount costs of $2.6 million resulting from the divestitures of our Audio business and PCIe enterprise flash controller business, a $1.9 million decrease in acquisition related legal and consulting costs due to a reduction in acquisition and divestiture related activities as compared to the same period last year, and a $1.2 million lower severance costs as a result of headcount reduction actions taken in the second quarter of fiscal 2014.
Interest Income and Other, Net
The components of interest income and other, net are summarized as follows:
Three Months Ended | Nine Months Ended | ||||||||||||||
(in thousands) | December 28, 2014 | December 29, 2013 | December 28, 2014 | December 29, 2013 | |||||||||||
Interest income | $ | 738 | $ | 419 | $ | 1,857 | $ | 921 | |||||||
Other income, net | 820 | 689 | 968 | 1,000 | |||||||||||
Interest income and other, net | $ | 1,558 | $ | 1,108 | $ | 2,825 | $ | 1,921 | |||||||
Interest income is derived from earnings on our cash and short-term investments. Other income, net primarily consists of gains or losses in the value of deferred compensation plan assets, foreign currency gains or losses and other non-operating gains or losses. The increase in interest income in the three and nine months ended December 28, 2014 as compared to the same periods in prior year was primarily attributable to higher level of short-term investments and interest rates. The increase in other income in the quarter ended December 28, 2014 as compared to the same quarter in prior year was primarily due to favorable impact of foreign currency fluctuations. The decrease in other income in the nine months ended December 28, 2014 as compared to the same period in prior year was primarily due to changes in fair value of the underlying investments in the Company's deferred compensation plan.
Income Tax Expense
During the three and nine months ended December 28, 2014, we recorded an income tax expense from continuing operations of $0.1 million and $0.8 million, respectively. The income tax expense recorded in the three and nine months ended December 28, 2014 was primarily due to taxes on earnings in foreign jurisdictions. We recorded an income tax expense from continuing operations of $0.5 million and $0.7 million in the three and nine months ended December 29, 2013, respectively. The income tax expense recorded in the three and nine months ended December 29, 2013 was primarily due to taxes on earnings on foreign earnings and federal and state tax on U.S. earnings, the reversal of uncertain tax positions resulting from statute lapse, and a discrete tax provision related to its fiscal 2013 income tax return filing.
We continued to maintain a valuation allowance as a result of uncertainties related to the realization of its net deferred tax assets at December 28, 2014. The valuation allowance was established as a result of weighing all positive and negative evidence. The valuation allowance reflects the conclusion of management that it is more likely than not that benefits from certain deferred tax assets will not be realized. If actual results differ from estimates or if our estimates are adjusted in future periods, the valuation allowance may require adjustment which could materially impact our financial position and results of operations. It is reasonably possible that sometime in the next twelve months, positive evidence will be sufficient to release a material amount of our valuation allowance; however, there is no assurance that this will occur. The required accounting for the potential release would have significant deferred tax consequences and would increase earnings in the quarter in which the allowance is released.
The Tax Increase Prevention Act of 2014 (the “Act”) was signed into law on December 19, 2014. The Act contains a number of provisions including, most notably, an extension of the US federal research tax credit through December 31, 2014. The Act did not have a material impact on our effective tax rate for fiscal 2015 due to the effect of the valuation allowance on the Company's deferred tax assets.
We benefit from tax incentives granted by local tax authorities in certain foreign jurisdictions. In the fourth quarter of fiscal 2011, we agreed with the Malaysia Industrial Development Board to enter into a new tax incentive agreement which is a full tax exemption on statutory income for a period of 10 years commencing April 4, 2011. This tax incentive agreement is subject to us meeting certain financial targets, investments, headcounts and activities in Malaysia.
We believe that it is reasonably possible that a decrease of up to $2.0 million in unrecognized tax benefits may occur within the next twelve months due to settlements with tax authorities or statute lapses.
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In fiscal 2013, the Internal Revenue Service commenced a tax audit for fiscal years beginning 2011 through 2012. Although the final outcome is uncertain, based on currently available information, we believe that the ultimate outcome will not have a material adverse effect on our financial position, cash flows or results of operations.
As of December 28, 2014 , we were subject to examination in various state and foreign jurisdictions for tax years 2008 forward, none of which were individually material.
Liquidity and Capital Resources
Our cash and cash equivalents and short-term investments were $511.4 million at December 28, 2014, an increase of $57.5 million compared to March 30, 2014.
We had no outstanding debt at December 28, 2014 and March 30, 2014.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $111.1 million in the nine months ended December 28, 2014 compared to $48.3 million in the nine months ended December 29, 2013. Cash provided by operating activities in the nine months ended December 28, 2014 consisted of our net income of $54.6 million, adjusted to add back stock-based compensation, depreciation, amortization, impairment charges and other non-cash items which totaled $45.2 million less net gain on divestitures of $16.8 million; and cash provided by working capital requirements. In the nine months ended December 28, 2014, excluding the effects of non-cash activities, cash provided by working capital requirements was $28.1 million and consisted primarily of a $13.6 million increase in accrued compensation and related expenses, $12.3 million increase in other accrued liabilities, $8.8 million decrease in inventories, a $1.2 million increase in deferred income and a $0.7 million increase in accounts payable. These working capital additions were offset in part by cash used from a $7.4 million increase in accounts receivable due to an increase in revenue as compared to nine months ended December 29, 2013, a $0.9 million decrease in prepayments and other current assets and a $0.4 million increase in income taxes receivable.
Cash Flows from Investing Activities
Net cash used in investing activities in the nine months ended December 28, 2014 was $22.2 million compared to $80.3 million in the nine months ended December 29, 2013. Net cash used in investing activities in the nine months ended December 28, 2014 was primarily due to $22.1 million for the net purchase of short-term investments, $12.4 million of expenditures to purchase capital equipment and $4.0 million for purchase of cost-method investment, offset in part by $15.3 million of proceeds from divestiture of assets of Alvand portion of HSC business and $1.0 million cash in escrow related to a prior acquisition.
Cash Flows from Financing Activities
Net cash used in financing activities was $49.5 million in the nine months ended December 28, 2014 as compared to net cash provided by financing activities of $5.4 million in the nine months ended December 29, 2013. Cash used in financing activities in the nine months ended December 28, 2014, was primarily due to $62.7 million in stock buyback and $1.6 million payment of acquisition-related contingent consideration, offset in part by proceeds of $14.8 million from the exercise of employee stock options and the issuance of stock under our employee stock purchase plan.
We anticipate capital expenditures of approximately $15 million to $25 million during the next 12 months to be financed through cash generated from operations and existing cash and investments.
In addition, as much of our revenues are generated outside the U.S., a significant portion of our cash and investment portfolio accumulates in the foreign countries in which we operate. At December 28, 2014, we had cash, cash equivalents and investments of approximately $396.3 million invested overseas in accounts belonging to various IDT foreign operating entities. While these amounts are primarily invested in U.S. dollars, a portion is held in foreign currencies, and all offshore balances are exposed to local political, banking, currency control and other risks. In addition, these amounts may be subject to tax and other transfer restrictions.
We believe that existing cash and investment balances, together with cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs through at least the next 12 months. We may choose to investigate other financing alternatives to supplement U.S. liquidity; however, we cannot be certain that additional financing will be available on satisfactory terms.
Off-Balance Sheet Arrangements
As of December 28, 2014, we did not have any off-balance sheet arrangements, as defined under SEC Regulation S-K Item 303(a)(4)(ii).
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ITEM 6. EXHIBITS
(a) The following exhibits are filed herewith:
Exhibit Number | Exhibit Description | ||
3.1# | Restated Certificate of Incorporation, as amended to date. Incorporated by reference to Exhibit 3.1 to Form 10-K filed on May 21, 2012. | ||
3.2# | Certificate of Designations specifying the terms of the Series A Junior Participating Preferred Stock of Integrated Device Technology, Inc., as filed with the Secretary of State of the State of Delaware. Incorporated by reference to Exhibit 3.6 to Form 8-A filed on December 23, 1998. | ||
3.3# | Amended and Restated Bylaws of the Company, as amended and restated. Incorporated by reference to Exhibit 3.3 to Form 10-Q filed on November 6, 2013. | ||
31.1# | Certification of Chief Executive Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended. | ||
31.2# | Certification of Chief Financial Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended. | ||
31.3** | Certification of Chief Executive Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended. | ||
31.4** | Certification of Chief Financial Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended. | ||
32.1*# | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2*# | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.3** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.4** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS# | XBRL Instance Document. | ||
101.SCH# | XBRL Taxonomy Extension Schema Document. | ||
101.CAL# | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.DEF# | XBRL Taxonomy Extension Definition Linkbase Document. | ||
101.LAB# | XBRL Taxonomy Extension Label Linkbase Document. | ||
101.PRE# | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
* This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
# Previously filed with the Company's Quarterly Report on Form 10-Q for the quarter ended December 28, 2014.
** Filed herewith.
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SIGNATURES
Pursuant to the requirements 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.
INTEGRATED DEVICE TECHNOLOGY, INC. Registrant | ||
By: | /s/ Gregory L. Waters | |
February 12, 2015 | Gregory L. Waters President and Chief Executive Officer | |
/s/ Brian C. White | ||
February 12, 2015 | Brian C. White Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) | |
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