10-Q 1 a10-22736_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended October 31, 2010

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to              

 

Commission file number: 0-29939

 


 

OMNIVISION TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

77-0401990

(State or other jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification Number)

 

4275 Burton Drive, Santa Clara, California 95054

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code:  (408) 567-3000

 


 

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 and Exchange Act of 1934 during the preceding 12 months (or for 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 x  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 (§232.405 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 o  No o

 

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.

 

Large accelerated filer  o

 

Accelerated filer  x

 

 

 

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 Securities Exchange Act of 1934). Yes o  No x

 

At December 6, 2010, 55,652,113 shares of common stock of the registrant were outstanding, exclusive of 12,541,000 shares of treasury stock.

 

 

 



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

INDEX

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements:

3

 

 

 

 

Condensed Consolidated Balance Sheets (unaudited) — October 31, 2010 and April 30, 2010

3

 

 

 

 

Condensed Consolidated Statements of Operations (unaudited) — Three and Six Months Ended October 31, 2010 and 2009

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) — Six Months Ended October 31, 2010 and 2009

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

42

 

 

 

Item 1A.

Risk Factors

44

 

 

 

Item 6.

Exhibits

60

 

 

 

Signatures

61

 

 

 

Exhibit Index

62

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

ITEM 1.    FINANCIAL STATEMENTS

 

OMNIVISION TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

340,693

 

$

234,023

 

Short-term investments

 

56,007

 

99,555

 

Accounts receivable, net of allowances for doubtful accounts and sales returns

 

113,072

 

74,261

 

Inventories

 

121,260

 

133,993

 

Refundable and deferred income taxes

 

5,910

 

1,990

 

Prepaid expenses and other current assets

 

7,370

 

9,380

 

Total current assets

 

644,312

 

553,202

 

Property, plant and equipment, net

 

118,432

 

121,547

 

Long-term investments

 

101,826

 

92,121

 

Goodwill

 

1,122

 

439

 

Intangibles, net

 

7,004

 

4,891

 

Other long-term assets

 

24,359

 

25,493

 

Total assets

 

$

897,055

 

$

797,693

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

91,944

 

$

85,487

 

Accrued expenses and other current liabilities

 

18,642

 

19,506

 

Deferred revenues, less cost of revenues

 

13,387

 

10,661

 

Current portion of long-term debt

 

4,301

 

4,286

 

Total current liabilities

 

128,274

 

119,940

 

Long-term liabilities:

 

 

 

 

 

Long-term income taxes payable

 

92,547

 

90,626

 

Non-current portion of long-term debt

 

43,977

 

45,428

 

Other long-term liabilities

 

7,887

 

4,727

 

Total long-term liabilities

 

144,411

 

140,781

 

Total liabilities

 

272,685

 

260,721

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

OmniVision Technologies, Inc. stockholders’ equity:

 

 

 

 

 

Common stock, $0.001 par value; 100,000 shares authorized; 67,253 shares issued and 54,712 outstanding at October 31, 2010 and 64,616 shares issued and 52,075 outstanding at April 30, 2010, respectively

 

67

 

65

 

Additional paid-in capital

 

485,387

 

441,077

 

Accumulated other comprehensive income

 

1,541

 

870

 

Treasury stock, 12,541 shares at October 31, 2010 and April 30, 2010, respectively

 

(178,683

)

(178,683

)

Retained earnings

 

316,058

 

270,253

 

Total OmniVision Technologies, Inc. stockholders’ equity

 

624,370

 

533,582

 

Noncontrolling interest

 

 

3,390

 

Total equity

 

624,370

 

536,972

 

Total liabilities and equity

 

$

897,055

 

$

797,693

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

 

3



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Revenues

 

$

239,460

 

$

183,344

 

$

432,531

 

$

288,904

 

Cost of revenues

 

172,013

 

139,382

 

313,129

 

221,272

 

Gross profit

 

67,447

 

43,962

 

119,402

 

67,632

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research, development and related

 

20,894

 

18,853

 

41,126

 

37,285

 

Selling, general and administrative

 

14,741

 

16,209

 

29,070

 

30,369

 

Total operating expenses

 

35,635

 

35,062

 

70,196

 

67,654

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

31,812

 

8,900

 

49,206

 

(22

)

Interest expense, net

 

(434

)

(244

)

(634

)

(448

)

Other income (expense), net

 

(421

)

223

 

1,072

 

791

 

Income before income taxes

 

30,957

 

8,879

 

49,644

 

321

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

2,090

 

961

 

3,871

 

2,149

 

Net income (loss)

 

28,867

 

7,918

 

45,773

 

(1,828

)

Net loss attributable to noncontrolling interest

 

 

(166

)

(32

)

(56

)

Net income (loss) attributable to OmniVision Technologies, Inc.

 

$

28,867

 

$

8,084

 

$

45,805

 

$

(1,772

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.53

 

$

0.16

 

$

0.85

 

$

(0.03

)

Diluted

 

$

0.50

 

$

0.16

 

$

0.80

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders:

 

 

 

 

 

 

 

 

 

Basic

 

54,235

 

50,763

 

53,724

 

50,668

 

Diluted

 

57,680

 

51,769

 

57,230

 

50,668

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

 

4



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

 

Six Months Ended

 

 

 

October 31,

 

 

 

2010

 

2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

45,773

 

$

(1,828

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

9,292

 

11,662

 

Change in fair value of interest rate swap

 

1,450

 

(645

)

Stock-based compensation

 

10,257

 

12,201

 

Tax effect from stock-based compensation

 

1,825

 

 

(Gain) loss on equity investments, net

 

(6,135

)

(1,398

)

Write-down of inventories

 

10,443

 

10,149

 

Loss on disposal of property, plant and equipment

 

 

108

 

Excess tax benefit from stock-based compensation

 

(1,249

)

 

Changes in assets and liabilities, net of acquisition and deconsolidation:

 

 

 

 

 

Accounts receivable, net

 

(38,901

)

(23,735

)

Inventories

 

31

 

7,696

 

Refundable and deferred income taxes

 

(3,181

)

(1,260

)

Prepaid expenses and other assets

 

1,455

 

235

 

Accounts payable

 

6,189

 

53,713

 

Accrued expenses and other current liabilities

 

321

 

2,957

 

Income taxes payable

 

2,301

 

3,975

 

Deferred revenues, less cost of revenues

 

2,701

 

2,233

 

Deferred tax liabilities

 

1,457

 

(967

)

Net cash provided by operating activities

 

44,029

 

75,096

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments

 

(37,356

)

(45,140

)

Proceeds from sales or maturities of short-term investments

 

78,277

 

23,916

 

Purchases of property, plant and equipment, net of sales

 

(3,350

)

(4,257

)

Purchases of long-term investments

 

(282

)

 

Purchase of intangible and other assets

 

(5,000

)

 

Deconsolidation of SOI

 

(2,816

)

 

Net cash provided by (used in) investing activities

 

29,473

 

(25,481

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from long-term borrowings

 

 

6,590

 

Repayment of long-term borrowings

 

(1,777

)

(1,778

)

Cash contribution by noncontrolling interest

 

 

4

 

Excess tax benefits from stock-based compensation

 

1,249

 

 

Proceeds from exercise of stock options and employee stock purchase plan

 

33,418

 

3,610

 

Net cash provided by financing activities

 

32,890

 

8,426

 

Effect of exchange rate changes on cash and cash equivalents

 

278

 

82

 

Net increase in cash and cash equivalents

 

106,670

 

58,123

 

Cash and cash equivalents at beginning of period

 

234,023

 

257,808

 

Cash and cash equivalents at end of period

 

$

340,693

 

$

315,931

 

Supplemental cash flow information:

 

 

 

 

 

Taxes paid

 

$

1,364

 

$

472

 

Interest paid (net of amount capitalized)

 

$

1,448

 

$

1,085

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

Additions to property, plant and equipment included in accounts payable and accrued expenses

 

$

842

 

$

2,592

 

Capitalized interest and other costs

 

$

102

 

$

46

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

 

5



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Note 1 — Basis of Presentation

 

Overview

 

The accompanying interim unaudited condensed consolidated financial statements as of October 31, 2010 and April 30, 2010 and for the three and six months ended October 31, 2010 and 2009 have been prepared by OmniVision Technologies, Inc., and its subsidiaries (“OmniVision” or the “Company”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The amounts as of April 30, 2010 are derived from the Company’s audited annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with SEC rules and regulations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the audited annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2010 (the “Form 10-K”).

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and beliefs of what could occur in the future considering available information. Actual results could differ from these estimates.

 

Note 2 — Recent Accounting Pronouncements

 

In October 2009, the FASB revised the authoritative guidance for revenue recognition for arrangements with multiple deliverables. The new guidance modifies the requirements for determining whether a deliverable can be treated as a separate unit of accounting by removing the criteria that verifiable and objective evidence of fair value exists for the undelivered elements. In allocating transaction consideration among the deliverables, the guidance also introduced the concept of using management’s best estimate of a standalone selling price as an alternate basis for allocation. The guidance is effective in fiscal years beginning on or after June 15, 2010, and the Company is required to adopt this guidance in its first quarter of fiscal 2012. The Company is currently evaluating the impact this guidance may have on its financial position, results of operations and cash flows.

 

In October 2009, the FASB issued authoritative guidance addressing certain revenue arrangements that include software elements. This guidance states that tangible products with hardware and software components that work together to deliver the product functionality are considered non-software products, and the accounting guidance under the revenue arrangements with multiple deliverables is to be followed. The guidance is effective in fiscal years beginning on or after June 15, 2010, and the Company is required to adopt this guidance in its first quarter of fiscal 2012. The Company is currently evaluating the impact this guidance may have on its financial position, results of operations and cash flows.

 

6



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Note 3 — Short-Term Investments

 

Available-for-sale securities as of the dates presented were as follows (in thousands):

 

 

 

As of October 31, 2010

 

 

 

Amortized

 

Gross
Unrealized

 

Gross
Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

U.S. government debt securities with maturities less than one year

 

$

26,702

 

$

4

 

$

(12

)

$

26,694

 

U.S. government debt securities with maturities over one year

 

8,023

 

5

 

 

8,028

 

Commercial paper and bond funds

 

21,287

 

2

 

(4

)

21,285

 

 

 

$

56,012

 

$

11

 

$

(16

)

$

56,007

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity dates, less than one year

 

 

 

 

 

 

 

$

47,979

 

Contractual maturity dates, one year to two years

 

 

 

 

 

 

 

8,028

 

 

 

 

 

 

 

 

 

$

56,007

 

 

 

 

As of April 30, 2010

 

 

 

Amortized

 

Gross
Unrealized

 

Gross
Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Certificates of deposit

 

$

2,285

 

$

 

$

 

$

2,285

 

U.S. government debt securities with maturities less than one year

 

77,128

 

12

 

 

77,140

 

U.S. government debt securities with maturities over one year

 

8,145

 

5

 

 

8,150

 

Commercial paper and bond funds

 

11,999

 

 

 

(19

)

11,980

 

 

 

$

99,557

 

$

17

 

$

(19

)

$

99,555

 

 

 

 

 

 

 

 

 

 

 

Contractual maturity dates, less than one year

 

 

 

 

 

 

 

$

91,405

 

Contractual maturity dates, one year to two years

 

 

 

 

 

 

 

8,150

 

 

 

 

 

 

 

 

 

$

99,555

 

 

7



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Note 4 — Supplemental Balance Sheet Account Information (in thousands)

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

Cash and cash equivalents:

 

 

 

 

 

Cash

 

$

211,096

 

$

183,393

 

Money market funds, certificates of deposit and U.S. government bonds

 

129,597

 

50,630

 

 

 

$

340,693

 

$

234,023

 

Accounts receivable, net:

 

 

 

 

 

Accounts receivable

 

$

115,515

 

$

75,908

 

Less: Allowance for doubtful accounts

 

(918

)

(711

)

Allowance for sales returns

 

(1,525

)

(936

)

 

 

$

113,072

 

$

74,261

 

Inventories:

 

 

 

 

 

Work in progress

 

$

49,177

 

$

76,845

 

Finished goods

 

72,083

 

57,148

 

 

 

$

121,260

 

$

133,993

 

Prepaid expenses and other current assets:

 

 

 

 

 

Prepaid expenses

 

$

5,324

 

$

6,398

 

Deposits and other

 

1,604

 

2,686

 

Interest receivable

 

442

 

296

 

 

 

$

7,370

 

$

9,380

 

Property, plant and equipment, net:

 

 

 

 

 

Land

 

$

13,000

 

$

13,000

 

Buildings and land use right

 

56,602

 

37,877

 

Buildings/leasehold improvements

 

24,860

 

19,148

 

Machinery and equipment

 

67,388

 

64,894

 

Furniture and fixtures

 

5,008

 

4,810

 

Software

 

6,369

 

5,873

 

Construction in progress

 

239

 

23,419

 

 

 

173,466

 

169,021

 

Less: Accumulated depreciation and amortization

 

(55,034

)

(47,474

)

 

 

$

118,432

 

$

121,547

 

Other long-term assets:

 

 

 

 

 

Deferred income tax assets – non-current

 

$

18,898

 

$

20,440

 

Prepaid wafer credits

 

3,343

 

2,826

 

Long-term employee loan receivable

 

1,000

 

1,000

 

Other long-term assets

 

1,118

 

1,227

 

 

 

$

24,359

 

$

25,493

 

Accrued expenses and other current liabilities:

 

 

 

 

 

Employee compensation

 

$

9,420

 

$

7,490

 

Third party commissions

 

710

 

1,004

 

Professional services

 

1,426

 

2,383

 

Noncancelable purchase commitments

 

2,844

 

4,689

 

Distributor pricing adjustments

 

2,493

 

1,871

 

Other

 

1,749

 

2,069

 

 

 

$

18,642

 

$

19,506

 

Other long-term liabilities:

 

 

 

 

 

Deferred income tax liabilities – non-current

 

$

2,499

 

$

1,040

 

Interest rate swaps

 

5,138

 

3,687

 

Other

 

250

 

 

 

 

$

7,887

 

$

4,727

 

 

8



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Note 5 — Long-term Investments

 

Long-term investments as of the dates indicated consisted of the following (in thousands):

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

VisEra

 

$

75,605

 

$

72,170

 

WLCSP

 

13,199

 

11,819

 

XinTec

 

4,661

 

4,661

 

Tong Hsing

 

4,574

 

3,471

 

SOI

 

3,787

 

 

Total

 

$

101,826

 

$

92,121

 

 

VisEra Technologies Company, Ltd.

 

On October 29, 2003, the Company and Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) entered into an agreement to form VisEra Technologies Company, Ltd. (“VisEra”), a joint venture in Taiwan, for the purposes of providing certain manufacturing and automated final testing services related to complementary metal oxide semiconductor (“CMOS”) image sensors. In August 2005, under an amendment to the original 2003 joint-venture agreement, the Company and TSMC formed VisEra Holding Company (“VisEra Cayman”), a company incorporated in the Cayman Islands, and VisEra became a subsidiary of VisEra Cayman. The Company and TSMC have equal interests in VisEra Cayman.

 

Through April 2007, the Company’s contributions to VisEra and VisEra Cayman totaled $51.6 million, effectively meeting its commitment under the terms of a January 2007 amendment to the joint-venture agreement, in which the Company and TSMC have agreed to commit a total of $112.9 million to the joint venture. The Company has not made any subsequent contributions into VisEra or VisEra Cayman.

 

The following table presents equity income recorded by the Company for the periods indicated in “Cost of revenues,” consisting of its portion of the net income recorded by VisEra during the periods presented (in thousands) (See Note 14.):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Equity income

 

$

2,152

 

$

1,567

 

$

3,285

 

$

1,451

 

 

China WLCSP Limited

 

China WLCSP Limited (“WLCSP”) is in the business of designing, manufacturing, packaging and selling certain wafer level chip scale packaging related services. In May 2007, the Company acquired 4,500,000 units of WLCSP’s equity interests, or 20.0% of WLCSP’s registered capital on a fully-diluted basis, for an aggregate purchase amount of $9.0 million. The Company has appointed a member to WLCSP’s board of directors and a supervisor.

 

At the date of the transaction, the Company’s $9.0 million investment in WLCSP exceeded its share of the book value of WLCSP’s assets by $5.7 million. Of this $5.7 million difference, $4.1 million represents equity method goodwill that is not subject to amortization. This amount is recorded as a portion of the Company’s investment in WLCSP. The Company is amortizing the remaining basis difference of $1.6 million, which is attributable to intangible assets of WLCSP, over various periods up to a maximum of five years.

 

9



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

The Company accounts for its investment in WLCSP under the equity method. The following table presents equity income recorded by the Company for the periods indicated in “Other income (expense), net,” consisting of its portion of the net income recorded by WLCSP during those periods and equity method investment adjustments (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Equity income

 

$

395

 

$

245

 

$

1,380

 

$

696

 

 

XinTec, Inc.

 

XinTec, Inc. (“XinTec”) is a Taiwan-based supplier of chip scale packaging services. The Company first made investments in XinTec in April 2003, for $2.8 million. As of October 31, 2010, the Company’s direct ownership percentage in XinTec was 4.2%. Separately, VisEra Cayman owns a 16.1% interest in XinTec. Consequently, the Company’s beneficial ownership percentage in XinTec was approximately 12.1%. The Company accounts for XinTec as a cost method investment.

 

Tong Hsing Electronic Industries, Limited

 

Tong Hsing Electronic Industries, Limited (“Tong Hsing”) is a Taiwan-based public company principally engaged in the development and production of microelectronic packaging. In December 2009, the Company obtained 0.8% of the outstanding shares of common stock of Tong Hsing, or 996,250 shares, when Tong Hsing acquired ImPac Technology Co., Ltd. (“ImPac”) in a stock-for-stock exchange. Prior to the exchange, the Company owned 25.7% of ImPac. In June 2010, the Company participated in Tong Hsing’s secondary offering and purchased an additional 95,570 shares for approximately $282,000. As of October 31, 2010, the Company’s ownership in Tong Hsing was approximately 0.8%.

 

As the shares of Tong Hsing are traded on the Taiwan Stock Exchange and the share price is readily determinable, the Company reported the shares on a mark-to-market basis. For the periods indicated, the Company recorded the following unrealized holding gains in “Accumulated other comprehensive income” (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Unrealized holding gains

 

$

413

 

$

 

$

821

 

$

 

 

Silicon Optronics, Inc.

 

In May 2004, the Company entered into an agreement with Powerchip Technology Corporation (“PTC”), formerly Powerchip Semiconductor Corporation, a Taiwan based company that produces memory chips and provides semiconductor foundry services, to establish Silicon Optronics, Inc. (“SOI”), a joint venture in Taiwan. The Company contributed approximately $2.1 million to SOI in exchange for an ownership percentage of 49.0%. In March 2005, the Company assumed control of the board of directors of SOI and the Company has consolidated SOI since April 30, 2005. The purpose of SOI is to manufacture, market and sell certain of the Company’s legacy products. Toward the end of fiscal 2010, SOI began to ship niche products into other markets, including touch panels that track touches with optical sensors, and linear sensors.

 

In June 2010, SOI held its annual meeting of stockholders and new board directors were elected. As a result, the Company no longer held the majority representation on the board of directors of SOI, and was required to deconsolidate SOI. The authoritative guidance for deconsolidation required the Company to record its retained interest in SOI at fair value. Pursuant to the guidance, the Company recorded a gain of approximately $1.6 million in “Other income (expense), net,” which was the difference between the fair value of the Company’s retained interest in SOI, and the carrying value of SOI’s net assets and noncontrolling interest before the deconsolidation. (See Note 9). After the deconsolidation, the Company owned 43.8% of SOI, which the Company accounted for under the equity method. As of October 31, 2010, the Company’s ownership in SOI was approximately 43.7%.

 

10



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

For the periods indicated, the Company recorded equity loss in “Other income (expense), net” for its portion of the net loss recorded by SOI (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Equity loss

 

$

(304

)

$

 

$

(267

)

$

 

 

Noncontrolling interest represents ownership interests in SOI held by parties other than the Company. The following table reconciles equity attributable to noncontrolling interest for the periods indicated (in thousands):

 

 

 

Six Months Ended

 

 

 

October 31,

 

 

 

2010

 

2009

 

Noncontrolling interest, May 1

 

$

3,390

 

$

3,497

 

Cash contribution by noncontrolling interest

 

 

4

 

Net loss attributable to noncontrolling interest

 

(32

)

(56

)

Translation gain (loss)

 

(70

)

60

 

Deconsolidation

 

(3,288

)

 

Noncontrolling interest, October 31

 

$

 

$

3,505

 

 

The following tables present the summary financial information of SOI, VisEra and WLCSP, as derived from their financial statements for the periods indicated, and prepared under GAAP (in thousands):

 

Silicon Optronics, Inc

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Operating data:

 

 

 

 

 

 

 

 

 

Revenues

 

$

2,367

 

$

614

 

$

4,804

 

$

2,294

 

Gross profit (loss)

 

(227

)

82

 

234

 

537

 

Income (loss) from operations

 

(727

)

(318

)

(719

)

(148

)

Net loss

 

$

(695

)

$

(296

)

$

(666

)

$

(100

)

 

VisEra Technologies Company, Ltd.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Operating data:

 

 

 

 

 

 

 

 

 

Revenues

 

$

26,709

 

$

20,142

 

$

53,154

 

$

31,785

 

Gross profit

 

7,249

 

4,422

 

12,699

 

4,328

 

Income from operations

 

4,483

 

2,455

 

7,301

 

586

 

Net income

 

$

5,412

 

$

2,367

 

$

6,558

 

$

2,372

 

 

11



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

China WLCSP Limited

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Operating data:

 

 

 

 

 

 

 

 

 

Revenues

 

$

8,221

 

$

5,138

 

$

19,058

 

$

10,529

 

Gross profit

 

2,968

 

1,962

 

9,099

 

4,534

 

Income from operations

 

951

 

1,276

 

6,174

 

3,109

 

Net income

 

$

990

 

$

1,227

 

$

6,002

 

$

3,486

 

 

The Company’s share of undistributed earnings of investees accounted for by the equity method as of the dates indicated were as follows (in thousands):

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

Undistributed earnings of investees

 

$

19,000

 

$

20,806

 

 

Note 6 — Goodwill and Intangible Assets

 

Goodwill

 

The change to the carrying value of the Company’s goodwill from May 1, 2010 through October 31, 2010 is reflected below (in thousands):

 

 

 

Goodwill

 

Balance at May 1, 2010

 

$

439

 

Goodwill from purchase of assets

 

683

 

Balance at October 31, 2010

 

$

1,122

 

 

Intangible assets as of the dates indicated consisted of the following (in thousands):

 

 

 

October 31, 2010

 

 

 

Cost

 

Accumulated
Amortization

 

Net Book
Value

 

Core technology(1)

 

$

24,410

 

$

18,506

 

$

5,904

 

Patents and licenses

 

13,460

 

13,070

 

390

 

Trademarks and tradenames

 

1,400

 

1,400

 

 

Customer relationships

 

340

 

120

 

220

 

In-process research and development

 

490

 

 

490

 

Intangible assets, net

 

$

40,100

 

$

33,096

 

$

7,004

 

 


(1)          During the six months ended October 31, 2010, the Company purchased certain intangible and other assets, of which $3.4 million was allocated to “Core technology” based on their fair values as of the purchase date.

 

 

 

April 30, 2010

 

 

 

Cost

 

Accumulated
Amortization

 

Net Book
Value

 

Core technology

 

$

21,010

 

$

17,856

 

$

3,154

 

Patents and licenses

 

13,487

 

12,477

 

1,010

 

Trademarks and tradenames

 

1,400

 

1,400

 

 

Customer relationships

 

340

 

103

 

237

 

In-process research and development

 

490

 

 

490

 

Intangible assets, net

 

$

36,727

 

$

31,836

 

$

4,891

 

 

12



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

The following table presents the amortization of intangibles recorded by the Company for the periods indicated (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Amortization of intangibles

 

$

802

 

$

1,633

 

$

1,260

 

$

3,266

 

 

The total expected future annual amortization of these intangible assets is as follows (in thousands):

 

Years Ending April 30,

 

 

 

2011

 

$

1,338

 

2012

 

1,978

 

2013

 

1,902

 

2014

 

766

 

2015

 

377

 

Thereafter

 

643

 

Total

 

$

7,004

 

 

Note 7 — Borrowing Arrangements

 

The following table sets forth the Company’s debt as of the dates indicated (in thousands):

 

 

 

October 31,
2010

 

April 30,
2010

 

 

 

 

 

 

 

Mortgage loan

 

$

25,590

 

$

25,867

 

Term loan

 

5,500

 

7,000

 

Construction loan

 

17,188

 

16,847

 

 

 

48,278

 

49,714

 

Less: amount due within one year

 

(4,301

)

(4,286

)

Non-current portion of long-term debt

 

$

43,977

 

$

45,428

 

 

As of October 31, 2010, aggregate debt maturities were as follows (in thousands):

 

Years Ending April 30,

 

Mortgage
and Term
Loan

 

Construction
Loan

 

Total

 

2011

 

$

1,777

 

$

747

 

$

2,524

 

2012

 

3,554

 

747

 

4,301

 

2013

 

1,554

 

1,495

 

3,049

 

2014

 

554

 

2,989

 

3,543

 

2015

 

554

 

2,989

 

3,543

 

Thereafter

 

23,097

 

8,221

 

31,318

 

Total

 

$

31,090

 

$

17,188

 

$

48,278

 

 

Mortgage Loan and Term Loan

 

On March 16, 2007, the Company entered into a Loan and Security Agreement with a domestic bank for the purchase of a complex of four buildings located in Santa Clara, California (the “Santa Clara Property”). The Loan and Security Agreement provides for a mortgage loan in the principal amount of $27.9 million (the “Mortgage Loan”) and a secured line of credit with an aggregate maximum principal amount of up to $12.0 million (the “Term Loan”). In March 2008, the Company borrowed $6.0 million under the Term Loan to finance improvements to the Santa Clara Property. The Company drew down the remaining $6.0 million under the Term Loan in July 2008.

 

13



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Borrowings under the Mortgage Loan accrue interest at the London Interbank Borrowing Rate (“LIBOR”) plus 90 basis points. Borrowings under the Term Loan accrue interest at the LIBOR rate plus 125 basis points. The Mortgage and Term Loans mature on March 31, 2017 and July 31, 2012, respectively.  The Company was in compliance with the financial covenants of the Loan and Security Agreement as of October 31, 2010.

 

Interest rates under the Mortgage Loan and the Term Loan for the dates indicated are set forth below:

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

Mortgage Loan

 

1.2

%

1.2

%

Term Loan

 

1.5

 

1.5

 

 

In conjunction with the Mortgage Loan, the Company entered into an interest rate swap with the same bank to effectively convert the variable interest rate described above to a fixed rate. The swap is for a period of ten years, and the notional amount of the swap approximates the principal outstanding under the Mortgage Loan. The Company is the fixed rate payer under the swap and the rate is fixed at 5.3% per annum and the effective rate on the Mortgage Loan is fixed at approximately 6.2%. In July 2008, in connection with the Term Loan, the Company entered into a second interest rate swap with the bank to effectively convert the variable interest rate described above to a fixed rate. This second swap is for a period of four years. The Company is the fixed rate payer and the rate is fixed at 4.3% per annum and the effective rate on the Term Loan is fixed at approximately 5.5%.

 

Construction Loan

 

On August 3, 2009, OmniVision Technologies (Shanghai) Co., Ltd., a wholly-owned subsidiary of the Company, entered into a Fixed Assets Loan Agreement with a bank in China (the “Construction Loan”). The purpose of the Construction Loan is to construct a research center for the Company in Pudong Development Zone, the Zhang Jiang Science Park in Shanghai, China. The loan amount is Chinese Yuan 140.0 million or approximately $20.5 million based on exchange rate in effect at the time of the loan origination. As of October 31, 2010, the Company has borrowed Chinese Yuan 115.0 million, or approximately $17.2 million, under the Construction Loan. The Company is scheduled to draw down the remaining $3.3 million by December 2011. The Construction Loan matures on June 30, 2016.

 

The interest rate under the Construction Loan is based on an indicative rate as published by the Chinese government, and will be adjusted every September to the then current published rate. The interest rate under the Construction Loan was 5.3% at October 31, 2010. The Company was in compliance with the financial covenants of the Fixed Assets Loan Agreement as of October 31, 2010.

 

Derivative Instruments and Hedging Activities

 

As indicated above, the Company holds two separate interest rate swaps in connection with the Mortgage Loan and the Term Loan. The Company utilizes the swaps to reduce the effect of interest rate variability on the two loans’ interest payments. The Company has not designated the two interest rate swaps as hedging instruments. Consequently, the Company remeasures the two interest rate swaps at fair value at each balance sheet date, and immediately recognizes any changes to the fair values in earnings. On the balance sheet, the Company records the swaps as either assets or liabilities, depending on whether the fair value represents net gains or net losses.

 

14



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

The following table presents the location of the swaps on the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets, and the related effects on the Company’s results of operations and financial positions (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Location of amounts recognized in Condensed Consolidated Statements of Operations and amount of gains (losses):

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

$

(353

)

$

(236

)

$

(1,451

)

$

645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

April 30,

 

 

 

 

 

 

 

2010

 

2010

 

Location of amounts on Condensed Consolidated Balance Sheets and fair values:

 

 

 

 

 

 

 

 

 

Other long-term liabilities

 

 

 

 

 

$

5,138

 

$

3,687

 

 

Note 8 — Net Income (Loss) Per Share Attributable to OmniVision Technologies, Inc. Common Stockholders

 

Basic net income (loss) per share attributable to OmniVision common stockholders is computed by dividing net income (loss) attributable to OmniVision by the weighted average number of common shares outstanding during the period.

 

Diluted net income per share attributable to OmniVision common stockholders is computed according to the treasury stock method using the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares represent the effect of stock options and restricted stock units. The following table sets forth the number of stock options and restricted stock units that were excluded from the periods indicated:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Antidilutive common stock subject to outstanding options and restricted stock units

 

410,000

 

11,012,000

 

878,000

 

11,291,000

 

 

15



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated (in thousands, except per share data):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

Basic:

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to OmniVision Technologies, Inc.

 

$

28,867

 

$

8,084

 

$

45,805

 

$

(1,772

)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average common shares for net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders

 

54,235

 

50,763

 

53,724

 

50,668

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders

 

$

0.53

 

$

0.16

 

$

0.85

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to OmniVision Technologies. Inc.

 

$

28,867

 

$

8,084

 

$

45,805

 

$

(1,772

)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Denominator for basic net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders

 

54,235

 

50,763

 

53,724

 

50,668

 

Weighted average effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Stock options, restricted stock units and employee stock purchase plan shares

 

3,445

 

1,006

 

3,506

 

 

Weighted average common shares for diluted net income (loss) per share

 

57,680

 

51,769

 

57,230

 

50,668

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share attributable to OmniVision Technologies, Inc. common stockholders

 

$

0.50

 

$

0.16

 

$

0.80

 

$

(0.03

)

 

Note 9 — Fair Value Measurements

 

The authoritative guidance for fair value measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s own assumption of market participant valuation (unobservable inputs). The fair value hierarchy consists of the following three levels:

 

·                  Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.

·                  Level 2 — Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

·                  Level 3 — Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

 

16



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

 

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis which were comprised of the following types of instruments as of the date indicated (in thousands):

 

 

 

October 31, 2010

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Money market funds

 

$

107,268

 

$

107,268

 

$

 

$

 

Debt securities issued by U.S. government and U.S. government agencies

 

34,722

 

 

34,722

 

 

Corporate debt securities/commercial paper

 

36,182

 

 

36,182

 

 

Equity investment in Tong Hsing

 

4,574

 

4,574

 

 

 

Total assets

 

$

182,746

 

$

111,842

 

$

70,904

 

$

 

Interest rate swaps

 

$

(5,138

)

$

 

$

(5,138

)

$

 

Total liabilities

 

$

(5,138

)

$

 

$

(5,138

)

$

 

 

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis which were presented on the Company’s Condensed Consolidated Balance Sheets as of the date indicated (in thousands):

 

 

 

October 31, 2010

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Cash equivalents

 

$

122,165

 

$

107,268

 

$

14,897

 

$

 

Short-term investments

 

56,007

 

 

56,007

 

 

Long-term investments

 

4,574

 

4,574

 

 

 

Total assets

 

$

182,746

 

$

111,842

 

$

70,904

 

$

 

Interest rate swaps

 

$

(5,138

)

$

 

$

(5,138

)

$

 

Total liabilities

 

$

(5,138

)

$

 

$

(5,138

)

$

 

 

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis which were comprised of the following types of instruments as of the date indicated (in thousands):

 

 

 

April 30, 2010

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Money market funds

 

$

41,211

 

$

41,211

 

$

 

$

 

Debt securities issued by U.S. government and U.S. government agencies

 

85,290

 

 

85,290

 

 

Corporate debt securities/commercial paper

 

11,980

 

 

11,980

 

 

Equity investment in Tong Hsing

 

3,471

 

3,471

 

 

 

Total assets

 

$

141,952

 

$

44,682

 

$

97,270

 

$

 

Interest rate swaps

 

$

(3,687

)

$

 

$

(3,687

)

$

 

Total liabilities

 

$

(3,687

)

$

 

$

(3,687

)

$

 

 

17



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis which were presented on the Company’s Consolidated Balance Sheets as of the date indicated (in thousands):

 

 

 

April 30, 2010

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Cash equivalents

 

$

41,211

 

$

41,211

 

$

 

$

 

Short-term investments

 

97,270

 

 

97,270

 

 

Long-term investments

 

3,471

 

3,471

 

 

 

Total assets

 

$

141,952

 

$

44,682

 

$

97,270

 

$

 

Interest rate swaps

 

$

(3,687

)

$

 

$

(3,687

)

$

 

Total liabilities

 

$

(3,687

)

$

 

$

(3,687

)

$

 

 

Certificates of deposit recorded as cash equivalents and short-term investments are not measured at fair value on a recurring basis and as such are not included in the tables above. The following table sets forth the carrying value of certificates of deposit recorded as cash equivalents and short-term investments for the dates presented (in thousands):

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

Certificates of deposit recorded as cash equivalents

 

$

7,432

 

$

9,419

 

Certificates of deposit recorded as short-term investments

 

$

 

$

2,285

 

 

For the Company’s interest rate swaps, the Company obtains fair value quotes from the issuing bank and assesses the quotes for reasonableness by comparing them to the present values of expected cash flows. The present value approach is based on observable market interest rate curves that are commensurate with the terms of the interest rate swaps. The carrying value represents the fair value of the swaps, as adjusted for any non-performance risk associated with the Company.

 

Due to their short maturities, the reported amounts of the Company’s financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and other current liabilities approximate fair value. The fair values of the Mortgage Loan, Term Loan and Construction Loan approximate book values as the underlying interest rates are based on risk-adjusted market rates.

 

Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

 

The following table presents the Company’s financial assets that were measured and recorded at fair value on a non-recurring basis during the three and six months ended October 31, 2010, and the gain recorded on the assets during the same period (in thousands):

 

 

 

Carrying
Value
October 31,

 

Fair Value Measured and Recorded Using

 

Gain for
Three Months
Ended

 

Gain for
Six Months
Ended

 

 

 

2010

 

Level 1

 

Level 2

 

Level 3

 

October 31, 2010

 

Equity investment in SOI

 

$

3,787

(1)

$

 

$

 

$

4,157

 

$

 

$

1,648

 

Total gain

 

 

 

 

 

 

 

 

 

 

 

$

1,648

 

 


(1)         The carrying value as presented as of October 31, 2010, reflects subsequent equity income (loss) adjustments to the fair value. These adjustments represented the Company’s portion of the net income or losses recorded by SOI.

 

The Company did not have any assets or liabilities that were measured at fair value on a non-recurring basis during the three and six months ended October 31, 2009. For the Company’s equity investment in SOI, the authoritative guidance for deconsolidation required the Company to record its retained interest in SOI at fair value in June 2010, when the Company no longer held the majority representation on SOI’s board. (See Note 5.) The Company classified the fair value measurement as Level 3 as the Company used unobservable inputs for the valuation methodologies that

 

18



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

were significant to the fair value measurements. The Company determined the fair value of its retained interest in SOI by using the market and income approaches. The market approach included the use of financial metrics from comparable public companies. The selection of comparable companies required management judgment and was based on a number of factors, including comparable companies’ sizes, industries, and other relevant factors. The income approach included the use of a discounted cash flow model that required significant estimates for SOI, including revenues, costs, risk adjusted discount rates and other relevant projections.

 

Note 10 — Segment and Geographic Information

 

The Company identifies its business segments based on business activities, management responsibility and geographic location. For all periods presented, the Company operated in a single reportable business segment.

 

The Company sells its image-sensor products either directly to OEMs and VARs or indirectly through distributors. The following table illustrates the percentage of revenues from sales to OEMs and VARs and to distributors for the periods indicated, respectively:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

OEMs and VARs

 

73.9

%

53.4

%

71.4

%

52.1

%

Distributors

 

26.1

 

46.6

 

28.6

 

47.9

 

Total

 

100.0

%

100.0

%

100.0

%

100.0

%

 

Since the Company’s end-user customers market and sell their products worldwide, its revenues by geographic location are not necessarily indicative of the geographic distribution of end-user sales, but rather indicate where their components are sourced. The revenues by geography in the following table are based on the country or region in which the Company’s customers issue their purchase orders (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

October 31,

 

October 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

China

 

$

166,421

 

$

154,027

 

$

293,872

 

$

242,443

 

South Korea

 

42,642

 

528

 

79,341

 

844

 

Malaysia

 

14,927

 

6,784

 

34,101

 

11,136

 

Taiwan

 

8,391

 

16,095

 

12,973

 

25,817

 

United States

 

731

 

883

 

1,962

 

1,552

 

All other

 

6,348

 

5,027

 

10,282

 

7,112

 

Total

 

$

239,460

 

$

183,344

 

$

432,531

 

$

288,904

 

 

The Company’s long-lived assets, including its long-term investments, are located in the following countries (in thousands):

 

 

 

October 31,

 

April 30,

 

 

 

2010

 

2010

 

Taiwan

 

$

95,503

 

$

92,092

 

China

 

66,573

 

64,558

 

United States

 

57,537

 

59,602

 

All other

 

5,106

 

928

 

Total

 

$

224,719

 

$

217,180

 

 

19



Table of Contents

 

OMNIVISION TECHNOLOGIES, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Three and Six Months Ended October 31, 2010 and 2009

(unaudited)

 

Note 11 — Supplemental Financial Information

 

Additional Paid-in Capital

 

The following table shows the amounts recorded to “Additional paid-in capital” for the six months ended October 31, 2010 (in thousands):

 

 

 

Additional

 

 

 

Paid-in

 

 

 

Capital

 

Balance at May 1, 2010

 

$

441,077

 

Exercise of common stock options

 

30,791

 

Employee stock purchase plan

 

2,625

 

Employee stock-based compensation

 

10,257

 

Withholding tax deduction on restricted stock units

 

(743

)

Tax effect from stock-based compensation

 

1,825

 

Write-off of employee stock-based compensation related deferred tax assets

 

(445

)

Balance at October 31, 2010

 

$

485,387