x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2012 |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ______ to ______ |
DELAWARE | 94-3065014 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Class | Shares Outstanding at April 20, 2012 |
Common Stock, $.001 par value | 28,380,485 |
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Item 1A. | ||
Item 2. | ||
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Item 6. | ||
March 31, | December 31, | ||||||
2012 | 2011 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 147,155 | $ | 139,836 | |||
Short-term marketable securities | 66,855 | 40,899 | |||||
Accounts receivable, net of allowances of $216 and $215 in 2012 and 2011, respectively (Note 2) | 16,696 | 9,396 | |||||
Inventories | 42,851 | 52,010 | |||||
Deferred tax assets | 890 | 892 | |||||
Prepaid expenses and other current assets | 6,222 | 7,068 | |||||
Total current assets | 280,669 | 250,101 | |||||
LONG-TERM MARKETABLE SECURITIES | — | 32,041 | |||||
PROPERTY AND EQUIPMENT, net | 89,695 | 88,241 | |||||
INTANGIBLE ASSETS, net | 8,663 | 8,852 | |||||
GOODWILL | 14,786 | 14,786 | |||||
DEFERRED TAX ASSETS | 12,716 | 12,387 | |||||
OTHER ASSETS | 43,724 | 26,511 | |||||
Total assets | $ | 450,253 | $ | 432,919 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 15,165 | $ | 16,532 | |||
Accrued payroll and related expenses | 5,279 | 5,911 | |||||
Deferred income on sales to distributors | 9,373 | 7,883 | |||||
Other accrued liabilities | 2,661 | 2,305 | |||||
Total current liabilities | 32,478 | 32,631 | |||||
LONG-TERM INCOME TAXES PAYABLE | 35,190 | 34,368 | |||||
Total liabilities | 67,668 | 66,999 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 9, 11 and 12) | |||||||
STOCKHOLDERS’ EQUITY: | |||||||
Common stock | 28 | 28 | |||||
Additional paid-in capital | 168,918 | 158,646 | |||||
Accumulated other comprehensive income | 398 | 50 | |||||
Retained earnings | 213,241 | 207,196 | |||||
Total stockholders’ equity | 382,585 | 365,920 | |||||
Total liabilities and stockholders’ equity | $ | 450,253 | $ | 432,919 |
Three Months Ended | |||||||
March 31, | |||||||
2012 | 2011 | ||||||
NET REVENUES | $ | 71,773 | $ | 76,762 | |||
COST OF REVENUES | 37,181 | 40,339 | |||||
GROSS PROFIT | 34,592 | 36,423 | |||||
OPERATING EXPENSES: | |||||||
Research and development | 10,640 | 10,023 | |||||
Sales and marketing | 8,139 | 8,248 | |||||
General and administrative | 7,092 | 6,475 | |||||
Total operating expenses | 25,871 | 24,746 | |||||
INCOME FROM OPERATIONS | 8,721 | 11,677 | |||||
OTHER INCOME | |||||||
Other income, net | 615 | 442 | |||||
Total other income | 615 | 442 | |||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 9,336 | 12,119 | |||||
PROVISION FOR INCOME TAXES | 1,875 | 2,265 | |||||
NET INCOME | $ | 7,461 | $ | 9,854 | |||
EARNINGS PER SHARE: | |||||||
Basic | $ | 0.26 | $ | 0.34 | |||
Diluted | $ | 0.25 | $ | 0.33 | |||
SHARES USED IN PER SHARE CALCULATION: | |||||||
Basic | 28,227 | 28,628 | |||||
Diluted | 29,435 | 30,187 |
Three Months Ended | |||||||
March 31, | |||||||
2012 | 2011 | ||||||
Net income | $ | 7,461 | $ | 9,854 | |||
Other comprehensive income, net of tax: | |||||||
Unrealized gain on marketable securities | 291 | — | |||||
Foreign currency translation adjustments | 57 | 50 | |||||
Total other comprehensive income | $ | 348 | $ | 50 | |||
Total comprehensive income | $ | 7,809 | $ | 9,904 |
Three Months Ended | |||||||
March 31, | |||||||
2012 | 2011 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 7,461 | $ | 9,854 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 3,732 | 3,682 | |||||
Amortization of intangibles | 189 | 243 | |||||
Gain on sale of property and equipment | (1 | ) | — | ||||
Stock-based compensation expense | 3,031 | 2,504 | |||||
Amortization of premium on marketable securities | 309 | 439 | |||||
Non-cash interest income from SemiSouth note | (157 | ) | — | ||||
Deferred income taxes | (327 | ) | 399 | ||||
Provision for accounts receivable allowances | — | 22 | |||||
Excess tax benefit from stock options exercised | (198 | ) | (398 | ) | |||
Tax benefit associated with employee stock plans | 782 | 783 | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (7,300 | ) | (7,622 | ) | |||
Inventories | 9,161 | (964 | ) | ||||
Prepaid expenses and other assets | 1,306 | 1,435 | |||||
Accounts payable | 1,485 | (2,908 | ) | ||||
Taxes payable and accrued liabilities | 604 | (525 | ) | ||||
Deferred income on sales to distributors | 1,490 | (1,269 | ) | ||||
Net cash provided by operating activities | 21,567 | 5,675 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (7,471 | ) | (7,248 | ) | |||
Proceeds from sale of property and equipment | 2 | — | |||||
Acquisition | — | (6,901 | ) | ||||
Increase in financing lease receivable | (383 | ) | (5,642 | ) | |||
Collections of financing lease receivable | 299 | 102 | |||||
Loan to SemiSouth | (18,000 | ) | — | ||||
Purchases of marketable securities | — | (11,508 | ) | ||||
Proceeds from maturities of marketable securities | 6,065 | 1,300 | |||||
Net cash used in investing activities | (19,488 | ) | (29,897 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Issuance of common stock under employee stock plans | 6,457 | 7,288 | |||||
Payments of dividends to stockholders | (1,415 | ) | (1,437 | ) | |||
Excess tax benefit from stock options exercised | 198 | 398 | |||||
Net cash provided by financing activities | 5,240 | 6,249 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 7,319 | (17,973 | ) |
Three Months Ended | |||||||
March 31, | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 139,836 | 155,667 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 147,155 | $ | 137,694 | |||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||
Unpaid property and equipment | $ | 965 | $ | 1,917 | |||
Receipt of SemiSouth purchase option | $ | 6,216 | $ | — | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Cash paid for income taxes, net of refunds | $ | 630 | $ | 118 |
Gross Unrealized | ||||||||||||||
Amortized Cost | Gains | Losses | Estimated Fair Market Value | |||||||||||
Investments due in less than 3 months: | ||||||||||||||
Commercial paper | $ | 16,672 | $ | 2 | $ | — | $ | 16,674 | ||||||
Corporate securities | 6,439 | 30 | — | 6,469 | ||||||||||
Total | $ | 23,111 | $ | 32 | $ | — | $ | 23,143 | ||||||
Investments due in 4-12 months: | ||||||||||||||
Corporate securities | $ | 19,694 | $ | 141 | $ | — | $ | 19,835 | ||||||
Certificates of deposit | 10,000 | 1 | — | 10,001 | ||||||||||
Total | $ | 29,694 | $ | 142 | $ | — | $ | 29,836 | ||||||
Investments due in more than 12 months: | ||||||||||||||
Corporate securities | $ | 30,433 | $ | 117 | $ | — | $ | 30,550 | ||||||
Total | $ | 30,433 | $ | 117 | $ | — | $ | 30,550 | ||||||
Total investment securities | $ | 83,238 | $ | 291 | $ | — | $ | 83,529 |
Gross Unrealized | ||||||||||||||
Amortized Cost | Gains | Losses | Estimated Fair Market Value | |||||||||||
Investments due in less than 3 months: | ||||||||||||||
Commercial paper | $ | 9,849 | $ | — | $ | — | $ | 9,849 | ||||||
Corporate securities | 6,098 | 9 | (1 | ) | 6,106 | |||||||||
Total | $ | 15,947 | $ | 9 | $ | (1 | ) | $ | 15,955 | |||||
Investments due in 4-12 months: | ||||||||||||||
Corporate securities | $ | 24,801 | $ | 179 | $ | (23 | ) | $ | 24,957 | |||||
Certificates of deposit | 10,000 | 1 | — | 10,001 | ||||||||||
Total | $ | 34,801 | $ | 180 | $ | (23 | ) | $ | 34,958 | |||||
Investments due in more than 12 months: | ||||||||||||||
Corporate securities | $ | 32,041 | $ | 5 | $ | (178 | ) | $ | 31,868 | |||||
Total | $ | 32,041 | $ | 5 | $ | (178 | ) | $ | 31,868 | |||||
Total investment securities | $ | 82,789 | $ | 194 | $ | (202 | ) | $ | 82,781 |
March 31, 2012 | December 31, 2011 | ||||||
Accounts receivable trade | $ | 39,311 | $ | 27,972 | |||
Accrued ship and debit and rebate claims | (22,399 | ) | (18,361 | ) | |||
Allowance for doubtful accounts | (216 | ) | (215 | ) | |||
Total | $ | 16,696 | $ | 9,396 |
March 31, 2012 | December 31, 2011 | ||||||
Prepaid legal fees | $ | 2,625 | $ | 3,500 | |||
Prepaid income tax | 148 | 118 | |||||
Prepaid maintenance agreements | 540 | 669 | |||||
Interest receivable | 570 | 625 | |||||
Other | 2,339 | 2,156 | |||||
Total | $ | 6,222 | $ | 7,068 |
March 31, 2012 | December 31, 2011 | ||||||
Prepaid royalty (Note 15) | $ | 10,000 | $ | 10,000 | |||
Investment in third party (Note 15) | 7,000 | 7,000 | |||||
Note receivable, net of interest discount (Note 15) | 11,965 | — | |||||
Financing lease receivables and deposits (Note 16) | 6,849 | 7,558 | |||||
Purchase option (Note 15) | 6,216 | — | |||||
Other | 1,694 | 1,953 | |||||
Total | $ | 43,724 | $ | 26,511 |
Three Months Ended | |||||||
March 31, | |||||||
2012 | 2011 | ||||||
Cost of revenues | $ | 245 | $ | 239 | |||
Research and development | 1,120 | 811 | |||||
Sales and marketing | 747 | 667 | |||||
General and administrative | 919 | 787 | |||||
Total stock-based compensation expense | $ | 3,031 | $ | 2,504 |
Three Months Ended | |||
March 31, | |||
2012 | 2011 | ||
Risk-free interest rates | 0.09% | 0.17% | |
Expected volatility rates | 48% | 37% | |
Expected dividend yield | 0.54% | 0.51% | |
Expected term of purchase right (years) | 0.5 | 0.5 | |
Weighted-average estimated fair value of purchase rights | $10.42 | $9.40 |
Shares (in thousands) | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Outstanding at January 1, 2012 | 3,557 | $ | 24.01 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (215 | ) | 19.58 | ||||||||||
Forfeited or expired | (3 | ) | 21.09 | ||||||||||
Outstanding at March 31, 2012 | 3,339 | $ | 24.29 | 4.52 | $ | 43,032 | |||||||
Exercisable at March 31, 2012 | 2,866 | $ | 23.44 | 3.96 | $ | 39,249 | |||||||
Vested and expected to vest at March 31, 2012 | 3,322 | $ | 24.24 | 4.50 | $ | 42,986 |
Shares (in thousands) | Weighted- Average Grant Date Fair Value Per Share | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Outstanding at January 1, 2012 | — | $ | — | ||||||||||
Granted | 96 | 37.28 | |||||||||||
Vested | — | — | |||||||||||
Forfeited or expired | — | — | |||||||||||
Outstanding at March 31, 2012 | 96 | $ | 37.28 | 0.75 | $ | 3,556 | |||||||
Vested and expected to vest at March 31, 2012 | 92 | 0.75 | $ | 3,409 |
Shares (in thousands) | Weighted- Average Grant Date Fair Value Per Share | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Outstanding at January 1, 2012 | 458 | $ | 36.08 | ||||||||||
Granted | 3 | 35.12 | |||||||||||
Vested | (5 | ) | 37.23 | ||||||||||
Forfeited or expired | (6 | ) | 37.09 | ||||||||||
Outstanding at March 31, 2012 | 450 | $ | 36.04 | 1.38 | $ | 16,708 | |||||||
Outstanding and expected to vest at March 31, 2012 | 420 | 1.37 | $ | 15,596 |
Fair Value Measurement at | ||||||||||||
March 31, 2012 | ||||||||||||
Description | March 31, 2012 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | |||||||||
Commercial paper | $ | 16,674 | $ | — | $ | 16,674 | ||||||
Money market funds | 29,658 | 29,658 | — | |||||||||
Certificates of deposit | 10,001 | — | 10,001 | |||||||||
Corporate securities | 56,854 | — | 56,854 | |||||||||
Total | $ | 113,187 | $ | 29,658 | $ | 83,529 |
Fair Value Measurement at | ||||||||||||
December 31, 2011 | ||||||||||||
Description | December 31, 2011 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | |||||||||
Commercial paper | $ | 9,849 | $ | — | $ | 9,849 | ||||||
Money market funds | 30,190 | 30,190 | — | |||||||||
Certificates of deposit | 10,000 | — | 10,000 | |||||||||
Corporate securities | 62,940 | — | 62,940 | |||||||||
Total | $ | 112,979 | $ | 30,190 | $ | 82,789 |
Fair Value Measurement Using Significant Unobservable Inputs (Level 3) | ||||
Note Receivable | ||||
Beginning balance at January 1, 2012 | $ | — | ||
Purchases and issuances | 11,965 | |||
Settlements | — | |||
Ending balance at March 31, 2012 | $ | 11,965 |
March 31, 2012 | December 31, 2011 | ||||||
Raw materials | $ | 9,323 | $ | 12,389 | |||
Work-in-process | 7,930 | 7,841 | |||||
Finished goods | 25,598 | 31,780 | |||||
Total | $ | 42,851 | $ | 52,010 |
March 31, 2012 | December 31, 2011 | ||||||||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
In-process research and development | $ | 4,690 | $ | — | $ | 4,690 | $ | 4,690 | $ | — | $ | 4,690 | |||||||||||
Technology licenses | 3,000 | (1,800 | ) | 1,200 | 3,000 | (1,725 | ) | 1,275 | |||||||||||||||
Patent rights | 1,949 | (1,949 | ) | — | 1,949 | (1,949 | ) | — | |||||||||||||||
Developed technology | 2,920 | (915 | ) | 2,005 | 2,920 | (829 | ) | 2,091 | |||||||||||||||
Customer relationships | 910 | (142 | ) | 768 | 910 | (114 | ) | 796 | |||||||||||||||
Other intangibles | 37 | (37 | ) | — | 37 | (37 | ) | — | |||||||||||||||
Total intangible assets | $ | 13,506 | $ | (4,843 | ) | $ | 8,663 | $ | 13,506 | $ | (4,654 | ) | $ | 8,852 |
Fiscal Year | Estimated Amortization (in thousands) | |||
2012 | (remaining 9 months) | $ | 566 | |
2013 | 755 | |||
2014 | 755 | |||
2015 | 592 | |||
2016 | 367 | |||
Thereafter | 938 | |||
Total (1) | $ | 3,973 |
(1) | The total above excludes $4.7 million of in-process research and development which will be amortized upon completion of development over the estimated useful life of the technology. |
Three Months Ended | |||||
March 31, | |||||
Customer | 2012 | 2011 | |||
A | 20 | % | 19 | % | |
B | 12 | % | 12 | % |
Customer | March 31, 2012 | December 31, 2011 | |||
A | 26 | % | 36 | % | |
B | 18 | % | 10 | % |
Three Months Ended | |||||
March 31, | |||||
2012 | 2011 | ||||
Hong Kong/China | 42 | % | 34 | % | |
Taiwan | 17 | % | 24 | % | |
Korea | 15 | % | 17 | % | |
Western Europe (excluding Germany) | 11 | % | 10 | % | |
Japan | 6 | % | 6 | % | |
Singapore | 2 | % | 3 | % | |
Germany | 1 | % | 1 | % | |
Other | 2 | % | 1 | % | |
Total foreign revenue | 96 | % | 96 | % |
Three Months Ended | |||||
March 31, | |||||
Product Family | 2012 | 2011 | |||
LinkSwitch | 41 | % | 40 | % | |
TinySwitch | 33 | % | 35 | % | |
TOPSwitch | 23 | % | 23 | % | |
Other | 3 | % | 2 | % |
Three Months Ended | |||||||
March 31, | |||||||
2012 | 2011 | ||||||
Basic earnings per share: | |||||||
Net income | $ | 7,461 | $ | 9,854 | |||
Weighted-average common shares | 28,227 | 28,628 | |||||
Basic earnings per share | $ | 0.26 | $ | 0.34 | |||
Diluted earnings per share (1): | |||||||
Net income | $ | 7,461 | $ | 9,854 | |||
Weighted-average common shares | 28,227 | 28,628 | |||||
Effect of dilutive securities: | |||||||
Employee stock plans | 1,208 | 1,559 | |||||
Diluted weighted-average common shares | 29,435 | 30,187 | |||||
Diluted earnings per share | $ | 0.25 | $ | 0.33 |
(1) | The Company includes the shares underlying performance-based awards in the calculation of diluted earnings per share when they become contingently issuable per ASC 260-10, Earnings per Share and excludes such shares when they are not contingently issuable. The Company has excluded all performance-based awards underlying the fiscal 2012 and 2011 awards as those shares were not contingently issuable as of the end of the period. |
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Interest income on note from SemiSouth | $ | 24 | $ | — | ||
Non-cash interest income on note from SemiSouth | 157 | — | ||||
Interest income from SemiSouth lease line | 83 | 21 | ||||
Total interest income from SemiSouth | $ | 264 | $ | 21 |
Fiscal Year | Total Minimum Lease Payments | |||
2012 (remaining 9 months) | $ | 0.9 | ||
2013 | 1.2 | |||
2014 | 1.2 | |||
2015 | 1.2 | |||
2016 | 1.2 | |||
Thereafter | 3.0 | |||
Total | $ | 8.7 |
• | Increase the penetration of our ICs in the “low-power” AC-DC power supply market. The vast majority of our revenues come from power-supply applications requiring 50 watts of output or less. We continue to introduce more advanced products that make our IC-based solutions more attractive in this market. We have also increased the size of our sales and field-engineering staff considerably in recent years, and we continue to expand our offerings of technical documentation and design-support tools and services in order to help customers use our ICs. These tools and services include our PI Expert™ design software, which we offer free of charge, and our transformer-sample service. |
• | Capitalize on the growing demand for more energy-efficient electronic products and lighting technologies. We believe that energy-efficiency is becoming an increasingly important design criterion for power supplies due largely to the emergence of standards and specifications that encourage, and in some cases mandate, the design of more energy-efficient electronic products. While power supplies built with competing technologies are often unable to meet these standards cost-effectively, power supplies incorporating our ICs are generally able to comply with all known efficiency specifications currently in effect. |
• | Increase the penetration of our products in “high-power” applications. We believe we have developed and acquired new technologies and products that enable us to bring the benefits of highly integrated power supplies to applications ranging from 50 to about 500 watts of output. These include such applications as main power supplies for flat-panel TVs and desktop PCs, as well as power supplies for LED streetlights, game consoles, and notebook computers, among others. |
• | revenue recognition; |
• | stock-based compensation; |
• | estimating write-downs for excess and obsolete inventory; |
• | income taxes; and |
• | goodwill and intangible assets. |
Three Months Ended March 31, | |||||
2012 | 2011 | ||||
Net revenues | 100.0 | % | 100.0 | % | |
Cost of revenues | 51.8 | 52.6 | |||
Gross profit | 48.2 | 47.4 | |||
Operating expenses: | |||||
Research and development | 14.8 | 13.1 | |||
Sales and marketing | 11.3 | 10.7 | |||
General and administrative | 9.9 | 8.4 | |||
Total operating expenses | 36.0 | 32.2 | |||
Income from operations | 12.2 | 15.2 | |||
Other income, net | 0.9 | 0.6 | |||
Income before provision for income taxes | 13.1 | 15.8 | |||
Provision for income taxes | 2.6 | 3.0 | |||
Net income | 10.5 | % | 12.8 | % |
Three Months Ended March 31, | |||||
Product Family | 2012 | 2011 | |||
LinkSwitch | 41 | % | 40 | % | |
TinySwitch | 33 | % | 35 | % | |
TOPSwitch | 23 | % | 23 | % | |
Other | 3 | % | 2 | % |
Three Months Ended March 31, | |||||
End Market | 2012 | 2011 | |||
Consumer | 40 | % | 37 | % | |
Communications | 27 | % | 32 | % | |
Industrial | 21 | % | 20 | % | |
Computer | 12 | % | 11 | % |
Three Months Ended March 31, | |||
Customer | 2012 | 2011 | |
A | 20% | 19% | |
B | 12% | 12% |
Three Months Ended March 31, | |||
2012 | 2011 | ||
Net revenues | $71.8 | $76.8 | |
Gross profit | $34.6 | $36.4 | |
Gross margin | 48.2% | 47.4% |
Three Months Ended March 31, | ||
2012 | 2011 | |
Net revenues | $71.8 | $76.8 |
R&D expenses | $10.6 | $10.0 |
R&D expenses as a % of net revenue | 14.8% | 13.1% |
Three Months Ended March 31, | ||
2012 | 2011 | |
Net revenues | $71.8 | $76.8 |
Sales and marketing expenses | $8.1 | $8.2 |
Sales and marketing expenses as a % of net revenue | 11.3% | 10.7% |
Three Months Ended March 31, | ||
2012 | 2011 | |
Net revenues | $71.8 | $76.8 |
G&A expenses | $7.1 | $6.5 |
G&A expenses as a % of net revenue | 9.9% | 8.4% |
Three Months Ended March 31, | ||
2012 | 2011 | |
Net revenues | $71.8 | $76.8 |
Other income | $0.6 | $0.4 |
Other income as a % of net revenue | 0.9% | 0.6% |
Three Months Ended March 31, | ||
2012 | 2011 | |
Income before provision for income taxes | $9.3 | $12.1 |
Provision for income taxes | $1.9 | $2.3 |
Effective tax rate | 20.1% | 18.7% |
• | competitive pressures on selling prices; |
• | the demand for our products declining in the major end markets we serve, which may occur due to competitive factors, supply-chain fluctuations or changes in macroeconomic conditions; |
• | the inability to adequately protect or enforce our intellectual property rights; |
• | expenses we are required to incur (or choose to incur) in connection with our intellectual property litigations; |
• | an audit by the Internal Revenue Service, which is asserting that we owe additional taxes relating to a number of tax related positions; |
• | reliance on international sales activities for a substantial portion of our net revenues; |
• | risks associated with acquisitions and strategic investments; |
• | our ability to successfully integrate, or realize the expected benefits from, our acquisitions; |
• | fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen; |
• | the volume and timing of delivery of orders placed by us with our wafer foundries and assembly subcontractors, and |
• | earthquakes, terrorists acts or other disasters; |
• | continued impact of recently enacted changes in securities laws and regulations, including potential risks resulting from our evaluation of internal controls under the Sarbanes-Oxley Act of 2002; |
• | the lengthy timing of our sales cycle; |
• | undetected defects and failures in meeting the exact specifications required by our products; |
• | our ability to develop and bring to market new products and technologies on a timely basis; |
• | the ability of our products to penetrate additional markets; |
• | the volume and timing of orders received from customers; |
• | our ability to attract and retain qualified personnel; |
• | changes in environmental laws and regulations, including with respect to energy consumption and climate change; and |
• | interruptions in our information technology systems. |
• | potential insolvency of international distributors and representatives; |
• | reduced protection for intellectual property rights in some countries; |
• | the impact of recessionary environments in economies outside the United States; |
• | tariffs and other trade barriers and restrictions; |
• | the burdens of complying with a variety of foreign and applicable U.S. Federal and state laws; and |
• | foreign-currency exchange risk. |
• | inability to realize anticipated benefits, which may occur due to any of the reasons described below, or for other unanticipated reasons; |
• | the risk of litigation or disputes with customers, suppliers, partners or stockholders of an acquisition target arising from a proposed or completed transaction; |
• | impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance, which would adversely affect our financial results; and |
• | unknown, underestimated and/or undisclosed commitments, liabilities or issues not discovered in our due diligence of such transactions. |
POWER INTEGRATIONS, INC. | |||
Dated: | May 7, 2012 | By: | /s/ SANDEEP NAYYAR |
Sandeep Nayyar Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer and Chief Accounting Officer) |
EXHIBIT NUMBER | DESCRIPTION | ||
2.1 | Share Purchase Agreement, dated March 30, 2012, by and between Heinz Rüedi, Power Integrations Netherlands B.V. and Power Integrations Limited regarding shares of Concept Beteiligungen AG and CT-Concept Holding AG. (As filed with the SEC as Exhibit 2.01 to our Current Report on Form 8-K on May 7, 2012, SEC File No. 000-23441.)* | ||
3.1 | Restated Certificate of Incorporation. (As filed with the SEC as Exhibit 3.1 to our Annual Report on Form 10-K on February 29, 2012, SEC File No. 000-23441.) | ||
3.2 | Amended and Restated Bylaws. (As filed with the SEC as Exhibit 3.1 to our Current Report on Form 8-K on January 30, 2012, SEC File No. 000-23441.) | ||
4.1 | Reference is made to Exhibits 3.1 and 3.2. | ||
10.1 | Amendment Number Three to Wafer Supply Agreement, effective as of February 1, 2012, by Power Integrations International Ltd. and Seiko Epson Corporation.* | ||
10.2 | Wafer Supply Agreement, made and entered into as of this 1st day of October, 2010, by and between Power Integrations International, Ltd., and X-FAB Semiconductor Foundries AG.* | ||
10.3 | Credit Agreement, dated February 22, 2011, by and between Power Integrations, Inc. and Wells Fargo Bank, National Association. | ||
10.4 | Amendment to Credit Agreement, dated August 2, 2011, by and between Power Integrations, Inc. and Wells Fargo Bank, National Association. | ||
10.5 | Second Amendment to Credit Agreement, dated April 2, 2012, by and between Power Integrations, Inc. and Wells Fargo Bank, National Association. | ||
10.6 | 2012 Executive Officer Cash Compensation Arrangements and 2012 Bonus Plan (As described in Item 5.02 of our Current Report on Form 8-K filed with the SEC on January 30, 2012, SEC File No. 000-23441.) | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
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.** | ||
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 |
** | The certifications attached as Exhibits 32.1 and 32.2 accompanying this Form 10-Q, are not deemed filed with the SEC, and are not to be incorporated by reference into any filing of Power Integrations, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing. |
(1) | POWER INTEGRATIONS INTERNATIONAL LTD., a Cayman Islands corporation having a place of business at 4th Floor, Century Yard, Cricket Square, Elgin Avenue, P.O. Box 32322, Grand Cayman K Y 1-1209 ("Power Integrations") |
(2) | SEIKO EPSON CORPORATION, a Japanese corporation having a place of business at 281 Fujimi, Fujimi-machi, Suwa-gun, Nagano-ken, 399-0293 Japan ("Seiko Epson"). |
1 | Exhibit B of the Agreement is deleted in its entirety and replaced with Exhibit B in the form attached hereto. |
2 | Effective as of the Amendment Effective Date, all references in the Agreement to the "Agreement" or "this Agreement" shall mean the Agreement as amended by this Amendment. Except as expressly amended |
SEIKO EPSON CORPORATION | POWER INTEGRATIONS INTERNATIONAL, LTD. | |||||
By: | /s/ Kazuhzro Takenaka | By: | /s/ John Tomlin | |||
Name: | Kazuhzro Takenaka | Name: | John Tomlin | |||
Title: | Deputy COO, Microdevice | Title: | President |
Monthly [*] WAFER Volume | [*] Price/[*] Price |
Less than [*] | [*] |
[*] | [*] |
[*] and above | [*] |
1. | Nominal F/X Rate Example: F/X_RATE = in the range of [*]¥ to [*]¥: |
2. | Higher F/X Rate Example: New F/X_RATE = [*]¥: |
3. | Lower F/X Rate Example: New F/X_RA TE = [*]¥: |
Exhibit 10.2 |
(1) | Power Integrations International, Ltd., a Cayman Islands corporation having its principal place of business at 4th Floor, Century Yard, Cricket Square, Elgin Avenue, P.O. Box 32322, Grand Cayman KY1-1209 (“POWER INTEGRATIONS”); and |
(1) | X-FAB Semiconductor Foundries AG having its principal place of business at Haarbergstrasse 67, 99097 Erfurt, Germany (“COMPANY”). |
(1) | Power Integrations, Inc., a Delaware corporation having its principal place of business at 5245 Hellyer Ave., San Jose, CA U.S.A. 95138; and |
(2) | ZMD Analog Mixed Signal Services GmbH & CoKG, a German corporation having its principal place of business at Grenzstrasse 28, 01109 Dresden, Germany (later X-FAB Dresden Gmbh & Co KG) [*]. |
1.1 | COMMON SPECIFICATION(S): The specifications for the production, delivery and acceptance of the WAFERS including the PI PROCESS, PI specifications and production practices as defined by PI and, in addition, the specifications currently in use by SUPPLIER to produce and deliver WAFERS to PI during the Term of this Agreement. |
1.2 | CONFIDENTIAL INFORMATION: Technical information, or other non-public information relating to PI or SUPPLIER, whether in a man-readable or machine-readable form and whether recorded on paper, tape, diskette or any other media, which is disclosed by the disclosing party to the receiving party, and subject to Section 1.3 (“CONFIDENTIAL MANUFACTURING INFORMATION”), (i) which is designated in writing, by appropriate legend, as confidential or, (ii) if disclosed orally is identified as confidential information at the time of disclosure and a summary of which is confirmed in writing within thirty (30) days after oral disclosure and designated, by appropriate legend, as confidential. Notwithstanding the foregoing, all information generated by the activities and actions of SUPPLIER under this Agreement on PI's behalf and any information, including all PI INTELLECTUAL PROPERTY received from PI by SUPPLIER, to effect the terms of this Agreement shall also be considered PI's CONFIDENTIAL INFORMATION. |
1.3 | CONFIDENTIAL MANUFACTURING INFORMATION: PI's CONFIDENTIAL INFORMATION that is or relates to the PI PROCESS. CONFIDENTIAL MANUFACTURING INFORMATION is CONFIDENTIAL MANUFACTURING INFORMATION in all cases, whether or not marked as or declared to be confidential. Any unmarked or oral information relating to the PI PROCESS conveyed during a meeting between the parties will be CONFIDENTIAL MANUFACTURING INFORMATION by default whether or not declared or marked confidential and whether or not it is subsequently described in writing. |
1.4 | ENGINEERING WAFERS: WAFERS that are processed in accordance with the applicable special pricing in Exhibit B and any applicable special specifications provided by PI. |
1.5 | INDIVIDUAL SALES CONTRACTS: Individual contracts of sale and purchase of the WAFERS that will be concluded between SUPPLIER and PI pursuant to this Agreement. |
1.6 | INTELLECTUAL PROPERTY RIGHTS: Copyrights, patents, trade secrets, moral rights, know‑how and all other intellectual or proprietary rights of any kind, as applicable to either party. |
1.7 | MASK SPECIFICATIONS: The specifications for the production, delivery and acceptance of the MASK TOOLING SETS which are set forth in the COMMON SPECIFICATIONS. |
1.8 | MASK TOOLING SETS: Those mask tooling sets made by or for SUPPLIER for use in making WAFERS pursuant to this Agreement. |
1.9 | PI: POWER INTEGRATIONS and any of its SUBSIDIARIES. |
1.10 | PI IMPROVEMENTS: Any modification or change, during the term of this Agreement, to the PI PROCESS, the COMMON SPECIFICATIONS, any PI provided information in the MASK TOOLING SETS, or the mask databases that are made solely by PI or made jointly by PI and SUPPLIER. |
1.11 | SUPPLIER IMPROVEMENTS: Any modification or change, during the term of this Agreement, to the PI PROCESS, the COMMON SPECIFICATIONS, any PI provided information in the MASK TOOLING SETS, or the mask databases that (i) are made solely by SUPPLIER without use of PI CONFIDENTIAL INFORMATION, and (ii) for which SUPPLIER has a substantial use other than manufacturing or incorporation into PRODUCTS, and (iii) are based on the SUPPLIER PROCESS. |
1.12 | PI INTELLECTUAL PROPERTY: The PI PROCESS, the COMMON SPECIFICATIONS, any PI provided information in the MASK TOOLING SETS, the mask databases, the PI IMPROVEMENTS, and all INTELLECTUAL PROPERTY RIGHTS in the foregoing. |
1.13 | BACKGROUND TECHNOLOGY means any ideas, concepts, information, materials, processes, data, programs, know-how, improvements, discoveries, developments, designs, artwork, formulae, other copyrightable works, and technique: (a) created, acquired or otherwise developed prior to May 23, 2003 by a party, or (b) developed entirely outside the scope of this AGREEMENT and the 2003 AGREEMENT without reference to the CONFIDENTIAL INFORMATION of the other party; and all INTELLECTUAL PROPERTY RIGHTS related thereto. |
1.14 | PI PROCESS: PI's process technologies, which are implemented in the SUPPLIER wafer fabrication facility to produce the WAFERS, and of which the detailed specification is specified in the COMMON SPECIFICATIONS, plus all PI IMPROVEMENTS. |
1.15 | PILOT PRODUCTION: The production by SUPPLIER of WAFERS for the purpose of evaluation by PI. |
1.16 | PRODUCTS: Any and all IC products of PI which will be manufactured in accordance with the PI PROCESS. |
1.17 | SUBSIDIARY: Any corporation, company or other entity in which COMPANY or POWER INTEGRATIONS, as the case may be, owns and/or controls, directly or indirectly, now or hereafter, more than fifty percent (50%) of the outstanding shares of stock entitled to vote for the election of directors or their equivalents regardless of the form thereof (other than any shares of stock whose voting rights are subject to restriction); provided, however, that any entity which would be a SUBSIDIARY by reason of the foregoing shall be considered a SUBSIDIARY only so long as such ownership or control exists. COMPANY and POWER INTEGRATIONS shall each enter into separate written agreements (each a “SUBSIDIARY AGREEMENT”) with each of their respective SUBSIDIARIES who wish to exercise any rights under this Agreement, binding the SUBSIDIARY to the terms and conditions of this Agreement. A SUBSIDIARY shall maintain its status as a SUBSIDIARY under this Agreement only for so long as such SUBSIDIARY has a SUBSIDIARY Agreement in force and effect. COMPANY and POWER INTEGRATIONS each guarantee to the other the performance of their respective SUBSIDIARIES under this Agreement, and each will indemnify and hold harmless the other from any costs, damages, or liabilities incurred by the other arising out of a breach by a SUBSIDIARY of the terms and conditions of this Agreement. Notwithstanding anything to the contrary in this AGREEMENT, unless the parties expressly agree otherwise in writing, the only COMPANY SUBSIDIARIES authorized to exercise rights and perform obligations under this AGREEMENT are X-FAB [*] and X-FAB [*]. |
1.18 | SUPPLIER: COMPANY, X-FAB [*], and X-FAB [*]. |
1.19 | SUPPLIER PROCESS: SUPPLIER's standard process technology steps, from SUPPLIER owned technologies, developed exclusively by SUPPLIER and implemented in the SUPPLIER wafer fabrication facility to produce the WAFERS. |
1.20 | VOLUME PRODUCTION: The production by SUPPLIER of WAFERS for the volume production of PRODUCTS. |
1.21 | WAFER(S): Non-probed silicon wafers produced during the PILOT PRODUCTION and VOLUME PRODUCTION which meet the COMMON SPECIFICATIONS and that may be identified by additional specifications in an exhibit that is added hereto by written agreement of the parties. |
1.22 | WAFER TYPE. The different types of WAFERS (e.g., size, location of manufacture) as defined by the COMMON SPECIFICATIONS. |
Article 2. | (Foundry Capacity and Forecasts) |
2.1 | SUPPLIER agrees using best efforts to provide to PI the foundry capacity (“FOUNDRY CAPACITY”) as set forth in Exhibit A. Annually, PI will provide SUPPLIER with a twelve (12) month forecast of WAFER orders by WAFER TYPE (“PI ANNUAL FORECAST”). Annually during the Term of this Agreement and in advance of the beginning of SUPPLIER's fiscal year, SUPPLIER and PI will jointly review the PI ANNUAL FORECAST and SUPPLIER's FOUNDRY CAPACITY for the upcoming SUPPLIER fiscal year. Annually, at the beginning of SUPPLIER's fiscal year during the Term of this Agreement, SUPPLIER will define a FOUNDRY CAPACITY for the current SUPPLIER fiscal year, at each of the SUPPLIER's plants making WAFERS for PI, in an amount no less than [*]%) of PI's total WAFER purchases by WAFER TYPE during the previous SUPPLIER fiscal year, provided the FOUNDRY CAPACITY does not exceed the MAXIMUM FOUNDRY CAPACITY for the PI PROCESS (cif Exhibit A) based on weekly capacity break down. During the SUPPLIER fiscal year, SUPPLIER shall consider up to a [*]%) upside request over the current FOUNDRY CAPACITY, by WAFER TYPE, upon a [*] month written advance notice from PI, unless the current FOUNDRY CAPACITY represents [*]%) of SUPPLIER's total capacity in which case such advance notice shall be a [*] month written notice. Either party can request the other party to negotiate to reduce the FOUNDRY CAPACITY, by WAFER TYPE, for the then current SUPPLIER fiscal year, if SUPPLIER and PI determine that PI will not order at least [*]%) of the PI ANNUAL FORECAST by WAFER TYPE or SUPPLIER can not provide FOUNDRY CAPACITY for justifiable reasons. Any negotiated reduction in FOUNDRY CAPACITY must be agreed to by PI and SUPPLIER in writing. |
2.2 | PI shall provide SUPPLIER, on or before a mutually agreed day of each calendar month, a written [*] month forecast for wafer starts (“PI MONTHLY FORECAST”) of the quantity of the WAFERS of each PRODUCT to be manufactured and delivered during [*]. |
2.3 | PI must order at least the quantity of WAFERS by WAFER TYPE (a) forecasted in the first [*] months of the PI MONTHLY FORECAST and (b) confirmed by SUPPLIER in accordance with Section 2.4, unless SUPPLIER agrees to any change. PI may revise the quantity of WAFERS for |
2.4 | The PI MONTHLY FORECAST will be either [*] or [*] for each forecasted month so as to align with SUPPLIER's manufacturing calendar. |
3.1 | As implementation of the foundry services provided in the preceding Article, PI shall purchase from SUPPLIER, and SUPPLIER shall sell to PI, those WAFERS ordered pursuant to the terms and conditions of this Agreement, which shall be non-probed WAFERS. |
3.2 | Subject to the provisions of Section 3.1 above and 5.2 (“VOLUME PRODUCTION”) below, PI shall submit to SUPPLIER a purchase order (the “PO”) for the WAFERS, which PO shall be substantially in line with the provisions of Section 2.3 above. All PO's shall be subject to acceptance by SUPPLIER through issuance of a written confirmation within five (5) business days of receipt of the PO. Upon such written confirmation only, the PO terms of total quantity, delivery time and pricing shall constitute an INDIVIDUAL SALES CONTRACT which will be deemed to incorporate all of the terms and conditions of this Agreement. The confirmed PO shall be irrevocable except as set forth in Section 2.3 above. The mix of PRODUCTS and the quantity of WAFERS, by WAFER TYPE, allocated per each of the PRODUCTS in any INDIVIDUAL SALES CONTRACT can be modified at any time, prior to the week the WAFERS will be started, by PI with confirmation from SUPPLIER so long as the total quantity of all WAFERS, by WAFER TYPE, is not less than the total quantity set forth in the INDIVIDUAL SALES CONTRACT. |
3.3 | The mask databases for creating MASK TOOLING SETS for WAFERS of any PRODUCT shall be supplied by PI to SUPPLIER [*] before its commencement of the WAFERS' fabrication at no cost to SUPPLIER. SUPPLIER will produce or procure the MASK TOOLING SETS for the WAFERS. The cost of production or procurement of the MASK TOOLING SETS shall be paid by PI and the MASK TOOLING SETS shall be owned by SUPPLIER, subject to Section 4.1. If, upon SUPPLIER's examination, the MASK TOOLING SETS are found to be defective or not in conformance with the MASK SPECIFICATIONS, SUPPLIER shall immediately notify PI in detail as to such defects or non-conformity, and PI shall either provide corrected mask databases and pay for corrected MASK TOOLING SETS or, notwithstanding any other provision of this Agreement, PI can cancel the INDIVIDUAL SALES CONTRACT for the affected WAFERS, upon written notice to SUPPLIER, without any liability except for affected WAFER work in progress (“WIP”) |
Article 4. | (INTELLECTUAL PROPERTY RIGHTS) |
4.1 | PI is and shall remain the sole and exclusive owner of all right, title and interest in the PI INTELLECTUAL PROPERTY. Subject to all of the terms and conditions of this Agreement, PI grants SUPPLIER a limited, non-exclusive license in the PI INTELLECTUAL PROPERTY for the sole purpose of using it internally to manufacture WAFERS for PI in accordance with the terms and conditions of this Agreement. SUPPLIER may not use the PI INTELLECTUAL PROPERTY for any other purpose or license it to any third party, unless a separate written agreement for any such rights is executed by PI. |
4.2 | PI shall be the sole and exclusive owner of all right, title and interest in the PI IMPROVEMENTS. SUPPLIER hereby does and will irrevocably and unconditionally transfer and assign to PI all of SUPPLIER's right, title and interest worldwide in the PI IMPROVEMENTS. SUPPLIER will promptly disclose in writing all PI IMPROVEMENTS to PI promptly upon their creation. SUPPLIER shall take all reasonable actions, at PI's expense, to assist PI in perfecting and enforcing its rights in the PI IMPROVEMENTS. Such actions shall include but not be limited to execution of assignments, patent applications and other documents. Subject to all of the terms and conditions of this Agreement, PI hereby grants to SUPPLIER a non-exclusive, irrevocable, perpetual, royalty-free, non-transferable, worldwide, right and license, under all of its INTELLECTUAL PROPERTY RIGHTS to use, modify, reproduce, (but sub-license only to a SUPPLIER SUBSIDIARY) the PI IMPROVEMENTS for SUPPLIER's internal use only except that no license is granted to the PI IMPROVEMENTS for the purpose of SUPPLIER provided foundry service or other benefit to a third party. |
4.3 | In the event that any portion of Section 4.2 is declared invalid or illegal according to any applicable law, SUPPLIER hereby waives and agrees never to assert such rights, including any moral rights or similar rights, against PI or its licensees. |
4.4 | In the event that any portion of Section 4.2 is declared invalid or illegal according to any applicable law, the parties hereby modify such portion, effective upon such declaration, in such manner as shall secure for PI, and SUPPLIER hereby grants and agrees to grant to PI, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license under all INTELLECTUAL PROPERTY RIGHTS, with rights to sublicense through one or more level(s) of sublicensee(s), to use, modify, reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, and otherwise exploit in any manner such rights in the PI IMPROVEMENTS, to the maximum extent permitted by applicable law. |
4.5 | SUPPLIER shall be the sole and exclusive owner of all right, title and interest in the SUPPLIER IMPROVEMENTS. SUPPLIER hereby grants to PI a non-exclusive, irrevocable, perpetual, royalty-free, non-transferable, worldwide, right and license, under all of its INTELLECTUAL PROPERTY RIGHTS in the SUPPLIER IMPROVEMENTS to exploit such SUPPLIER |
4.6 | SUPPLIER agrees not to use the PI INTELLECTUAL PROPERTY or any license under this Agreement in whole or in part, or any knowledge gained by SUPPLIER through producing WAFERS for PI to develop an equivalent or competing process or other product or service that would compete with PI. Subject to the previous sentence, SUPPLIER may produce any type or variety of product, technology or service whatsoever in order to conduct business with its other customers. |
4.7 | In the case of a jointly developed PI IMPROVEMENT, SUPPLIER may request that a license be granted for use in non-PI PRODUCTS that do not directly compete with PI PRODUCTS, such license shall not be unreasonably withheld. |
4.8 | As between the parties, each party shall own and hold all right, title and interest in and to all such party's BACKGROUND TECHNOLOGY. No right or license in such party's BACKGROUND TECHNOLOGY is granted to the other party, except as necessary to perform the other party's obligations under this Agreement or as specifically granted in this Agreement. |
Article 5. | (PILOT PRODUCTION and Minimum Order Quantity) |
5.1 | PILOT PRODUCTION |
5.1.1 | For the PILOT PRODUCTION, PI shall, if PI desires to, place a PO with SUPPLIER for a minimum of [*] WAFER starts (one (1) pilot lot) or multiples thereof per each PRODUCT. |
5.1.2 | The output of the PILOT PRODUCTION will be shipped to PI if the WAFERS output is at least [*]%) of the ordered quantity. If the WAFERS output is less than [*]%) of the ordered quantity, SUPPLIER will inform PI of the output quantity of the WAFERS, and if PI requires to have the shortage covered, SUPPLIER will re-input the WAFERS to cover the shortage of quantity at no additional cost to PI. |
5.2 | VOLUME PRODUCTION |
5.2.1 | For the VOLUME PRODUCTION, PI shall place a PO with SUPPLIER for a minimum of [*] WAFER starts (one (1) lot) or multiples thereof per each PRODUCT and SUPPLIER will ship monthly orders in quantities not less than [*]%) of the quantities ordered of each PRODUCT. |
5.2.2 | The orders of PI for the VOLUME PRODUCTION shall be subject to the provisions of Section 3.2 above. |
6.1 | The terms of delivery of the WAFERS from X-FAB [*] shall be DAP (destination specified in POWER INTEGRATIONS PO) Incoterms 2010. The terms of delivery of the WAFERS from X-FAB [*] shall be DAP (destination specified in POWER INTEGRATIONS PO) Incoterms 2010. |
6.2 | The risk of loss relating to the WAFERS delivered by SUPPLIER to PI shall transfer from SUPPLIER to PI at such time and point as provided in Incoterms 2010 relating to such DAP term. Title to the WAFERS delivered by SUPPLIER to PI shall transfer from SUPPLIER to PI upon arrival at the destination specified in POWER INTEGRATIONS PO. PI shall have the right to designate a freight forwarder, subject to SUPPLIER's reasonable approval. PI will pay freight. |
6.3 | SUPPLIER will deliver the WAFERS within the number of calendar days specified in the INDIVIDUAL SALES CONTRACT. In the event that SUPPLIER foresees a delay in the delivery schedule of the WAFERS, SUPPLIER shall make a best effort to correct any delay and SUPPLIER shall promptly notify PI of such delay and submit to PI the new delivery schedule. PI will have the right to cancel, without liability, the INDIVIDUAL SALES CONTRACT for the delayed WAFERS if the delay is greater than [*] days. |
6.4 | SUPPLIER shall pack the WAFERS in accordance with the packing standards defined in the COMMON SPECIFICATIONS. |
6.5 | SUPPLIER shall collect PCM data (“PCM DATA”), as defined in the COMMON SPECIFICATIONS, on the manufactured WAFERS. SUPPLIER will send the PCM DATA electronically to PI before the WAFERS are received by PI. The PCM DATA will be accurate and complete for all WAFERS and sent in a mutually agreed upon format. |
6.6 | In the case that PI determines, in consultation with SUPPLIER, that the WAFERS currently being manufactured will not meet the PRODUCTS requirements, PI can, notwithstanding any other provision of this Agreement, cancel the INDIVIDUAL SALES CONTRACT for the affected WAFERS without any liability except for the affected WAFER WIP and inventory, upon written notice to SUPPLIER. |
7.1 | PI shall conduct incoming inspection of the WAFERS, by WAFER TYPE, to determine the WAFERS' conformance to the COMMON SPECIFICATIONS. The PCM DATA specified in Section 6.5 is required for the incoming inspection of the WAFERS and the omission, inaccuracy or other defect in the PCM DATA will in itself be sufficient cause to reject the WAFERS. This inspection shall be regarded as final in terms of quality, quantity and other conditions of the WAFERS supplied to PI subject to SUPPLIER's warranty as defined in Section 11.1. All WAFERS passing the incoming inspection will be accepted by PI. |
7.2 | PI shall notify SUPPLIER which of the WAFERS have been accepted by PI within [*] business days after receipt of the WAFERS by PI. Should PI fail to notify SUPPLIER within the said [*] business days, the WAFERS shall be deemed to have been accepted by PI. PI will owe SUPPLIER payment only for the quantity of WAFERS that have been accepted by PI. |
7.3 | SUPPLIER shall not be held responsible for the defects and failures of the WAFERS which are attributable to the design, test and assembly by PI of the PRODUCTS. |
7.4 | SUPPLIER shall not be held responsible for the defects, failures and yield problems of the WAFERS if the WAFERS meet the specifications set forth in the COMMON SPECIFICATIONS. |
7.5 | SUPPLIER may make a written special waiver request to PI to ship WAFERS that do not comply with the COMMON SPECIFICATIONS. If PI approves such special waiver request in writing, which approval may include special terms and conditions, SUPPLIER may ship such non-complying WAFERS under such terms and conditions. |
8.1 | SUPPLIER shall notify PI in writing as soon as possible, in advance and in accordance with the COMMON SPECIFICATIONS, of process changes which require PI's change in database or which would affect the quality, reliability, form, fit or function of the PRODUCTS. Each such process change shall be subject to PI's prior written approval. If PI does not approve and the process change is implemented, PI will have the right to cancel, without liability, any INDIVIDUAL SALES CONTRACT affected by the process change. |
8.2 | PI shall have sole responsibility for the control, maintenance, distribution and modification of the COMMON SPECIFICATIONS including but not limited to the addition and maintenance of applicable process, inspection, quality and procurement specifications. PI will notify SUPPLIER of any changes to the COMMON SPECIFICATIONS. SUPPLIER will acknowledge acceptance of the COMMON SPECIFICATIONS in writing and SUPPLIER's acceptance of the COMMON SPECIFICATIONS will not be unreasonably withheld. In the case of any issue with the COMMON SPECIFICATIONS, SUPPLIER agrees that PI is the ultimate authority on the COMMON SPECIFICATIONS. |
9.1 | The prices of the WAFERS, which are produced both in the PILOT PRODUCTION and the VOLUME PRODUCTION are set forth in Exhibit B attached hereto. Any modifications thereto must be agreed upon by SUPPLIER and PI in writing, either as an amendment to EXHIBIT B or as part of an INDIVIDUAL SALES CONTRACT. SUPPLIER and PI may jointly review and revise the WAFERS' price, by WAFER TYPE, within [*] days of the close of SUPPLIER's fiscal year or upon a material change to the COMMON SPECIFICATIONS. |
10.1 | Payment for the WAFERS shall be by telephonic transfer [*] days after receipt of invoice and secured by a standby letter of credit to be opened at a first class bank acceptable to SUPPLIER. SUPPLIER agrees to negotiate terms or alternate forms of payment as proposed by PI. |
10.2 | For the [*] costs, PI has paid to SUPPLIER [*] (“[*] Cost”) (i.e., [*] for the [*] and [*] for installation and fitting). SUPPLIER will pay PI back for the [*] Cost in the form of [*] discounts per wafer after the Rebate Milestone Date until SUPPLIER delivers and PI accepts [*] WAFERS (“Rebate Number of Wafers”) (i.e., [*] = [*]). The “Rebate Milestone Date” means the date on which the [*] is qualified for production by PI. |
10.3 | If this Agreement is terminated in accordance with Article 13 (“Term and Termination”) before |
11.1 | SUPPLIER warrants that the WAFERS sold to PI will conform to their COMMON SPECIFICATIONS. PI shall notify SUPPLIER in writing of any non-conformity or defect of said WAFERS within [*] months after notification of acceptance per Section 7.2 above. SUPPLIER's sole obligations under this warranty are limited to, at PI's option, (i) replacing or reworking any said WAFERS which shall be returned to SUPPLIER's manufacturing facility with transportation charges prepaid, or (ii) SUPPLIER crediting an amount equal to the purchase price of said WAFERS. |
11.2 | SUPPLIER shall defend, indemnify and hold harmless PI, its officers, directors, employees and representatives from and against any claim, demand, cause of action, debt, or liability, including reasonable attorneys' fees, relating to or arising from allegations that the SUPPLIER PROCESS or SUPPLIER IMPROVEMENTS used to produce WAFERS or the resulting WAFERS infringes any patent, copyright, trade secret or other right of any kind of a third party; provided that SUPPLIER is promptly (within [*] days after initial legal notice to PI) notified in writing of the action and is allowed to assume and control the defense. SUPPLIER shall pay all damages and costs awarded therein, but shall not be responsible for any compromise or settlement made without SUPPLIER's consent. |
11.3 | EXCEPT AS EXPRESSLY STATED HEREIN, NO EXPRESS OR IMPLIED WARRANTIES ARE MADE BY SUPPLIER RELATING TO THE WAFERS, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PI MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH REGARD TO ANY OF THE PI INTELLECTUAL PROPERTY. |
11.4 | PI shall defend, indemnify and hold harmless SUPPLIER, its officers, directors, employees and representatives from and against any claim, demand, cause of action, debt, or liability, including reasonable attorneys' fees, relating to or arising from allegations that the PI PROCESS and any PI contributions to the PI IMPROVEMENTS used to produce WAFERS infringes any patent, copyright, trade secret or other right of any kind of a third party; provided that PI is promptly (within [*] days after initial legal notice to COMPANY) notified in writing of the action and is allowed to assume and control the defense. PI shall pay all damages and costs awarded therein, but shall not be responsible for any compromise or settlement made without PI's consent. |
11.5 | Notwithstanding Section 13.7, SUPPLIER shall keep records for [*] years, notwithstanding the |
12.1 | The receiving party shall use any CONFIDENTIAL INFORMATION acquired from the disclosing party in connection with this Agreement solely for the purposes of this Agreement. |
12.2 | Subject to Sections 12.7 and 12.8, for a period of [*] years after the receipt or creation of the CONFIDENTIAL INFORMATION, or during the Term of this Agreement, whichever is longer, the receiving party shall use a reasonable standard of care not to publish or disseminate the CONFIDENTIAL INFORMATION to any third party, except as otherwise provided herein. The receiving party shall have no obligation with respect to any CONFIDENTIAL INFORMATION received by it which the receiving party shall prove is: |
(a) | Published or otherwise available to the public other than by a breach of this Agreement or any other agreement by the receiving party |
(b) | Rightfully received by the receiving party hereunder from a third party not obligated under this Agreement or any other agreement, and without confidential limitation; |
(c) | Known to the receiving party prior to its first receipt of the same from the disclosing party; |
(d) | Independently developed by the receiving party without access to the CONFIDENTIAL INFORMATION of the other party; |
(e) | Furnished to a third party by the disclosing party without restrictions on the third party's right of disclosure similar to those of this Agreement; or |
(f) | Stated in writing by the disclosing party no longer to be CONFIDENTIAL INFORMATION. |
12.3 | If any CONFIDENTIAL INFORMATION is disclosed pursuant to the requirement or request of a governmental or judicial agency or disclosure is required by operation of law, such disclosure will not constitute a breach of this Agreement, provided that the receiving party shall give prior written notice to the disclosing party and seek a protective order with respect thereto reasonably satisfactory to the disclosing party to the extent available under applicable law. |
12.4 | The receiving party shall limit access to the CONFIDENTIAL INFORMATION only to such officers and employees of the receiving party who are reasonably necessary to implement this Agreement and only to such extent as may be necessary for such officers and employees to |
12.5 | CONFIDENTIAL INFORMATION and all materials including, without limitation, documents, drawings, masks, specifications, models, apparatus, sketches, designs and lists furnished to the receiving party by and which are themselves identified to be or designated in writing to be the property of the disclosing party are and shall remain the property of the disclosing party and shall be returned to the disclosing party promptly at its request, including any copies. |
12.6 | PI may disclose information with respect to any SUPPLIER IMPROVEMENTS to the PI PROCESS to one or more third parties as PI CONFIDENTIAL INFORMATION and covered by a non-disclosure agreement with protection equivalent to this Agreement for the sole purpose of having such third parties provide PI with design, layout, foundry, assembly and testing services. |
12.7 | CONFIDENTIAL MANUFACTURING INFORMATION will be confidential for a period of [*] years after the Term of this Agreement and SUPPLIER agrees to use its best efforts to never make public the CONFIDENTIAL MANUFACTURING INFORMATION. Notwithstanding any other provision of this Agreement, SUPPLIER shall treat the CONFIDENTIAL MANUFACTURING INFORMATION in accordance with the confidentiality obligations and use restrictions of this Agreement during that [*] year period. |
12.8 | SUPPLIER's obligations with respect to any portion of PI's CONFIDENTIAL MANUFACTURING INFORMATION shall terminate when SUPPLIER can document and with PI's written concurrence that such CONFIDENTIAL MANUFACTURING INFORMATION: |
(a) | Was rightfully in the public domain at the time it was communicated to SUPPLIER by PI; or |
(b) | Rightfully entered the public domain through no fault of SUPPLIER subsequent to the time it was communicated to SUPPLIER by PI; or |
(c) | Was rightfully in SUPPLIER's possession free of any obligation of confidence at the time it was communicated to SUPPLIER by PI; or |
(d) | Was rightfully communicated to SUPPLIER by a third party free of any obligation of confidence subsequent to the time it was communicated to SUPPLIER by PI; or |
(e) | Was independently developed by SUPPLIER and upon specific request of PI, SUPPLIER documents that the information was independently developed by the SUPPLIER. |
12.9 | PI may request the confidential release of SUPPLIER's CONFIDENTIAL INFORMATION to a customer of the PRODUCTS for purposes of such customer's evaluation or audit. SUPPLIER shall not unreasonably withhold approval of the release. |
12.10 | Obligation to Notify and Remedy. SUPPLIER will immediately give written notice to PI of any suspected unauthorized use or disclosure of PI's CONFIDENTIAL MANUFACTURING INFORMATION and SUPPLIER will be responsible for remedying such unauthorized use or disclosure. In the event that SUPPLIER or (to the knowledge of SUPPLIER) any of its representatives is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoenas, civil investigative demands or other similar processes) to disclose any of PI's CONFIDENTIAL MANUFACTURING INFORMATION, SUPPLIER shall provide PI with prompt written notice of any such request or requirement sufficiently timely to allow PI adequate time to seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. |
12.11 | Notwithstanding Section 18.1 (“Entire Agreement”), the parties agree that the CMI Agreement previously entered into between Power Integrations, Inc. and X-FAB [*], the 2003 AGREEMENT, and the CMI Agreement previously entered into between Power Integrations, Inc. and X-FAB [*] (collectively the “PRIOR AGREEMENTS”) shall remain in full force and effect and govern POs and information exchanged prior to the EFFECTIVE DATE of this AGREEMENT. The PRIOR AGREEMENTS shall not govern POs and information exchanged after the EFFECTIVE DATE. All POs and information exchanged after the EFFECTIVE DATE will be governed by the terms and conditions of this AGREEMENT. |
12.12 | Notwithstanding anything to the contrary in this AGREEMENT, any activity performed by or information provided by any affiliate of POWER INTEGRATIONS in connection with this AGREEMENT will be deemed performed by or provided by POWER INTEGRATIONS. |
13.1 | This Agreement shall continue in full force and effect from the Effective Date until [*], unless earlier terminated as provided herein (“Term”). |
13.2 | Notwithstanding anything to the contrary in Section 18.11 (“Force Majeure”), if any governmental agency, entity or authority requires (including through administrative guidance) any changes to this Agreement, PI may terminate this Agreement immediately if the changes are, in PI's sole discretion, detrimental to PI's interests or otherwise not reasonably acceptable to PI, without liability of any kind, except for affected WAFER work in progress (“WIP”) and inventory. |
13.3 | In the event that either party has committed a material breach of this Agreement, the other party shall promptly give written notice thereof to the breaching party, specifying any alleged material breach or breaches. The breaching party shall have sixty (60) days after the effective date of such written notice to have all material breaches specified either remedied or waived (“cured”). If such breaches are not so cured, the other party shall have the right to terminate this Agreement effective |
13.4 | Either party shall also have the right to terminate this Agreement with immediate effect by giving written notice of termination to the other party at any time upon or after the occurrence of any of the following events with respect to such other party: |
(a) | Insolvency, bankruptcy, reorganization or liquidation or filing of any application therefor, or other commitment of an affirmative act of insolvency, which is not promptly removed or stayed, if (1) the first party does not receive prompt, satisfactory, written assurance from the other party that it can meet its obligations under this Agreement, or (2) after such assurance such other party does not continue to meet such obligations; |
(b) | Attachment, execution or seizure of substantially all of the assets or filing of any application therefor which is not promptly released or stayed; |
(c) | Assignment or transfer of that portion of the business to which this Agreement pertains to a trustee for the benefit of creditors; |
(d) | Termination of its business or dissolution. |
13.5 | [*] |
13.6 | No failure or delay on the part of either party in exercising its right of termination hereunder for any one or more causes shall be construed to prejudice its rights of termination for such cause or any other or subsequent cause. |
13.7 | In the event of expiration or termination of this Agreement, within [*] days after expiration or termination of this Agreement, the receiving party shall return to the disclosing party all media and documentation containing the CONFIDENTIAL INFORMATION and render unusable all said CONFIDENTIAL INFORMATION placed in any storage apparatus under the receiving party's control. SUPPLIER will promptly produce for PI all documents in any form containing CONFIDENTIAL MANUFACTURING INFORMATION, whether made by PI or by SUPPLIER (including notes made by SUPPLIER), and whether such documents be in hard copy, electronic (including email), optical or other form. |
13.8 | The termination or expiration of this Agreement shall not release either party from any liability which at said date of termination or expiration has already accrued to the other party. |
13.9 | Notwithstanding any termination or expiration of this Agreement, the provisions of Articles 1 (“Definitions”), 4 (“INTELLECTUAL PROPERTY RIGHTS”), 11 (“Warranty, Indemnification and Improvements”), and 12 (“Confidentiality”), Sections 13.7, 13.8, 13.9, and Articles 14 (“Government Regulations”), 15 (“Non-Disclosure”), and 18 (“Miscellaneous Provisions”) shall survive this Agreement. |
14.1 | Unless prior approval is obtained from the competent governmental agency, each party shall not knowingly export or re-export, directly or indirectly, any WAFERS to any country or countries to |
14.2 | SUPPLIER is responsible for all taxes in respect of this Agreement except for taxes on PI's income. |
15.1 | SUPPLIER shall keep the terms and existence of this Agreement confidential and shall not make disclosure thereof to any third party without the prior written consent of PI, which will be at PI's sole discretion and, if given, shall be conditioned upon all CONFIDENTIAL MANUFACTURING INFORMATION being redacted from such disclosure. |
16.1 | SUPPLIER shall have no right to have WAFERS manufactured, in whole or in part, by a third party unless PI gives its written approval therefor in advance, which approval shall be at PI's sole discretion. If PI does give such written approval, then SUPPLIER may disclose PI CONFIDENTIAL INFORMATION for the sole purpose of, and only to the extent reasonably necessary for, having such third party provide such services solely for the benefit if PI and not for the benefit of any other party. Such approval shall be conditioned upon: |
(i) | PI's prior review and written approval of the contract between SUPPLIER and such third party performing such manufacture; and |
(ii) | the third party agreeing in writing to all applicable terms and conditions of this Agreement, and; |
(iii) | SUPPLIER being the insurer and guarantor of such third party's full observance of such terms and conditions; and |
(iv) | SUPPLIER's disclosure of CONFIDENTIAL MANUFACTURING INFORMATION to such third party being subject to PI's prior written approval, which shall be at PI's sole discretion. |
17.1 | SUPPLIER shall keep the Varian Model Kestrel II 750 MeV implanter located in X-FAB [*]'s facility in operating condition and available for VOLUME PRODUCTION during the Term of this Agreement as long as wafers are produced for PI at the X-FAB [*] facility in [*]. SUPPLIER shall be responsible for the maintenance and operation of this implanter. SUPPLIER will pay for all repairs of this implanter. Any repairs should be completed in reasonable time provided, however, that if a repair cannot be completed within ten (10) calendar days from discovery of the need for such repair, then SUPPLIER shall give immediate written notice to PI describing (1) the problem preventing repair in such ten (10) day period, and (2) a firm schedule for completing the repair. |
17.2 | SUPPLIER has purchased (1) the following manufacturing equipment, which is an [*] machine (“[*]”): [*] Machine / Model: [*]; (2) installation of the [*]; and (3) fitting for [*] & [*]. |
17.3 | SUPPLIER will own the [*] and, except as set forth above, will be responsible for full installation, connection to existing equipment, testing and qualification of the [*] at SUPPLIER's facility. Qualification will be in accordance with a qualification plan mutually agreed upon in writing between SUPPLIER and PI. Qualification shall not be complete until the date PI reasonably agrees in writing that the foregoing qualification plan has been met. |
17.4 | SUPPLIER shall keep the [*] in operating condition and available for VOLUME PRODUCTION during the Term of this Agreement. SUPPLIER shall be responsible for the maintenance and operation of the [*] as long as wafers are produced for PI at X‑FAB [*]'s facility in [*]. SUPPLIER will pay for all repairs of the [*]. Any repairs should be completed in reasonable time provided, however, that if a repair cannot be completed within [*] calendar days from discovery of the need for such repair, then SUPPLIER shall give immediate written notice to PI describing (1) the problem preventing repair in such [*] day period, and (2) a firm schedule for completing the repair. |
17.5 | SUPPLIER shall not modify the [*] without the prior written approval of PI. SUPPLIER will pay for any modifications of the [*]. PI shall determine whether the approved modification requires re-qualification of the [*]. SUPPLIER agrees to re-qualify the [*] if so determined in accordance with a mutually agreed-to, written qualification plan. Such re-qualification will be at SUPPLIER's expense. |
17.6 | Without PI's prior written consent, SUPPLIER shall not (a) move or relocate the [*], (b) lend or transfer it to any third party, or (c) encumber the [*] with any lien or other security interest, except for the terms and conditions of any grant by the [*] government. |
17.7 | The [*] will be used for manufacturing WAFERS for PI, and for PI research and development activities. The [*] will not be used for the benefit of competitors of PI. SUPPLIER will obtain prior written consent of PI for the use of the [*] for third parties. Such consent will not unreasonably be withheld. The operation of the [*] for any other use is permitted as long as delivery and FOUNDRY CAPACITY commitments by SUPPLIER to PI are met. |
17.8 | SUPPLIER will maintain, at its sole cost and expense, the same types and amounts of insurance for the [*] as SUPPLIER maintains for its other similar equipment at SUPPLIER's facility. A Certificate of Insurance indicating such coverage shall be delivered to PI upon request. The Certificate shall indicate that the policy will not be changed or terminated without at least thirty (30) days' prior notice to PI, shall name PI as an additional named insured and shall also indicate that the insurer has waived its subrogation rights against PI. |
17.9 | SUPPLIER hereby grants a security interest in the [*] furnished hereunder and the proceeds therefrom, to secure full re-payment of the [*] COST to PI in accordance with this Agreement. SUPPLIER agrees to execute any financing statements or other documents PI requests to protect its security interest. |
17.10 | The requirements of Sections 17.3 - 17.7 will expire upon the earlier of the date that SUPPLIER delivers and PI accepts the Rebate Number of Wafers or upon the date that PI is paid the total amount set forth in Section 10.3. |
18.1 | Entire Agreement. This Agreement embodies the entire understanding of the parties as it relates to the subject matter hereof commencing as of the EFFECTIVE DATE and this Agreement supersedes any prior agreements or understandings between the parties with respect to such subject matter. For the avoidance of doubt, (1) this AGREEMENT does not supersede or replace the PRIOR AGREEMENTS and (2) all POs and information exchanged after the EFFECTIVE DATE will be governed by the terms and conditions of this AGREEMENT, and not the PRIOR AGREEMENTS. |
18.2 | Article Headings. The article and section headings herein are for convenience only and shall not affect the construction hereof. |
18.3 | Waiver. Should either PI or SUPPLIER fail to enforce any provision of this Agreement or to exercise any right in respect thereto, such failure shall not be construed as constituting a waiver or a continuing waiver of its rights to enforce such provision or right or any other provision or right. |
18.4 | No License. Nothing contained in this Agreement shall be construed as conferring by implication, estoppel or otherwise upon either party hereunder any license or other right except as expressly set forth in Article 4 (“INTELLECTUAL PROPERTY RIGHTS”). |
18.5 | English Language. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the parties. All communications between SUPPLIER and PI to effect the terms of this Agreement shall be in the English language only. |
18.6 | No Agency. The parties to this Agreement are independent contractors. There is no relationship of agency, partnership, joint venture, employment or franchise between the parties. Neither party has, nor will either party represent that it has, the authority to bind the other or to incur any obligation on its behalf. |
18.7 | Notices. Any notice required or permitted to be given by either party to the other party under this Agreement shall be in writing and delivered by overnight courier, signature of receipt required, and shall be deemed delivered upon written confirmation of delivery by the courier, if sent to the following respective addresses or such new addresses as may from time to time be supplied hereunder. |
18.8 | Invalidity. If any provision of this Agreement, or the application thereof to any situation or circumstance, shall be invalid or unenforceable, the remainder of this Agreement or the application of such provision to situations or circumstances other than those as to which it is invalid or unenforceable, shall not be affected; and each remaining provision of this Agreement shall be valid and enforceable to the fullest extent permitted by applicable law. In the event of such partial invalidity, the parties shall seek in good faith to agree on replacing any such legally invalid provisions with provisions which, in effect, will most nearly and fairly approach the effect of the invalid provision. |
18.9 | Assignment. This Agreement and any rights or licenses granted herein shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUPPLIER shall not assign any of its rights or privileges hereunder without the prior written consent of PI except as set forth in Section 13.5. Such consent shall not be unreasonably withheld. |
18.10 | Amendment. This Agreement may not be extended, supplemented or amended in any manner except by an instrument in writing expressly referring to this Agreement and duly executed by authorized officers of both parties. |
18.11 | Force Majeure. Either party shall be excused for failures and delays in performance caused by war, declared or not, any laws, proclamations, ordinances or regulations of the government of any country or of any political subdivision of any country, or strikes, lockouts, floods, fires, explosions, acts of terrorism or such other catastrophes as are beyond the control or without the material fault of such party (“Causes”). Any party claiming any such excuse for failure or delay in performance due to such Causes shall give prompt notice thereof to the other party, and neither party shall be required to perform hereunder during the period of such excused failure or delay in performance except as otherwise provided herein. This provision shall not, however, release such party from using its best efforts to avoid or remove all such Causes and such party shall continue performance hereunder with the utmost dispatch whenever such Causes are removed. In the event that the period of excused performance continues for ninety (90) days, this Agreement may be terminated by the party not excused under this Section 18.11 (“Force Majeure”), by written notice to the other party, subject to the provisions of Article 13 (“Term and Termination”) relating to the effect of termination. |
18.12 | Equitable Relief. Because SUPPLIER will have access to and become acquainted with the CONFIDENTIAL INFORMATION of PI, the unauthorized use or disclosure of which would cause irreparable harm and significant injury which would be difficult to ascertain and which would not be compensable by damages alone, the parties agree that PI will have the right to obtain an injunction, specific performance, or other equitable relief without prejudice to any other rights and remedies that it may have for such breach of this Agreement. |
18.13 | [*] |
18.14 | Governing Law. This Agreement and matters connected with the performance hereof shall be construed, interpreted, applied and governed in all respects in accordance with the laws of California and the United States without regard to conflict of laws principles. SUPPLIER hereby submits to the jurisdiction of, and waives any venue objection against, the Superior Court of the State of California in Santa Clara County, or the Municipal Court of the State of California, County of Santa Clara, or the United States District Court for the Northern District of California, in any litigation arising out of this Agreement. To the extent permissible under applicable law, each party to the contract hereby irrevocably waives its right to apply for a jury trial. |
18.15 | [*] Inch Wafers. This Agreement covers PI's acquisition of wafer fabrication and supply services from SUPPLIER based on [*]”) WAFERS. It is recognized by the parties that this Agreement shall not apply to the development and manufacture of [*]”) WAFERS. After the technical feasibility of the [*]”) WAFER process has been verified at PI's other supplier, the parties agree to negotiate in good faith regarding PI's potential acquisition of additional WAFER fabrication and supply services for [*]”) WAFERS from SUPPLIER's X-FAB [*] facility. |
X-FAB Semiconductor Foundries AG | Power Integrations International, Ltd. | |||
Signature: | /s/ Charles Hage | Signature: | /s/ John L. Tomlin | |
Name: | Charles Hage | Name: | John L. Tomlin | |
Title: | Vice President of Sales | Title: | President and Director | |
Date: | February 10, 2012 | Date: | 3/5/2012 |
Calendar Year | 2011 | 2012 | 2013 | 2014 | 2015 and beyond |
X-FAB [*] WAFERS | [*] | [*] | [*] | [*] | [*] |
X-FAB [*] WAFERS | [*] | [*] | [*] | [*] | [*] |
Calendar Year | 2011 | 2012 | 2013 | 2014 | 2015 and beyond |
X-FAB [*] WAFERS | [*] | [*] | [*] | [*] | [*] |
X-FAB [*] WAFERS (projected capacity) | [*] | [*] | [*] | [*] | [*] |
BORROWER: | POWER INTEGRATIONS, INC. | |
5245 Hellyer Avenue | ||
San Jose, CA 95138 | ||
BANK: | WELLS FARGO BANK, NATIONAL ASSOCIATION | |
Santa Clara Technology Regional Commercial Banking Office | ||
121 S. Market Street, 2nd Floor | ||
San Jose, CA 95113 |
POWER INTEGRATIONS, INC. | WELLS FARGO BANK, | |||
NATIONAL ASSOCIATION | ||||
By: | /s/ Balu Balakrishnan | By: | /s/ Greg P. Cohn | |
Balu Balakrishnan, | Greg P. Cohn, | |||
President & CEO | Vice President |
$50,000,000.00 | San Jose, California | |||
February 22, 2011 |
LIBOR = | Base LIBOR | |
100% - LIBOR Reserve Percentage |
POWER INTEGRATIONS, INC. | ||||
By: | /s/ Balu Balakrishnan | |||
Balu Balakrishnan, | ||||
President & CEO |
LIBOR EARLY TERMINATION PREPAYMENT EXAMPLE | ||
Loan Amount advance under LIBOR rate | $1,000,000 | |
Initial Date | 2/1/2011 | |
Initial Term | 90-days | to 5/1/2011 |
Initial Rate (hypothetical rate for illustrative purposes only) | 0.45% | |
Termination Date | 4/1/2011 | 4/1/2011 |
Days Remaining | 30-days | 30-days |
LIBOR at date of Termination for Days Remaining (30-day LIBOR) | 0.3% | 0.5% |
Two examples - one rate higher and one lower at time of termination. | ||
90-day LIBOR at initial term compared to Remaining days, 30-day LIBOR rate at Termination Date | ||
Prepayment Calculation | ||
Rate Lower | Rate Higher | |
Interest over Remaining 30-Days if no termination (0.45%, 30days remaining) | 375 | 375 |
Interest over Remaining 30-Days at new LIBOR Rate at Termination date: (example 0.30% and 0.50% with 30-days remaining) | 250 | 417 |
Difference in Interest over Remaining Days in term | 125 | (42) |
Prepayment that would apply: | 125 | none |
1. | Section 1.1(b) is hereby deleted in its entirety, and the following substituted therefor: |
POWER INTEGRATIONS, INC. | WELLS FARGO BANK, | |||
NATIONAL ASSOCIATION | ||||
By: | /s/ Balu Balakrishnan | By: | /s/ Greg P. Cohn | |
Balu Balakrishnan, | Greg P. Cohn, | |||
President & CEO | Vice President |
POWER INTEGRATIONS, INC. | WELLS FARGO BANK, | |||
NATIONAL ASSOCIATION | ||||
By: | /s/ Balu Balakrishnan | By: | /s/ Greg P. Cohn | |
Balu Balakrishnan, | Greg P. Cohn, | |||
President and CEO | SVP / Relationship Manager |
$65,000,000.00 | San Jose, California | |||
April 2, 2012 |
LIBOR = | Base LIBOR | |
100% - LIBOR Reserve Percentage |
POWER INTEGRATIONS, INC. | ||||
By: | /s/ Balu Balakrishnan | |||
Balu Balakrishnan, | ||||
President & CEO |
LIBOR EARLY TERMINATION PREPAYMENT EXAMPLE | ||
Loan Amount advance under LIBOR rate | $1,000,000 | |
Initial Date | 2/1/2011 | |
Initial Term | 90-days | to 5/1/2011 |
Initial Rate (hypothetical rate for illustrative purposes only) | 0.45% | |
Termination Date | 4/1/2011 | 4/1/2011 |
Days Remaining | 30-days | 30-days |
LIBOR at date of Termination for Days Remaining (30-day LIBOR) | 0.30% | 0.50% |
Two examples - one rate higher and one lower at time of termination. | ||
90-day LIBOR at initial term compared to Remaining days, 30-day LIBOR rate at Termination Date | ||
Prepayment Calculation | ||
Rate Lower | Rate Higher | |
Interest over Remaining 30-Days if no termination (0.45%, 30days remaining) | 375 | 375 |
Interest over Remaining 30-Days at new LIBOR Rate at Termination date: (example 0.30% and 0.50% with 30-days remaining) | 250 | 417 |
Difference in Interest over Remaining Days in term | 125 | (42) |
Prepayment that would apply: | 125 | none |
Dated: | May 7, 2012 | By: | /s/ BALU BALAKRISHNAN |
Balu Balakrishnan Chief Executive Officer |
Dated: | May 7, 2012 | By: | /s/ SANDEEP NAYYAR |
Sandeep Nayyar Chief Financial Officer |
Dated: | May 7, 2012 | By: | /s/ BALU BALAKRISHNAN |
Balu Balakrishnan Chief Executive Officer |
Dated: | May 7, 2012 | By: | /s/ SANDEEP NAYYAR |
Sandeep Nayyar Chief Financial Officer |
LEASE LINE TO THIRD PARTY (Details) (Semi South [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended |
---|---|
Mar. 31, 2012
|
|
Capital Leases, Future Minimum Payments Receivable [Abstract] | |
2012 (remaining 3 months) | $ 0.9 |
2013 | 1.2 |
2014 | 1.2 |
2015 | 1.2 |
2016 | 1.2 |
Thereafter | 3.0 |
Total | 8.7 |
Capital Leases of Lessor [Abstract] | |
Future lease payments period | four to eight year |
Noncontrolling Interest [Member]
|
|
Capital Leases of Lessor [Abstract] | |
Lease line maximum borrowing capacity | 8.6 |
Lease line funded amount | 8.5 |
Lease line funded amount, less payments withheld under arrangement to finance capital equipment | 8.2 |
Lease line funded as deposits on equipment | $ 0.3 |
GOODWILL AND INTANGIBLE ASSETS (Future Amortization Expense) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2012
years
|
||||
Finite-Lived Intangible Assets [Line Items] | ||||
Finite-Lived Intangible Assets, Useful Life, Minimum | 5 | |||
Finite-Lived Intangible Assets, Useful Life, Maximum | 10 | |||
Finite-Lived Intangible Assets, Future Amortization Expense [Abstract] | ||||
2012 (remaining 9 months) | $ 566 | |||
2013 | 755 | |||
2014 | 755 | |||
2015 | 592 | |||
2016 | 367 | |||
Thereafter | 938 | |||
Total | $ 3,973 | [1] | ||
|
LEASE LINE TO THIRD PARTY (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2012
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block] | The total lease payments related to the $8.2 million funded, including interest, will be received over a four-to-eight year term and are reflected in the table below (in millions):
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale Securities [Table Text Block] | Amortized cost and estimated fair market value of investments classified as available-for-sale at March 31, 2012, are as follows (in thousands):
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Held-to-maturity Securities [Table Text Block] | Amortized cost and estimated fair market value of investments classified as held-to-maturity at December 31, 2011 are as follows (in thousands):
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Schedule of Accounts Receivable [Table Text Block] | Accounts Receivable (in thousands):
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Schedule of Prepaid Expenses and Other Current Assets [Table Text Block] | Prepaid Expenses and Other Current Assets (in thousands):
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Schedule of Other Assets, Noncurrent [Table Text Block] | Other Assets (in thousands):
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EARNINGS PER SHARE (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | |||||
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Mar. 31, 2012
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Mar. 31, 2011
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Basic earnings per share: | ||||||
Net income | $ 7,461 | $ 9,854 | ||||
Weighted Average Common Shares | 28,227,000 | 28,628,000 | ||||
Basic earnings per share | $ 0.26 | $ 0.34 | ||||
Diluted earnings per share: | ||||||
Net income | $ 7,461 | $ 9,854 | ||||
Weighted Average Common Shares | 28,227,000 | 28,628,000 | ||||
Effect of dilutive securities: | ||||||
Employee stock plans | 1,208,000 | [1] | 1,559,000 | [1] | ||
Diluted weighted average common shares | 29,435,000 | [1] | 30,187,000 | [1] | ||
Diluted earnings per share | $ 0.25 | [1] | $ 0.33 | [1] | ||
Antidilutive shares attributable to stock-based awards outstanding excluded from computation of diluted earnings per share | 297,531 | 210,044 | ||||
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Common Stock Repurchases and Common Stock Dividend) (Details) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified |
1 Months Ended | 3 Months Ended | 1 Months Ended | 12 Months Ended | |||||||
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Jan. 31, 2012
quarters
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Oct. 31, 2010
quarters
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Mar. 31, 2012
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Dec. 31, 2011
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Sep. 30, 2011
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Jun. 30, 2011
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Mar. 31, 2011
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Mar. 31, 2012
Common Stock [Member]
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Nov. 30, 2011
Common Stock [Member]
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Feb. 28, 2011
Common Stock [Member]
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Dec. 31, 2011
Common Stock [Member]
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Class of Stock [Line Items] | |||||||||||
Stock Repurchase Program, Authorized Amount | $ 30,000,000 | $ 50,000,000 | |||||||||
Stock Repurchase Program, Amount Cancelled | 30,000,000 | ||||||||||
Stock Repurchased and Retired During Period, Shares | 1.5 | ||||||||||
Stock Repurchased and Retired During Period, Value | 50,000,000 | ||||||||||
Dividends Declared, Number Of Quarters | 4 | 4 | |||||||||
Common Stock, Dividends, Per Share, Declared | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | |||||
Payments of Dividends | $ 1,415,000 | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | $ 1,437,000 |
LEGAL PROCEEDINGS AND CONTINGENCIES (Details) (USD $)
In Millions, unless otherwise specified |
1 Months Ended | 3 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | |||||||
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Dec. 31, 2008
Pending or Threatened Litigation [Member]
Patent Infringement Claim One [Member]
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Nov. 30, 2008
Pending or Threatened Litigation [Member]
Patent Infringement Claim Two [Member]
patents
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Mar. 31, 2012
Pending or Threatened Litigation [Member]
Patent Infringement Claim Two [Member]
patents
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May 31, 2010
Pending or Threatened Litigation [Member]
Patent Infringement Claim Three [Member]
patents
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Nov. 30, 2009
Pending or Threatened Litigation [Member]
Patent Infringement Claim Three [Member]
patents
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Feb. 28, 2010
Pending or Threatened Litigation [Member]
Patent Infringement Claim Four [Member]
patents
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May 01, 2012
Pending or Threatened Litigation [Member]
Patent Infringment Claim Five [Member]
patents
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Feb. 28, 2011
Positive Outcome of Litigation [Member]
Patent Infringement Claim One [Member]
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Dec. 31, 2008
Positive Outcome of Litigation [Member]
Patent Infringement Claim One [Member]
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Oct. 31, 2006
Positive Outcome of Litigation [Member]
Patent Infringement Claim One [Member]
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Oct. 31, 2004
Positive Outcome of Litigation [Member]
Patent Infringement Claim One [Member]
patents
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May 31, 2008
Positive Outcome of Litigation [Member]
Patent Infringement Claim Two [Member]
patents
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Gain and Loss Contingencies [Line Items] | ||||||||||||
Number of patents in filed infringement claims | 3 | 2 | 4 | 4 | 4 | 3 | ||||||
Number of patents withdrawn from infringement claims | 1 | 1 | ||||||||||
Number of patents remaining in infringement claims | 2 | 2 | ||||||||||
Period for petition for further stay of permanent injunction | 90 days | |||||||||||
Damages awarded to the Company | $ 12.9 | $ 6.1 | $ 34.0 | |||||||||
Loss Contingency, Percent of Revenue Impacted by Patents Involved in Litigation | 0.10% | |||||||||||
Damages sought after the Company | $ 19.0 |
SIGNIFICANT CUSTOMERS AND EXPORT SALES (Customer and Credit Risk Concentration) (Details)
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3 Months Ended | ||||||||||||||
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Mar. 31, 2012
segments
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Mar. 31, 2012
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
customers
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Mar. 31, 2011
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
customers
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Mar. 31, 2012
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
Customer A [Member]
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Mar. 31, 2011
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
Customer A [Member]
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Mar. 31, 2012
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
Customer B [Member]
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Mar. 31, 2011
Sales Revenue, Goods, Net [Member]
Customer Concentration Risk [Member]
Customer B [Member]
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Mar. 31, 2012
Accounts Receivable [Member]
Credit Concentration Risk [Member]
customers
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Mar. 31, 2011
Accounts Receivable [Member]
Credit Concentration Risk [Member]
customers
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Mar. 31, 2012
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Customer A [Member]
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Dec. 31, 2011
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Customer A [Member]
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Mar. 31, 2012
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Customer B [Member]
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Dec. 31, 2011
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Customer B [Member]
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Mar. 31, 2012
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Ten Customers [Member]
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Dec. 31, 2011
Accounts Receivable [Member]
Credit Concentration Risk [Member]
Ten Customers [Member]
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Concentration Risk [Line Items] | |||||||||||||||
Number of reportable segment | 1 | ||||||||||||||
Number of major customers | 10 | 10 | |||||||||||||
Concentration risk, percentage of total net revenues | 66.00% | 67.00% | 20.00% | 19.00% | 12.00% | 12.00% | |||||||||
Number Of Not Separately Disclosed Customers Accounting For Ten Percent Or More Of Net Revenue | 0 | 0 | |||||||||||||
Concentration risk, percentage | 26.00% | 36.00% | 18.00% | 10.00% | 78.00% | 79.00% | |||||||||
Number Of Not Separately Disclosed Customers Accounting For Ten Percent Or More Of Accounts Receivable | 0 | 0 |
STOCK PLANS AND SHARE BASED COMPENSATION
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2012
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK PLANS AND SHARE BASED COMPENSATION [Text Block] | STOCK PLANS AND SHARE-BASED COMPENSATION: Stock Plans As of March 31, 2012, the Company had two stock-based compensation plans (the “Plans”) which are described below. 2007 Equity Incentive Plan The 2007 Equity Incentive Plan (the "2007 Plan") was adopted by the board of directors on September 10, 2007 and approved by the stockholders on November 7, 2007 as an amendment and restatement of the 1997 Stock Option Plan (the "1997 Plan"). The 2007 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards ("RSUs"), stock appreciation rights, performance stock awards and other stock awards to employees, directors and consultants. As of March 31, 2012, the maximum remaining number of shares that may be issued under the 2007 Plan was 6,352,885 shares, which includes options issued but not exercised and awards granted but unvested and shares remaining available for issuance under the 1997 Plan, including shares subject to outstanding options and stock awards under the 1997 Plan. Pursuant to the 2007 Plan, the exercise price for incentive stock options and nonstatutory stock options is generally at least 100% of the fair market value of the underlying shares on the date of grant. Options generally vest over 48 months measured from the date of grant. Options generally expire no later than ten years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service. Beginning January 27, 2009, grants pursuant to the Directors Equity Compensation Program (that was adopted by the board of directors on January 27, 2009) to nonemployee directors have been made primarily under the 2007 Plan. The Directors Equity Compensation Program provides in certain circumstances (depending on the status of the particular director's holdings of Company stock options) for the automatic grant of nonstatutory stock options to nonemployee directors of the Company on the first trading day of July in each year over their period of service on the board of directors. Further, each future nonemployee director of the Company would be granted under the 2007 Plan: (a) on the first trading day of the month following commencement of service, an option to purchase the number of shares of common stock equal to: the fraction of a year between the date of the director's appointment to the board of directors and the next July 1, multiplied by 8,000, which option shall vest on the next July 1st; and (b) on the first trading day of July following commencement of service, an option to purchase 24,000 shares vesting monthly over the three year period commencing on the grant date. The Directors Equity Compensation Program will remain in effect at the discretion of the board of directors or the compensation committee. On July 28, 2009, the 2007 Plan was amended generally to prohibit outstanding options or stock appreciation rights from being cancelled in exchange for cash without stockholder approval. 1997 Employee Stock Purchase Plan Under the 1997 Employee Stock Purchase Plan (the “Purchase Plan”), eligible employees may apply accumulated payroll deductions, which may not exceed 15% of an employee's compensation, to the purchase of shares of the Company's common stock at periodic intervals. The purchase price of stock under the Purchase Plan is equal to 85% of the lower of (i) the fair market value of the Company's common stock on the first day of each offering period, or (ii) the fair market value of the Company's common stock on the purchase date (as defined in the Purchase Plan). Each offering period consists of one purchase period of approximately six months duration. An aggregate of 3,000,000 shares of common stock were reserved for issuance to employees under the Purchase Plan. As of March 31, 2012, 2,412,036 shares had been purchased and 587,964 shares were reserved for future issuance under the Purchase Plan. Stock-Based Compensation The Company applies the provisions of ASC 718-10. Under the provisions of ASC 718-10, the Company recognizes the fair value of stock-based compensation in financial statements over the requisite service period of the individual grants, which generally equals a four-year vesting period. The Company uses estimates of volatility, expected term, risk-free interest rate, dividend yield and forfeitures in determining the fair value of these awards and the amount of compensation expense to recognize. The Company uses the straight-line method to amortize all stock awards granted over the requisite service period of the award. Determining Fair Value of Stock Options The Company uses the Black-Scholes valuation model for valuing stock option grants using the following assumptions and estimates: Expected Volatility. The Company calculates expected volatility as an average of implied volatility and historical volatility. Expected Term. The Company utilizes a model which uses historical exercise, cancellation and outstanding option data to calculate the expected term of stock option grants. Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on a U.S. Treasury note with a term approximately equal to the expected term of the underlying grants. Dividend Yield. The dividend yield was calculated by dividing the annual dividend by the average closing price of the Company's common stock on a quarterly basis. Estimated Forfeitures. The Company uses historical data to estimate pre-vesting forfeitures, and records share-based compensation expense only for those awards that are expected to vest. The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2012 and March 31, 2011 (in thousands).
As of March 31, 2012 there were approximately $5.0 million, net of expected forfeitures, of total unrecognized compensation expense related to stock options. The unrecognized compensation expense at March 31, 2012 is expected to be recognized over a weighted-average period of 1.7 years. As of March 31, 2012, the Company had $11.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock units. The unamortized compensation expense will be recognized on a straight-line basis over a weighted-average period of 2.6 years. As of March 31, 2012, the Company had $2.8 million of total unrecognized compensation expense, net of estimated forfeitures, related to performance-based share grants. The unamortized compensation expense will be recognized on a straight-line basis, and is expected to be recognized over the remainder of 2012. As of March 31, 2012, the total unrecognized compensation cost under the Purchase Plan to purchase the Company's common stock was approximately $0.4 million. The Company will amortize this cost on a straight-line basis over approximately 0.5 years. Stock compensation expense in the three months ended March 31, 2012 was $3.0 million; consisting of approximately $0.9 million related to stock options, $0.4 million related to performance shares, $1.4 million related to restricted stock units and $0.3 million related to the Purchase Plan. Stock compensation expense in the three months ended March 31, 2011, was $2.5 million; consisting of approximately $1.2 million related to stock options, $0.3 million related to performance shares, $0.6 million related to restricted stock units and $0.3 million related to the Purchase Plan. The Company did not grant stock options in the first quarter of 2012 or 2011, and therefore no fair value assumptions were reported for those periods. The fair value of employees’ stock purchase rights under the Purchase Plan was estimated using the Black-Scholes model with the following weighted-average assumptions:
A summary of stock option activity under the Plans, excluding performance-based shares and restricted stock units, as of March 31, 2012, and changes during the three months then ended, is presented below:
The Company did not grant stock options in the three months ended March 31, 2012 and 2011; since 2010 the Company's equity grants to new hires and its annual incentive grants to non-executive employees have been primarily in the form of RSUs. The total intrinsic value of options exercised during the three months ended March 31, 2012 and 2011 was $3.9 million and $6.2 million, respectively. Performance-based Awards Under the performance-based awards program, the Company grants awards in the first half of the performance year in an amount equal to twice the target number of shares to be issued if the target performance metrics are met. The number of shares that are released at the end of the performance year can range from zero to 200% of the targeted number depending on the Company's performance. The performance metrics of this program are annual targets consisting of net revenue, non-GAAP operating earnings and strategic goals. Each performance-based award granted from the 2007 Plan will reduce the number of shares available for issuance under the 2007 Plan by 2.0 shares. During the three months ended March 31, 2012, the Company issued approximately 96,000 performance-based awards to employees and executives. As the net revenue and non-GAAP operating earnings are considered performance conditions, expenses associated with these awards, net of estimated forfeitures, are recorded throughout the year depending on the number of shares expected to be earned based on progress toward the performance targets. The cost of performance-based awards is determined using the fair value of the Company's common stock on the grant date, reduced by the discounted present value of dividends expected to be declared before the awards vest. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed. In January 2012, it was determined that the Company had not reached the minimum level of the established performance targets for the performance-based awards granted in 2011. Accordingly, the 93,000 performance-based awards granted in the first quarter of 2011 were canceled. A summary of performance-based awards outstanding as of March 31, 2012, and activity during the three months then ended, is presented below:
The weighted-average grant-date fair value per share of performance-based awards granted in the three months ended March 31, 2012 and 2011 was approximately $37.28 and $36.90, respectively. The grant date fair value of awards released, which were fully vested, in the three months ended March 31, 2011 was approximately $3.0 million. There were no performance-based awards released in the three months ended March 31, 2012, as the performance-based awards granted in 2011 were canceled. Restricted Stock Units (RSUs) The Company grants restricted stock units to employees under the 2007 Plan. RSUs granted to employees typically vest ratably over a four-year period, and are converted into shares of the Company's common stock upon vesting on a one-for-one basis subject to the employee's continued service to the Company over that period. The cost of the RSUs is determined using the fair value of the Company's common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. Compensation is recognized on a straight-line basis over the requisite service period of each grant adjusted for estimated forfeitures. Each RSU award granted from the 2007 plan will reduce the number of shares available for issuance under the 2007 Plan by 2.0 shares. A summary of RSUs outstanding as of March 31, 2012, and changes during the three months then ended, is as follows:
The weighted-average grant-date fair value of RSUs awarded in the three months ended March 31, 2012 and 2011 was approximately $35.12 and $38.66, respectively. The grant date fair value of awards vested in the three months ended March 31, 2012 and 2011 was approximately $0.2 million and $0.1 million, respectively. |