UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


 

 

 

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended September 29, 2013

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193

 

For the transition period from        to             

 

 

Commission File No. 0-14225

 


 
EXAR CORPORATION

(Exact Name of Registrant as specified in its charter)

 

 

 

 

Delaware

 

94-1741481

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

48720 Kato Road, Fremont, CA 94538

(Address of principal executive offices, Zip Code)

 

(510) 668-7000

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒     No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒    No  ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    ☐            Accelerated filer    ☒            

Non-accelerated filer    ☐          (Do not check if a smaller reporting company)   Smaller reporting company    ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

The number of shares outstanding of the Registrant’s Common Stock was 47,509,410 as of November 5, 2013.

 



 
1

 

 

EXAR CORPORATION AND SUBSIDIARIES

 

INDEX TO

 

QUARTERLY REPORT ON FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 2013

 

   

Page

 

PART I – FINANCIAL INFORMATION

 
     

Item 1.

Financial Statements (Unaudited)

3

     
 

Condensed Consolidated Balance Sheets

3

     
 

Condensed Consolidated Statements of Operations

4

     
 

Condensed Consolidated Statements of Comprehensive Income (Loss)

5

     
 

Condensed Consolidated Statements of Cash Flows

6

     
 

Notes to Condensed Consolidated Financial Statements

7

     

Item 2.

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

28

     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

     

Item 4.

Controls and Procedures

35

     
 

PART II – OTHER INFORMATION

 
     

Item 1.

Legal Proceedings

35

     

Item 1A.

Risk Factors

36

     

Item 6.

Exhibits

51

     
 

Signatures

52

     
 

Index to Exhibits

53

 

 
2

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.      FINANCIAL STATEMENTS

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

 

   

September 29,

2013

   

March 31,

2013

 

ASSETS

               
                 

Current assets:

               

Cash and cash equivalents

  $ 10,051     $ 14,718  

Short-term marketable securities

    174,862       190,587  

Accounts receivable (net of allowances of $1,124 and $944)

    17,236       12,614  

Accounts receivable, related party (net of allowances of $798 and $346)

    3,223       3,374  

Inventories

    19,841       19,430  

Assets held for sale

    13,083        

Other current assets

    3,474       3,177  

Total current assets

    241,770       243,900  
                 

Property, plant and equipment, net

    9,153       24,100  

Goodwill

    29,573       10,356  

Intangible assets, net

    30,054       13,338  

Other non-current assets

    1,482       1,474  

Total assets

  $ 312,032     $ 293,168  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               
                 

Current liabilities:

               

Accounts payable

  $ 12,782     $ 9,455  

Accrued compensation and related benefits

    3,770       3,624  

Deferred income and allowances on sales to distributors

    2,150       2,399  

Deferred income and allowances on sales to related party distributor

    9,056       9,475  

Other current liabilities

    14,375       15,215  

Total current liabilities

    42,133       40,168  
                 

Long-term lease financing obligations

    456       1,342  

Other non-current obligations

    12,550       11,204  

Total liabilities

    55,139       52,714  
                 

Commitments and contingencies (Notes 13, 14 and 15)

               
                 

Stockholders' equity:

               

Common stock, $.0001 par value; 100,000,000 shares authorized; 47,505,596 and 46,607,246 shares outstanding

    5       5  

Additional paid-in capital

    510,038       749,426  

Accumulated other comprehensive loss

    (970 )     (526 )

Treasury stock at cost, 0 and 19,924,369 shares

          (248,983 )

Accumulated deficit

    (252,180 )     (259,468 )

Total stockholders' equity

    256,893       240,454  

Total liabilities and stockholders’ equity

  $ 312,032     $ 293,168  

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 
3

 

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 
 

September 29,

2013

 

September 30,

2012

 

September 29,

2013

 

September 30,

2012

 

Sales:

                       

Net sales

$ 24,978   $ 21,528   $ 48,836   $ 40,975  

Net sales, related party

  9,040     9,094     17,809     18,898  

Total net sales

  34,018     30,622     66,645     59,873  
                         

Cost of sales:

                       

Cost of sales

  12,371     12,054     24,183     22,924  

Cost of sales, related party

  4,156     4,380     8,063     8,892  

Amortization of purchased intangible assets and inventory step-up

  2,098     858     3,448     1,777  

Warranty Reserve

  1,440         1,440      

Restructuring charges and exit costs

  24         105     81  

Total cost of sales

  20,089     17,292     37,239     33,674  

Gross profit

  13,929     13,330     29,406     26,199  
                         

Operating expenses:

                       

Research and development

  7,136     5,773     13,334     11,222  

Selling, general and administrative

  9,520     7,639     17,321     15,421  

Restructuring charges and exit costs

  384     291     1,315     1,095  

Net change in fair value of contingent consideration

  (2,495 )       (2,495 )    

Total operating expenses

  14,545     13,703     29,475     27,738  
                         

Loss from operations

  (616 )   (373 )   (69 )   (1,539 )
                         

Other income and expense, net:

                       

Interest income and other, net

  372     674     659     1,320  

Interest expense

  (41 )   (38 )   (78 )   (72 )

Total other income and expense, net

  331     636     581     1,248  
                         

Income (Loss) before income taxes

  (285 )   263     512     (291 )

(Benefit) Provision for income taxes

  (6,767 )       (6,776 )   22  

Net income (loss)

$ 6,482   $ 263   $ 7,288   $ (313 )
                         

Net income (loss) per share:

                       

Basic

$ 0.14   $ 0.01   $ 0.15   $ (0.01 )

Diluted

$ 0.13   $ 0.01   $ 0.15   $ (0.01
                         

Shares used in the computation of net income (loss) per share:

                       

Basic

  47,496     45,720     47,151     45,554  

Diluted

  49,150     46,046     48,647     45,554  

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 
4

 

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

September 29,

2013

   

September 30,

2012

   

September 29,

2013

   

September 30,

2012

 

Net income (loss)

  $ 6,482     $ 263     $ 7,288     $ (313 )

Changes in market value of investments, net of tax:

                               

Changes in unrealized gain (loss) on investments

    166       532       (418 )     263  

Reclassification adjustment for net realized gains (losses)

    33       (115 )     (26 )     (153 )

Net change in market value of investments

    199       417       (444 )     110  

Comprehensive income (loss)

  $ 6,681     $ 680     $ 6,844     $ (203 )

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 
5

 

 

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

   

Six Months Ended

 
   

September 29,

2013

   

September 30,

2012

 

Cash flows from operating activities:

               

Net income ( loss)

  $ 7,288     $ (313 )

Reconciliation of net income (loss) to net cash provided by operating activities:

               

Depreciation and amortization

    6,171       5,909  

Gain on sale of intangible asset

          (223 )

Stock-based compensation expense

    4,710       1,521  

Release of deferred tax valuation allowance

    (6,770 )      

Net change in fair value of contingent consideration

    (2,495 )      

Changes in operating assets and liabilities, net of effect of acquisition:

               

Accounts receivable and accounts receivable, related party

    (4,230 )     (5,366 )

Inventories

    1,345       2,319  

Other current and non-current assets

    (427 )     98  

Accounts payable

    2,807       1,168  

Accrued compensation and related benefits

    77       (818 )

Deferred income and allowance on sales to distributors and related party distributor

    (668 )     (640 )

Other current and non-current liabilities

    (3,256 )     (3,612 )

Net cash provided by operating activities

    4,552       43  
                 

Cash flows from investing activities:

               

Purchases of property, plant and equipment and intellectual property, net

    (749 )     (1,106 )

Purchases of short-term marketable securities

    (116,589 )     (81,477 )

Proceeds from maturities of short-term marketable securities

    18,589       25,885  

Proceeds from sales of short-term marketable securities

    113,618       55,710  

Acquisition of Cadeka Microcircuits, LLC, net of cash acquired

    (23,111 )      

Other disposal activities

    125       110  

Net cash used in investing activities

    (8,117 )     (878 )
                 

Cash flows from financing activities:

               

Proceeds from issuance of common stock

    2,897       3,174  

Purchase of stock for withholding taxes on vested restricted stock

    (1,018 )      

Repurchase of common stock

    (1,999 )      

Payments of lease financing obligations

    (982 )     (630 )

Net cash provided by (used in) financing activities

    (1,102 )     2,544  
                 

Net increase (decrease) in cash and cash equivalents

    (4,667 )     1,709  

Cash and cash equivalents at the beginning of period

    14,718       8,714  

Cash and cash equivalents at the end of period

  $ 10,051     $ 10,423  
                 

Supplemental disclosure of non-cash investing activities:

               

Issuance of common stock in connection with Cadeka acquisition

  $ 5,005     $  

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 
6

 

 

EXAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1.

ORGANIZATION AND BASIS OF PRESENTATION

 

Description of Business— Exar Corporation was incorporated in California in 1971 and reincorporated in Delaware in 1991. Exar Corporation and its subsidiaries (“Exar” or “we”) is a fabless semiconductor company that designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the Networking & Storage, Industrial & Embedded, and Communications Infrastructure markets. Exar's product portfolio includes power management and connectivity components, high-performance analog and mixed-signal products, communications products and data compression and storage solutions.

 

Basis of Presentation and Use of Management Estimates—The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of September 29, 2013 and results of operations for the three and six months ended September 29, 2013 and September 30, 2012, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year.

 

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

 

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2014 and 2013 consisted of 52 weeks. The second quarter of fiscal years 2014 and 2013 both consisted of 13 weeks.

 

NOTE 2.

RECENT ACCOUNTING PRONOUNCEMENTS

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued amended standards that provided explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists. Under the amended standards, the unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward. These amended standard updates will be effective for our interim period beginning after December 15, 2013 and applied prospectively with early adoption permitted. We are currently evaluating the impact of this guidance on the presentation of our financial positions, results of operations and cash flows.

 

In February 2013, the FASB issued amended standards to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. These amended standards are effective for interim and annual reporting periods beginning after December 15, 2012. The adoption of this guidance did not have any material impact on our financial position, results of operations or cash flows.

 

In July 2012, the FASB issued amended standards to simplify how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. These amended standards are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

 

 
7

 

 

NOTE 3.

   BUSINESS COMBINATIONS

 

We periodically evaluate potential strategic acquisitions to broaden our product offering and build upon our existing library of intellectual property, human capital and engineering talent in order to expand our capabilities in the areas in which we operate or to acquire complementary businesses.

 

We account for each business combination by applying the acquisition method, which requires (1) identifying the acquiree; (2) determining the acquisition date; (3) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest we have in the acquiree at their acquisition date fair value; and (4) recognizing and measuring goodwill or a gain from a bargain purchase.

 

Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, we typically account for the acquired contingencies using existing guidance for a reasonable estimate.

 

To establish fair value, we measure the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants. The measurement assumes the highest and best use of the asset by the market participants that would maximize the value of the asset or the group of assets within which the asset would be used at the measurement date, even if the intended use of the asset is different.

 

Acquisition related costs, including finder’s fees, advisory, legal, accounting, valuation and other professional or consulting fees are accounted for as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity securities are recognized in accordance with other applicable GAAP.

 

Acquisition of Cadeka 

 

On July 5, 2013, we completed the acquisition of substantially all of the assets of Cadeka Technologies (Cayman) Holding Ltd., a privately held company organized under the laws of the Cayman Islands and all the outstanding stock of the subsidiaries of Cadeka, including the equity of its wholly owned subsidiary Cadeka Microcircuits, LLC, a Colorado limited liability company (“Cadeka”). With locations in Loveland, Colorado, Shenzhen and Wuxi, China, Cadeka designs, develops and markets high precision analog integrated circuits for use in industrial and high reliability applications. Cadeka’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our condensed consolidated financial statements beginning July 6, 2013. The pro forma effects of the portion of the Cadeka operations assumed through the transaction on our results of operations during fiscal years 2013 and 2012 were considered immaterial.

 

Consideration

 

The purchase consideration includes approximately 454,000 shares of our common stock issued to the shareholders of Cadeka (valued at $5.2 million) and a cash payment of $25.0 million (less an amount of $1.0 million, inclusive of 15,000 shares, held back temporarily to satisfy potential indemnity claims). An additional purchase price consideration earn-out (up to $5.0 million) may be earned over the next two fiscal years contingent upon achieving certain revenue targets, and may be paid in the form of cash, stock or both. The $5.2 million worth of shares issued at closing were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions and discounted to a present value. Final determination of the earn-out liability can range from zero to $5.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the preliminary purchase consideration is as follows (in thousands):

 

   

Amount

 

Cash

  $ 25,000  

Equity instruments

    5,177  

Estimated fair value of earn-out payments

    4,660  

Total consideration paid

  $ 34,837  

 

 
8

 

 

In accordance with ASC 805, Business Combinations, the acquisition of Cadeka was recorded as a purchase business acquisition since Cadeka was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to net assets acquired at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant unobservable inputs (“Level 3 inputs”) determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 15% to 23%. The fair value of the contingent earn-out was a probability-based approach that includes significant unobservable inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the preliminary fair value of consideration paid over the preliminary fair values of net assets acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $12.4 million prior to considering the impact on deferred tax assets and liabilities. The goodwill results largely of expected synergies from combining the operations of Cadeka with that of Exar and is not expected to be tax deductible. After considering the impact of deductible and taxable temporary tax differences on the acquired business, a deferred tax liability of $6.8 million was established primarily related to identified intangible asset basis differences, which resulted in a total goodwill amount recorded as part of the acquisition of $19.2 million. Additionally, in accordance with ASC 805, Business Combinations, we also evaluated the impact of the acquisition on Exar’s valuation allowance, the impact of which is recorded outside of purchase accounting, resulting in a release of the valuation allowance and an income tax benefit of $6.8 million.

 

Preliminary Purchase Price Allocation

 

The allocation of the total preliminary purchase price to Cadeka’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

 

The preliminary fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Cadeka acquisition was as follows (in thousands):

 

   

Amount

 

Identifiable tangible assets

       

Cash

  $ 1,055  

Accounts Receivable

    241  

Inventories

    1,756  

Property, plant and equipment

    231  

Other assets

    3  

Accounts payable and accruals

    (7,400

)

Other short-term liabilities

    (520

)

Long-term liabilities

    (126

)

Total identifiable tangible assets, net

    (4,760

)

Identifiable intangible assets

    20,380  

Total identifiable assets, net

    15,620  

Goodwill

    19,217  

Fair value of total consideration transferred

  $ 34,837  

 

The following table sets forth the components of identifiable intangible assets acquired in connection with the Cadeka acquisition (in thousands):

 

   

Fair Value

 

Developed technologies

  $ 15,720  

In-process research and development

    2,280  

Customer relations

    2,170  

Trade name

    210  

Total identifiable intangible assets

  $ 20,380  

 

In valuing specific components of the acquisition, that includes deferred taxes, and intangibles required us to make estimates that may be adjusted in the future, if new information is obtained about circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. Thus, the purchase price allocation is considered preliminary and dependent upon the finalization of the valuation of assets acquired and liabilities assumed, including income tax effects. Final determination of these estimates could result in an adjustment to the preliminary purchase price allocation, with an offsetting adjustment to goodwill.

 

Acquisition Related Costs

 

Acquisition related costs, or deal costs, relating to Cadeka are included in the selling, general and administrative line on the condensed consolidated statement of operations for the six months ended September 29, 2013, and were approximately $0.3 million.

 

 
9

 

 

Acquisition of Altior

 

On March 22, 2013, we completed the acquisition of substantially all of the assets of Altior Inc. (“Altior”), a developer of data management solutions in Eatontown, New Jersey. Altior’s results of operations and estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements beginning March 23, 2013. The pro forma effects of the portion of the Altior operations assumed through the transaction on our results of operations during fiscal years 2013 and 2012 were considered immaterial.

 

Consideration

 

The purchase consideration includes approximately 358,000 of our shares issued to the shareholders of Altior, a cash payment of $1.0 million (of which $0.25 million was held back temporarily to satisfy potential indemnity claims), and additional purchase price consideration earn-outs which may be paid in the form of cash, shares or a combination thereof (not to exceed $20.0 million in aggregate) payable over the next three fiscal years contingent upon achieving certain revenue targets. The $3.7 million worth of shares issued as consideration were valued on the date of the acquisition, and the fair value of contingent earn-outs was derived using a probability-based approach on various revenue assumptions. Final determination of the earn-out liability can range from zero to $20.0 million based on the actual achievement of the revenue targets. Fair value of contingent consideration is subject to periodic revaluation and any change in the fair value of contingent consideration from the events after the acquisition date, will be recognized in earnings of the period in which the fair value changes. The probability–based approach used to fair value contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. The significant unobservable inputs include projected revenues, percentage probability of occurrence and a discount rate to present value the future payments. The summary of the purchase consideration is as follows (in thousands):

 

   

Amount

 

Cash

  $ 1,000  

Equity instruments

    3,740  

Estimated fair value of earn-out payments

    10,138  

Total consideration paid

  $ 14,878  

 

In accordance with ASC 805, Business Combinations, the acquisition of Altior was recorded as a purchase business acquisition since Altior was considered a business. Under the purchase method of accounting, the fair value of the consideration was allocated to assets and liabilities assumed at their fair values. The fair value of purchased identifiable intangible assets and contingent earn-outs were derived from model-based valuations from significant unobservable inputs (“Level 3 inputs”) determined by management. The fair value of purchased identifiable intangible assets was determined using discounted cash flow models from operating projections prepared by management using an internal rate of return ranging from 12% to 19%. The fair value of the contingent earn-outs was a probability-based approach that includes significant unobservable inputs. See Note 4 —“Fair Value,” for additional details of the inputs used to determine the fair value of the contingent earn-out. The excess of the fair value of consideration paid over the fair values of net assets and liabilities acquired and identifiable intangible assets resulted in recognition of goodwill of approximately $7.2 million. The goodwill consists largely of expected synergies from combining the operations of Altior with that of Exar and is deductible over 15 years for tax purposes.

 

Purchase Price Allocation

 

The allocation of the purchase price to Altior’s tangible and identifiable intangible assets and liabilities assumed was based on their estimated fair values at the date of acquisition.

 

 
10

 

 

The fair value allocated to each of the major classes of tangible and identifiable intangible assets acquired and liabilities assumed in the Altior acquisition was as follows (in thousands):

 

   

Amount

 

Identifiable tangible assets

       

Inventories

  $ 126  

Property, plant and equipment

    140  

Other assets

    36  

Accounts payable and accruals

    (24

)

Other short-term liabilities

    (51

)

Long-term liabilities

    (61

)

Total identifiable tangible assets, net

    166  

Identifiable intangible assets – existing technology

    7,540  

Total identifiable assets, net

    7,706  

Goodwill

    7,172  

Fair value of total consideration transferred

  $ 14,878  

 

Acquisition Related Costs

 

Acquisition related costs, or deal costs, relating to Altior are included in the selling, general and administrative line on the consolidated statement of operations for fiscal year 2013, were approximately $48,000.

 

NOTE 4.

FAIR VALUE

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

 

The fair value of contingent consideration arising from the acquisitions of Altior and Cadeka is classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs.

 

There were no transfers between Level 1, Level 2, and Level 3 during the fiscal quarter ended September 29, 2013.

 

 
11

 

 

Our investment assets, measured at fair value on a recurring basis, as of the dates indicated below were as follows (in thousands, except for percentages):

 

   

September 29, 2013

 
   

Level 1

   

Level 2

   

Level 3

   

Total

   

 

 

Assets:

                                       

Money market funds

  $ 2,428     $     $     $ 2,428       1

%

U.S. government and agency securities

    19,333       28,067             47,400       27

%

State and local government securities

          2,832             2,832       2

%

Corporate bonds and securities

    3       85,387             85,390       48

%

Asset-backed securities

          28,490             28,490       16

%

Mortgage-backed securities

          10,750             10,750       6

%

Total investment assets

  $ 21,764     $ 155,526     $     $ 177,290       100

%

                                         

Liabilities:

                                       

Acquisition-related contingent consideration – Altior

  $     $     $ 7,643     $ 7,643       62

%

Acquisition-related contingent consideration – Cadeka

  $     $     $ 4,660     $ 4,660       38

%

Total liabilities

  $     $     $ 12,303     $ 12,303       100

%

 

   

March 31, 2013

 
   

Level 1

   

Level 2

   

Level 3

   

Total

   

 

 

Assets:

                                       

Money market funds

  $ 5,042     $     $     $ 5,042       3

%

U.S. government and agency securities

    22,460       19,261             41,721       21

%

State and local government securities

          2,935             2,935       1

%

Corporate bonds and securities

    274       91,955             92,229       47

%

Asset-backed securities

          30,966             30,966       16

%

Mortgage-backed securities

          22,736             22,736       12

%

Total investment assets

  $ 27,776     $ 167,853     $     $ 195,629       100

%

                                         

Liabilities:

                                       

Acquisition-related contingent consideration – Altior

  $     $     $ 10,138     $ 10,138       100

%

 

Our cash, cash equivalents and short-term marketable securities as of the dates indicated below were as follows (in thousands):

 

   

September 29,

2013

   

March 31,

2013

 

Cash and cash equivalents

               

Cash at financial institutions

  $ 7,623     $ 9,676  
                 

Cash equivalents

               

Money market funds

    2,428       5,042  

Total cash and cash equivalents

  $ 10,051     $ 14,718  
                 

Available-for-sale securities

               

U.S. government and agency securities

  $ 47,400     $ 41,721  

State and local government securities

    2,832       2,935  

Corporate bonds and securities

    85,390       92,229  

Asset-backed securities

    28,490       30,966  

Mortgage-backed securities

    10,750       22,736  

Total short-term marketable securities

  $ 174,862     $ 190,587  

 

Our marketable securities include U.S. government and agency securities, state and local government securities, corporate bonds and securities, and asset-backed and mortgage-backed securities. We classify investments as available-for-sale at the time of purchase and re-evaluate such designation as of each balance sheet date. We amortize premiums and accrete discounts to interest income over the life of the investment. Our available-for-sale securities, which we intend to sell as necessary to meet our liquidity requirements, are classified as cash equivalents if the maturity date is 90 days or less from the date of purchase and as short-term marketable securities if the maturity date is greater than 90 days from the date of purchase.

 

 
12

 

 

All marketable securities are reported at fair value based on the estimated or quoted market prices as of each balance sheet date, with unrealized gains or losses, net of tax effect, recorded in the condensed consolidated statements of other comprehensive income except those unrealized losses that are deemed to be other than temporary which are reflected in the impairment charges on investments line item on the condensed consolidated statements of operations.

 

The fair value of contingent consideration was determined based on a probability-based approach which includes projected revenues, percentage probability of occurrence and discount rate to present value payments. A significant increase (decrease) in the projected revenue, discount rate or probability of occurrence in isolation could result in a significantly higher (lower) fair value measurement. 

 

The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of September 29, 2013.

 

   

Fair Value

(in thousands)

 

Valuation

Technique

 

Significant

Unobservable Input

   

As of September 29, 2013

                 
                   

Acquisition-related contingent consideration – Altior

 

$

7,643

 

Combination of income and marketable approach

 

Revenue and Probability of Achievement

   
 

  

 

             

Acquisition-related contingent consideration – Cadeka

 

$

4,660

 

Combination of income and marketable approach

 

Revenue and Probability of Achievement 

   

 

We calculate the fair value of the contingent consideration on a quarterly basis based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period.

 

The change in the fair value of our Altior purchase consideration liability is as follows:

 

   

September 29,

2013

 

As of March 31, 2013

  $ 10,138  

Less: Adjustment to purchase consideration

    (2,495 )

As of September 29, 2013

  $ 7,643  

 

We have focused our resources on developing and marketing our coprocessor products with the Altior software technology incorporated. These products, when compared to the Altior legacy FPGA-based products, will earn credit under the asset purchase agreement at a lower rate, resulting in a lower probability of meeting certain near-term earn-out targets. As a result, the fair value of the contingent consideration for Altior acquisition was reduced by $2.5 million and credited to operating expense for the three months ended September 29, 2013.

 

Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in the interest income and other net, line item on the condensed consolidated statements of operations.

 

Our net realized gains (losses) on marketable securities for the periods indicated below were as follows (in thousands):

 

   

Three Months Ended

   

Six Months Ended

 
   

September 29,

 2013

   

September 30,

2012

   

September 29,

2013

   

September 30,

2012

 

Gross realized gains

  $ 164     $ 144     $ 382     $ 384  

Gross realized losses

    (131 )     (259 )     (408 )     (537 )

Net realized income (losses)

  $ 33     $ (115 )   $ (26 )   $ (153 )

 

 
13

 

 

The following table summarizes our investments in marketable securities as of the dates indicated below (in thousands):

 

   

September 29, 2013

 
   

Amortized

Cost

   

Unrealized

Gross

Gains (1)

   

Unrealized

Gross

Losses (1)

   

Fair Value

 

Money market funds

  $ 2,428     $     $     $ 2,428  

U.S. government and agency securities

    47,402       15       (17 )     47,400  

State and local government securities

    2,837       1       (6 )     2,832  

Corporate bonds and securities

    85,413       58       (81 )     85,390  

Asset-backed securities

    28,528       14       (52 )     28,490  

Mortgage-backed securities

    10,797       21       (68 )     10,750  

Total investments

  $ 177,405     $ 109     $ (224 )   $ 177,290  

 

   

March 31, 2013

 
   

Amortized

Cost

   

Unrealized

Gross

Gains (1)

   

Unrealized

Gross

Losses (1)

   

Fair Value

 

Money market funds

  $ 5,042     $     $     $ 5,042  

U.S. government and agency securities

    41,694       27             41,721  

State and local government securities

    2,927       10       (2 )     2,935  

Corporate bonds and securities

    92,059       215       (45 )     92,229  

Asset-backed securities

    30,932       61       (27 )     30,966  

Mortgage-backed securities

    22,646       194       (104 )     22,736  

Total investments

  $ 195,300     $ 507     $ (178 )   $ 195,629  

—————

(1)  Gross of tax impact

 

Our asset-backed securities are comprised primarily of premium tranches of vehicle loans and credit card receivables, while our mortgage-backed securities are primarily from Federal agencies. We do not own auction rate securities nor do we own securities that are classified as subprime. As of September 29, 2013, we have sufficient liquidity and do not intend to sell these securities to fund normal operations or realize any significant losses in the short term; however, these securities are available for use, if needed, for current operations.

 

Management determines the appropriate classification of cash equivalents or short-term marketable securities at the time of purchase and reevaluates such classification as of each balance sheet date. The investments are adjusted for amortization of premiums and accretion of discounts to maturity and such accretion/amortization, which is immaterial for all periods presented, is included in the interest income and other, net line in the condensed consolidated statements of operations. Cash equivalents and short-term marketable securities are reported at fair value with the related unrealized gains and losses included in the accumulated other comprehensive losses line in the condensed consolidated balance sheets. As of September 29, 2013, there was approximately $0.9 million of unrealized losses, net of tax from our Level 1 and Level 2 investments.

 

We periodically review our investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, our intent not to sell the security, and whether it is more likely than not that we will not have to sell the security before recovery of its cost basis. For the three and six months ended September 29, 2013 and September 30, 2012, respectively, there were no investments identified with other than temporary declines in value.

 

The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale by expected maturity as of the dates indicated below were as follows (in thousands):

 

   

September 29, 2013

   

March 31, 2013

 
   

Amortized

Cost

   

Fair Value

   

Amortized

Cost

   

Fair Value

 

Less than 1 year

  $ 57,231     $ 57,215     $ 61,011     $ 61,029  

Due in 1 to 5 years

    120,174       120,075       134,289       134,600  

Total

  $ 177,405     $ 177,290     $ 195,300     $ 195,629  

 

 
14

 

 

The following table summarizes the gross unrealized losses and fair values of our investments in an unrealized loss position as of the dates indicated below, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

   

September 29, 2013

 
   

Less than 12 months

   

12 months or greater

   

Total

 
   

Fair Value

   

Gross

Unrealized

Losses

   

Fair Value

   

Gross

Unrealized

Losses

   

Fair Value

   

Gross

Unrealized

Losses

 

U.S. government and agency securities

  $ 21,759     $ (17 )   $     $     $ 21,759     $ (17 )

State and local government securities

    1,515       (5 )     315       (1 )     1,830       (6 )

Corporate bonds and securities

    48,977       (80 )     758       (1 )     49,735       (81 )

Asset-backed securities

    15,817       (44 )     2,143       (8 )     17,960       (52 )

Mortgage-backed securities

    249       (2 )     7,161       (66 )     7,410       (68 )

Total

  $ 88,317     $ (148 )   $ 10,377     $ (76 )   $ 98,694     $ (224 )

 

 

   

March 31, 2013

 
   

Less than 12 months

   

12 months or greater

   

Total

 
   

Fair Value

   

Gross

Unrealized

Losses

   

Fair Value

   

Gross

Unrealized

Losses

   

Fair Value

   

Gross

Unrealized

Losses

 

State and local government securities

  $     $     $ 404     $ (2 )   $ 404     $ (2 )

Corporate bonds and securities

    29,609       (42 )     497       (3 )     30,106       (45 )

Asset-backed securities

    10,008       (17 )     1,241       (10 )     11,249       (27 )

Mortgage-backed securities

    2,911       (39 )     3,263       (65 )     6,174       (104 )

Total

  $ 42,528     $ (98 )   $ 5,405     $ (80 )   $ 47,933     $ (178 )

 

NOTE 5.

GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one reporting unit, we utilize an entity-wide approach to assess goodwill for impairment. As of September 29, 2013, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

 

The changes in the carrying amount of goodwill for fiscal years 2014 and 2013 were as follows (in thousands):

 

   

September 29,

2013

   

March 31,

2013

 

Beginning balance

  $ 10,356     $ 3,184  

Goodwill additions

    19,217       7,172  

Ending balance

  $ 29,573     $ 10,356  

 

The goodwill additions during the six months ended September 29, 2013 consist of $19.2 million residual allocation from the Cadeka acquisition purchase price accounting. Goodwill additions during the fiscal year ended March 31, 2013 consisted of $7.2 million residual allocation from the Altior acquisition purchase price accounting.

 

 
15

 

 

Intangible Assets

 

Our purchased intangible assets as of the dates indicated below were as follows (in thousands):

 

   

September 29, 2013

   

March 31, 2013

 
   


Carrying
Amount

   

Accumulated
Amortization

   

Net

Carrying

Amount

   

Carrying
Amount

   

Accumulated
Amortization

   

Net

Carrying

Amount

 

Amortized intangible assets:

                                               

Existing technology

  $ 58,588     $ (33,914

)

  $ 24,674     $ 42,858     $ (30,668

)

  $ 12,190  

Patents/Core technology

    3,459       (3,280

)

    179       3,459       (3,182

)

    277  

Distributor relationships

    1,264       (1,260

)

    4       1,264       (1,219

)

    45  

Customer relationships

    5,075       (2,351

)

    2,724       2,905       (2,079

)

    826  

Tradenames

    210       (17

)

    193                    

Total intangible assets subject to amortization

    68,596       (40,822

)

    27,774       50,486       (37,148

)

    13,338  

In-process research and development

    2,280             2,280                    

Total

  $ 70,876     $ (40,822

)

  $ 30,054     $ 50,486     $ (37,148

)

  $ 13,338  

 

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Patents/core technology is amortized over five to six years. Distributor relationships are amortized over six years. Customer relationships are amortized over five to seven years. Tradenames are amortized over three years. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indicator of impairment exists, we compare the carrying value of long-lived assets to our projection of future undiscounted cash flows attributable to such assets and, in the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge equal to the excess of the carrying value over the asset’s fair value. Although the assumptions used in projecting future revenues and gross margins are consistent with those used in our annual strategic planning process, intangible asset impairment charges might be required in future periods if our assumptions are not achieved.

 

As of September 29, 2013, there were no indicators that required us to perform an intangible assets impairment review.

 

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

 

   

Three Months Ended

   

Six Months Ended

 
   

September 29,

2013

   

September 30,

2012

   

September 29,

2013

   

September 30,

2012

 

Amortization expense

  $ 2,130     $ 1,048     $ 3,674     $ 2,161  

 

The total future amortization expenses for our purchased intangible assets are summarized below (in thousands):

 

Amortization Expense (by fiscal year)

 

2014 (6 months remaining)

  $ 3,982  

2015

    6,039  

2016

    4,863  

2017

    3,449  

2018

    3,255  

2019 and thereafter

    6,186  

Total future amortization

  $ 27,774  

 

NOTE 6.

LONG-TERM INVESTMENT

 

Our long-term investment consists of our investment in Skypoint Telecom Fund II (US), L.P. (“Skypoint Fund”). Skypoint Fund is a venture capital fund that invested primarily in private companies in the telecommunications and/or networking industries. We account for this non-marketable equity investment under the cost method. We periodically review and determine whether the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

 

 
16

 

 

As of the dates indicated below, our long-term investment balance, which is included in the “Other non-current assets” line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

 

   

September 29,

2013

   

March 31,

2013

 

Beginning balance

  $ 1,288     $ 1,273  

Contributions

          15  

Ending balance

  $ 1,288     $ 1,288  

 

The carrying amount of $1.3 million as of September 29, 2013 reflects the net of the capital contributions, capital distributions and cumulative impairment charges. We have made $4.8 million in capital contributions to Skypoint Fund since we became a limited partner in July 2001. During the first quarter of fiscal year 2013, we contributed $15,000 to the fund. The Partnership is currently in the dissolution phase. As of September 29, 2013, we do not have any further capital commitments.

 

Impairment

 

We evaluate our long-term investment for impairment whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year by comparing the carrying amount to the fair value of the underlying investments. If the carrying amount exceeds its fair value, long term-investment is considered impaired and a second step is performed to measure the amount of impairment loss. We analyzed the fair value of the underlying investments of Skypoint Fund and as a result, no impairment was recorded during the second fiscal quarter of 2014.

 

NOTE 7.

RELATED PARTY TRANSACTIONS

 

Affiliates of Future Electronics Inc. (“Future”), Alonim Investments Inc. and two of its affiliates (collectively “Alonim”), own approximately 7.6 million shares, or approximately 16%, of our outstanding common stock as of September 29, 2013. As such, Alonim is our largest stockholder.

 

Our sales to Future are made under a distribution agreement that provides protection against price reduction for its inventory of our products and other sales allowances that are also provided to certain of our other distributor partners. We recognize revenue on sales to Future when Future sells the products to its end customers. Future has historically accounted for a significant portion of our net sales.

 

Related party contributions to our total net sales for the periods indicated below were as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

September 29,

2013

   

September 30,

2012

   

September 29,

2013

   

September 30,

2012

 

Future

    27 %     30 %     27 %     32 %

 

Related party receivables to our net accounts receivables were as follows as of the dates indicated below:

 

   

September 29,

2013

   

March 31,

2013

 

Future

    16 %     21 %

 

Related party expenses for marketing promotional materials reimbursed were not significant for the three and six months ended September 29, 2013 and September 30, 2012, respectively.

 

We rent our Loveland, Colorado office from an entity, which is partially-owned by one of the founders of Cadeka, who is now one of our employees. We have recorded $69,000 in related party rent expense for both the three and six months ended September 29, 2013.

 

 
17

 

 

NOTE 8.

RESTRUCTURING CHARGES AND EXIT COSTS

 

2014 Restructuring Charges and Exit Costs

 

During the three and six months ended September 29, 2013, we incurred restructuring charges and exit costs of $0.4 million and $1.4 million, respectively. The charges include $1.2 million of severance benefits, net of adjustments in other costs and $0.2 million of costs related to efforts to sell and market our campus in Fremont, California.

 

2013 Restructuring Charges and Exit Costs

 

In the fourth quarter of fiscal year 2013, we recorded $0.3 million restructuring charges and exit costs and released a $0.5 million liability related to Industrial Research Assistance Program with Canadian governmental agency. In the third, second and first quarters of fiscal year 2013, we recorded restructuring charges and exit costs of $0.6 million, $0.3 million and $0.9 million, respectively. Of the total restructuring charges and exit costs recorded in fiscal year 2013, $0.3 million was reflected in cost of sales and $1.3 million was reflected in operating expenses within our consolidated statements of operations. 

 

Our restructuring liabilities were included in the other current liabilities and other non-current obligations lines within our condensed consolidated balance sheets. The following table summarizes the activities affecting the liabilities as of the dates indicated below (in thousands):

 

   

September 29, 2013

 
   

Beginning

balance

   

Additions/

adjustments

   

Non-cash

charges

   

Payments

   

Ending

balance

 

Lease termination costs and others

  $ 2,860     $ (76 )   $ (16

)

  $ (183

)

  $ 2,585  

Severance

    426       1,270             (1,122

)

    574  

Sale / Leaseback of Exar campus

          226             (188

)

    38  

Balance at September 29, 2013

  $ 3,286     $ 1,420     $ (16

)

  $ (1,493

)

  $ 3,197  

 

   

March 31, 2013

 
   

Beginning

balance

   

Additions/

adjustments

   

Non-cash

charges

   

Payments

   

Ending

balance

 

Lease termination costs and others

  $ 5,235     $ 6     $ (56

)

  $ (2,325

)

  $ 2,860  

Severance

    2,806       1,548             (3,928

)

    426  

Balance at March 31, 2013

  $ 8,041     $ 1,554     $ (56

)

  $ (6,253

)

  $ 3,286  

 

NOTE 9.

BALANCE SHEET DETAIL

 

Our inventories consisted of the following as of the dates indicated below (in thousands):

 

   

September 29,

2013

   

March 31,

2013

 

Work-in-process and raw materials

  $ 11,556     $ 9,981  

Finished goods

    8,285       9,449  

Total inventories

  $ 19,841     $ 19,430  

 

Our property, plant and equipment consisted of the following as of the dates indicated below (in thousands):

 

   

September 29,

2013

   

March 31,

2013

 

Land

  $     $ 6,660  

Building

    807       16,224  

Machinery and equipment

    39,628       42,258  

Software and licenses

    17,350       17,566  

Property, plant and equipment, total

    57,785       82,708  

Accumulated depreciation and amortization

    (48,632 )     (58,608 )

Total property, plant and equipment, net

  $ 9,153     $ 24,100  


 
18

 

 

Our other current liabilities consisted of the following as of the dates indicated below (in thousands):

 

   

September 29,