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International Rectifier 10-Q 2009
form10q.htm




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2009
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
 
Commission file number 1-7935
IRF Logo
International Rectifier Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
95-1528961
(I.R.S. Employer
Identification No.)
101 N. Sepulveda Blvd
El Segundo, California
(Address of Principal Executive Offices)
 
90245
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code:(310) 726-8000
 
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 x  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller
reporting company)
Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
 
There were 71,275,516 shares of the registrant’s common stock, par value $1.00 per share, outstanding on October 31, 2008.


 
 

 

TABLE OF CONTENTS
 
   
Page
 
PART I.
FINANCIAL INFORMATION                                                                                                                            
4
     
Item 1.
FINANCIAL STATEMENTS                                                                                                                            
4
     
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2009 AND SEPTEMBER 28, 2008
4
     
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2009 AND SEPTEMBER 28, 2008
5
     
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 27, 2009 AND JUNE 28, 2009
6
     
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2009 AND SEPTEMBER 28, 2008
7
     
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
     
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
31
     
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
42
     
Item 4.
CONTROLS AND PROCEDURES                                                                                                                            
43
     
PART II.
OTHER INFORMATION                                                                                                                            
45
     
Item 1.
LEGAL PROCEEDINGS                                                                                                                            
45
     
Item 1A.
RISK FACTORS                                                                                                                            
45
     
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
46
     
Item 5.
OTHER INFORMATION                                                                                                                            
46
     
Item 6.
EXHIBITS                                                                                                                            
47
 

 

 
2

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, or (c) embody assumptions that may prove to have been inaccurate. These forward-looking statements involve risks, uncertainties and assumptions. When we use words such as “believe,” “expect,” “anticipate,” “will” or similar expressions, we are making forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give readers any assurance that such expectations will prove correct. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond our control. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors discussed in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements attributable to us are expressly qualified in their entirety by the factors that may cause actual results to differ materially from anticipated results. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinion only as of the date hereof. We undertake no duty or obligation to revise these forward-looking statements. Readers should carefully review the risk factors described in this document as well as in other documents we file from time to time with the Securities and Exchange Commission (“SEC”).
 

 
3

 

PART I. FINANCIAL INFORMATION
 
ITEM 1.  Financial Statements
 
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(In thousands, except per share data)
 
   
Three Months Ended
 
   
September 27, 2009
   
September 28, 2008
 
Revenues
  $ 179,371     $ 244,474  
Cost of sales
    132,014       148,082  
Gross profit
    47,357       96,392  
Selling, general and administrative expense
    43,582       64,877  
Research and development expense
    22,827       24,717  
Amortization of acquisition-related intangible assets
    1,094       1,097  
Asset impairment, restructuring and other charges
    167       471  
Operating (loss) income
    (20,313 )     5,230  
Other expense, net
    778       14,582  
Interest income, net
    (3,970 )     (5,060 )
Loss before income taxes
    (17,121 )     (4,292 )
Benefit from income taxes
    (221 )     (106 )
Net loss
  $ (16,900 )   $ (4,186 )
Net loss per common share—basic
  $ (0.24 )   $ (0.06 )
Net loss income per common share—diluted
  $ (0.24 )   $ (0.06 )
Average common shares outstanding—basic
    71,218       72,843  
Average common shares and potentially dilutive securities outstanding—diluted
    71,218       72,843  
 
The accompanying notes are an integral part of these statements.
 

 
4

 

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
(In thousands)
 
   
Three Months Ended
 
   
September 27, 2009
   
September 28, 2008
 
Net loss
  $ (16,900 )   $ (4,186 )
Other comprehensive loss:
               
Foreign currency translation adjustments
    (4,156 )     (23,871 )
Unrealized losses on securities:
               
Unrealized holding gains (losses) on available-for-sale securities, net of tax effect of $2,657 and $0, respectively
    2,209       (6,464 )
Reclassification adjustments of net gains on foreign currency forward contract
    (1,566 )     (196 )
Other comprehensive loss
    (3,513 )     (30,531 )
Comprehensive loss
  $ (20,413 )   $ (34,717 )
 
The accompanying notes are an integral part of these statements.
 

 
5

 

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands)
 
   
September 27,
2009
   
June 28,
2009
 
Assets
           
Current assets:
           
Cash and cash equivalents
  $ 292,499     $ 365,761  
Restricted cash
    3,925       3,925  
Short-term investments
    199,116       113,247  
Trade accounts receivable, net
    112,928       97,572  
Inventories
    152,586       151,121  
Current deferred tax assets
    1,248       1,223  
Prepaid expenses and other receivables
    30,002       28,556  
Total current assets
    792,304       761,405  
Long-term investments
    95,278       121,508  
Property, plant and equipment, net
    358,684       369,713  
Goodwill
    74,955       74,955  
Acquisition-related intangible assets, net
    10,727       11,821  
Long-term deferred tax assets
    7,913       7,994  
Other assets
    55,652       53,911  
Total assets
  $ 1,395,513     $ 1,401,307  
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 70,627     $ 62,570  
Accrued income taxes
    8,417       6,830  
Accrued salaries, wages and commissions
    20,890       22,325  
Current deferred tax liabilities
    2,793       2,793  
Other accrued expenses
    116,201       114,043  
Total current liabilities
    218,928       208,561  
Long-term deferred tax liabilities
    5,266       4,439  
Other long-term liabilities
    53,270       53,055  
Total liabilities
    277,464       266,055  
Commitments and contingencies
               
Stockholders’ equity:
               
Common shares
    73,181       73,101  
Capital contributed in excess of par value of shares
    984,916       981,786  
Treasury stock, at cost
    (23,632 )     (23,632 )
Retained earnings
    68,115       85,015  
Accumulated other comprehensive income
    15,469       18,982  
Total stockholders’ equity
    1,118,049       1,135,252  
Total liabilities and stockholders’ equity
  $ 1,395,513     $ 1,401,307  
 
The accompanying notes are an integral part of these statements.
 

 
6

 

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In thousands)
 
   
Three Months Ended
 
   
September 27, 2009
   
September 28, 2008
 
Cash flow from operating activities:
           
Net loss
  $ (16,900 )   $ (4,186 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    16,558       16,622  
Amortization of acquisition-related intangible assets
    1,093       1,097  
Stock compensation expense
    2,539       1,190  
Provision for bad debt
    41       225  
Provision for inventory write-downs
    (5,135 )     951  
Deferred income taxes
    (1,830 )     163  
Other-than-temporary impairment of investments
    1,905       15,198  
(Gain) loss on derivatives
    (1,256 )     178  
(Gain) loss on sale of investments
    (2,560 )     927  
Changes in operating assets and liabilities, net
    (2,425 )     (52,260 )
Other
    901       3,764  
Net cash used in operating activities
    (7,069 )     (16,131 )
Cash flow from investing activities:
               
Additions to property, plant and equipment
    (9,466 )     (4,799 )
Proceeds from sale of property, plant and equipment
    50       19  
Additions to restricted cash
          (34 )
Sale or maturities of investments
    52,757       60,086  
Purchase of investments
    (110,420 )     (57,444 )
Other, net
          1,032  
Net cash used in investing activities
    (67,079 )     (1,140 )
Cash flow from financing activities:
               
Proceeds from exercise of stock options and stock participation plan
    870       981  
Net settlement of restricted stock units
    (192 )      
Other, net
          (129 )
Net cash provided by financing activities
    678       852  
Effect of exchange rate changes on cash and cash equivalents
    208       (1,263 )
Net decrease in cash and cash equivalents
    (73,262 )     (17,682 )
Cash and cash equivalents, beginning of period
    365,761       320,464  
Cash and cash equivalents, end of period
  $ 292,499     $ 302,782  
 
The accompanying notes are an integral part of these statements.
 

 

 
7

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 

1. Business, Basis of Presentation and Summary of Significant Accounting Policies
 
Business
 
International Rectifier Corporation (“IR” or the “Company”) designs, manufactures and markets power management semiconductors. Power management semiconductors address the core challenges of power management, power performance and power conservation, by increasing system efficiency, allowing more compact end-products, improving features on electronic devices and prolonging battery life.
 
The Company pioneered the fundamental technology for power metal oxide semiconductor field effect transistors (“MOSFETs”) in the 1970s, and estimates that the majority of the world’s planar powerMOSFETs use its technology. Power MOSFETs are instrumental in improving the ability to manage power efficiently. The Company’s products include power MOSFETs, high voltage analog and mixed signal integrated circuits (“HVICs”), low voltage analog and mixed signal integrated circuits (“LVICs”), digital integrated circuits (“ICs”), radiation-resistant (“RAD-Hard™”) power MOSFETs, insulated gate bipolar transistors (“IGBTs”), high reliability DC-DC converters, Automotive Products modules, and DC-DC converter type applications.
 
Basis of Presentation
 
The condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and therefore do not include all information and notes normally provided in audited financial statements prepared in accordance with generally accepted accounting principles (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, which are located in North America, Europe and Asia. Intercompany balances and transactions have been eliminated in consolidation.
 
In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation of the Company’s results of operations, financial position, and cash flows have been included. The results of operations for any interim period are not necessarily indicative, nor comparable to the results of operations for any other interim period or for a full fiscal year. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2009 filed with the SEC on August 27, 2009 (the “2009 Annual Report”).
 
Fiscal Year and Quarter
 
The Company operates on a 52-53 week fiscal year with the fiscal year ending on the Sunday closest to June 30. The three months ended September 2009 and 2008 consisted of 13 weeks ending on September 27, 2009 and September 28, 2008, respectively.
 
Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
8

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (Continued)
 
Financial Assets and Liabilities Measured at Fair Value
 
Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s condensed consolidated balance sheet as of September 27, 2009 as follows (in thousands):
 
Assets and Liabilities:
 
 
Total
   
Quoted Prices in Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
Cash and cash equivalents
  $ 38,997     $ 38,997     $     $  
Short-term investments
    199,116       176,257       22,859       -  
Long-term investments
    95,278       32,255       27,979       35,044  
Other assets
    35,398       33,245             2,153  
Other accrued expenses
    (1,375 )           (1,375 )      
Other long-term liabilities
    (7,128 )     (7,128 )            
Total
  $ 360,286     $ 273,626     $ 49,463     $ 37,197  
Fair value as a percentage of total
    100.0 %     76.0 %     13.7 %     10.3 %
Level 3 as a percentage of total assets
                            2.7 %

 
The fair value of investments, derivatives, and other assets and liabilities are disclosed in Note 2, Note 3, and Note 9, respectively.

During the three months ended September 27, 2009, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis.

Level 3 Valuation Techniques

Certain financial assets are measured using Level 3 inputs such as pricing models, discounted cash flow methodologies or similar techniques, and where at least one significant model assumption or input is unobservable. Level 3 inputs are used for financial assets that include a non-transferable put option on a strategic investment and certain investment securities for which there is limited market activity where the determination of fair value requires significant judgment or estimation. Level 3 inputs are also used to value investment securities that include certain mortgage-backed securities and asset-backed securities for which there was a decrease in the observability of market pricing for these investments. At September 27, 2009, these securities were valued primarily using independent valuation firm or broker pricing models that incorporate transaction details such as maturity, timing and amount of future cash flows, as well as assumptions about liquidity and credit valuation adjustments of marketplace participants at September 27, 2009.

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable Level 3 inputs for the fiscal year ended September 27, 2009 (in thousands):

   
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
   
Derivatives
   
Investments
   
Total
 
Beginning balance at June 28, 2009
  $     $ 40,834     $ 40,834  
Total gains or losses (realized or unrealized):
                       
    Included in earnings (or changes in net assets)
          1,338       1,338  
    Included in other comprehensive income
          1,345       1,345  
Purchases, issuance, and settlements
    2,149       (8,469 )     (6,320 )
Transfers in and/or out of level 3
                 
Ending balance at September 27, 2009
  $ 2,149     $ 35,048     $ 37,197  
        
 
9

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (Continued)
 
Gains and losses attributable to financial assets whose fair value is determined by using Level 3 inputs and included in earnings as shown above consist of mark to market adjustments for derivatives and other-than-temporary impairments for investments which are included in other expense and realized losses on sale of securities which are included in interest income

Subsequent Events
 
The Company has evaluated subsequent events through November 6, 2009, which represents the date the financial statements were issued.  The Company did not identify any subsequent events that required disclosure.
 
Out-of-Period Adjustments
 
Included in the results for the three months ended September 27, 2009, are corrections of prior period errors, some of which increased and some of which decreased net loss. Based on the Company's current financial condition and results of operations, management has determined that these corrections are immaterial to the financial statements in each applicable prior period and the current period to date, both individually and in the aggregate.
 
Adoption of New Accounting Standards
 
In June, 2009, the FASB issued ASC update No. 2009-01, “Topic-105-Generally Accepted Accounting Principles, amendments based on Statement of financial Accounting Standards No. 168-The FASB Accounting Standards Codification and hierarchy of Generally Accepted Accounting Principles”.  The objective of this Topic is to establish the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification as the source of authoritative principles and standards recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”).  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  This update is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The adoption of FASB ASC Update No. 2009-01 during the first three months of fiscal 2010 did not have a material impact on the Company’s financial statements.
 
In December 2007, the FASB issued Accounting Standards Codification (“ASC”) 805-10, “Business Combinations” (“FASB ASC 805-10”).  Under FASB ASC 805-10, an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date.  It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred, restructuring costs generally be expensed in periods subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period impact income tax expense.  In addition, acquired in-process research and development (“R&D”) is capitalized as an intangible asset and amortized over its estimated useful life.  The adoption of FASB ASC 805-10 did not have a material impact on the Company’s financial statements.
 
In February 2008, the FASB issued FASB ASC 820-10-55, “Fair Value Measurements and Disclosures” (“FASB ASC 820-10-55”),  which delayed the effective date of fair value accounting for all non-financial liabilities, except those that are measured at fair value on a recurring basis.  Effective the beginning of fiscal year 2010, the Company adopted FASB ASC 850-10 with respect to non-financial assets and liabilities measured on a non-recurring basis.  The application of the fair value framework established by FASB ASC 820-10 to these fair value measurements did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
 
In June 2008, the FASB issued FASB ASC 260-10, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FASB ASC 260-10”), which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method.  FASB ASC 260-10 is applied retroactively to all prior periods presented in the Company’s financial statements. The adoption of FASB ASC 260-10 did not have a material impact on the Company’s financial statements for the three months ended September 27, 2009 or September 28, 2008; however, the adoption of FASB ASC 260-10 may have a material impact on earnings per share in future periods.
 
10

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (Continued)
 
In April 2008, the FASB issued FASB ASC 350-30 and 275-10, “Intangibles-Goodwill and Other” and “Risk and Uncertainties”, respectively.  These Topics amend the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of a recognized intangible asset under FASB ASC 350-10 and 350-20, “Intangibles-Goodwill and Other.” FASB ASC 350-30 and 275-10 are effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years.  The Company adopted FASB ASC 350-30 and 275-10 as of the beginning of fiscal year 2010, and the adoption did not have a material impact on the Company’s financial statements
 
Recent Accounting Pronouncements
 
In October 2009, the FASB issued ASC update No. 2009-13, “Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force.”  These amendments establish a selling price hierarchy for determining the selling price of a deliverable.  The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available.  The amendments also replace the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant.  In addition, the amendments eliminate the residual method of allocation and require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method.  The relative selling price method allocates any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price.  The amendments are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  The Company does not believe that the adoption of this update will have a material impact on its financial statements.
 
In August 2009, the FASB issued ASC Update No. 2009-05, “Fair Value Measurements and disclosures (Topic 820)-Measuring Liabilities at Fair Value”.  This update provides amendments to FASB ASC 820, “Fair Value Measurements and Disclosures-Overall”, for the fair value measurement of liabilities.  This update also provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1) A valuation technique that uses: a) the quoted price of the identical liability when traded as an asset, b) quoted prices for similar liabilities or similar liabilities when trades as assets, and 2) another valuation technique that is consistent with the principles of Topic 820.  Two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability.  The Company does not believe that the adoption of update 2009-05 will have a material impact on its financial statements.
 
2. Investments
 
Available-for-sale investments are carried at fair value, inclusive of unrealized gains and losses, and net of discount accretion and premium amortization computed using the level yield method. Net unrealized gains and losses are included in other comprehensive loss net of applicable income taxes. Gains or losses on sales of available-for-sale investments are recognized on the specific identification basis.
 
11

 

 
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
2. Investments (Continued)
 
    Available-for-sale securities as of September 27, 2009 are summarized as follows (in thousands):
 
   
Amortized Costs
   
Gross Unrealized Gain
   
Gross Unrealized Loss
   
Net Unrealized Gain
   
Market Value
 
Short-Term Investments:
                             
U.S. government and agency obligations
  $ 198,497     $ 628     $ (9 )   $ 619     $ 199,116  
Total short-term investments
  $ 198,497     $ 628     $ (9 )   $ 619     $ 199,116  
Long-Term Investments:
                                       
Corporate debt
  $     $ 27     $     $ 27     $ 27  
U.S. government and agency obligations
    58,261       1,946             1,946       60,207  
Mortgage-backed securities
    17,213       2,749             2,749       19,962  
Asset-backed securities
    13,619       1,463             1,463       15,082  
Total long-term investments
  $ 89,093     $ 6,185     $     $ 6,185     $ 95,278  
                                         
Notes receivable
  $ 2,050     $ -     $     $     $ 2,050  
Equity securities
  $ 15,685     $ 5,782     $     $ 5,782     21,467  
 
Available-for-sale securities as of June 28, 2009 are summarized as follows (in thousands):
 
   
Amortized Costs
   
Gross Unrealized Gain
   
Gross Unrealized Loss
   
Net Unrealized Gain
   
Market Value
 
Short-Term Investments:
                             
Corporate debt 
  $ 1,543     $ 58     $     $ 58     $ 1,601  
U.S. government and agency obligations 
    111,199       447             447       111,646  
Total short-term investments 
  $ 112,742     $ 505     $     $ 505     $ 113,247  
Long-Term Investments:
                                       
Corporate debt                                                   
  $ 385     $ 300     $     $ 300     $ 685  
U.S. government and agency obligations 
    79,024       2,570             2,570       81,594  
Mortgage-backed securities 
    18,600       1,668             1,668       20,268  
Asset-backed securities 
    17,818       1,143             1,143       18,961  
Total long-term investments 
  $ 115,827     $ 5,681     $     $ 5,681     $ 121,508  
                                         
Notes receivable                                                   
  $ 2,050     $     $     $     $ 2,050  
Equity securities                                                   
  $ 16,893     $ 3,301     $ (1,766 )   $ 1,535     $ 18,428  
 
The Company manages its total portfolio to encompass a diversified pool of investment-grade securities. The investment policy is to manage its total cash and investments balances to preserve principal and maintain liquidity while maximizing the returns on the investment portfolio.
 
The Company holds as strategic investments the common and preferred stock of three publicly traded foreign companies. The common and preferred investments are shown as “Equity Securities” and “Notes Receivable” in the table above, respectively, and are included in other assets on the consolidated balance sheets.  The common shares of these companies are traded on either the Tokyo Stock Exchange or the Taiwan Stock Exchange.  The Company holds an option on one of the strategic investments to put the shares to the issuer at the price the shares were issued to the Company as adjusted for dividends received.  The put option became effective September 1, 2009, and was fair valued as of September 27, 2009 with the fair value of $2.1 million recorded in other income (See Note 3, “Derivatives”).  Dividend income from these companies was $0.1 million and $0.2 million for the three months ended September 27, 2009 and September 28, 2008, respectively.
 
12

 

 
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Investments (Continued)
 
Available-for-sale investments are carried at fair value, inclusive of unrealized gains and losses, and net of discount accretion and premium amortization computed using the level yield method. Net unrealized gains and losses are included in other comprehensive income (loss) net of applicable income taxes. Gains or losses on sales of available-for-sale investments are recognized on the specific identification basis.
 
The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which the market value has been less than cost; the financial condition and near-term prospects of the issuer of the securities; and the intent and ability of the Company to retain the security in order to allow for an anticipated recovery in fair value. If, based upon the analysis, it is determined that the impairment is other-than-temporary, the security is written down to fair value, and a loss is recognized through earnings. Other-than-temporary impairments relating to certain available-for-sale securities for the three months ended September 27, 2009, and September 28, 2008 were $1.9 million and $15.2 million, respectively.
 
The investments the Company determined were other-than-temporarily impaired were mortgage-backed securities, asset-backed securities and an equity investment during the first three months of fiscal year 2010 and mortgage-backed securities, asset-backed securities and corporate bonds with stated maturities ranging from 1 to 27 years (expected maturity from 3 months to 20 years) during the first three months of fiscal year 2009. As a result of determining the investments were other-than-temporarily impaired, the Company recorded an impairment charge of $0.7 million related to its investment in mortgage-back securities and asset-backed securities, and $1.2 million related to an equity investment during the first three months of fiscal 2010; and $11.3 million related to mortgage-backed and asset backed securities and $3.9 million related to corporate bonds in fiscal year 2009.

As of September 27, 2009, the Company had $4.1 million in investment positions in mortgage-backed securities and asset-backed securities that were in a loss position and which the Company does not intend to hold until maturity. These securities were fair valued utilizing a cash flow model which relied upon tranche specific cash flow projections, the benchmark yield, assumed collateral performance and tranche specific yield. These investments were determined to be other than temporarily impaired due to the expectation of a prolonged economic slowdown weighing on the underlying assets of these securities. The Company does not believe that it is more likely than not prices will recover before these investment positions are sold. Additional information the Company considered in determining that these securities were other than temporarily impaired included quantitative information regarding the most recent delinquency rate, foreclosure or real estate-owned rate, current credit rating and the rating date, correlation of price change and benchmark yield change, net credit support, coverage ratio and effective maturity for these securities. Qualitative analysis considered past impairments, changes in prepayment speed and the magnitude of the unrealized loss.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale investments, aggregated by type of investment and length of time that individual securities have been held. The unrealized loss position is measured and determined at each fiscal quarter end (in thousands):
   
Securities held
in a loss position
for less than
12 months at
September 27, 2009
   
Securities held
in a loss position
for 12 months
or more at
September 27, 2009
   
Total in a loss position
at September 27, 2009
 
   
Market
Value
   
Gross
Unrealized
Losses
   
Market
Value
   
Gross
Unrealized
Losses
   
Market
Value
   
Gross
Unrealized
Losses
 
U.S. government and agency obligations
  $ 23,351     $ (9 )   $     $     $ 23,351     $ (9 )
Total
  $ 23,351     $ (9 )   $     $     $ 23,351     $ (9 )
 
   
Securities held
in a loss position
for less than
12 months at
June 28, 2009
   
Securities held
in a loss position
for 12 months
or more at
June 28, 2009
   
Total in a loss position
at June 28, 2009
 
   
Market
Value
   
Gross
Unrealized
Losses
   
Market
Value
   
Gross
Unrealized
Losses
   
Market
Value
   
Gross
Unrealized
Losses
 
Equity securities
  $ 18,428     $ (1,766 )   $     $     $ 18,428     $ (1,766 )
Total
  $ 18,428     $ (1,766 )   $     $     $ 18,428     $ (1,766 )

 
13

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
 
2. Investments (Continued)
 
The amortized cost and estimated fair value of investments at September 27, 2009, by contractual maturity, are as follows (in thousands):
 
Contractual Maturity (1)
 
Amortized
Cost
   
Estimated
Market Value
 
Due in 1 year or less
  $ 198,497     $ 199,116  
Due in 1-2 years
    55,034       56,817  
Due in 2-5 years
    3,543       3,746  
Due after 5 years
    30,516       34,715  
Total investments
  $ 287,590     $ 294,394  
 
 
(1)
Contractual maturity for asset-backed and mortgage-backed securities was based on initial contractual maturity dates.
 
In accordance with the Company’s investment policy which limits the length of time that cash may be invested, the expected disposal dates may be less than the contractual maturity dates as indicated in the table above.
 
Gross realized gains and (losses) were $2.6 million and $(0.0) million, respectively, for the three months ended September 27, 2009. Gross realized gains and (losses) were $0.4 million and $(1.3) million, respectively, for the three months ended September 28, 2008.  The cost of marketable securities sold was determined by the first-in, first-out method.
 
For the three months ended September 27, 2009 and September 28, 2008, as a result of sales of available-for-sale securities and recognition of other-than-temporary impairments on available-for-sale securities, the Company reclassified $0.8 million and $14.3 million from accumulated other comprehensive income to earnings either as a component of interest expense (income) or other expense depending on the nature of the gain (loss).
 
Fair Value of Investments
 
The following table presents the balances of investments measured at fair value on a recurring basis, including cash equivalents, as of September 27, 2009:
 
   
Total
   
Quoted Prices in Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
U.S. government and agency obligations
  $ 298,320     $ 247,512     $ 50,808     $  
Corporate debt
    27             27        
Mortgage-backed securities
    19,962                   19,962  
Asset-backed securities
    15,082                   15,082  
Notes receivable
    2,050       2,050              
Equity securities
    21,467       21,463             4  
Total securities at fair value
  $ 356,908     $ 271,025     $ 50,835     $ 35,048  
 
3. Derivative Financial Instruments
 
The Company is exposed to financial market risks, including fluctuations in interest rates, foreign currency exchange rates and market value risk related to its investments. The Company uses derivative financial instruments primarily to mitigate these risks, and as part of its strategic investment program. In the normal course of business, the Company also faces risks that are either non-financial or non-quantifiable. Such risks principally include country risk, credit risk and legal risk, and are not discussed or quantified in the following analyses.  In prior periods, the Company has designated certain derivatives as fair value hedges or cash flow hedges qualifying for hedge accounting treatment.  As of September 27, 2009 and June 28, 2009, the Company had currency forward contracts and a foreign currency swap contract which were not designated as accounting hedges.  In addition, at September 27, 2009, the Company had a put option on one of the Company’s strategic investments (See Note 2, “Investments”).
 
14

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 

3. Derivative Financial Instruments (Continued)
 
Interest Rates
 
The Company is subject to interest rate risk through its investments.  The objectives of the Company’s investments in debt securities are to preserve principal and maintain liquidity while maximizing returns.  To achieve these objectives, the returns on the Company’s investments in short-term fixed-rate debt will be generally compared to yields on money market instruments such as industrial commercial paper, LIBOR or Treasury Bills.  Investments in longer term fixed rate debt will be generally compared to yields on comparable maturity Government or high grade corporate securities with an equivalent credit rating.
 
The Company had no outstanding interest rate derivatives as of September 27, 2009.
 
Foreign Currency Exchange Rates
 
The Company generally hedges the risks of foreign currency denominated repetitive working capital positions with offsetting foreign currency denominated exchange transactions, currency forward contracts or currency swaps.  Transaction gains and losses on these foreign currency denominated working capital positions are generally offset by corresponding gains and losses on the related hedging instruments, usually resulting in negligible net exposure.
 
A significant amount of the Company’s revenue, expense, and capital purchasing transactions are conducted on a global basis in several foreign currencies.  At various times, the Company has currency exposure related to the British Pound Sterling, the Euro and the Japanese Yen.  For example, in the United Kingdom, the Company has a sales office and a Semiconductor Fabrication Facility with revenues primarily in the U.S. Dollar and Euro, and expenses in British Pound Sterling.  To protect against exposure to currency exchange rate fluctuations, the Company has established cash flow and balance sheet translation risk hedging programs.  Currency forward contract hedges have generally been utilized in these risk management programs.  The Company’s hedging programs seek to reduce, but do not always entirely eliminate, the impact of currency exchange rate movements.
 
In May 2006, the Company entered into a forward contract for the purpose of reducing the effect of exchange rate fluctuations on forecasted inter-company purchases by its Japan subsidiary.  The Company had designated the forward contract as a cash flow hedge.  Under the terms of the forward contract, the Company was required to exchange 507.5 million Yen for $5.0 million on a quarterly basis starting in June 2006 and expiring in March 2011.  In December 2007, the Company terminated the forward contract and received $2.8 million of cash as part of the settlement.  In accordance with FASB ASC 850-10, “Derivatives and Hedging”, the net gain at the forward contract’s termination date would continue to be reported in accumulated other comprehensive income and recognized over the originally specified time period through March 2011, unless it became probable that the forecasted transactions will not occur.
 
The Company concluded that beginning in the fourth quarter of fiscal year 2009, the hedge would not have been effective. As a result of this ineffectiveness in the hedge on a retroactive basis, the Company reassessed the effectiveness of the hedge on a prospective basis and determined that the hedge was ineffective on a prospective basis.  As a result of the determination that the hedge was ineffective, the Company recognized the remaining unamortized balance of the gain of $1.6 million in other income during the first three months of fiscal year 2010.
 
In October 2004, the Company’s Japan subsidiary entered into a currency swap agreement to hedge intercompany payments in U.S. Dollars.  The transaction commencement date was March 2005 and the termination date is April 2011.  Each month, the Company exchanges JPY 9,540,000 for $100,000.  When the applicable currency exchange rate is less than or equal to 95.40, the Company exchanges JPY 18,984,600 for $199,000.
 
The Company had approximately $41.6 million in notional amounts of forward contracts not designated as accounting hedges under FASB ASC 850-10, “Derivatives and Hedging”, at September 27, 2009.  The net realized and unrealized foreign-currency gains(losses) related to these contracts recognized in earnings, as a component of other expense, were $(1.3) million, and $1.1 million for the three months ended September 27, 2009, and September 28, 2008, respectively.
 
 In the normal course of business, the Company also faces risks that are either non-financial or non-quantifiable. Such risks principally include country risk, credit risk and legal risk and are not discussed or quantified in the preceding analysis. 
 
15

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
3. Derivative Financial Instruments (Continued)
 
    At September 27, 2009, the fair value carrying amount of the Company’s derivative instruments were as follows:
 
   
Derivative Assets September 27, 2009
 
Derivative Liabilities September 27, 2009
 
Derivatives Not Designated as Hedging Instruments Under FASB ASC 850-10
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
(In thousands)
                 
 
Put option
 
 
Other assets
  $  2,149       $  
Currency forward contracts
 
Prepaid expenses and other receivables
     
Other accrued expenses
    1,117  
Foreign currency swap contracts
 
Other assets
     
Other accrued expenses
    258  
Total
      $ 2,149       $ 1,375  
 
The gain or (loss) recognized in earnings during the three months ended September 27, 2009 was:
 
 
Derivatives Not Designated as Hedging Instruments Under FASB ASC 850-10
 
 
 
Location of Gain or (Loss) Recognized in Income on Derivatives
 
 
Amount of Gain or (Loss) Recognized in Income on Derivatives
(In thousands)
 
           
Put option
 
Other expense
  $ 2,149  
Currency forward contracts
 
Other expense
    (1,264 )
Foreign currency swap contracts
 
Other expense
    (128 )
Total
      $ 757  

Fair Value

The following table presents derivative instruments measured at fair value on a recurring basis as of September 27, 2009:

   
Total
   
Quoted Prices in Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
Put Option
  $ 2,149     $     $     $ 2,149  
Foreign Currency Derivatives
                               
Liabilities
    (1,375 )           (1,375 )      
Total derivative instruments at fair value
  $ 774     $     $ (1,375 )   $ 2,149  

 
16

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
4. Supplemental Cash Flow Disclosures
 
Components in the changes of operating assets and liabilities for the three months ended September 27, 2009 and September 28, 2008 were comprised of the following (in thousands):
 
   
Three Months Ended
 
   
September 27, 2009
   
September 28, 2008
 
Trade accounts receivable
  $ (14,777 )   $ (6,808 )
Inventories
    3,253       (2,282 )
Prepaid expenses and other receivables
    960       (19,077 )
Accounts payable
    7,869       (11,275 )
Accrued salaries, wages and other commissions
    (1,456 )     (5,598 )
Deferred compensation
    195       (598 )
Accrued income taxes payable
    704       (1,208 )
Other accrued expenses
    827       (5,414 )
Changes in operating assets and liabilities
  $ (2,425 )   $ (52,260 )
 
Supplemental disclosures of cash flow information (in thousands):
 
   
As of
 
   
September 27, 2009
   
September 28, 2008
 
Non-cash investing activities:
           
Liabilities accrued for property, plant and equipment purchases
  $ 2,691     $ 1,778  
 
5. Inventories
 
Inventories at September 27, 2009 and June 28, 2009 were comprised of the following (in thousands):
 
   
September 27,
2009
   
June 28,
2009
 
Raw materials
  $ 35,279     $ 32,717  
Work-in-process
    70,031       66,613  
Finished goods
    47,276       51,791  
Total inventories
  $ 152,586     $ 151,121  
 
6. Goodwill and Acquisition-Related Intangible Assets
 
At September 27, 2009 and June 28, 2009, acquisition-related intangible assets included the following (in thousands):
 
         
September 27, 2009
 
   
Amortization Periods
(Years)
   
Gross Carrying
Amount
   
Accumulated
Amortization
   
Net
 
Completed technology
    4 - 12     $ 29,679     $ (20,540 )   $ 9,139  
Customer lists
    5 - 12       5,330       (4,539 )     791  
Intellectual property and other
    5 - 15       7,963       (7,166 )     797  
Total acquisition-related intangible assets
          $ 42,972     $ (32,245 )   $ 10,727  

 
17

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
6. Goodwill and Acquisition-Related Intangible Assets (Continued)

         
June 28, 2009
 
   
Amortization Periods
(Years)
   
Gross Carrying
Amount
   
Accumulated
Amortization
   
Net
 
Completed technology
    4 - 12     $ 29,679     $ (19,593 )   $ 10,086  
Customer lists
    5 - 12       5,330       (4,437 )     893  
Intellectual property and other
    5 - 15       7,963       (7,121 )     842  
Total acquisition-related intangible assets
          $ 42,972     $ (31,151 )   $ 11,821  
 
As of September 27, 2009, estimated amortization expense for the next five years is as follows (in thousands): remainder of fiscal year 2010: $3,295; fiscal year 2011: $4,125; fiscal year 2012: $1,771; fiscal year 2013: $231; and fiscal year 2014: $177.
 
Goodwill
 
The Company evaluates the carrying value of goodwill and other intangible assets annually during the fourth quarter of each fiscal year and more frequently if it believes indicators of impairment exist.  In evaluating goodwill, a two-step goodwill impairment test is applied to each reporting unit.  The Company identifies reporting units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.  In the first step of the impairment test, the Company estimates the fair value of the reporting unit.  If the fair value of the reporting unit is less than the carrying value of the reporting unit, the Company performs the second step which compares the implied fair value of the reporting unit with the carrying amount of that goodwill and writes down the carrying amount of the goodwill to the implied fair value.
 
The carrying amounts of goodwill by ongoing business segment as of September 27, 2009 and June 28, 2009 are as follows (in thousands):
 
Business Segments:
 
September 27,
2009
   
June 28, 2009
 
Power Management Devices
  $     $  
Energy-Saving Products
    33,190       33,190  
HiRel
    18,959       18,959  
Enterprise Power
    22,806       22,806  
Automotive Products
           
Intellectual Property
           
Total goodwill
  $ 74,955     $ 74,955  

7. Bank Loans and Long-Term Debt
 
As of September 27, 2009 and June 28, 2009, the Company had no long-term debt outstanding.
 
At September 27, 2009, the Company had $2.9 million of outstanding letters of credit.  These letters of credit are secured by cash collateral provided by the Company equal to their face amount.
 
18

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
8. Other Accrued Expenses
 
Other accrued expenses were comprised of the following as of (in thousands):
 
   
September 27, 2009
   
June 28, 2009
 
Sales returns
  $ 21,013     $ 21,036  
Accrued accounting and legal costs
    56,735       60,713  
Deferred revenue
    9,042       7,885  
Accrued employee benefits
    3,861       3,995  
Accrued Divestiture liability
    2,090       2,410  
Accrued warranty
    1,778       1,767  
Accrued utilities
    1,637       1,563  
Accrued sales and other taxes
    2,264       1,117  
Short-term severance liability
    6,533       5,234  
Other
    11,248       8,323  
Total other accrued expenses
  $ 116,201     $ 114,043  
 
Warranty
 
The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under the terms of its warranty agreements. The specific warranty terms and conditions vary depending upon the product sold and the country in which the Company does business. In general, for standard products, the Company will replace defective parts not meeting the Company’s published specifications at no cost to the customers. Factors that affect the liability include historical and anticipated failure rates of products sold, and cost per claim to satisfy the warranty obligation. If actual results differ from the estimates, the Company revises its estimated warranty liability to reflect such changes.
 
The following table details the changes in the Company’s warranty reserve for the three months ended September 27, 2009, which is included in other accrued expenses (in thousands):
 
Accrued warranty, June 28, 2009
  $ 1,767  
Accruals for warranties issued during the period
    887  
Changes in estimates related to pre-existing warranties
    (202 )
Warranty claim settlements
    (674 )
Accrued warranty, September 27, 2009
  $ 1,778  

9. Other Long-Term Liabilities
 
Other long-term liabilities were comprised of the following as of (in thousands):
 
   
September 27, 2009
   
June 28, 2009
 
Income taxes payable
  $ 34,898     $ 35,197  
Divested entities’ tax obligations
    7,500       7,283  
Deferred compensation
    7,128       6,543  
Other
    3,744       4,032  
Total other long-term liabilities
  $ 53,270     $ 53,055  

 
19

 



INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 

9. Other Long-Term Liabilities (Continued)
 
Fair Value of Long-term Liabilities
 
The following table presents the long-term liabilities and the related assets measured at fair value on a recurring basis:
 
Long-term Liabilities
 
 
Total
   
Quoted Prices in Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
Employee deferred compensation plan
  $ 7,128     $ 7,128     $     $  
Assets of  employee deferred compensation plan (reported in Other assets)
    9,732       9,732              
 
10. Stock-Based Compensation
 
The Company issues new shares to fulfill the obligations under all of its stock-based compensation awards. The following table summarizes the stock option activities for the three months ended September 27, 2009 (in thousands, except per share price data):
 
   
Shares
   
Weighted Average
Option Exercise
Price per Share
   
Weighted Average
Grant Date
Fair Value per Share
   
Aggregate
Intrinsic Value
 
Outstanding, June 28, 2009
    8,248     $ 30.40           $ 3,738  
Granted
    136     $ 18.62     $ 5.79        
Exercised
    (55 )   $ 15.46           $ 227  
Expired or forfeited
    (661 )   $ 29.46              
Outstanding, September 27, 2009
    7,668     $ 30.37           $ 11,664  
 
For the three months ended September 27, 2009 and September 28, 2008, the Company received $0.8 million and $1.0 million, respectively, for stock options exercised. The total tax benefit realized for the tax deductions from stock options exercised was de minimis for the three months ended September 27, 2009 and September 28, 2008, respectively.
 
The following table summarizes the Restricted Stock Unit (“RSU”) activities for the three months ended September 27, 2009 (in thousands, except per share price data):
 
   
Restricted
Stock
Units
   
Weighted Average
Grant Date
Fair Value per Share
   
Aggregate
Intrinsic Value
 
Outstanding, June 28, 2009
    355     $ 17.84     $ 5,215  
Granted
    3     $ 18.62        
Vested
    (36 )   $ 16.55     $ 599  
Expired or forfeited 
    (2 )