Document And Entity Information(USD $)
In Millions, except Share data, unless otherwise specified
9 Months Ended
Jan. 1, 2012
Jan. 29, 2012
Sep. 26, 2010
Entity Registrant Name
INTEGRATED DEVICE TECHNOLOGY INC
Entity Central Index Key
0000703361
Current Fiscal Year End Date
--04-01
Entity Well-known Seasoned Issuer
Yes
Entity Voluntary Filers
No
Entity Current Reporting Status
Yes
Entity Filer Category
Large Accelerated Filer
Entity Public Float
$671
Entity Common Stock, Shares Outstanding
141,392,129
Document Fiscal Year Focus
2012
Document Fiscal Period Focus
Q3
Document Type
10-Q
Amendment Flag
false
Document Period End Date
Jan. 01, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(USD $)
In Thousands, unless otherwise specified
Jan. 1, 2012
Apr. 3, 2011
Current assets:
Cash and cash equivalents
$110,414
$104,680
Short-term investments
204,200
194,512
Accounts receivable, net
58,422
81,798
Inventories
78,649
67,041
Prepayments and other current assets
22,273
23,929
Total current assets
473,958
471,960
Property, plant and equipment, net
69,977
67,754
Goodwill
96,092
104,020
Acquisition-related intangible assets, net
44,908
51,021
Deferred tax assets
2,034
2,034
Other assets
29,825
30,671
Total assets
716,794
727,460
Current liabilities:
Accounts payable
23,351
35,419
Accrued compensation and related expenses
33,402
32,784
Deferred income on shipments to distributors
14,087
12,853
Deferred tax liabilities
2,268
2,224
Other accrued liabilities
21,870
30,886
Total current liabilities
94,978
114,166
Deferred tax liabilities
1,519
1,513
Long-term income tax payable
764
712
Other long-term obligations
17,504
15,808
Total liabilities
114,765
132,199
Commitments and contingencies (Note 15)
  
  
Stockholders' equity:
Preferred stock: $.001 par value: 10,000 shares authorized; no shares issued
  
  
Common stock: $.001 par value: 350,000 shares authorized; 141,725 and 148,352 shares issued and outstanding at January 1, 2012 and April 3, 2011, respectively
142
148
Additional paid-in capital
2,368,058
2,343,726
Treasury stock at cost: 89,607 shares and 80,037 shares at January 1, 2012 and April 3, 2011, respectively
(972,285)
(909,824)
Accumulated deficit
(794,887)
(840,596)
Accumulated other comprehensive income
1,001
1,807
Total stockholders' equity
602,029
595,261
Total liabilities and stockholders' equity
$716,794
$727,460
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical)(USD $)
Jan. 1, 2012
Apr. 3, 2011
Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)
$0.001
$0.001
Preferred stock, shares authorized (in shares)
10,000
10,000
Preferred stock, shares issued (in shares)
0
0
Common stock, par value (in dollars per share)
$0.001
$0.001
Common stock, shares authorized (in shares)
350,000
350,000
Common stock, shares issued (in shares)
141,725
148,352
Common stock, shares outstanding (in shares)
141,725
148,352
Treasury stock, at cost (in shares)
89,607
80,037
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Jan. 1, 2012
Jan. 2, 2011
Consolidated Statement of Operations
Revenues
$119,977
$147,524
$407,580
$460,715
Cost of revenues
56,093
67,177
190,627
213,222
Gross profit
63,884
80,347
216,953
247,493
Operating expenses:
Research and development
38,410
40,674
117,409
116,774
Selling, general and administrative
23,661
26,017
74,478
77,732
Total operating expenses
62,071
66,691
191,887
194,506
Operating income
1,813
13,656
25,066
52,987
Other-than temporary impairment loss on investments
(2,130)
0
(2,130)
0
Interest income and other, net
(10)
1,352
(1,794)
2,793
Income (loss) from continuing operations before income taxes
(327)
15,008
21,142
55,780
Provision for income taxes
576
111
1,176
1,659
Net income (loss) from continuing operations
(903)
14,897
19,966
54,121
Discontinued operations:
Gain from divestiture
0
0
45,939
0
Loss from discontinued operations before income taxes
(5,290)
(5,124)
(20,286)
(15,404)
Benefit from income taxes
0
(21)
(89)
(64)
Net income (loss) from discontinued operations
(5,290)
(5,103)
25,742
(15,340)
Net income (loss)
$(6,193)
$9,794
$45,708
$38,781
Basic net income (loss) per share - continuing operations (in dollars per share)
$(0.01)
$0.10
$0.14
$0.35
Basic net income (loss) per share - discontinued operations (in dollars per share)
$(0.03)
$(0.04)
$0.18
$(0.10)
Basic net income (loss) per share (in dollars per share)
$(0.04)
$0.06
$0.32
$0.25
Diluted net income (loss) per share - continuing operations (in dollars per share)
$(0.01)
$0.10
$0.14
$0.35
Diluted net income (loss) per share - discontinued operations (in dollars per share)
$(0.03)
$(0.04)
$0.17
$(0.10)
Diluted net income (loss) per share (in dollars per share)
$(0.04)
$0.06
$0.31
$0.25
Weighted average shares:
Basic (in shares)
141,839
151,421
144,792
154,487
Diluted (in shares)
141,839
152,975
146,706
155,525
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(USD $)
In Thousands, unless otherwise specified
9 Months Ended
Jan. 1, 2012
Jan. 2, 2011
Cash flows provided by operating activities:
Net income
$45,708
$38,781
Adjustments:
Depreciation
14,191
13,566
Amortization of intangible assets
12,129
14,916
Other-than temporary impairment loss on investments
2,130
0
Gain from divestiture
(45,939)
0
Stock-based compensation expense
12,574
13,207
Tax benefit from share based payment arrangements
(460)
0
Deferred tax provision
49
74
Changes in assets and liabilities (net of effects of acquisitions and divestiture):
Accounts receivable, net
23,376
713
Inventories
(11,456)
(9,600)
Prepayments and other assets
886
1,445
Accounts payable
(11,727)
(1,900)
Accrued compensation and related expenses
914
7,790
Deferred income on shipments to distributors
1,234
(3,289)
Income taxes payable and receivable
1,265
1,384
Other accrued liabilities and long term liabilities
(8,242)
(5,228)
Net cash provided by operating activities
36,632
71,859
Cash flows provided by (used for) investing activities
Acquisitions, net of cash acquired
(1,957)
(6,247)
Proceeds from divestitures
51,670
0
Cash in escrow related to acquisition
0
(1,160)
Purchases of intangible assets
(5,000)
0
Purchases of property, plant and equipment
(16,917)
(7,579)
Purchase of non-marketable equity securities
0
(2,500)
Proceeds from sales of non-marketable equity securities
2,619
0
Purchases of short-term investments
(450,156)
(349,701)
Proceeds from sales of short-term investments
294,485
36,765
Proceeds from maturities of short-term investments
145,934
318,318
Net cash provided by (used for) investing activities
20,678
(12,104)
Cash flows provided by (used for) financing activities
Proceeds from issuance of common stock
11,139
9,775
Repurchases of common stock
(62,461)
(96,920)
Excess tax benefit from share based payment arrangements
460
(228)
Net cash used for financing activities
(50,862)
(87,373)
Effect of exchange rates on cash and cash equivalents
(714)
450
Net increase (decrease) in cash and cash equivalents
5,734
(27,168)
Cash and cash equivalents at beginning of period
104,680
120,526
Cash and cash equivalents at end of period
$110,414
$93,358
Basis of Presentation
Basis of Presentation
Note 1
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Integrated Device Technology, Inc. (“IDT” or the “Company”) contain all adjustments that are, in the opinion of management, necessary to state fairly the interim financial information included therein. Certain prior period balances have been reclassified to conform to the current period presentation. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The Company's fiscal year is the 52- or 53-week period ending on the Sunday closest to March 31st.  In a 52-week year, each fiscal quarter consists of thirteen weeks.  In a 53-week year, the additional week is usually added to the third quarter, making such quarter consist of fourteen weeks.  The first, second and third quarters of fiscal 2012 and fiscal 2011 were thirteen week periods.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the Company's financial statements and the accompanying notes. Actual results could differ from those estimates.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 2011.  Operating results for the three and nine months ended January 1, 2012 are not necessarily indicative of operating results for an entire fiscal year.

There have been no significant changes in the Company's significant accounting policies during the nine months ended January 1, 2012, as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended April 3, 2011.
Revision of Prior Period Financial Statements
Revision of Prior Period Financial Statements
Note 2
Revision of Prior Period Financial Statements

During the third quarter of fiscal 2012, the Company identified errors primarily related to retention bonuses associated with its plan to close its Oregon manufacturing facility ($6.4 million expense).  In addition, the Company had corrected prior period errors in the first and second quarters of 2012 related to retention bonuses ($0.5 million expense) for certain key employees and accounts payable system related issues ($1.0 million benefit) respectively. The Company assessed the materiality of these errors individually and in the aggregate on prior periods' financial statements in accordance with the SEC's Staff Accounting Bulletin No. 99 (“SAB 99”), and concluded that the errors were not material to any of its prior annual or interim financial statements. The Company also concluded that correcting the errors, on a cumulative basis, would not be material to the expected results of operations for the year ended April 1, 2012. However, as permitted in SEC's Staff Accounting Bulletin No. 108 (“SAB 108”), the Company elected to revise previously issued consolidated financial statements the next time they are filed.  As each subsequent filing is made in the future, the previous period consolidated financial statements affected by the errors will be revised. The Company has revised the April 3, 2011 consolidated balance sheet and the consolidated statements of operations for the three and nine months ended January 2, 2011 included herein to reflect the correct balances. Of the above mentioned errors, the amount related to the accounts payable system related issue will be corrected in the opening retained earnings and will not impact the earnings of current or subsequent filings.  The impact of correcting these errors on net income as reported for the interim three month period ended July 3, 2011 and three and six month periods ended October 2, 2011 was a reduction of $1.5 million, $0.8 million and $2.3 million, respectively.
 
Set out below are the line items within the consolidated financial statements as of and for the three and nine months ended January 2, 2011 that have been impacted by the revisions.  The revision had no impact on the Company's total cash flows from operating, investing or financing activities.

   
For the Three Months Ended January 2, 2011
  
For the Nine Months Ended January 2, 2011
 
(in thousands, except per share amounts)
 
As
Reported (1)
  
Adjustments
  
As
 Revised
  
As
Reported (1)
  
Adjustments
  
As
 Revised
 
Consolidated Statement of Operations
                  
Cost of revenues
 $66,507  $670  $67,177  $211,212  $2,010  $213,222 
Gross profit
  81,017   (670)  80,347   249,503   (2,010)  247,493 
Research and development
  40,620   54   40,674   116,612   162   116,774 
Selling, general and administrative
  25,997   20   26,017   77,672   60   77,732 
Total operating expenses
  66,617   74   66,691   194,284   222   194,506 
Operating income
  14,400   (744)  13,656   55,219   (2,232)  52,987 
Income from continuing operations
   before income taxes
  15,752   (744)  15,008   58,012   (2,232)  55,780 
Provision for income taxes
  52   59   111   1,438   221   1,659 
Net income from continuing operations
  15,700   (803)  14,897   56,574   (2,453)  54,121 
Net income
 $10,597  $(803) $9,794  $41,234  $(2,453) $38,781 
                          
Basic income (loss) per share:
                        
    Continuing operations
 $0.10  $-  $0.10  $0.37  $(0.02) $0.35 
    Net income (loss)
 $0.07  $(0.01) $0.06  $0.27  $(0.02) $0.25 
                          
Diluted net income (loss) per share:
                        
    Continuing operations
 $0.10  $-  $0.10  $0.37  $(0.02) $0.35 
    Net income (loss)
 $0.07  $(0.01) $0.06  $0.27  $(0.02) $0.25 
                          
   
As of  April 3, 2011
             
(in thousands)
 
As
Reported
  
Adjustments
  
As
 Revised
             
Consolidated Balance Sheets
                        
Accounts payable
 $36,470  $(1,051) $35,419             
Accrued compensation
    and related expenses
  28,212  $4,572   32,784             
Total current liabilities
  110,645  $3,521   114,166             
Total liabilities
  128,678  $3,521   132,199             
Accumulated deficit
  (837,075)  (3,521)  (840,596)            
Total stockholders' equity
 $598,782  $(3,521) $595,261             
                          
1) Reflect's previously reported amounts as adjusted for discontinued operations (see Note 6).
         
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Note 3
Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued amended guidance regarding the testing of goodwill for impairment. The objective of this amendment is to simplify how entities test goodwill for impairment. Under the updated guidance an entity is to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The amended guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. The adoption of this guidance on April 2, 2012 is not expected to have a material impact on the Company's consolidated financial statements.

In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The amended guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance on January 2, 2012 is not expected to have a material impact on the Company's consolidated financial statements.

In May 2011, the FASB issued additional guidance on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance on January 2, 2012 is not expected to have a material impact on the Company's consolidated financial statements.
Net Income (Loss) Per Share
Net Income (Loss) Per Share
Note 4
Net Income Per Share

Basic net income per share is computed using the weighted-average number of common shares outstanding during the period.  Diluted net income per share is computed using the weighted-average number of common and dilutive potential common shares outstanding during the period. Potential common shares include employee stock options and restricted stock units.
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands, except per share amounts)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Numerators (basic and diluted):
            
   Net income (loss) from continuing operations
 $(903) $14,897  $19,966  $54,121 
   Net income (loss) from discontinued operations (including
      gain from divestiture)
  (5,290)  (5,103)  25,742   (15,340)
   Net income (loss)
 $(6,193) $9,794  $45,708  $38,781 
                  
Denominators:
                
   Weighted average shares outstanding - basic
  141,839   151,421   144,792   154,487 
   Dilutive effect of employee stock options and restricted
      stock units
  ---   1,554   1,914   1,038 
Weighted average common shares outstanding, assuming dilution
  141,839   152,975   146,706   155,525 
                  
Basic net income (loss) per share:
                
   Net income (loss) from continuing operations
 $(0.01) $0.10  $0.14  $0.35 
Net income (loss) from discontinued operations
  (0.03)  (0.04)  0.18   (0.10)
Net income (loss)
 $(0.04) $0.06  $0.32  $0.25 
                  
Diluted net income (loss) per share:
                
Net income (loss) from continuing operations
 $(0.01) $0.10  $0.14  $0.35 
Net income (loss) from discontinued operations
  (0.03)  (0.04)  0.17   (0.10)
Net income (loss)
 $(0.04) $0.06  $0.31  $0.25 
 
Stock options to purchase 18.9 million shares and 11.1 million shares for the three and nine months ended January 1, 2012, respectively, and 12.9 million shares and 16.9 million shares for the three and nine months ended January 2, 2011, respectively, were outstanding, but were excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive. In addition, unvested restricted stock units of  0.8 million and 0.7 million for the three and nine months ended January 1, 2012, respectively, and less than 0.1 million for the three and nine months ended January 2, 2011, respectively, were excluded from the calculation because they were anti-dilutive.
Business Combinations
Business Combinations
Note 5
Business Combinations

Acquisition of Nethra Imaging

On November 2, 2011, the Company completed the acquisition of Nethra Imaging for $2.0 million in cash consideration, of which $0.3 million will be kept in escrow account for a period of one year.  As a result of this transaction, IDT has obtained a SerDes team of engineers, rights to technology and a number of customer contracts.

The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The fair values assigned to tangible and intangible assets acquired are based on management estimates and assumptions.

The aggregate purchase price has been allocated as follows:
 
(in thousands)
 
Fair Value
 
 Property, plant and equipment, net
 $51 
 Amortizable intangible assets - exisitng technology
  874 
 Amortizable intangible assets - customer relationships
  435 
 Goodwill and workforce
  640 
Total purchase price
 $2,000 
 
Existing technology consists of products that have reached technological feasibility. The Company valued the existing technology utilizing a discounted cash flow (“DCF”) model, which uses forecasts of future revenues and expenses related to the intangible assets. The Company utilized a discount factor of 31% for existing technology and is amortizing the intangible asset over 3 years on a straight-line basis.

Customer relationship values have been estimated utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset. The Company utilized a discount factor of 31% for this intangible asset and is amortizing this intangible asset over 3 years on a straight-line basis.

The Nethra Imaging acquisition related financial results have been included in the Company's Consolidated Statements of Operations from the closing date of the acquisition on November 2, 2011.  Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company's historical financial statements.

Acquisition of Certain Assets of IKOR Acquisition Corporation (“IKOR”)

On April 16, 2010, the Company completed its acquisition of certain assets of IKOR, a former subsidiary of iWatt Corporation.  IKOR designed and manufactured power voltage regulator module (VRM) solutions for high-performance computing. Pursuant to the agreement, the Company acquired IKOR- patented coupled inductor (“CL”) technology and related assets and hired members of IKOR' engineering team. The total purchase price was $7.7 million, including the fair value of contingent consideration of $1.5 million payable upon the achievement of certain business performance metrics during the twelve months after the closing date. The fair value of the contingent consideration was estimated using probability-based forecasted revenue for the business as of the acquisition date.  The maximum payment for this contingent consideration is $2.8 million.  Pursuant to the agreement, $1.8 million in cash has been held in escrow and will be utilized to fund the contingent consideration payment. During the third quarter of fiscal 2011, the fair value of the contingent consideration was remeasured based on the revised revenue forecast for the business.  As a result, the fair value of the contingent consideration increased $0.3 million to $1.8 million.  The change in the fair value of the contingent consideration was recorded in selling and administrative expenses in fiscal 2011.  There was no change in the fair value of the contingent consideration during the first nine months of fiscal 2012.  During the quarter ended January 1, 2012 the Company paid the $1.8 million in contingent consideration through the release of the funds held in escrow.

The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The acquired CL technology complements the Company's growing power management initiative, allowing it to achieve higher levels of performance and integration.  The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management estimates and assumptions.

The Company incurred approximately $0.3 million of acquisition-related costs, which were included in selling, general and administrative (“SG&A”) expenses on the Consolidated Statements of Operations for fiscal 2011.

The aggregate purchase price has been allocated as follows:
 
(in thousands)
 
Fair Value
 
 Accounts receivable
 $836 
 Inventories
  1,136 
 Prepayments and other current assets
  63 
 Property, plant and equipment, net
  277 
 Accounts payable and accrued expenses
  (1,226)
 Amortizable intangible assets
  5,711 
 Goodwill
  946 
Total purchase price
 $7,743 

A summary of the allocation of amortizable intangible assets is as follows:
 
(in thousands)
 
Fair Value
 
Amortizable intangible assets:
   
    Existing technologies
 $5,224 
    Customer relationships
  443 
    Backlog
  44 
Total
 $5,711 

Identifiable Tangible Assets and Liabilities

Assets and liabilities were reviewed and adjusted, if required, to their estimated fair value.

Inventories

The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less reasonable selling margin.

Amortizable Intangible Assets

Existing technologies consist of products that have reached technological feasibility. The Company valued the existing technologies utilizing a discounted cash flow (“DCF”) model, which uses forecasts of future revenues and expenses related to the intangible assets. The Company utilized discount factors of 35% - 36% for the existing technologies and is amortizing the intangible assets over 7 years on a straight-line basis.

Customer relationship values have been estimated utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset. The Company utilized discount factor of 35% for this intangible asset and is amortizing this intangible asset over 5 years on a straight-line basis.

Backlog represents the value of the standing orders for IKOR products as of the closing date of the acquisition.  Backlog was valued utilizing a DCF model and a discount factor of 15%.  The value was amortized over five month period.

The IKOR acquisition related financial results have been included in the Company's Consolidated Statements of Operations from the closing date of the acquisition on April 16, 2010.  Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company's historical financial statements.
Discontinued Operations and Assets Held For Sale
Discontinued Operations and Assets Held For Sale
Note 6
Discontinued Operations and Assets Held For Sale

On September 26, 2011, the Company completed the transfer of certain assets related to IDT's Hollywood Quality Video (“HQV”) and Frame Rate Conversion (“FRC”) video processing product lines to Qualcomm pursuant to an Asset Purchase Agreement. The sale of these HQV and FRC video processing assets is intended to allow the Company to intensify focus on its analog-intensive mixed-signal, timing, and interface and solutions. Upon the closing of the transaction, Qualcomm paid the Company $58.7 million in cash consideration, of which $6.0 million was withheld in an escrow account and is included in the Company's balance sheet as other assets (non-current). In the second quarter of fiscal 2012, the Company recorded a gain of $45.9 million related to this divestiture. The following table summarizes the components of the gain (in thousands):
 
Cash proceeds from sale (including amounts held in escrow)
 $58,744 
Less cost basis of assets sold and direct costs related to the sale:
    
   Fixed assets transferred to Qualcomm
  (434)
   Goodwill write-off
  (8,568)
   Intangible assets write-off
  (1,818)
   License write-off
  (525)
   Transaction and other costs
  (1,460)
Gain on divestiture
 $45,939 
 
The Company's HQV and FRC product lines represented a significant portion of the Company's video processing assets. The Company currently intends to fully divest its remaining video processing product lines within the next twelve months and has classified these assets as held for sale.  As of January 1, 2012 the remaining video processing assets classified as held for sale consisted of $1.0 million in fixed assets and $0.7 million in intangible assets. The video processing lines were included as are part of the Company's Computing and Consumer reportable segment.  For financial statement purposes, the results of operations for these discontinued businesses have been segregated from those of the continuing operations and are presented in the Company's consolidated financial statements as discontinued operations.

The results of discontinued operations for the three and nine months ended January 1, 2012 and January 2, 2011 are as follows (in thousands):
 
   
Three Months Ended
  
Nine Months Ended
 
   
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Revenues
 $2,229  $5,706  $7,333  $17,695 
Cost of revenue
  2,745   4,248   9,309   12,263 
Operating expenses
  4,774   6,582   18,310   20,836 
Gain on divestiture
  ---   ---   45,939   --- 
Benefit for income taxes
  ---   (21)  (89)  (64)
Net income (loss) from discontinued operations
 $(5,290) $(5,103) $25,742  $(15,340)


Fair Value Measurement
Fair Value Measurement
Note 7
Fair Value Measurement

Fair value measurement is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing assets or liabilities.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted market prices for identical assets or liabilities in active markets at the measure date.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.  The inputs are unobservable in the market and significant to the instrument's valuation.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis as of January 1, 2012:
 
   
Fair Value at Reporting Date Using:
 
(in thousands)
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total Balance
 
Cash equivalents and short-term
 investments:
          
    US government treasuries and
    agencies securities
 $157,279  $---  $---  $157,279 
    Money market funds
  61,259   ---   ---   61,259 
    Corporate commercial paper
  ---   8,494   ---   8,494 
    Corporate bonds
  ---   38,088   ---   38,088 
    Bank deposits
  ---   22,133   ---   22,133 
    Municipal bonds
  ---   580   ---   580 
Total assets measured at fair value
 $218,538  $69,295  $-  $287,833 
 
The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis as of April 3, 2011:
 
   
Fair Value at Reporting Date Using:
 
(in thousands)
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total Balance
 
Cash equivalents and short-term
 investments:
          
    US government treasuries and
    agencies securities
 $119,926  $---  $---  $119,926 
    Money market funds
  32,203   ---   ---   32,203 
    Corporate commercial paper
  ---   51,785   ---   51,785 
    Corporate bonds
  ---   57,087   ---   57,087 
    Bank deposits
  ---   17,764   ---   17,764 
    Municipal bonds
  ---   369   ---   369 
Total assets measured at fair value
 $152,129  $127,005  $---  $279,134 
                  
Liabilities:
                
    Fair value of contigent consideration
  ---   ---   1,800   1,800 
Total liabilities measured at fair value
 $---  $---  $1,800  $1,800 
 
U.S. government treasuries and U.S. government agency securities as of January 1, 2012 and April 3, 2011 do not include any U.S. government guaranteed bank issued paper. Corporate bonds include bank-issued securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

The securities in Level 1 are highly liquid and actively traded in exchange markets or over-the-counter markets. Level 2 fixed income securities are priced using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data.

In connection with the acquisition of IKOR (please see “Note 5 – Business Combinations”), a liability was recognized for the Company's estimate of the fair value of contingent consideration on the acquisition date based on probability-based forecasted revenue.  This fair value measurement was based on significant inputs not observed in the market and thus represents a Level 3 measurement. This fair value measurement was valued based on unobservable inputs that were supported by little or no market activity and reflect the Company's own assumptions concerning future revenue of the acquired business in measuring fair value.  During the quarter ended January 1, 2012 the Company paid the $1.8 million in contingent consideration through the release of the funds held in escrow.

The following table summarizes the change in the fair value of the contingent consideration measured using significant unobservable inputs (Level 3) during the first nine months of fiscal 2012:
 
(in thousands)
 
Fair Value
 
Balance as of April 3, 2011
 $1,800 
    Additions
  --- 
    Settlements
  (1,800)
Balance as of January 1, 2012
 $--- 

Cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains its cash and cash equivalents with reputable major financial institutions.  Deposits with these banks may exceed the FDIC insurance limits or similar limits in foreign jurisdictions. These deposits typically may be redeemed upon demand and, therefore, bear minimal risk.  While the Company monitors daily the cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which the Company deposits fails or is subject to other adverse conditions in the financial markets.  As of January 1, 2012, the Company has not experienced any losses in its operating accounts.

All of the Company's available-for-sale investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the length of time, general market conditions and the Company's intent and ability to hold the investment for a period of time sufficient to allow for recovery. Although the Company believes its portfolio continues to be comprised of sound investments due to high credit ratings and government guarantees of the underlying investments, a further decline in the capital and financial markets would adversely impact the market values of its investments and their liquidity. The Company continually monitors the credit risk in its portfolio and future developments in the credit markets and makes appropriate changes to its investment policy as deemed necessary.  The Company did not record any impairment loss related to its short-term investments in the three and nine months ended January 1, 2012 and January 2, 2011.
Investments
Investments
Note 8
Investments

Available- for -Sale Securities

All of the Company's cash equivalents and marketable securities are classified as “available-for-sale” securities. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders' equity, net of tax.

Available-for-sale investments at January 1, 2012 were as follows:
 
(in thousands)
 
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Estimated
Fair
Value
 
U.S. government treasuries and
   agency securities
 $157,256  $25  $(2) $157,279 
Corporate commercial paper
  8,494   ---   ---   8,494 
Corporate bonds
  38,123   36   (71)  38,088 
Money market funds
  61,259   ---   ---   61,259 
Bank deposits
  22,133   ---   ---   22,133 
Municipal bonds
  578   2   ---   580 
    Total available-for-sale investments
  287,843   63   (73)  287,833 
Less amounts classified as cash equivalents
  (83,638)  ---   5   (83,633)
    Short-term investments
 $204,205  $63  $(68) $204,200 
 
Available-for-sale investments at April 3, 2011 were as follows:
 
(in thousands)
 
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Estimated
Fair
Value
 
U.S. government treasuries and
   agency securities
 $119,917  $17  $(8) $119,926 
Corporate commercial paper
  51,785   ---   ---   51,785 
Corporate bonds
  57,001   104   (18)  57,087 
Money market funds
  32,203   ---   ---   32,203 
Bank deposits
  17,764   ---   ---   17,764 
Municipal bonds
  368   1   ---   369 
    Total available-for-sale investments
  279,038   122   (26)  279,134 
Less amounts classified as cash equivalents
  (84,623)  ---   1   (84,622)
    Short-term investments
 $194,415  $122  $(25) $194,512 
 
The amortized cost and estimated fair value of available-for-sale securities at January 1, 2012, by contractual maturity, were as follows:
 
(in thousands)
 
Amortized
Cost
  
Estimated
Fair
Value
 
Due in 1 year or less
 $272,059  $272,083 
Due in 1-2 years
  13,798   13,775 
Due in 2-5 years
  1,986   1,975 
Total investments in available-for-sale debt securities
 $287,843  $287,833 
 
The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses as of January 1, 2012, aggregated by length of time that individual securities have been in a continuous loss position.
 
   
Less Than 12 Months
  
12 Months or Greater
  
Total
 
(in thousands)
 
Fair
Value
  
Unrealized
Loss
 
Fair
Value
  
Unrealized
Loss
 
Fair
Value
  
Unrealized
Loss
 
Corporate bonds
 $16,146  $(64) $---  $---  $16,146  $(64)
U.S. government treasuries
    and agency securities
  39,663   (10)  ---   ---   39,663   (10)
Total
 $55,809  $(74) $---  $---  $55,809  $(74)

The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses as of April 3, 2011, aggregated by length of time that individual securities have been in a continuous loss position.
 
   
Less Than 12 Months
  
12 Months or Greater
  
Total
 
(in thousands)
 
Fair
Value
  
Unrealized
Loss
 
Fair
Value
  
Unrealized
Loss
 
Fair
Value
  
Unrealized
Loss
 
Corporate bonds
 $24,176  $(18) $---  $---  $24,176  $(18)
U.S. government treasuries
    and agency securities
  36,531   (8)  ---   ---   36,531   (8)
Total
 $60,707  $(26) $---  $---  $60,707  $(26)
 

A significant portion of the available-for-sale investments held by the Company are high grade instruments.  As of January 1, 2012, the unrealized losses on the Company's available-for-sale investments represented an insignificant amount in relation to its total available-for-sale portfolio.  Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company did not consider these investments to be other-than-temporarily impaired at January 1, 2012 and April 3, 2011.

Non-Marketable Equity Securities

The Company accounts for its equity investments in privately held companies under the cost method.  These investments are subject to periodic impairment review and measured and recorded at fair value when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of its investment has occurred and is other than temporary, an assessment was made by considering available evidence, including the general market conditions, the investee's financial condition, near-term prospects, market comparables and subsequent rounds of financing.  The valuation also takes into account the investee's capital structure, liquidation preferences for its capital and other economic variables. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment. The aggregate carrying value of the Company's non-marketable equity securities was approximately $2.5 million and $8.5 million as of January 1, 2012 and April 3, 2011, respectively, and was classified within other assets on the Company's Consolidated Balance Sheets.  During the quarter ended January 1, 2012, the company reduced the estimated fair value of one of its non-marketable private equity investments and recorded a $2.8 million other-than temporary impairment loss during the period. Also during the quarter, the Company sold a non-marketable equity security, which had been valued at $2.0 million, for $2.6 million and recorded a gain on sale of $0.6 million in the period.
Stock-Based Compensation
Stock-Based Compensation
Note 9
Stock-Based Compensation

Compensation Expense

The following table summarizes stock-based compensation expense by line items appearing in the Company's Condensed Consolidated Statements of Operations:
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Cost of revenue
 $535  $370  $1,415  $1,260 
Research and development
  2,174   2,400   6,493   6,746 
Selling, general and administrative
  1,603   1,237   4,458   3,765 
Discontinued operations
  113   506   208   1,436 
Total stock-based compensation expense
 $4,425  $4,513  $12,574  $13,207 
 
Stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest.  The authoritative guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes the value of stock-based compensation to expense on an accelerated method.

Valuation Assumptions

Assumptions used in the Black-Scholes valuation model and resulting weighted average grant-date fair values were as follows:
 
   
Three Months Ended
  
Nine Months Ended
 
   
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Stock option plans:
            
     Expected Term (in years)
  4.3   4.6   4.3   4.6 
     Risk-free interest rate
  0.8%  1.5%  1.4%  2.0%
     Volatility
  48.3%  39.2%  43.4%  41.5%
     Dividend Yield
  0.0%  0.0%  0.0%  0.0%
     Weighted average grant-date fair value
 $2.18  $2.17  $2.88  $2.16 
ESPP:
                
     Expected Term (in years)
  0.24   0.25   0.25   0.25 
     Risk-free interest rate
  0.2%  0.2%  0.3%  0.2%
     Volatility
  59.1%  32.1%  52.6%  40.9%
     Dividend Yield
  0.0%  0.0%  0.0%  0.0%
     Weighted average fair value
 $1.37  $1.23  $1.66  $1.33 

Equity Incentive Programs

The Company currently issues awards under two equity based plans in order to provide additional incentive and retention to directors and employees who are considered to be essential to the long-range success of the Company.  These plans are further described below.

2004 Equity Plan (“2004 Plan”)

In September 2004, the Company's stockholders approved the 2004 Plan.  On July 21, 2010, the Board of Directors of the Company approved an amendment to the Company's 2004 Plan to increase the number of shares of common stock reserved for issuance thereunder from 28,500,000 shares to 36,800,000 shares (an increase of 8,300,000 shares), provided, however, that the aggregate number of common shares available for issuance under the 2004 Plan is reduced by 1.74 shares for each common share delivered in settlement of any full value award, which are awards other than stock options and stock appreciation rights, that are granted under the 2004 Plan on or after September 23, 2010.  On September 23, 2010, the stockholders of the Company approved the proposed amendment described above, which also includes certain other changes to the 2004 Plan, including an extension of the term of the 2004 Plan. Options granted by the Company under the 2004 Plan generally expire seven years from the date of grant and generally vest over a four-year period from the date of grant, with one-quarter of the shares of common stock vesting on the one-year anniversary of the grant date and the remaining shares vesting monthly for the 36 months thereafter.  The exercise price of the options granted by the Company under the 2004 Plan shall not be less than 100% of the fair market value for a common share subject to such option on the date the option is granted.  Full value awards made under the 2004 Plan shall become vested over a period of not less than three years (or, if vesting is performance-based, over a period of not less than one year) following the date such award is made; provided, however, that full value awards that result in the issuance of an aggregate of up to 5% of common stock available under the 2004 Plan may be granted to any one or more participants without respect to such minimum vesting provisions.   As of January 1, 2012, there were 11.9 million shares available for future grant under the 2004 Plan.

The following table summarizes the Company's stock option activities for the nine months ended January 1, 2012:
 
(in thousands, except per share data)
 
Shares
  
Weighted
Average
Exercise
Price
 
Options outstanding as of April 3, 2011
  17,814  $8.49 
    Granted
  3,909   7.93 
    Exercised
  (466)  5.55 
    Canceled, forfeited or expired
  (2,339)  9.75 
Options outstanding as of January 1, 2012
  18,918  $8.29 
Options exercisable at January 1, 2012
  11,508  $9.16 

Restricted stock units available for grant by the Company under the 2004 Plan generally vest over at least a three-year period from the grant date with a proportionate share of the restricted stock units vesting annually over the total vesting period (e.g., for an award with a total three-year vesting period, one-third of the restricted stock units will vest on each one-year anniversary).  Prior to vesting, participants holding restricted stock units do not have shareholder rights.  Shares are issued on or as soon as administratively practicable following the vesting date of the restricted stock units and upon issuance, recordation and delivery, the participant will have all the rights of a shareholder of the Company with respect to voting such stock and receipt of dividends and distributions on such stock.  As of January 1, 2012, 2.4 million restricted stock unit awards were outstanding under the 2004 Plan.

The following table summarizes the Company's restricted stock unit activities for the nine months ended January 1, 2012:
 
(in thousands, except per share data)
 
Shares
  
Weighted
Grant Date
Fair Value
 
RSU's outstanding as of April 3, 2011
  2,342  $6.70 
    Granted
  1,125   7.96 
    Released
  (732)  7.72 
    Forfeited
  (319)  6.82 
RSU's outstanding as of  Janaury 1, 2012
  2,416  $6.97 

2009 Employee Stock Purchase Plan (“2009 ESPP")

On June 18, 2009, the Board approved implementation of the 2009 Employee Stock Purchase Plan (“2009 ESPP”) and authorized the reservation and issuance of up to 9,000,000 shares of the Company's common stock, subject to stockholder approval. On September 17, 2009, the Company's stockholders approved the plan at the 2009 Annual Meeting of Stockholders.  The 2009 ESPP is intended to be implemented in successive quarterly purchase periods commencing on the first day of each fiscal quarter of the Company.  In order to maintain its qualified status under Section 423 of the Internal Revenue Code, the 2009 ESPP imposes certain restrictions, including the limitation that no employee is permitted to participate in the 2009 ESPP if the rights of such employee to purchase common stock of the Company under the 2009 ESPP and all similar purchase plans of the Company or its subsidiaries would accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year.  During the nine months ended January 1, 2012, the Company issued 1.7 million shares of common stock with a weighted-average purchase price of $4.90 per share.
Balance Sheet Detail
Balance Sheet Detail
Note 10
Balance Sheet Detail
 
(in thousands)
 
January 1,
2012
  
April 3,
2011
 
Inventories:
      
Raw materials
 $7,601  $4,709 
Work-in-process
  45,502   41,517 
Finished goods
  25,546   20,815 
   Total inventories
 $78,649  $67,041 

Deferred Income on Shipments to Distributors
Deferred Income on Shipments to Distributors
Note 11
Deferred Income on Shipments to Distributors

Included in the caption “Deferred income on shipments to distributors” on the Condensed Consolidated Balance Sheets are amounts related to shipments to certain distributors for which revenue is not recognized until the Company's product has been sold by the distributor to an end customer. The components at January 1, 2012 and April 3, 2011 were as follows:
 
(in thousands)
 
January 1,
2012
  
April 3,
2011
 
Gross deferred revenue
 $17,853  $15,463 
Gross deferred costs
  (3,766)  (2,610)
   Deferred income on shipments to distributors
 $14,087  $12,853 
 
The gross deferred revenue represents the gross value of shipments to distributors at the list price billed to the distributor less any price protection credits provided to them in connection with reductions in list price while the products remain in their inventory.  The amount ultimately recognized as revenue will be lower than this amount as a result of future price protection and ship from stock pricing credits which are issued in connection with the sell through of the Company's products to end customers. Historically this amount has represented an average of approximately 28% of the list price billed to the customer. The gross deferred costs represent the standard costs, which approximate actual costs of products, the Company sells to the distributors.  Although the Company monitors the levels and quality of inventory in the distribution channel, its experience is that product returned from these distributors are able to be sold to a different distributor or in a different region of the world.  As such, inventory write-downs for products in the distribution channel have not been significant.
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Note 12
Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amounts of goodwill by segment for nine months ended January 1, 2012 were as follows:
 
(in thousands)
 
Communications
  
Computing and Consumer
  
Totals
 
Balance as of April 3, 2011
 $74,673  $29,347  $104,020 
Additions
  640   ---   640 
Disposal related to divestiture (see Note 5)
  ---   (8,568)  (8,568)
Balance as of January 1, 2012
 $75,313  $20,779  $96,092 
 
Purchase of Intangible Assets from Samplify Systems, Inc.(“Samplify”)

During the quarter ended January 1, 2012, the Company acquired from Samplify developed wireless technology including license and patent rights. In exchange for these technology rights, the Company paid Samplify $5.0 million in cash consideration, and returned a portion of IDT's previous equity investment in Samplify. The total fair value of the consideration paid for the purchased existing technology from Samplify was recorded at $6.5 million. This intangible asset will be amortized over its estimated useful life of 3 years.

Intangible Assets

Intangible asset balances as of January 1, 2012 are summarized as follows:
 
(in thousands)
 
Gross Assets
  
Accumulated
 Amortization
  
Net Assets
 
Purchased intangible assets:
         
Existing technology
 $223,455  $(188,719) $34,736 
Trademarks
  2,911   (1,039)  1,872 
Customer relationships
  127,231   (121,642)  5,589 
Total amortizable purchased intangible assets
  353,597   (311,400)  42,197 
IPR&D*
  2,711   ---   2,711 
Total purchased intangible assets
 $356,308  $(311,400) $44,908 
 
Intangible asset balances as of April 3, 2011 are summarized as follows:
 
(in thousands)
 
Gross Assets
  
Accumulated
 Amortization
  
Net Assets
 
Purchased intangible assets:
         
Existing technology
 $219,700  $(181,722) $37,978 
Trademarks
  3,421   (904)  2,517 
Customer relationships
  127,379   (119,564)  7,815 
Total amortizable purchased intangible assets
  350,500   (302,190)  48,310 
IPR&D*
  2,711   ---   2,711 
Total purchased intangible assets
 $353,211  $(302,190) $51,021 
 
* IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When the IPR&D project is complete, it is reclassified as an amortizable purchased intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned, the Company will record a charge for the value of the related intangible asset to its Consolidated Statements of Operations in the period it is abandoned.
 
Amortization expense for purchased intangible assets is summarized below:
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Existing technology
 $3,038  $3,548  $9,142  $10,555 
Trademarks
  104   122   349   366 
Customer relationships
  864   1,319   2,641   3,951 
Other
  ---   ---   ---   44 
Total
 $4,006  $4,989  $12,132  $14,916 

Based on the purchased intangible assets recorded at January 1, 2012, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated amortization expense is expected to be as follows:
 
(in thousands)
   
Fiscal Year
 
Amount
 
Remainder of FY 2012
 $4,293 
2013
  12,949 
2014
  10,571 
2015
  6,926 
2016
  4,249 
Thereafter
  3,209 
Total
 $42,197 
 
Comprehensive Income (Loss)
Comprehensive Income
Note 13
Comprehensive Income (Loss)

The components of comprehensive income were as follows:
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Net income
 $(6,193) $9,794  $45,708  $38,781 
Currency translation adjustments
  (190)  113   (701)  435 
Change in net unrealized gain (loss) on investment
  (28)  (177)  (106)  (194)
Comprehensive income (loss)
 $(6,411) $9,730  $44,901  $39,022 
 
The components of accumulated other comprehensive income, net of tax, were as follows:
 
(in thousands)
 
January 1,
2012
  
April 3,
2011
 
Cumulative translation adjustments
 $1,010  $1,711 
Unrealized gain (loss) on available-for-sale investments
  (10)  96 
Total accumulated other comprehensive income
 $1,000  $1,807 
 

Industry Segments
Industry Segments
Note 14
Industry Segments

The Company's reportable segments include the following:
·  
Communications segment: includes high-performance timing products, Rapid I/O switching solutions, flow-control management devices, FIFOs, integrated communications processors, high-speed SRAM, digital logic, telecommunications.
·  
Computing and Consumer segment: includes timing products, PCI Express switching and bridging solutions, high-performance server memory interfaces, multi-port products, touch controller, signal integrity products and PC audio products.

The tables below provide information about these segments:

Revenues by segment
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
 
Jan. 1,
2012
  
Jan. 2,
2011
 
Communications
 $55,513  $72,775  $192,048  $220,159 
Computing and Consumer
  64,464   74,749   215,532   240,556 
Total
 $119,977  $147,524  $407,580  $460,715 
 
Income (loss) by segment from continuing operations:
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Communications
 $16,923  $32,868  $69,374  $96,511 
Computing and Consumer
  (6,836)  (5,038)  (16,536)  (5,180)
Unallocated expenses:
                
     Amortization of intangible assets
  (4,006)  (4,739)  (11,628)  (14,165)
     Acquisition related costs and other
  (109)  (694)  (109)  (1,833)
     Fair market value adjustment to acquired inventory sold
  ---   ---   ---   (379)
     Restructuring and related costs
  1,962   (2,387)  (665)  (5,424)
     Fabrication product transfer costs
  (1,233)  (1,639)  (3,893)  (3,851)
     Compensation expense - deferred compensation plan
  (649)  (815)  633   (1,303)
     Impairment of assets
  73   107   255   383 
     Stock-based compensation expense
  (4,312)  (4,007)  (12,365)  (11,772)
     Interest income (expense) and other, net
  (2,140)  1,352   (3,924)  2,793 
Income (loss) from continuing operations, before income taxes
 $(327) $15,008  $21,142  $55,780 
 
The Company does not allocate amortization of intangible assets, severance and retention costs, acquisition-related costs, stock-based compensation, interest income and other (expense), net, and interest expense to its segments.  The Company excludes these items consistent with the manner in which it internally evaluates its results of operations. In addition, the Company does not allocate assets to its segments.
 
The Company's significant operations outside of the United States include a manufacturing facility in Malaysia, design centers in the U.S., Canada and China, and sales subsidiaries in Japan, Asia Pacific and Europe. Revenues from unaffiliated customers by geographic area, based on the customers' shipment locations, were as follows:
 
   
Three Months Ended
  
Nine Months Ended
 
(in thousands)
 
Jan. 1,
2012
  
Jan. 2,
2011
  
Jan. 1,
2012
  
Jan. 2,
2011
 
Asia Pacific
 $78,444  $91,664  $272,210  $302,416 
Americas
  20,020   25,418   57,785   73,088 
Japan
  10,417   16,621   33,463   42,667 
Europe
  11,096   13,821   44,122   42,544 
Total consolidated revenues
 $119,977  $147,524  $407,580  $460,715 
 
The Company sells integrated circuits primarily in the U.S., Europe, and Asia. The Company monitors the financial condition of its major customers, including performing credit evaluations of those accounts which management considers high risk, and generally does not require collateral from its customers. When deemed necessary, the Company may limit the credit extended to certain customers. The Company's relationship with the customer, and the customer's past and current payment experience, are also factored into the evaluation in instances where limited financial information is available. The Company maintains and reviews its allowance for doubtful accounts by considering factors such as historical bad debts, age of the account receivable balances, customer credit-worthiness and current economic conditions that may affect customer's ability to pay.

The Company utilizes global and regional distributors around the world, who buy product directly from the Company on behalf of their customers.  For the nine months ended January 1, 2012, three distributors represented 16%, 11%, and 10% of the Company's net revenues, respectively.  For the nine months ended January 2, 2011, two distributors represented 19%, and 11% of the Company's net revenues, respectively.  At January 2, 2012, four distributors represented 20%, 12%, 10%, and 10% of the Company's gross accounts receivable. At April 3, 2011, three distributors represented 19%, 14%, and 11% of the Company's gross accounts receivable.

The Company's property, plant and equipment are summarized below by geographic area:
 
(in thousands)
 
January 1,
2012
  
April 3,
2011
 
United States
 $52,221  $51,642 
Canada
  4,642   5,613 
Malaysia
  12,312   8,599 
All other countries
  802   1,900 
Total property, plant and equipment, net
 $69,977  $67,754 

Commitments and Contingencies
Commitments and Contingencies
Note 15
Commitments and Contingencies

Guarantees

As of January 1, 2012, the Company's financial guarantees consisted of guarantees and standby letters of credit, which are primarily related to the Company's electrical utilities in Malaysia, utilization of non-country nationals in Malaysia and Singapore, consumption tax in Japan and value-added tax obligations in Singapore and Holland, and a workers' compensation plan in the United States. The maximum amount of potential future payments under these arrangements is approximately $2.5 million.
 
Indemnification

During the normal course of business, the Company makes certain indemnifications and commitments under which it may be required to make payments in relation to certain transactions.  In addition to indemnifications related to non-infringement of patents and intellectual property, other indemnifications include indemnification of the Company's directors and officers in connection with legal proceedings, indemnification of various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnification of other parties to certain acquisition agreements. The duration of these indemnifications and commitments varies, and in certain cases, is indefinite. The Company believes that substantially all of its indemnities and commitments provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities and commitments because such liabilities are contingent upon the occurrence of events which are not reasonably determinable.  The Company believes that any liability for these indemnities and commitments would not be material to its accompanying consolidated financial statements.

The Company maintains an accrual for obligations it incurs under its standard product warranty program and customer, part, or process specific matters. The Company's standard warranty period is one year, however in certain instances the warranty period may be extended to as long as two years. Management estimates the fair value of the Company's warranty liability based on actual past warranty claims experience, its policies regarding customer warranty returns and other estimates about the timing and disposition of product returned under the standard program. Customer, part, or process specific accruals are estimated using a specific identification method. Historical profit and loss impact related to warranty returns activity has been minimal. The total warranty accrual was $0.2 million and $0.4 million as of January 1, 2012 and April 3, 2011, respectively.

Litigation

In November 2010, the Company filed a complaint in the Northern District of California against Phison Electronics Corp. (“Phison”) for infringement of the Company's four patents directed to oscillator and clock signal technology.  The lawsuit sought a preliminary and permanent injunction against Phison products as well as damages, attorney's fees and cost of the lawsuit.  Phison filed an answer to the complaint on January 31, 2011, denying infringement of the patents in suit. The companies subsequently entered into a confidential settlement agreement, under which IDT licensed certain patents to Phison and the companies agreed to dismiss all claims and counterclaims in the litigation.  The court issued an order dismissing the lawsuit on August 10, 2011.
Restructuring
Restructuring
Note 16
Restructuring

The following table shows the provision of the restructuring charges and the liability remaining as of January 1, 2012:
 
(in thousands)
 
Cost of
Goods Sold
  
Operating
Expenses
  
Totals
 
Balance as of April 3, 2011
 $9,187  $815  $10,002 
Provision
  (1,425)  2,991   1,566 
Cash payments
  (166)  (241)  (407)
Balance as of January 1, 2012
 $7,596  $3,565  $11,161 

As part of an effort to streamline operations with changing market conditions and to create a more efficient organization, the Company has undertaken restructuring actions, to reduce its workforce and consolidate facilities.  The Company's restructuring expenses have been comprised primarily of: (i) severance and termination benefit costs related to the reduction of its workforce; and (ii) lease termination costs and costs associated with permanently vacating certain facilities. 

Associated with the Company's plans to fully divest its remaining video processing product lines, during the nine months ended January 1, 2012, the Company recorded $1.9 million in restructuring expenses for employee retention costs. These costs have been recorded to discontinued operations. As of January 1, 2012, the total accrued balance for employee retention costs related to this restructuring action was $1.9 million.
 
In connection with the Company's plan to transition the manufacture of products to Taiwan Semiconductor Manufacturing Limited (“TSMC”), management approved a plan to exit wafer production operations at its Oregon fabrication facility.  As a result, the Company accrued estimated restructuring expenses of $4.8 million for severance payments and other benefits associated with this restructuring action in fiscal 2010. During the nine months ended January 1, 2012, the Company decreased this accrual by $2.9 million based on the actual number of employee that have been offered employment with the prospective acquirer of the wafer fabrication facility. As of January 1, 2012, the total accrued balance for severance costs related to this restructuring was $1.9 million.  Also associated with this restructuring action, during the nine months ended January 1, 2012, the Company recorded $2.6 million for employee retention costs. As of January 1, 2012, the total accrued balance for employee retention costs related to this restructuring action was $6.7 million. The Company expects to complete this restructuring action in the fourth quarter of fiscal 2012.

In connection with the discontinuing of manufacturing operations at its Singapore facility in the fourth quarter of fiscal 2010, the Company exited its leased facility in Singapore in the first quarter of fiscal 2011. As a result, the Company recorded lease impairment charges of approximately $0.5 million in fiscal 2011, which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to the Company. These charges were recorded as cost of goods sold.  Since the initial restructuring, the Company has made lease payments of $0.4 million.  As of January 1, 2012, the remaining accrued lease liabilities were $0.1 million. The Company expects to continue paying the facility lease charges through, and concluding in, the third quarter of fiscal 2013.

In connection with the divestiture of Silicon Logic Engineering business in the third quarter of fiscal 2010, the Company exited a leased facility. As a result, the Company recorded lease impairment charges of approximately $0.5 million, which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to the Company. These charges were recorded as SG&A expense.  Since the initial restructuring, the Company has made lease payments of $0.4 million related to the vacated facilities.  As of January 1, 2012, the remaining accrued lease liabilities were $0.1 million. The Company expects to continue paying the facility lease charges through, and concluding in, the first quarter of fiscal 2013.

During the second quarter of fiscal 2006, the Company completed the consolidation of its Northern California workforce into its San Jose headquarters and exited a leased facility in Salinas, California. The Company recorded lease impairment charges of approximately $2.1 million, of which $0.6 million was recorded as cost of revenues, $0.9 million was recorded as R&D expense and $0.6 million was recorded as SG&A expense. Since the initial restructuring, the Company has made lease payments of $1.6 million related to the vacated facility in Salinas.  As of January 1, 2012, the remaining accrued lease liabilities were $0.5 million. The Company expects to continue paying the facility lease charges through, and concluding in, the fourth quarter of fiscal 2014.
Income Taxes
Income Taxes
Note 17
Income Taxes

The provision for income taxes reflects tax on foreign earnings and federal and state tax on U.S. earnings.  For the nine months ended January 1, 2012 and January 2, 2011, the Company had effective tax rates of 2.3% and 3.2%, respectively. The Company's effective tax rate is lower than statutory rates in the U.S. due primarily to its mix of earnings in foreign jurisdictions with lower tax rates.

As of January 1, 2012, the Company continued to maintain a valuation allowance against its net U.S. deferred tax assets, as it is currently unable to conclude that it is more likely than not that the Company will be able to realize these U.S. deferred tax assets in the foreseeable future.

As of January 1, 2012, the Company was subject to examination in the U.S. federal tax jurisdiction for the fiscal years 2009 and 2010.  To date, the Company has not been notified by the IRS that a field audit will be conducted.  The statute of limitations to assess tax for fiscal 2009 expires in December 2012.  The general practice of the IRS is to notify taxpayers of a field audit months before the statute of limitations expire.  If the Company is audited by the IRS based on currently available information, the Company believes that the ultimate outcome will not have a material adverse effect on its financial position, cash flows or results of operations.
Share Repurchase Program
Share Repurchase Program
Note 18
Share Repurchase Program

On July 21, 2010, the Company's Board of Directors approved a plan to repurchase up to $225 million of its common stock.  In fiscal 2011, the Company repurchased 12.8 million shares at an average price of $6.06 per share for a total purchase price of $77.7 million under this plan. During the first nine months of fiscal 2012, the Company repurchased 9.6 million shares at an average price of $6.53 per share for a total purchase price of $62.5 million.  As of January 1, 2012, approximately $84.9 million was available for future purchase under this share repurchase program.  Share repurchases were recorded as treasury stock and resulted in a reduction of stockholders' equity.  
Credit Facility
Credit Facility
Note 19
Credit Facility

On June 13, 2011, the Company entered into a Master Repurchase Agreement (the "Repurchase Agreement") with Bank of America, N.A. (“Bank of America”), pursuant to which the Company has the right, subject to the terms and conditions of the Repurchase Agreement, to sell to Bank of America up to 1,431 shares of Class A preferred shares of one of its wholly owned subsidiaries (the “Subsidiary”), in one or more transactions prior to June 13, 2012, for an aggregate purchase price of $135 million in cash. Pursuant to the Repurchase Agreement, to the extent it sells any such shares to Bank of America, the Company will be obligated to repurchase from Bank of America and Bank of America will be obligated to resell to the Company, those preferred shares for the aggregate purchase price paid by Bank of America. In such case, and while such shares are outstanding,  the Company will also be obligated to make monthly payments to Bank of America at a floating interest rate of LIBOR plus 2.125% and will have the right to accelerate the repurchase of all or any portion of the shares prior to June 13, 2016.  In addition, the Company is obligated to pay retention fees associated with amounts available under the Repurchase Agreement. These retention fees have been recorded as interest expense in the Company's Statement of Operations.  The Repurchase Agreement also contains certain customary events of default. As of January 1, 2012, the Company has not sold any preferred stock to Bank of America.

In connection with the Repurchase Agreement, the Company has entered into an agreement dated June 13, 2011 in favor of Bank of America and certain additional parties (the “IDTI Agreement”), which contains certain representations and various affirmative and negative covenants of the Company, including an obligation that the Company and its Subsidiary each maintain adequate capital in light of contemplated business operations. This agreement contains certain agreements by the Company intended to maintain the status of its Subsidiary as an entity distinct from the Company and its other subsidiaries, with separate assets and liabilities, as well as an indemnity by the Company.
Subsequent Events
Subsequent Events
Note 20
Subsequent Event

On January 31, 2012, the Company completed the sale of its wafer fabrication facility located in Oregon and related assets to Alpha and Omega Semiconductor Limited (“AOS”) for approximately $26.5 million in cash. This transaction will be recorded in the fourth quarter of fiscal 2012, and the Company expects to realize a gain on the sale of this facility.
Revision of Prior Period Financial Statements (Tables)
Revision of Prior Period Financial Statements
Set out below are the line items within the consolidated financial statements as of and for the three and nine months ended January 2, 2011 that have been impacted by the revisions.  The revision had no impact on the Company's total cash flows from operating, investing or financing activities.

   
For the Three Months Ended January 2, 2011
  
For the Nine Months Ended January 2, 2011
 
(in thousands, except per share amounts)
 
As
Reported (1)
  
Adjustments
  
As
 Revised
  
As
Reported (1)
  
Adjustments
  
As
 Revised
 
Consolidated Statement of Operations
                  
Cost of revenues
 $66,507  $670  $67,177  $211,212  $2,010  $213,222 
Gross profit
  81,017   (670)  80,347   249,503   (2,010)  247,493 
Research and development
  40,620   54   40,674   116,612   162   116,774 
Selling, general and administrative
  25,997   20   26,017   77,672   60   77,732 
Total operating expenses
  66,617   74   66,691   194,284   222   194,506 
Operating income
  14,400