10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2012

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ to ________________

Commission File Number 0-27026

Pericom Semiconductor Corporation

(Exact Name of Registrant as Specified in Its Charter)

California	77-0254621
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
3545 North First Street San Jose, California 95134	95134
(Address of Principal Executive Offices)	(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (408) 435-0800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
Common Stock	The NASDAQ Stock Market LLC
Preferred Share Purchase Rights	The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o  No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o  No [X]

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 

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 [X] No 

Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K   o

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

Large Accelerated Filer o Accelerated Filer [X] Non Accelerated Filer o 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]

The aggregate market value of voting stock held by non-affiliates of the Registrant, based on the closing price of the Common Stock on December 31, 2011 as reported by the NASDAQ Stock Market was approximately $170,130,000. Shares of common stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of August 29, 2012 the Registrant had outstanding 23,544,521 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held December 6, 2012, which will be filed subsequently, are incorporated by reference in Part III of this report on Form10-K.

PERICOM SEMICONDUCTOR CORPORATION

Form 10-K for the Year Ended June 30, 2012

INDEX

		PAGE
PART I
Item 1:	Business		1
Item 1A:	Risk Factors		15
Item 1B:	Unresolved Staff Comments		25
Item 2:	Properties		26
Item 3:	Legal Proceedings		26
Item 4:	Mine Safety Disclosures		26
PART II
Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		27
Item 6:	Selected Financial Data		30
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 7A:	Quantitative and Qualitative Disclosures about Market Risk		44
Item 8:	Financial Statements and Supplementary Data		45
Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		46
Item 9A:	Controls and Procedures		46
Item 9B:	Other Information		46
PART III
Item 10:	Directors, Executive Officers and Corporate Governance		48
Item 11:	Executive Compensation		48
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		48
Item 13:	Certain Relationships and Related Transactions, and Director Independence		48
Item 14:	Principal Accountant Fees and Services		48
PART IV
Item 15:	Exhibits and Financial Statement Schedules		49
	Signatures		87

 

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PART I

EXPLANATORY NOTE

As used in this Form 10-K, the term “fiscal 2012” refers to our fiscal year ended June 30, 2012, the term “fiscal 2011” refers to our fiscal year ended July 2, 2011, and the term “fiscal 2010” refers to our fiscal year ended July 3, 2010.

ITEM 1. BUSINESS

Pericom Semiconductor Corporation (the “Company” or “Pericom” or “we”, “us” or “our”) was incorporated in June 1990 in the state of California. We design, develop and market high-performance integrated circuits (“ICs”) and frequency control products (“FCPs”) used in many of today’s advanced electronic systems. Our IC products include functions that support the connectivity, timing and signal conditioning of high-speed parallel and serial protocols that transfer data among a system’s microprocessor, memory and various peripherals, such as displays and monitors, and between interconnected systems. Our FCPs are electronic components that provide frequency references such as crystals and oscillators for computer, communication and consumer electronic products. Our analog, digital and mixed-signal ICs, together with our FCP products enable higher system bandwidth and signal quality, resulting in better operating reliability, signal integrity, and lower overall system cost in applications such as notebook computers, servers, network switches and routers, storage area networks, digital TVs, cell phones, GPS and digital media players.

We have one reportable segment, the interconnectivity device supply market. Additional segment reporting information is included in Note 21 of Notes to Consolidated Financial Statements in this report.

INDUSTRY BACKGROUND — OVERVIEW

Electronic systems and subsystems create the fabric that increasingly supports everyday modern life as evidenced by the continued growth of the computer, mobile communications, networking and consumer electronics markets. Systems characterized by ever-improving performance, flexibility, reliability and multi-functionality, as well as decreasing size, weight and power consumption have driven the growth of these markets. IC advancements through improvements in semiconductor technology have contributed significantly to the increased performance of, and demand for, electronic systems and to the increasing proportion of IC cost as a portion of overall system cost. This technological progress occurs at an accelerated pace, while at the same time, the cost of electronic systems continues to decline.

Development of high-performance computer requirements for higher network performance and increased levels of connectivity among different types of electronic devices drive the demand for new and varying types of high-speed, high-performance signal conditioning, connectivity and timing products to handle the conditioning, routing, bridging and timing of digital and analog signals at high speeds with minimal loss of signal quality. High-speed signal transfer is essential to maximize the speed and bandwidth of the microprocessor, the memory and the local or wide area network. High signal quality is equally essential for optimal balance between high data transmission rates and reliable system operation. Without high signal quality, transmission errors occur, resulting in retransmissions and hence lower throughput and system reliability, as bandwidth increases. The same market pressures imposed on microprocessors also drive the market requirements for connectivity and timing products, and include higher speed, reduced power consumption, lower voltage operation, smaller size and higher levels of integration.

Our FCPs are devices incorporating quartz crystal resonators. Quartz crystals have the physical property such that, when stimulated electrically, they resonate at a precise and consistent frequency. A crystal oscillator, combining a quartz crystal and a simple electronic circuit, also generates a signal at a precise and consistent frequency. All types of crystal oscillators are clocks in the sense that they provide a frequency reference for various electronic systems.

The continuing increase in electronic sophistication, as well as the penetration and proliferation of electronic products into new applications, puts new demands on frequency control devices. This creates both technological

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challenges and new business opportunities for products offering faster speeds, tighter frequency tolerance, higher stability relative to temperature, smaller surface-mountable packaging and lower unit cost.

Connectivity, switching, and timing products are used to enable higher system bandwidth in applications such as notebook computers, servers, network switches and routers, storage area networks, wireless base-stations, cell phones and digital TVs. We pioneer technology in each of these areas as demonstrated in the development and implementation of our wide variety of serial protocol product families. An example is our PCI Express technology across our interface, switching, bridging and timing product areas. PCI Express is a relatively new industry-standard serial protocol developed to offer higher bandwidth to and from the CPU chipset and peripherals like Ethernet, Universal Serial Bus (“USB”), video, and other types of connectivity devices. Almost every market segment and end product application is adopting PCI Express as the new serial high-speed signal path. As a serial protocol, PCI Express can offer many times the bandwidth of PCI, the industry-standard parallel protocol that preceded PCI Express. PCI Express allows new cost-effective means to send high-speed signals across longer distances.

However, this expanded bandwidth comes at a price: signal quality and integrity becomes difficult to maintain as data rates routinely exceed multi-gigabits per second. The problems associated with signal quality that must be addressed by the connectivity IC’s are magnified by increased speed at which these products must transfer, route and time electrical signals. The performance challenges presented to today’s designers are significant: signals must transfer at high speed with low propagation delay, while signal degradation — such as ‘noise,’ ‘jitter,’ ‘skew,’ and electromagnetic interference (“EMI”) — must be minimal. In short, high-speed signal conditioning is essential for state-of-the-art electronic systems to function reliably and cost effectively. Our signal conditioning technology and resulting products address these critical issues, and support the major serial high-speed protocols including Gigabit Ethernet, PCI Express, High Definition Multimedia Interface (“HDMI”), USB, Serial Advanced Technology Architecture (“SATA”), serial attached SCSI (“SAS”) and DisplayPort (“DP”). SCSI stands for Small Computer System Interface, referred to and pronounced “skuzzy”. Pericom refers to its signal conditioning products as ‘ReDrivers^TM’.

High frequency and high data transfer rates are critical in the reliability of systems prevalent in the major market trends of today. Internet and high-performance network applications continue to push for more data bandwidth on system buses and across system boundaries. Computer and networking system clock frequencies continue to increase at a very rapid rate, shortening the time available to perform data transfers. While the data transfer rate has typically increased every few years, the continuing desire for higher system reliability with minimal system downtime creates increasing pressure to achieve lower data error rates. These factors all increase the need for high speed, high performance connectivity and switching products.

In server, networking and computing applications, we support higher system bandwidth with our PCI Express to PCI-X/PCI bridges, and PCI Express packet switches as well as PCI Express signal switching and re-driver products enabling optimum system partitioning and design flexibility. All major server original equipment manufacturers (“OEM”) have adopted PCI Express. PCI Express bridges and packet switches allow the transfer and switching of high speed data in and out of the CPU chipset to serial I/O ports such as Fiber Channel, Gigabit Ethernet and SAS. In fiscal 2010, we saw the adoption of our PCIe Gen2 5Gbps ReDriver by the major server and storage OEM’s in blade server and storage platforms. In fiscal 2011, we introduced PCIe Gen3 8Gbps ReDrivers mainly for next generation server and storage platforms, and began shipping our latest family of USB3 ReDrivers, as integrated USB3 capability became a market reality. In fiscal 2012, we saw the widespread adoption of our standards-compliant USB3 5Gbps ReDriver by major computing customers, and we introduced switching and signal conditioning products supporting 10Gb Ethernet and Thunderbolt applications.

In high-bandwidth systems, data transfer needs to be synchronized, creating a high demand for timing products. Our clocks and FCPs provide the precise timing signals needed to ensure reliable data transfer at high speeds in applications ranging from notebook computers to network switches. As systems continue to grow in processing power and complexity, the demand for these products will accelerate. The demand for higher precision will also continue to increase as timing margins shrink in higher bandwidth serial connectivity systems.

Our SATA switch and ReDriver products enable external SATA (“eSATA”) disk drive expansion and standard compliance. They are applicable to desktop and notebook PCs, set top boxes, portable media players and game

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consoles. We have expanded our SATA and SAS ReDriver product families to support the latest generation of SATA3 and SAS2 (6Gbps) for computing and storage applications.

Our video switch products address the need for higher video resolution, enable the integration of horizontal and vertical synchronous signals as well as control signals, and accommodate switching of up to four video input streams with improved cross-talk, off-isolation and electrostatic discharge (“ESD”) protection features. These products address the HDMI, DP, and Digital Video Interface (“DVI”) switching, signal conditioning and voltage shifting requirements for PC video/graphics and LCD monitors, as well as digital television (“DTV”) and other digital video applications.

OUR STRATEGY

As a supplier of high-performance IC and FCP products, we enable serial connectivity with solutions for the computing, communications and consumer market segments. With our analog, digital and mixed-signal ICs, along with FCPs, our complete solutions support the timing, switching, bridging and conditioning of high-speed signals in today’s ever-increasing speed-and-bandwidth-demanding applications.

We define our products in collaboration with industry-leading OEMs and industry enablers and our modular design methodology shortens our time to market and time to volume production. The key elements of our strategy are:

Market Focus:

Within the computer, communications and consumer markets, we are focused on growth segments that allow multi-product penetration opportunities that align well with our technology focus. These growth applications include tablets, servers, storage, enterprise networks, telecommunications, digital video and TV, embedded applications such as automotive, video surveillance and medical, notebooks and PCs, and mobile devices such as cell phones.

Using our development expertise, our understanding of our customer’s product evolution, and our rapid-cycle IC development, we continue to pursue new opportunities in existing and emerging markets to expand our market share as a solution provider.

Customer Focus:

Our customer strategy is to use a superior level of responsiveness and proprietary solutions with high quality to support customer needs and sell a wider range of products to our existing customers, as well as targeted new customers. Key elements of our customer strategy include:

•   Penetrate target accounts through joint product development. We approach prospective customers primarily by working with their system design engineers at the product specification stage with the goal that one or more Pericom ICs or FCPs will be incorporated into a new system design. Our understanding of our customers’ requirements combined with our ability to develop and deliver reliable, high-performance products within our customers’ product introduction schedules has enabled us to establish strong relationships with many leading OEMs.

•   Solidify customer relationships through superior responsiveness. We believe that our customer service orientation is a significant competitive advantage. We seek to maintain short product lead times and provide our customers with excellent on-schedule delivery, in part by having available adequate finished goods inventory for anticipated customer demands. We emphasize product quality for our products and we have been ISO-9001 certified since 1995. We also endeavor to be a good corporate citizen, required by many customers, with solid environmental and other processes and we received our ISO 14001 Environmental Management System certification in 2004.

•   Expand customer relationships through broad-based solutions. We aim to grow our business with existing customers by offering product lines that provide increasingly extensive solutions for our customers’ high-speed interfacing needs. By providing our customers with superior support in existing programs and anticipating our customers’ needs in next- generation products, we have often been able to increase our overall volume of business with those customers substantially. With larger customers, we have also initiated electronic data interchange

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(“EDI”) and remote warehousing programs, annual purchase and supply programs, joint development projects and other services intended to enhance our position as a key vendor.

Technology Focus:

High bandwidth, high-speed serial protocols inherently present challenges in system design, such as error-free signal routing, end-point integrity and timing sensitivities. We focus on three main technology areas: serial high-speed protocol switching, advanced silicon and quartz based timing and signal conditioning solutions. These focus areas combine at the product level to provide a complementary and complete system level solution for high-speed serial protocol implementation.

Because of this focus, we provide a broad solution in high-speed analog switching technology. We possess a history of ‘industry first’ product introductions, such as our dual HDMI and PCI Express signal switching solutions and our serial signal conditioning technology. Focused product families include high-frequency Signal Switches, Packet Switches, Bridges, ReDrivers, Clock Generators/Buffers, Crystals and Oscillators.

Today, our technology encompasses all major serial high-speed protocols including PCI Express, USB, HDMI/DVI, Display Port, SAS/SATA, 10-Gigabit Attachment Unit Interface (“XAUI”) and Ethernet.

Our primary efforts are in the creation of additional proprietary digital, analog and mixed-signal functionality. We work closely with our wafer suppliers to incorporate their advanced complementary metal oxide semiconductor (“CMOS”) process technologies to improve our ability to introduce next generation products expeditiously. We continue to expand our patent portfolio with the goal of providing increasingly proprietary product lines.

For FCPs, our strategy is to further our position in high-frequency, superior-performance, low-jitter timing products by combining our crystal and silicon design capabilities. In addition, we address the growing needs of very small size surface mount crystals and crystal oscillators for the growing wireless and other portable consumer markets. By leveraging internal proprietary IC designs in digital, analog and mixed-signal functionality, we add specialized features and optimize costs to provide advanced timing solutions for our target market segments. Working closely with historical manufacturing partners while developing new ones, we will continue to advance proprietary process techniques and capabilities required to complement new technology products.

Manufacturing Focus:

We closely integrate our manufacturing strategy with our focus on customer needs. Central to this strategy is our ability to support high-volume shipment requirements at a low cost. We design products so that we may manufacture many different ICs from a single partially processed wafer. Accordingly, we keep inventory in the form of a wafer bank, from which wafers can be completed to produce a variety of specific ICs in as little as five weeks. This approach has enabled us to reduce our overall work-in-process inventory while providing increased availability to produce a variety of finished products. In addition, we keep some inventory in the form of die bank, which can become finished product in three weeks or less. We have established relationships with four leading foundries, Magnachip Semiconductor, Ltd. (“Magnachip”), GlobalFoundries Inc. (“GlobalFoundries”), Taiwan Semiconductor Manufacturing Company Limited (“TSMC”), and Semiconductor Manufacturing International Corporation (“SMIC”), as well as several other suppliers. We rely on foreign subcontractors for the assembly, testing and packaging of our finished products. Some of these subcontractors are a single source supplier for certain packages.

For FCPs, our vertically integrated Asian design and manufacturing subsidiaries, PSE Technology Corporation (“PSE-TW”) and PSE Technology (Shandong) Corporation (“PSE-SD”) provide a significant competitive advantage through highly efficient design and volume crystal manufacturing processes, in combination with strict quality standards and low-cost labor. We maintain high quality standards and all our subcontractors’ plants are ISO 9000 certified. We operate our own FCP factories, located in Chungli (Taiwan) and Jinan, in the Shandong Province of the People’s Republic of China (“PRC”).

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Strategic and Collaborative Relationships Focus:

We pursue a strategy of entering into new relationships and expanding existing relationships with companies that engage in the product design, manufacturing and marketing of ICs and frequency control products. We have an active internal program focused on reference designs with key IC suppliers in the Pericom target market segments and partner programs, which can strengthen and leverage our marketing and sales presence worldwide. We believe that these relationships enable us to access additional design and application expertise, accelerate product introductions, reduce costs and obtain additional needed capacity. Our established collaborative relationships with leading wafer manufacturers allow us to access high performance digital and analog core libraries for use in our future products.

OUR PRODUCTS

We use our expertise in high-performance digital, analog, mixed-signal silicon-based IC and quartz-based FCP designs, our reusable core cell library and our modular design methodology to achieve a rapid rate of new product introductions. Within each of our IC product families, the product portfolio has evolved from a standard building block into both standard products of increasing performance and application-specific standard products (“ASSP”), which are tailored to meet a specific high volume application. Within each product family, we continue to address the common trends of decreasing supply voltage, higher integration and faster speeds. Within our quartz based FCP product families, including crystal, crystal oscillator (“XO”), and voltage controlled crystal oscillator (“VCXO”), we have evolved our technologies to include specialized XO and hybrid capability.

In fiscal 2012, IC product revenues, which includes $13.3 million of revenues from Pericom Technology Inc. (“PTI”) products, were $85.4 million or 62.3% of the $137.1 million in total revenues, with the balance of $51.7 million attributable to FCP product revenues. In fiscal 2011, IC product revenues were $111.0 million, which includes PTI revenues after the PTI acquisition was completed on August 31, 2010. The IC revenues comprised 66.7% of the $166.3 million in total fiscal 2011 revenues, with the balance of $55.3 million attributable to FCP products. In fiscal 2010, IC product revenues were $92.3 million or 62.8% of the $146.9 million in total revenues, with the balance of $54.6 million attributable to FCP product revenues.

IC PRODUCTS

SiliconConnect^TM Family:

Our SiliconConnect family offers the highest level of complexity and integration among our products. It consists of our PCI and PCI-X Bridges and our PCI Express Bridges and Packet Switches, our recently-introduced PCI Express Serial Bridges and our PCI Express and USB3 ReDrivers, as well as our legacy family of low-voltage differential signaling (“LVDS”) high-speed differential drivers, receivers and transceivers.

PCI/PCI-X:

With a comprehensive product portfolio based on performance and value, this legacy product family consists of both existing and new applications across multiple market segments. Manufacturers continue to use PCI and PCI-X for legacy designs, especially in long-term higher-end platforms, such as networking, storage, high-end server and embedded systems used in military, industrial and computing applications, and PC based video surveillance products. In fiscal 2011, our legacy PCI and PCI-X products continued to sell well, especially into PC-based video surveillance applications and the embedded market segment, where continued use of legacy CPU-based systems is especially prevalent. In fiscal 2012, we saw our legacy PCI and PCI-X products begin to transition to PCI Express, especially in PC-based video surveillance applications and the embedded market segment, where legacy CPU-based systems are being replaced by PCI Express-based CPU systems. However, we expect to see continued demand for our legacy products over the near future.

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PCI Express:

PCI Express (“PCIe”) is the next generation replacement for PCI. PCIe is a serial, high-speed technology, which offers many advantages over the parallel bus based PCI technology. All market segment applications have adopted or are in the process of adopting PCIe, and our PCIe products actively target all major PCIe based applications, including mainstream and industrial PCs, PC peripherals, embedded systems, high-end multifunction printers, video security monitoring, redundant arrays of independent disks (“RAID”) and Fiber Channel cards in the Storage Area Network space, Multi-channel Ethernet NICs, and routers and switches. In fiscal 2010, Pericom developed and sampled another generation of the PCIe bridge for volume PC applications, with special features designed to replace the PCI port on CPU chipsets. We also developed our PCIe GEN2 small packet switch family, which will leverage our successful GEN1 product family to the higher PCIe serial speed of 5 Gb/s. In fiscal 2011, Pericom announced and customers began sampling the next generation PCI Express 3.0 (GEN 3) product families, including ReDrivers, Switches, and Timing products, all of which support the new PCIe 3.0 specification. In addition, we began shipping products in our new PCI Express ‘Serial Bridge’ family. These products help translate high speed serial protocols such as PCI Express to USB, UART and others. In fiscal 2012, we expanded our PCIe 3.0 switch, clock generator, and buffer product families to support this newest PCIe speed generation. We also continued to expand our PCIe Express 1.0 serial bridge family to support non-Microsoft based operating systems, as well as expanding our PCIe to PCI bridge family to support ‘legacy PCI’ port applications, mainly in the computing and embedded segments.

LVDS:

We offer a comprehensive LVDS product portfolio of legacy products that includes drivers, receivers and transceivers with data rates of 660 megabits per second, or Mbps, and allowing point-to-point connections over distances up to 10 meters. This legacy LVDS standard offers a number of improvements over the older emitter-coupled logic (“ECL”) and pseudo emitter-coupled logic (“PECL”) in applications requiring lower power consumption and noise.

SiliconSwitch^TM Family

Our SiliconSwitch product family offers a broad range of high-performance ICs for switching digital and analog signals. The ability to switch or route high-speed digital or analog signals with minimal delay and signal distortion is a critical requirement in many high-speed computers, networking and multi-media applications. Historically, systems designers have used mechanical relays and solid-state relays, which have significant disadvantages compared to IC switches. Mechanical relays are bulky, dissipate significant power and have very low response times, while solid-state relays are expensive.

ASSP Switch:

In this product segment we offer a line of ASSP switches for local area networks (“LAN”), Analog Video, Digital Video such as DVI/HDMI, PCI Express and USB applications. The LAN switches address the high-performance demands of 10/100/1000 Ethernet LANs. The video switches address the high bandwidth that enables the switching between different video sources associated with video graphic cards and flat panel displays. Some of our newest video switches address the HDMI^TM (High-Definition Multimedia Interface) Rev. 1.3 standard. We are also marketing our PCI Express signal switches with GEN1 (2.5Gbps) and GEN2 (5.0Gbps) speeds for desktop PC, gaming stations, servers and storage applications. We continue to expand our innovations in this area to address next generation networking, computing and media platforms. In fiscal 2011, we announced and customers began sampling 8Gb PCI Express 3.0 (“GEN3”) signal switches, mainly for next generation server and storage applications, as well as an ASSP switch supporting the ‘Thunderbolt’^TM protocol introduced by Intel Corporation. In fiscal 2012, we expanded our PCIe 3.0 switch family, and added to our Thunderbolt 10Gb switch family as well.

Analog Switches:

We offer a family of analog switches for low-voltage (1.8-volt to 7-volt) applications such as multimedia audio and video signal switching with enhanced characteristics such as low power, high bandwidth, low crosstalk and low distortion to maintain analog signal integrity. Our analog switches have significantly lower distortion than

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traditional analog switches due to our advanced CMOS switch design. To support space-constrained applications, such as wireless handsets and global positioning system receivers, we offer 3-volt low R-on 0.4-ohm switches. To complement this low-voltage family we also offer higher voltage (17-volt) analog switches for applications requiring higher signal range, such as instrumentation, telecommunications and industrial controls.

Digital Switches:

We offer a family of digital switches in 8-, 16- and 32-bit widths that address the switching needs of high-performance systems. These digital switches offer performance and cost advantages over traditional switch functions, offering both low on-resistance and capacitance, low propagation delay (less than 250 picoseconds), low standby current (as low as 0.2 micro amps) and series resistor options that support low electromagnetic interference, or EMI, emission requirements. Applications for our digital switches include 5-volt to 3.3-volt signal translation, high-speed data transfer and switching between microprocessors, PCI slots and multiple memories and hot-plug interfaces in notebook and desktop computers, servers and switching hubs and routers. We also have products at 2.5-volt and 3.3-volt offering industry-leading performance in switching times, and low capacitance for bus isolation applications.

SiliconInterface^TM Family

Through our SiliconInterface product line, we offer a family of products that address both next generation designs as well as legacy interface. SiliconInterface also focuses on managing different voltage levels by use of voltage level translator devices. Our legacy high-performance 5-volt, 3.3-volt, 2.5-volt, and 1.8-volt CMOS logic interface circuits provide logic functions to handle data transfer between microprocessors and memory, bus exchange, backplane interface and other logic interface functions where high-speed, low-power, low-noise and high-output drive characteristics are essential. In fiscal 2011, we announced and began shipping the latest generation of 6Gbps SATA3, eSATA3 and SAS2 ReDrivers, providing options that cover all volume platform applications. In fiscal 2012, we further expanded our SATA3 and SAS2 ReDriver families to support low power portable products, such as notebook and tablet computers.

ReDrivers/Signal Conditioners:

With the adaptation of the latest generation of high-speed PCIe serial, switched architecture at 5.0 Gbps rates, and with the latest release of 8.0 Gbps speeds, systems designers are confronted with challenges associated with maintaining clean eye-pattern signal integrity at the receiver end points. The signal attenuation loss increases in almost an exponential form as trace lengths increase in a signal path using high-speed differential signaling. Our ReDriver family of products boost signals by combining programmable equalization and de-emphasis techniques at the transmit and receive points, respectively, on a signal path to ensure good signal integrity at the end points.

Through this line of products, we offer a broad range of ReDrivers to manage standard protocols such as PCIe, SATA, SAS, USB3 and XAUI for applications including servers, storage, networking, notebook, tablet and docking stations. Systems designers benefit from our ReDriver products in another way: they can now use our ReDrivers with inexpensive cables, such as CAT6 or flexible ribbon cables instead of using very expensive cables to achieve good signal integrity at the end of the trace. In fiscal 2010, Pericom introduced our new USB3 ReDriver, targeted to PC, consumer, and embedded market segments. In fiscal 2011, Pericom announced and customers began sampling PCIe GEN3 8Gbps ReDrivers mainly for next generation server and storage platforms, and we began shipping our latest family of USB3 ReDrivers, as major chipset vendors began shipping with integrated USB3 capability. In fiscal 2012, we received industry standards (USB-IF) compliance testing approval, resulting in widespread adoption of our USB3 redriver products in the latest generation of computing products. We also introduced our 10Gbps Redriver to support mainly 10Gb Ethernet applications.

1.8V/3.3V/5V ULS and Logic Families:

Pericom offers legacy Universal Level Shifter (“ULS”) and Logic families with a selection of supply voltages to fit numerous applications and end markets. Level-shifting solutions have evolved into more advanced devices as bi-directional signal translation requirements become more prevalent, in turn driven by new technology needing

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to function with legacy designs. While traditional voltage translators require direction control signals, our ULS products address the need for voltage translation between 1.8-volts and 3.3-volts without any direction control signals. These ULS voltage translators are ideal for mobile, test equipment, servers and telecom applications.

For Logic functions, our 1.8-volt, 2.5-volt, 3.3-volt and 5-volt product families offer high output current with sub-2.5 nanosecond propagation delay and low power consumption. In addition, our Lower Balanced Drive (“LBD”) family has a propagation delay of less than two nanoseconds to support high-speed processor-memory interfacing and we have optimized our Balanced Drive (“BD”) family for low-noise operation at very low voltages.

SiliconClock^TM Family

In high-bandwidth systems, data transfer must be synchronized and this creates a demand for timing products. Our timing products provide the precise timing signals needed to ensure reliable data transfer at high speeds in applications ranging from servers to network switches to televisions. As systems continue to grow in processing power and complexity, we expect the demand for these products to accelerate. The requirement for precision will also increase as timing margins shrink in higher-bandwidth systems.

Our SiliconClock IC product line provides a broad range of general-purpose solutions including clock generators, clock fanout buffers/converters, and zero delay buffers to meet customers’ needs for their timing trees. In fiscal 2010, we developed clock generators and buffers to support the new PCIe GEN3 8 Gb specification. In fiscal 2011, we introduced multiple clock generator products based on our latest HiFlex^TM silicon clock technology. In fiscal 2012, we developed high performance differential clock buffers with ultra-low jitter mainly for the next generation networking, cloud computing infrastructure and systems. These new products offer multiple frequency outputs and are designed to meet the extremely low jitter requirements of the newest high speed PCI Express GEN3, SAS2, 10Gb Ethernet, and other high speed protocols. Many of these new products were also introduced in smaller package sizes and reduced power requirements to help enable Energy Star ratings for end customer platforms.

HiFlex^TM Clock Family:

This newly introduced clock generator family includes high frequency and low jitter clock signals generated from fundamental crystals to provide high performance and flexible timing solutions to networking and storage systems. Performance of less than one picosecond of jitter makes these products ideal for replacing multiple XO buffer generators in a system and provides additional cost savings to our customers. In fiscal 2012, our HiFlex clock family began being adopted by major networking customers worldwide.

Clock Buffers and Zero-Delay Clock Drivers:

Clock buffers receive a clock signal from a frequency source and create multiple copies of the same frequency for distribution across system boards. We offer 1.2-volt (1.2V), 1.5V, 1.8V, 2.5V, 3.3V and 5V clock buffers for high-speed, low-skew applications in computers and networking equipment. We offer options for integrated crystal oscillators and provide a flexible selection of output levels for interfacing to various system components. For systems that require higher performance, we have differential clock buffers with frequencies up to 800MHz. Zero-delay clocks virtually eliminate propagation delays by synchronizing the clock outputs with the incoming frequency source. Our 3.3V, 2.5V and 1.8V zero-delay clock drivers offer frequencies of up to 400MHz for applications in networking switches, routers and hubs, computer servers, and memory modules. Differential zero-delay clock buffers support GEN2 PCIe as well as fully buffered dual in-line memory modules (“DIMM”). Zero-delay buffers support the 2nd generation double date rate (“DDR II”) memory technologies available today. In fiscal 2011, we introduced clock buffer products that support PCIe GEN3 (8Gbps) and meet extremely low jitter requirements. In fiscal 2012, we developed high performance differential clock buffers with ultra-low jitter for the next generation networking, cloud computing infrastructure and systems.

Clock Generators:

Clock generators generate various output frequencies using a single input frequency source and provide critical timing signals to microprocessors, memory and peripheral functions. Our products support a wide range of microprocessor systems and their associated integrated chipsets for computing, communication and consumer

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applications. For computing applications, we provide PCIe clock synthesizers for server, notebook and desktop PC applications. For high-performance networking and storage applications, we have high-frequency clock synthesizers targeted up to 300MHz with very low jitter. For emerging networking and consumer platforms with PCIe interface, we provide PCIe GEN2 and GEN3 compliant clock generator/buffers. For consumer applications such as digital TV and digital set-top boxes, we have developed a line of high-performance audio and video clocks. For GPS applications, we have developed low power clock generators to supply a clock reference for processor, real-time clock and other peripheral interface circuits. We have also developed spread-spectrum clock generators used for reducing EMI in graphics and video applications.

VCXO IC:

We offer a VCXO based jitter cleaner product to provide a very low jitter recovered clock signal in synchronous networking systems supporting SyncE function.

Programmable Skew Clocks:

In large computing and communications systems, customers need to provide precise timing across large printed circuit boards (“PCB”s). At the very high frequencies used today, these large PCB traces can result in significant timing delays and matching these delays (or timing skew) can be a significant challenge for the system designer. We have responded to this challenge with a family of programmable skew clock products.

PTI PRODUCTS

Microprocessor Supervisory:

The fundamental application of a Microprocessor Supervisory (“MPS”) circuit is to keep the microprocessor of a system under control. A system with good microprocessor (“uP”) supervisory circuitry can greatly enhance the quality and reliability of the product. We focus on IC-designed uP Supervisory products for the market. Currently we provide a broad series of MPS for engineers to select for many kinds of applications including telecom, networking, hand-held devices and television.

We also provide high accuracy voltage supervisors with watchdog power-up reset and manual reset serial functions to improve system reliability.

Real Time Clock:

The fundamental application for a Real Time Clock (“RTC”) circuit is to provide calendar/clock and data storage functions, that is, application-specific integrated circuits for various systems where the RTC is used as the clock signal source and parameter storage circuit. We provide high accuracy and low power consumption RTC products for many kinds of applications such as STB, DTV, power meters and hand-held devices.

Home Appliance Controller:

We offer highly integrated mixed-signal IC products for small home appliance applications, such as single-chip temperature controller IC products for hair curlers, toaster ovens and smart electronic irons. We also offer IC products for shaver power switches and smart battery charger applications. We provide our customers with very cost effective total solutions utilizing leading-edge semiconductor products. Through joint efforts with our global customers, our home appliance IC products pass stringent regulatory standards, such as Underwriters Laboratories (“UL”), Electrical Fast Transient (“EFT”), and Conformite-Europeenne (“CE”).

Power Switch:

We offer a series of power switches that integrate a current-limiting circuit to protect the input power supply to fall out of regulation against large currents. Power switches are designed for turning power on/off and providing fault protection. When the output loading exceeds the current-limit threshold or a short-circuit situation is present, the devices limit the output current by switching into a constant-current mode. When switched, power dissipation

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increases and causes the junction temperature to rise, whereupon a thermal protection circuit turns off the switch to prevent damage. Recovery from a thermal shutdown occurs automatically once the device has cooled sufficiently.

Low Dropout Regulators:

We offer a series of low dropout (“LDO”) regulators, including a low dropout voltage linear regulator featuring low noise, high ripple rejection and low current consumption specifications. We provide many extremely small packages, such as 1mm by 1mm size LDO regulators to fulfill ultra-mobility applications. We also provide a multi-output power supply in one package to save printed circuit board (“PCB”) space and reduce the bill of materials cost.

FCP PRODUCTS

FCPs include crystals that resonate at a precise frequency, and XOs, a circuit assembly comprising a crystal and accompanying electronic circuitry providing very stable output frequency. Crystals and XOs are essential components used in a wide variety of electronic devices. There are three general categories of oscillator products. Clock Oscillators are oscillators without temperature compensation and voltage tuning options used primarily in networking, telecommunication, wireless and computer/peripheral applications. VCXOs are frequency tunable crystal stabilized oscillators that are voltage controlled and generally operate below 1 GHz. Manufacturers use these oscillators primarily for synchronization in data networking and communications applications.

The ultra-miniature ceramic packaged crystal and clock oscillators are tailored for densely populated applications such as Wireless Local Area Networking (“WLAN”), mobile phones, portable multimedia players, personal data assistants (“PDA”s), GPS modules, networking equipment, and hard disk drives. The ultra-miniature package allows system designers to overcome the physical space constraint of integrating more features into portable applications. The set of available frequencies supports various industry standard protocols and applications.

The XP series of crystal clock oscillators is a proprietary technology that combines our silicon ICs with our quartz crystals to improve reliability and performance for high frequency 2.5V and 3.3V, low voltage complementary metal oxide semiconductor (“LVCMOS”) and low voltage positive emitter coupled logic (“LVPECL”) clock applications. The product family is drop-in compatible with existing Overtone XO, surface acoustic wave (“SAW”) and PLL-based oscillator solutions in 5x7mm and 3.2x5mm packages, yet aims to provide better cost performance benefits. These high frequency clock oscillators are used to provide a stable timing reference in various networking and storage serial connectivity platforms such as 1/10 Gigabit Ethernet, Fiber Channel, synchronous optical networking/synchronous digital hierarchy (“SONET/SDH”), serial advanced technology attachment (“SATA”), Serial Attached SCSI (“SAS”) and Passive Optical Network (“PON”). In fiscal 2010, we launched a family of ‘ASSP’ XO products, which support the most popular frequencies for various storage, server and networking applications, and are available “off the shelf” for rapid design cycles. In fiscal 2011, we have introduced our HiFlex^TM XO family that supports both CMOS and LVPECL outputs and targets for various applications such as networking, server/storage, and consumer applications. The PLL technology implemented in this family enables us to provide any frequency to our customers within one week while still providing very low jitter performance. In fiscal 2011, we have also introduced ASSP VCXO family that is similar to our ASSP XO family. This ASSP VCXO family provides the right solutions for applications such as Base stations, SONET/SDH systems and video systems. Like ASSP XO, the ASSP VCXO family also provides the off the shelf solutions for the tight time to market requirements of our customers. In fiscal 2012, we introduced our high performance programmable XO family with off the shelf delivery service. These products are mainly aimed at storage, networking, and consumer market segments.

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OUR CUSTOMERS

The following is a list of some of our customers and end-users:

Notebook, Desktop and Servers	Telecommunications	Digital Media
Dell	Cisco	Echostar
Intel	Tellabs	Primary Technology
Lenovo	Polycom	Pace
Hewlett Packard	Huawei	Amtran
Wistron	Dell	LGE
Asustek	Avaya	Proview
Gigabyte	Alcatel-Lucent	Hikvision
Micro Star	Zhongxing Telecom (ZTE)	Toshiba
Samsung	Huawei-3Com
Acer	Motorola Solutions
Google
Networking Equipment	Mobile Terminal	Contract Manufacturing
Cisco	Garmin	Foxconn
Nokia-Siemens	LG Electronics	Solectron
Brocade Communications	Samsung	Celestica
Delta Networks	Even	Sanmina-SCI
Juniper	Panasonic	Flextronics
Alpha Networks	Inventec Appliance	Jabil
H3C		Inventec
Cameo Communications
TP-LINK
Askey
Freebox
Peripherals	Storage
Hewlett Packard	JMSH International Corp.
Konica-Minolta	Brocade
Lexmark	M&J Technologies
Xerox	USI
EFI	Hitachi
	Western Digital

 

Our customers include distributors, contract manufacturers and OEMs for computer, networking, telecommunications, embedded and consumer markets. Our direct sales include shipments to distributors, contract manufacturers, and OEMs. We consider our end-user customer to be the OEM producing the final electronics product for sale.

In fiscal 2012, direct sales to Avnet and Techmosa accounted for approximately 18% and 14% of net revenues, respectively, and direct sales to our top five direct customers accounted for approximately 47% of net revenues. No end-user customer accounted for greater than 10% of net revenues in the fiscal year ended June 30, 2012 and sales to the top five end-user customers totaled approximately 28% of net revenues. End-user customer revenues include both direct purchases and purchases through distributor or contract manufacturer channels. We rely on the end customer data provided by our direct distribution and contract manufacturing customers for end customer sales data.

In fiscal 2011, direct sales to Avnet and Techmosa accounted for approximately 18% and 15% of net revenues, respectively, and direct sales to our top five direct customers accounted for approximately 51% of net revenues. No end-user customer accounted for greater than 10% of net revenues in the fiscal year ended July 2, 2011 and sales to the top five end-user customers totaled approximately 26% of net revenues.

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In fiscal 2010, our direct sales to Avnet and Techmosa accounted for approximately 22% and 14% of net revenues, respectively, and direct sales to our top five direct customers accounted for approximately 54% of net revenues. One end-user customer accounted for approximately 12% of net revenues in the fiscal year ended July 3, 2010.

We continue to expect a small number of customers to account for a large portion of our net revenues. See Item 1A “Risk Factors; Factors That May Affect Operating Results — The demand for our products depends on the growth of our end users’ markets” and “Risk Factors; Factors That May Affect Operating Results — A large portion of our revenues is derived from sales to a few customers, who may cease purchasing from us at any time” of this Annual Report on Form 10-K.

DESIGN AND PROCESS TECHNOLOGY

Our design efforts focus on the development of high-performance digital, analog and mixed-signal ICs. To minimize design cycle times of high-performance products, we use a modular design methodology that has enabled us to produce many new products each year and to meet our customers’ need for fast time-to-market response. This methodology uses state-of-the-art computer-aided design software tools such as high-level description language (“HDL”), logic synthesis, full-chip mixed-signal simulation, and automated design layout and verification and uses our library of high-performance digital and analog core cells. We have developed this family of core cells over several years and it contains high-performance, specialized digital and analog functions not available in commercial application-specific integrated circuit (“ASIC”) libraries. Among these cells are our proprietary mixed-voltage input/output (“I/O”) cells, high-speed, low-noise I/O cells, analog and digital PLLs, charge pumps and data communication transceiver circuits using low voltage differential signaling. The United States Patent and Trademark Office has granted us 104 U.S. patents and we have 7 U.S. patent applications pending. Another advantage of our modular design methodology is that it allows the application of final design options late in the wafer manufacturing process to determine a product’s specific function. This option gives us the ability to use pre-staged wafers, which significantly reduces the design and manufacturing cycle time and enables us to respond rapidly to a customer’s prototype needs and volume requirements.

We use advanced CMOS processes to achieve higher performance and lower die cost. Our process and device engineers work closely with our independent wafer foundry partners to develop and evaluate new process technologies. Our process engineers also work closely with circuit design engineers to improve the performance and reliability of our cell library. We currently manufacture a majority of our products using 0.8, 0.6, 0.5, 0.35, 0.25, 0.18 and 0.13u micron CMOS process technologies and are currently developing and beginning to ship new products using 0.09u (90 nanometer) technology. We are also using a high-voltage CMOS process developed by one of our wafer suppliers in the design of higher voltage switch products.

For FCPs, we have a well-established design focus, methodology and execution technique. We implement the majority of designs for oscillators and higher-functionality parts with CMOS process technologies. However, we also pursue designs incorporating Bipolar, BiCMOS and Silicon-Germanium (SiGe) technologies, as well as utilization of complex programmable logic device (CPLD) and field-programmable gate array (FPGA) components. Crystal components developed and marketed by all suppliers are similar. However, the operating behavior of the resonator and the specific techniques employed in their design, modeling, manufacturing & testing processes are highly specialized and distinctive. As such, manufacturing processes, equipment and test procedures can form an important part of the design activity. The outcome of the development becomes a permanent and proprietary part of the design specification.

SALES AND MARKETING

We market and distribute our products through a worldwide network of independent sales representatives and distributors supported by our internal and field sales organization. Sales to domestic and international distributors represented 67% of our net revenues in fiscal 2012, 69% of our net revenues in fiscal 2011, and 62% of our net revenues in fiscal 2010. Our major distributors in North America and Europe include Avnet, Arrow Electronics, Future Electronics and Nu Horizons Electronics. Our major Asian distributors include AIT (Hong Kong), Avnet (Asia), Chinatronics (Hong Kong), Desner Electronics (Singapore), Internix (Japan), MCM (Japan), RTI Holdings (Hong Kong) and Techmosa (Taiwan).

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We have two regional sales offices in the United States (New England and Texas), as well as international sales offices in Taiwan, Korea, Singapore, Hong Kong, Japan and the United Kingdom. International sales comprised approximately 95% of our net revenues in fiscal 2012, 94% of our net revenues in fiscal 2011 and 92% of our net revenues in fiscal 2010. For further information regarding our international and domestic revenues, see the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Comparison of Fiscal 2012, 2011 and 2010 — Net Revenues” in Item 7 of this Annual Report on this Form 10-K. We also support field sales design-in and training activities with application engineers. Marketing and product management personnel are located at our corporate headquarters in San Jose, California and in Taiwan.

We focus our marketing efforts on market knowledge, product definition, new product introduction, product marketing and advertising. We use advertising both domestically and internationally to market our products independently and in cooperation with our distributors. Our product information is available on our website, which contains overview presentations, technical information on our products, and offers design modeling/applications support plus sample-request capabilities online. We also publish and circulate technical briefs relating to our products and their applications.

MANUFACTURING

We have adopted a fabrication foundry non-ownership (“fabless”) IC manufacturing strategy by subcontracting our wafer production to independent wafer foundries. We have established collaborative relationships with selected independent foundries with which we can develop a strategic relationship to the benefit of both parties. We believe that our fabless strategy enables us to introduce high performance products quickly at competitive cost. Currently, our principal manufacturing relationships have been with Magnachip, GlobalFoundries, TSMC and SMIC. We have an ongoing effort to qualify new foundry vendors that offer cost or other advantages.

We rely on foreign subcontractors for the assembly, testing and packaging of our finished products. Some of these subcontractors are a single source supplier for certain packages.

To enhance our manufacturing capability of FCPs, which are composed of crystals and oscillators housed in multiple sized surface mount ceramic packages, PSE-TW and PSE-SD have “state of the art” high volume production lines capable of manufacturing FCPs with tight specifications to competitively support the most popular high volume target industries including telecommunications, medical, computing and security as well as other commercial sectors. PSE-TW is ISO9001 certified and also has TS16949 certification, which allows us access to the automotive FCP market. To supplement our manufacturing capacity we are maintaining established relationships with our manufacturing partners and we have a plan already implemented for qualifying additional factories and creating new partners. New relationships and our expanded capacity are necessary to continue cost reduction, grow our revenue and maintain our competitive position in the FCP market. We have an operations team based in Asia that pursues lower cost packaging techniques and both monitors and modifies manufacturing processes to maximize yields and improve quality. After a manufacturing partner has been qualified through a stringent process, we maintain design and process controls that include using recurring factory audits and in some cases using onsite inspectors.

In order to complement our FCP manufacturing capabilities, we also have established relationships with selected companies for subcontracting some of the manufacturing. The primary ones are Yantai Dynamic in Yantai, China and Zhejiang East Crystal in Zhejiang, China. We have an ongoing effort to establish relationships and qualify additional factories to continue cost reduction and maintain our competitive position in the FCP market.

COMPETITION

The IC semiconductor and FCP industry is intensely competitive. Significant competitive factors in the market for high-performance ICs and FCPs include the following:

•   product features and performance;

•   price;

•   product quality;

•   success in developing new products;

•   timing of new product introductions;

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•   general market and economic conditions;

•   adequate wafer fabrication, assembly and test capacity and sources of raw materials;

•   efficiency of production; and

•   ability to protect intellectual property rights and proprietary information.

Our IC competitors include Analog Devices, Cypress Semiconductor Corporation, Fairchild Semiconductor International, Hitachi, Integrated Device Technology, Inc., Maxim Integrated Products, Inc., Motorola, On Semiconductor Corp., NXP, Parade Technologies, PLX Technology, Silicon Laboratories, Inc., STMicroelectronics, Texas Instruments, Inc. and Toshiba. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships than we do. We also compete with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in our primary markets in order to gain or maintain market share. We also face competition from the makers of ASICs and other system devices. These devices may include interface functions, which may eliminate the need or sharply reduce the demand for our products in particular applications.

Our FCP competitors include Vectron International, Inc., Connor Winfield Ltd., Fox Electronics, Ecliptek Corporation, Mtron PTI, Epson Toyocom Corporation, Kyocera Kinseki Corporation, Daishinku Corporation, Nihon Dempa Kogyo Company, Ltd, TXC Corporation, Siward Crystal Technology Co, Ltd, Taitien Electronics Co, Ltd and Hosonic Electronic Co, Ltd. A second group of competitors in China primarily pursues the lower end of the FCP market with limited technical content products. However, they do have some sales to our target customer base.

RESEARCH AND DEVELOPMENT

We believe that the continued timely development of new interface ICs and FCPs is essential to maintaining our competitive position. Accordingly, we have assembled a team of highly skilled engineers whose activities are focused on the development of signal transfer, routing and timing technologies and products. We have IC design centers located in San Jose, California, Hong Kong, Shanghai, Yangzhou and Taiwan and we develop FCP products in San Jose, California and Taiwan. Research and development expenses were $21.7 million in fiscal 2012, $20.2 million in fiscal 2011 and $17.2 million in fiscal 2010. Additionally, we actively seek cooperative product development relationships.

INTELLECTUAL PROPERTY

In the United States, we hold 104 patents covering certain aspects of our product designs, with various expiration dates through March 2029, and we have 7 additional patent applications pending. We expect to continue to file patent applications where appropriate to protect our proprietary technologies; however, we believe that our continued success depends primarily on factors such as the technological skills and innovation of our personnel, rather than on our patents.

EMPLOYEES

As of June 30, 2012, we had 976 full-time employees, including 110 in sales, marketing and customer support, 502 in manufacturing, assembly and testing, 196 in research and development and 168 in finance and administration, including information systems and quality assurance. We have never had a work stoppage and no labor organization represents any of our employees. We consider our employee relations to be good.

AVAILABLE INFORMATION

We file electronically with the Securities and Exchange Commission (“SEC”) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The SEC maintains an Internet site at http://www.sec.gov that contains these reports, proxy and information statements. We make available on our website at http://www.pericom.com, free of charge, copies of these reports as soon as reasonably practicable after filing

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or furnishing the information to the SEC. Any reports or financial information presented at our website are not to be considered part of this annual report filed on Form 10-K.

ITEM 1A. RISK FACTORS

In addition to other information contained in this Form 10-K, investors should carefully consider the following factors that could adversely affect our business, financial condition and operating results as well as adversely affect the value of an investment in our common stock. This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any statements regarding: projections of revenues, research and development expenses, selling, general and administrative expenses, other expenses, gross profit, gross margin, order backlog or other financial items; the plans and objectives of management for future operations; the implementation of advanced process technologies; our tax rate; the adequacy of allowances for returns, price protection and other concessions; proposed new products or services; the sufficiency of cash generated from operations and cash balances; our future investment in the Yangzhou facility; our exposure to interest rate risk; future economic conditions or performance; plans to focus on cost control; plans to seek intellectual property protection for our technologies; expectations regarding export sales and net revenues; the expansion of sales efforts; acquisition prospects; the results of our possible future acquisitions; technological trends; and assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including but not limited to the factors set forth below and elsewhere in this report. All forward-looking statements and reasons why results may differ included in this Annual Report are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ.

RISKS RELATED TO OUR BUSINESS AND OPERATING RESULTS

In the past, our operating results have varied significantly and are likely to fluctuate in the future, making it difficult to predict our future operating results.

We continue to face a challenging business environment and limited visibility on end-market demands. Wide varieties of factors affect our operating results, many of which are beyond our control. These factors and risks include, but are not limited to, the following:

•   changes in the quantity of our products sold;

•   changes in the average selling price of our products;

•   general conditions in the semiconductor industry;

•   changes in our product mix;

•   a change in the gross margins of our products;

•   the operating results of the FCP product line, which normally has a lower profit margin than IC products;

•   expenses incurred in obtaining, enforcing, and defending intellectual property rights;

•   the timing of new product introductions and announcements by us and by our competitors;

•   customer acceptance of new products introduced by us;

•   delay or decline in orders received from distributors;

•   growth or reduction in the size of the market for interface ICs;

•   the availability of manufacturing capacity with our wafer suppliers, especially to support sales growth and new products;

•   changes in manufacturing costs;

•   fluctuations in manufacturing yields;

•   disqualification by our customers for quality or performance related issues;

•   the ability of customers to pay us;

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•   increased research and development expenses associated with new product introductions or process changes;

•   the impairment of our goodwill, intangible assets or other long-lived assets; and

•   fluctuations in our effective tax rate from quarter to quarter.

All of these factors are difficult to forecast and could seriously harm our operating results. Our expense levels are based in part on our expectations regarding future sales and are largely fixed in the short term. Therefore, we may be unable to reduce our expenses fast enough to compensate for any unexpected shortfall in sales. Any significant decline in demand relative to our expectations or any material delay of customer orders could harm our operating results. In addition, if our operating results in future quarters fall below public market analysts’ and investors’ expectations, the market price of our common stock would likely decrease.

The demand for our products depends on the growth of our end users’ markets.

Our continued success depends in large part on the continued growth of markets for the products into which our semiconductor and frequency control products are incorporated. These markets include the following:

•   computers, notebooks, tablets and connectivity to related peripherals;

•   data communications and telecommunications equipment including switches and routers;

•   servers and storage equipment including cloud computing requirements;

•   consumer electronics equipment; and

•   embedded systems including video surveillance, medical and automotive.

Any decline in the demand for products in these markets could seriously harm our business, financial condition and operating results. These markets have also historically experienced significant fluctuations in demand. We may also be seriously harmed by slower growth in the other markets in which we sell our products.

Customer demands for the Company’s products are volatile and difficult to predict.

Our business is characterized by short-term orders and shipment schedules. We do not have long-term purchase agreements with any of our customers. Customers can typically cancel or reschedule their orders without significant penalty. We typically plan production and inventory levels based on forecasts of customer demand generated with input from customers and sales representatives. Our customers continuously adjust their inventories in response to changes in end market demand for their products and the availability of semiconductor components. This results in frequent changes in demand for our products. Accordingly, we must rely on multiple assumptions to forecast customer demand. Various external factors that are outside of our control can make it difficult to accurately make such forecasts, and the volatility of customer demand limits our ability to predict future levels of sales and profitability.

Further, as end customer demand can change very quickly, the supply of semiconductors can quickly and unexpectedly match or exceed demand. Also, semiconductor suppliers can rapidly increase production output. This can lead to a sudden oversupply situation and a subsequent reduction in order rates and revenues as customers adjust their inventories to true demand rates. A rapid and sudden decline in customer demand for our products can result in excess quantities of certain of our products relative to demand. Under such circumstances, we may be required to record significant provisions for excess and obsolete inventories. This could materially and adversely affect our results of operations and financial condition.

The markets for our products are characterized by rapidly changing technology, and our financial results could be harmed if we do not successfully develop and implement new manufacturing technologies or develop, introduce and sell new products.

The markets for our products are characterized by rapidly changing technology, frequent new product introductions and declining selling prices over product life cycles. We currently offer a comprehensive portfolio of silicon and quartz based products. Our future success depends upon the timely completion and introduction of new products, across all our product lines, at competitive price and performance levels. The success of new products depends on a variety of factors, including the following:

•   product performance and functionality;

•   customer acceptance;

•   competitive cost structure and pricing;

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•   successful and timely completion of product development;

•   sufficient wafer fabrication capacity; and

•   achievement of acceptable manufacturing yields by our wafer suppliers.

Our failure to successfully develop new products that achieve market acceptance in a timely fashion and that can be efficiently and successfully integrated with our customers’ products could adversely affect our ability to grow our business and improve our operating results. The development, introduction and market acceptance of new products is critical to our ability to sustain and grow our business. Any failure to successfully develop, introduce, market and sell new products could materially adversely affect our business and operating results.

We may also experience delays, difficulty in procuring adequate fabrication capacity for the development and manufacture of new products, or other difficulties in achieving volume production of these products. Even relatively minor errors may significantly affect the development and manufacture of new products. If we fail to complete and introduce new products in a timely manner at competitive price and performance levels, our business would be significantly harmed.

If we do not develop products that our customers and end-users design into their products, or if their products do not sell successfully, our business and operating results would be harmed.

We have relied in the past and continue to rely upon our relationships with our customers and end-users for insights into product development strategies for emerging system requirements. We generally incorporate new products into a customer’s or end-user’s product or system at the design stage. Our success has been, and will continue to be, dependent upon manufacturers designing our connectivity products into their products. To achieve design wins, which are decisions by manufacturers to design our products into their systems, we must define and deliver cost effective and innovative connectivity solutions on a timely basis that satisfy the manufacturers’ requirements and specifications. Our ability to achieve design wins is subject to numerous risks including competitive pressures as well as technological risks and delays in our product development cycle. However, these design efforts, which can often require significant expenditures by us, may precede product sales, if any, by a year or more. Moreover, the value to us of any design win will depend in large part on the ultimate success of the customer or end-user’s product and on the extent to which the system’s design accommodates components manufactured by our competitors. If we fail to achieve design wins or if the design wins fail to result in significant future revenues, our operating results would be harmed. If we have problems developing or maintaining our relationships with our customers and end-users, our ability to develop well-accepted new products may be impaired.

Intense competition in the semiconductor industry may reduce the demand for our products or the prices of our products, which could reduce our revenues and gross profits and limit our ability to maintain or grow our business.

The semiconductor industry is intensely competitive, and we expect competition in this industry to continue to increase. This competition has resulted in rapid technological change, evolving standards, reductions in product selling prices and rapid product obsolescence. If we are unable to successfully meet these competitive challenges, we may be unable to maintain and grow our business. Any inability on our part to compete successfully would also adversely affect our results of operations and impair our financial condition.

Our competitors include Analog Devices, Cypress Semiconductor, Fairchild Semiconductor, Hitachi, Integrated Device Technology, Maxim Integrated Products, Motorola, On Semiconductor, NXP, Parade Technologies, PLX Technology, Silicon Laboratories, STMicroelectronics, Texas Instruments, and Toshiba. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships than we do. We also compete with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in our primary markets in order to gain or maintain market share.

We believe that our future success will depend on our ability to continue to improve and develop our products and processes. Unlike us, many of our competitors maintain internal manufacturing capacity for the fabrication and assembly of semiconductor products. This ability may provide them with more reliable manufacturing capability, shorter development and manufacturing cycles and time-to-market advantages. In addition, competitors with their own wafer fabrication facilities that are capable of producing products with the same design geometries as ours

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may be able to manufacture and sell competitive products at lower prices. Any introduction of products by our competitors that are manufactured with improved process technology could seriously harm our business. As is typical in the semiconductor industry, our competitors have developed and marketed products that function similarly or identically to ours. If our products do not achieve performance, price, size or other advantages over products offered by our competitors, we might lose market share. Competitive pressures could also reduce market acceptance of our products, reduce our prices and increase our expenses.

We also face competition from the makers of ASICs and other system devices. These devices may include interface logic functions that may eliminate the need or sharply reduce the demand for our products in particular applications.

Downturns in the semiconductor industry, rapidly changing technology, accelerated selling price erosion and evolving industry standards can harm our operating results.

The semiconductor industry has historically been cyclical and periodically subject to significant economic downturns, characterized by diminished product demand, accelerated erosion of selling prices and overcapacity, as well as rapidly changing technology and evolving industry standards. In the future, we may experience substantial period-to-period fluctuations in our business and operating results due to general semiconductor industry conditions, overall economic conditions or other factors. Our business is also subject to the risks associated with the effects of legislation and regulations relating to the import or export of semiconductor products.

Recent domestic and worldwide economic conditions adversely affected and could have future adverse effects on our business, results of operations, financial condition and cash flows.

Our revenues and earnings have fluctuated significantly in the past and may fluctuate significantly in the future. General economic or other conditions could cause a downturn in the market for our products or technology. The 2008-2009 financial disruption affecting the banking system, investment banks, insurance companies and the financial markets negatively impacted general domestic and global economic conditions. These economic conditions resulted in our facing a very challenging period leading to reduced sales and earnings in fiscal 2009.

In 2011 and 2012, concerns over European sovereign debt and the ability of countries to borrow funds have again raised questions about the loan portfolios of large international banks, and low economic growth rates have increased the possibility of an economic downturn. There could be a number of effects on our business that could also adversely affect our operating results. Disruptions may result in the insolvency of key suppliers resulting in product delays; the inability of our customers to obtain credit to finance purchases of our products and/or customer insolvencies that cause our customers to change delivery schedules, cancel or reduce orders; a slowdown in global economies which could result in lower end-user demand for our products; and increased impairments of our investments. Net income could vary from expectations depending on the gains or losses realized on the sale or exchange of securities, gains or losses from equity method investments, and impairment charges related to goodwill, intangible assets, long-term assets, investments and marketable securities. Our cash and marketable securities investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements and financial market conditions in fixed income securities.

Volatility in the financial markets and overall economic uncertainty increases the risk of substantial quarterly and annual fluctuations in our earnings. Given the current economic environment, we remain cautious and we expect our customers to be cautious as well, which could affect our future results. If the economic recovery slows down or dissipates, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

The complexity of our products makes us susceptible to manufacturing problems, which could increase our costs and delay our product shipments.

The manufacture and assembly of our products is highly complex and sensitive to a wide variety of factors, including:

•   the level of contaminants in the manufacturing environment;

•   impurities in the materials used; and

•   the performance of manufacturing personnel and production equipment.

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In a typical semiconductor manufacturing process, silicon wafers produced by a foundry are cut into individual die. These die are assembled into individual packages and tested for performance. Our wafer fabrication suppliers have from time to time experienced lower than anticipated yields of suitable die. In the event of such decreased yields, we would incur additional costs to sort wafers, an increase in average cost per usable die and an increase in the time to market or availability of our products. These conditions could reduce our net revenues and gross margin and harm our customer relations.

We rely on independent manufacturers who may not be able to meet our manufacturing requirements.

We do not manufacture any of our IC products. Therefore, we are referred to in the semiconductor industry as a “fabless” producer. We depend upon third party foundries to produce wafers and subcontractors to manufacture IC products that meet our specifications. We currently have third party manufacturers located in China, Taiwan, Singapore, Malaysia, India, Korea and Japan that can produce products that meet our needs. However, as the industry continues to progress to smaller manufacturing and design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may introduce new problems and delays that may affect product development and deliveries. Due to the nature of the industry and our status as a “fabless” IC semiconductor company, we could encounter fabrication-related problems that may affect the availability of our products, delay our shipments or increase our costs.

Our contracts with our wafer suppliers do not obligate them to a minimum supply or set prices. Any inability or unwillingness of our wafer suppliers generally, and GlobalFoundries, TSMC and MagnaChip in particular, to meet our manufacturing requirements would delay our production and product shipments and harm our business.

In recent years, we purchased over 70% of our wafers from MagnaChip, TSMC and GlobalFoundries, with the balance from other wafer suppliers. Our reliance on independent wafer suppliers to fabricate our wafers at their production facilities subjects us to possible risks such as:

•   lack of adequate capacity or assured product supply;

•   lack of available manufactured products;

•   reduced control over delivery schedules, quality assurance, manufacturing yields and production costs; and

•   unanticipated changes in wafer prices.

Any inability or unwillingness of our wafer suppliers to provide adequate quantities of finished wafers to meet our needs in a timely manner would delay our production and product shipments and seriously harm our business. In March 2004, GlobalFoundries shut down one of their production facilities used to manufacture our products. We transitioned the production of these products to different facilities. The transfer of production of our products to other facilities subjects us to the above listed risks as well as potential yield or other production problems, which could arise as a result of any change.

At present, we purchase wafers from our suppliers through the issuance of purchase orders based on our rolling nine-month forecasts. The purchase orders are subject to acceptance by each wafer supplier. We do not have long-term supply contracts that obligate our suppliers to a minimum supply or set prices. We also depend upon our wafer suppliers to participate in process improvement efforts, such as the transition to finer geometries. If our suppliers are unable or unwilling to do so, our development and introduction of new products could be delayed. Furthermore, sudden shortages of raw materials or production capacity constraints can lead wafer suppliers to allocate available capacity to customers other than us or for their internal uses, interrupting our ability to meet our product delivery obligations. Any significant interruption in our wafer supply would seriously harm our operating results and our customer relations. Our reliance on independent wafer suppliers may also lengthen the development cycle for our products, providing time-to-market advantages to our competitors that have in-house fabrication capacity.

In the event that our suppliers are unable or unwilling to manufacture our key products in required volumes, we will have to identify and qualify additional wafer foundries. The qualification process can take up to nine months or longer. Furthermore, we are unable to predict whether additional wafer foundries will become available to us or will be in a position to satisfy any of our requirements on a timely basis.

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We depend on single or limited source assembly subcontractors with whom we do not have written contracts. Any inability or unwillingness of our assembly subcontractors to meet our assembly requirements would delay our product shipments and harm our business.

We primarily rely on foreign subcontractors for the assembly and packaging of our products and, to a lesser extent, for the testing of finished products. Some of these subcontractors are our single source supplier for some of our packages. In addition, changes in our or a subcontractor’s business could cause us to become materially dependent on a single subcontractor. We have from time to time experienced difficulties in the timeliness and quality of product deliveries from our subcontractors and may experience similar or more severe difficulties in the future. We generally purchase these single or limited source components or services pursuant to purchase orders and have no guaranteed arrangements with these subcontractors. These subcontractors could cease to meet our requirements for components or services, or there could be a significant disruption in supplies from them, or degradation in the quality of components or services supplied by them. Any circumstance that would require us to qualify alternative supply sources could delay shipments, result in the loss of customers and limit or reduce our revenues. Introducing new products or transferring existing products to a new third party manufacturer or process may result in unforeseen product specification and operating problems. These problems may affect our shipments and may be costly to correct.

We may experience integration or other problems with potential future acquisitions, which could have an adverse effect on our business or results of operations. New acquisitions could dilute the interests of existing stockholders, and the announcement of new acquisitions could result in a decline in the price of our common stock.

Our previous and potential future acquisitions could result in the following:

•   large one-time write-offs;

•   the difficulty in integrating newly-acquired businesses and operations in an efficient and effective manner;

•   the challenges in achieving strategic objectives, cost savings, and other benefits from acquisitions as anticipated;

•   the risk of diverting the attention of senior management from other business concerns;

•   risks of entering geographic and business markets in which we have no or limited prior experience and potential loss of key employees of acquired organizations;

•   the risk that our markets do not evolve as anticipated and that the technologies and capabilities acquired do not prove to be those needed to be successful in those markets;

•   potentially dilutive issuances of equity securities;

•   excessive usages of cash;

•   the incurrence of debt and contingent liabilities or amortization expenses related to intangible assets;

•   difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies; and

•   difficulties in integrating or expanding information technology systems and other financial or business processes that may lead to financial reporting issues.

In the first quarter of fiscal 2011, we completed the acquisition of outstanding PTI shares not owned by us, as described in Note 6 of Notes to Consolidated Financial Statements. We are in the process of integrating PTI as a wholly-owned subsidiary and may experience one or more of the risks summarized above in the process of completing that integration.

As part of our business strategy, we may seek acquisition prospects that would complement our existing product offerings, improve our market coverage or enhance our technological capabilities. In addition, from time to time, we invest in other companies, without actually acquiring them, and such investments involve many of the same risks as are involved with acquisitions.

Implementation of new Financial Accounting Standards Board (“FASB”) rules and the issuance of new corporate governance regulations or other accounting regulations, or reinterpretation of existing laws or regulations, could materially impact our business or stated results.

In general, from time to time the government, courts and the financial accounting boards may issue new corporate governance regulations or accounting regulations, or modify or reinterpret existing ones. There may be future

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changes in laws, interpretations or regulations that would affect our financial results or the way in which we present them. Additionally, changes in the laws or regulations could have adverse effects on hiring and many other aspects of our business that would affect our ability to compete, both nationally and internationally.

If we are unable to maintain processes and procedures to sustain effective internal control over our financial reporting, our ability to provide reliable and timely financial reports could be harmed and this could have a material adverse effect on our stock price.

Under the rules promulgated under Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, we are required to maintain, and evaluate the effectiveness of, our internal control over financial reporting and disclosure controls and procedures. In our annual reports on Form 10-K for the years ended July 3, 2010, June 27, 2009, June 30, 2007 and July 2, 2005, we reported material weaknesses in our internal control over financial reporting. We have since remediated these deficiencies and continue to spend a significant amount of time and resources to ensure compliance with Section 404 of the Sarbanes Oxley Act of 2002. As reported in Item 9A of this Form 10-K, our management does not believe that we had any material weaknesses in our internal control over financial reporting as of June 30, 2012, and management has determined that as of June 30, 2012, our internal control over financial reporting was effective. However, we have and will continue to evolve our business in a changing marketplace. In addition, we are expanding our overseas operations, and as we grow in these locations, we may have difficulty in recruiting and retaining a complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of U.S. generally accepted accounting principles commensurate with our financial reporting requirements. Due to these factors, there can be no assurance that other material weaknesses or significant deficiencies will not arise in the future. Should we or our independent registered public accounting firm determine in future periods that we have a material weakness in our internal control over financial reporting, the reliability of our financial reports may be impacted, and investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price and we could suffer other materially adverse consequences.

Our finance department has undergone, and continues to undergo, significant changes.

In the past three years, we have undergone significant turnover of personnel in the finance department, including in significant positions. During fiscal 2010, we hired a new Chief Financial Officer and Corporate Controller. During fiscal 2011, we hired a new Accounting Manager and outsourced internal auditing activities to an independent consultant. There can be no assurance that these changes will improve our finance functions, or that the finance personnel turnover we have experienced will not continue. In either event, the reliability of our financial reports may be impacted, and investors may lose confidence in the accuracy or completeness of our financial reports, which could have an adverse impact on our stock price.

Changes to environmental laws and regulations applicable to manufacturers of electrical and electronic equipment are causing us to redesign our products, and may increase our costs and expose us to liability.

The implementation of new environmental regulatory legal requirements, such as lead free initiatives, may affect our product designs and manufacturing processes. The impact of such regulations on our product designs and manufacturing processes could affect the timing of compliant product introductions as well as their commercial success. Redesigning our products to comply with new regulations may result in increased research and development and manufacturing and quality control costs. In addition, the products we manufacture that comply with new regulatory standards may not perform as well as our current products. Moreover, if we are unable to successfully and timely redesign existing products and introduce new products that meet new standards set by environmental regulation and our customers, sales of our products could decline, which could materially adversely affect our business, financial condition and results of operations.

We compete with others to attract and retain key personnel, and any loss of or inability to attract key personnel would harm us.

To a greater degree than non-technology companies, our future success will depend on the continued contributions of our executive officers and other key management and technical personnel. None of these individuals has an employment agreement with us and each one would be difficult to replace. We do not maintain any key person life insurance policies on any of these individuals. The loss of the services of one or more of our executive officers

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or key personnel or the inability to continue to attract qualified personnel could delay product development cycles or otherwise harm our business, financial condition and results of operations.

Our future success also will depend on our ability to attract and retain qualified technical, sales, marketing, finance and management personnel, particularly highly skilled design, process and test engineers, for whom competition can be intense. During strong business cycles, we expect to experience difficulty in filling our needs for qualified engineers and other personnel. If we do not succeed in hiring and retaining candidates with appropriate qualifications, our revenues, operations and product development efforts could be harmed.

Our limited ability to protect our intellectual property and proprietary rights could harm our competitive position. Litigation regarding intellectual property could divert management attention, be costly to defend and prevent us from using or selling the challenged technology.

Our success depends in part on our ability to obtain patents and licenses and preserve other intellectual property rights covering our products and development and testing tools. In the United States, we currently hold 104 patents covering certain aspects of our product designs and have 7 additional patent applications pending. Copyrights, mask work protection, trade secrets and confidential technological know-how are also key to our business. Additional patents may not be issued to us or our patents or other intellectual property may not provide meaningful protection. We may be subject to, or initiate, interference proceedings in the U.S. Patent and Trademark Office. These proceedings can consume significant financial and management resources. We may become involved in litigation relating to alleged infringement by us of others’ patents or other intellectual property rights. This type of litigation is frequently expensive to both the winning party and the losing party and takes up significant amounts of management’s time and attention. In addition, if we lose such a lawsuit, a court could require us to pay substantial damages and/or royalties or prohibit us from using essential technologies. For these and other reasons, this type of litigation could seriously harm our business. Also, although we may seek to obtain a license under a third party’s intellectual property rights in order to bring an end to certain claims or actions asserted against us, we may not be able to obtain such a license on reasonable terms or at all.

Because it is important to our success that we are able to prevent competitors from copying our innovations, we intend to continue to seek patent, trade secret and mask work protection for our technologies. The process of seeking patent protection can be long and expensive, and we cannot be certain that any currently pending or future applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us. Furthermore, others may develop technologies that are similar or superior to our technology or design around the patents we own.

We also rely on trade secret protection for our technology, in part through confidentiality agreements with our employees, consultants and third parties. However, these parties may breach these agreements. In addition, the laws of some territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States.

Our independent foundries use a process technology that may include technology we helped develop with them, that may generally be used by those foundries to produce their own products or to manufacture products for other companies, including our competitors. In addition, we may not have the right to implement key process technologies used to manufacture some of our products with foundries other than our present foundries.

We may not provide adequate allowances for exchanges, returns and concessions.

We recognize revenue from the sale of products when shipped, less an allowance based on future authorized and historical patterns of returns, price protection, exchanges and other concessions. We believe our methodology and approach are appropriate. However, if the actual amounts we incur exceed the allowances, it could decrease our revenue and corresponding gross profit.

Our future tax rates and tax payments could be higher than we anticipate and may harm our results of operations.

As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of multiple and sometimes conflicting tax

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laws and regulations as well as multinational tax conventions. A number of factors, including unanticipated changes in the mix of earnings in countries with differing statutory tax rates or by unexpected changes in existing tax laws or our interpretation of them, could unfavorably affect our future effective tax rate. In the event our management determines it is no longer more likely than not that we will realize a portion of our deferred tax assets we will be required to increase our valuation allowance which will result in an increase in our effective tax rate. Furthermore, our tax returns are subject to examination in all the jurisdictions in which we operate which subjects us to potential increases in our tax liabilities. All of these factors could have an adverse effect on our financial condition and results of operations.

A large portion of our revenues is derived from sales to a few key customers, and the loss of one or more of our key customers, or their key end user customers, could significantly reduce our revenues. In addition, our sales through distributors increase the complexity of our business.

A relatively small number of key customers have accounted for a significant portion of our net revenues in each of the past several fiscal years. In general we expect this to continue for the foreseeable future. We had two direct customers who each accounted for more than 10% of net revenues during the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010. As a percentage of net revenues, sales to our top five direct customers during the fiscal year ended June 30, 2012 totaled 47%, as compared with 51% in the fiscal year ended July 2, 2011 and 54% in the fiscal year ended July 3, 2010.

We do not have long-term sales agreements with any of our customers. Our customers are not subject to minimum purchase requirements, may reduce or delay orders periodically due to excess inventory and may discontinue purchasing our products at any time. Our distributors typically offer competing products in addition to ours. For the fiscal year ended June 30, 2012, sales to our domestic and international distributors were approximately 67% of net revenues, as compared to approximately 69% of net revenues in the fiscal year ended July 2, 2011 and approximately 62% of net revenues in the fiscal year ended July 3, 2010. Distributors therefore continue to account for a significant portion of our sales. The loss of one or more significant customers, or the decision by a significant distributor to carry additional product lines of our competitors could decrease our revenues.

Selling through distributors increases the complexity of our business, requiring us to, among other matters:

•   manage a more complex supply chain;

•   manage the level of inventory at each distributor;

•   provide for credits, return rights and price protection;

•   estimate the impact of credits, return rights, price protection and unsold inventory at distributors; and

•   monitor the financial condition and creditworthiness of our distributors.

Any failure to manage these challenges could cause us to inaccurately forecast sales and carry excess or insufficient inventory, thereby adversely affecting our operating results and cash flows.

Because we sell products in foreign markets and have operations outside of the United States, we face foreign business, political, economic and currency risks that could seriously harm us. Almost all of our wafer suppliers and assembly subcontractors are located in Southeast Asia, as are our FCP manufacturing facilities, which exposes us to the problems associated with international operations.

Risks associated with international business operations include the following:

•   disruptions or delays in shipments;

•   changes in economic conditions in the countries where these subcontractors are located;

•   currency fluctuations;

•   changes in political conditions;

•   potentially reduced protection for intellectual property;

•   foreign governmental regulatory requirements and unexpected changes in them;

•   the burdens of complying with a variety of foreign laws;

•   import and export controls;

•   delays resulting from difficulty in obtaining export licenses for technology; and

•   changes in tax laws, tariffs and other barriers, and freight rates.

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Regulatory, geopolitical and other factors could seriously harm our business or require us to modify our current business practices. We are subject to general geopolitical risks in connection with our international operations, such as political and economic instability and changes in diplomatic and trade relationships. Although most of our products are sold in U.S. dollars, we incur a significant amount of certain types of expenses, such as payroll, utilities, capital equipment purchases and taxes in local currencies. The impact of currency exchange rate movements could harm our results and financial condition. In addition, changes in tariff and import regulations and in U.S. and non-U.S. monetary policies could harm our results and financial condition by increasing our expenses and reducing our revenue. Varying tax rates in different jurisdictions could harm our results of operations and financial condition by increasing our overall tax rate.

In fiscal year 2012, we generated approximately 92% of our net revenues from sales in Asia and approximately 3% from sales outside of Asia and the United States. In fiscal year 2011, we generated approximately 90% of our net revenues from sales in Asia and approximately 4% from sales outside of Asia and the United States. In fiscal year 2010, we generated approximately 87% of our net revenues from sales in Asia and approximately 4% from sales outside of Asia and the United States. We expect that foreign sales will continue to represent a significant portion of net revenues. We intend to continue the expansion of our sales efforts outside the United States. This expansion will require significant management attention and financial resources and further subject us to international operating risks.

We have subsidiaries located in Asia. We manufacture some of our frequency control products in Taiwan as well as in the Jinan Development Zone in the Shandong Province of the PRC. The development of the Jinan facility depends upon various tax concessions, tax rebates and other support from the local governmental entity. There can be no assurance that the local governmental entity will not change their position regarding such tax and other support and such a change might adversely affect the successful completion and profitability of this facility. Currently, as a consequence of changing government positions, we are negotiating a possible termination of an R&D Agreement at Yangzhou, as further described in Note 13 of Notes to Consolidated Financial Statements in this report.

We are expanding our presence in China with manufacturing and research and development activities. We will be subject to increased risks relating to foreign currency exchange rate fluctuations that could have a material adverse effect on our business, financial condition and operating results. The value of the Chinese renminbi against the United States dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Significant future appreciation of the renminbi could increase our component and other raw material costs as well as our labor costs, and could adversely affect our financial results. To the extent that we need to convert United States dollars into renminbi for our operations, appreciation of renminbi against the United States dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our renminbi into United States dollars for other business purposes and the United States dollar appreciates against the renminbi, the United States dollar equivalent of the renminbi we convert would be reduced. The Chinese government recently announced that it is pegging the exchange rate of the renminbi against a number of currencies, rather than just the United States dollar. Fluctuations in the renminbi exchange rate could increase and could adversely affect our ability to operate our business.

In addition, there is a potential risk of conflict and further instability in the relationship between Taiwan and the People’s Republic of China (“PRC”). Conflict or instability could disrupt the operations of one of our principal wafer suppliers, several of our assembly subcontractors located in Taiwan, and our FCP manufacturing operations in Taiwan and the PRC.

Our operations and financial results could be severely harmed by natural disasters.

Our headquarters and some of our major suppliers’ manufacturing facilities are located near major earthquake faults. In particular, our Asian operations and most of our third party service providers involved in the manufacturing of our products are located within relative close proximity. Therefore, any disaster that strikes within or close to that geographic area could be extremely disruptive to our business and could materially and adversely affect our operating results and financial condition.

One of the foundries we use is located in Taiwan, which suffered a severe earthquake during fiscal 2000. We did not experience significant disruption to our operations as a result of that earthquake. Taiwan is also exposed to

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typhoons and tsunamis, which can affect not only foundries we rely upon but also our PSE-TW subsidiary. In March 2011, an earthquake and tsunami occurred off the northeast coast of Japan which disrupted the global supply chain for core materials manufactured in Japan that are incorporated in our products and manufacturing equipment. Thailand experienced floods in the quarter ended December 31, 2012, which interrupted the industry’s supply chain for storage products and impacted our sales as well. If a major earthquake, typhoon, tsunami or other natural disaster were to affect our operations or those of our suppliers, our product supply could be interrupted, which would seriously harm our business. Natural disasters could also affect the operations of the distributors and contract manufacturers we sell to, as well as the operations of our end use customers, which would adversely affect our operations and financial results. Natural disasters anywhere in the world may potentially adversely affect us by harming or causing interruptions to our supply chain or the supply chains of our suppliers, direct customers or end use customers.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

Our stock has been and will likely continue to be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control.

The trading price of our common stock has been and is likely to continue to be highly volatile. The securities markets have experienced significant price and volume fluctuations in the past, and the market prices of the securities of semiconductor companies have been especially volatile. This market volatility, as well as general economic, market or political conditions, including the current global economic situation, could reduce the market price of our common stock in spite of our operating performance. Our stock price could fluctuate widely in response to factors some of which are not within our control, including:

•   general conditions in the semiconductor and electronic systems industries;

•   actual or anticipated fluctuations in our operating results;

•   changes in expectations as to our future financial performance;

•   announcements of technological innovations or new products by us or our competitors;

•   changes in earnings estimates by analysts; and

•   price and volume fluctuations in the overall stock market, which have particularly affected the market prices of many high technology companies.

Our shareholder rights plan may adversely affect existing shareholders.

On March 6, 2012, we adopted a shareholder rights plan that may have the effect of deterring, delaying, or preventing a change in control that otherwise might be in the best interests of our shareholders. Under the rights plan, we declared a dividend of one preferred share purchase right for each share of our common stock held by shareholders of record as of March 6, 2012. Each right entitles shareholders, after the rights become exercisable, to purchase one one-thousandth of a share of our Series D Junior Participating Preferred Stock.

In general, the rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer for 15% or more of our common stock is announced or commenced. After such event, our other stockholders may purchase from us additional shares of our common stock at a 50% discount to the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The rights should not interfere with any merger or other business combination approved by our Board of Directors since the rights may be redeemed by us at $0.001 per right at any time before any person or group acquire 15% or more of our outstanding common stock. These rights expire in March 2022.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

We currently lease approximately 76,200 square feet of space in San Jose, California in which our headquarters, technology and product development facilities are located. On July 6, 2012, we entered into an agreement to purchase a building of 85,040 square feet to serve as our new corporate headquarters in Milpitas, California. We will move into this new facility upon expiration of our current lease in 2013. We also own, through our PSE-TW subsidiary, a manufacturing facility near Taipei, Taiwan consisting of approximately 74,000 square feet. Our PSE-TW subsidiary also owns a facility of approximately 8,840 square feet in Taipei and has leased approximately 1,570 square feet of space in Hsin Chu, Taiwan for research and development as well as sales and administrative functions. In addition, we have land use rights for a period of 50 years from the PRC for our factory in the Jinan Development Zone in Shandong Province, China. This factory, which is for the development and manufacture of frequency control products, is approximately 344,000 square feet and consists of an administrative building, a workers dormitory, and a fabrication plant. We own a 15,000 square foot office building in Shanghai, China that is occupied by our PTI subsidiary. We also have leased or rented international sales offices in Hong Kong, Japan, Korea, Singapore and the United Kingdom. We believe our current facilities are adequate to support our needs through the end of fiscal 2013.

ITEM 3. LEGAL PROCEEDINGS

We are subject to various routine claims and legal proceedings that arise in the ordinary course of business. We are presently not subject to any legal proceedings that could have a material impact on our business or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in Item 12 of this Annual Report on Form 10-K.

COMMON STOCK PRICE RANGE

Our common stock began trading publicly on the NASDAQ National Market on October 31, 1997 under the symbol PSEM. Prior to that date, there was no public market for the common stock. We have not paid cash dividends and have no present plans to do so. It is our policy to reinvest our earnings to finance expansion of our operations and to repurchase shares of our common stock to help counter dilution from the Company’s Stock Incentive and Employee Stock Purchase Plans. The following table sets forth, for the periods indicated, the high and low prices of the common stock on the NASDAQ Stock Market. As of June 30, 2012, we had 39 holders of record of our common stock. Holders of record do not include shareowners whose shares are in broker or other nominee accounts. During fiscal year 2012, we did not sell any unregistered securities.

	Common Stock Prices
	High		Low
Fiscal year ended July 2, 2011
First Quarter	$	10.19	$	8.20
Second Quarter		11.46		8.33
Third Quarter		11.58		8.61
Fourth Quarter		10.57		8.22
Fiscal year ended June 30, 2012
First Quarter	$	9.45	$	6.57
Second Quarter		8.95		6.78
Third Quarter		8.63		7.13
Fourth Quarter		9.13		7.60

 

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PERFORMANCE GRAPH

 

The graph and other information furnished under the above caption “Performance Graph” in this Part II, Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of the Exchange Act, as amended.

SHAREHOLDER RIGHTS PLAN

On March 6, 2012, we adopted a new shareholder rights plan following the expiration of our previous rights plan. Under the rights plan, we declared a dividend of one preferred share purchase right for each share of our common stock held by shareholders of record as of March 6, 2012. Each right entitles shareholders, after the rights become exercisable, to purchase one one-thousandth of a share of our Series D Junior Participating Preferred Stock.

In general, the rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer for 15% or more of our common stock is announced or commenced. After such event, our other stockholders may purchase from us additional shares of our common stock at a 50% discount to the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The rights should not interfere with any merger or other business combination approved by our Board of Directors since the rights may be redeemed by us at $0.001 per right at any time before any person or group acquire 15% or more of our outstanding common stock. These rights expire in March 2022.

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STOCK REPURCHASE PLAN

On April 29, 2008, the Board authorized the repurchase of $30 million worth of common stock. The Company was authorized to repurchase the shares from time to time in the open market or private transactions, at the discretion of the Company’s management. During the year ended June 30, 2012, the Company repurchased 1,482,572 shares for an aggregate cost of $11.6 million. Repurchases during the fourth quarter of fiscal 2012 were as follows:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum $ Value of Shares That MayYet be Purchased Under the Plans or Programs
April, 2012		133,003	$	8.11		5,411,215	$	27,025,877
May, 2012		123,916		7.98		5,535,131		26,037,034
June, 2012		41,424		8.12		5,576,555		25,700,771
Total at June 30, 2012		298,343	$	8.06		5,576,555	$	25,700,771

 

During the year ended July 2, 2011, the Company repurchased 613,331 shares for an aggregate cost of $5.4 million. During the year ended July 3, 2010, the repurchases totaled 907,545 shares at an aggregate cost of $8.7 million.

As of June 30, 2012, the Company had $701,000 of purchase authority remaining under the 2008 authorization. On April 26, 2012, the Board of Directors authorized an additional share repurchase program for up to $25 million of shares of the Company’s common stock.

Current cash balances and the proceeds from stock option exercises and purchases in the stock purchase plan have funded stock repurchases in the past, and the Company expects to fund future stock repurchases from these same sources.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data of the Company is qualified by reference to and should be read in conjunction with the consolidated financial statements, including the Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The consolidated statements of operations data for each of the years in the three-year period ended June 30, 2012, and the consolidated balance sheets data as of June 30, 2012 and July 2, 2011, are derived from, and are qualified by reference to, the consolidated financial statements included herein. We derived the consolidated statements of operations data for the years ended June 27, 2009 and June 28, 2008 and the consolidated balance sheets data as of July 3, 2010, June 27, 2009 and June 28, 2008 from audited financial statements not included herein. The fiscal year ending July 3, 2010 contained 53 weeks and all other years presented contained 52 weeks. On August 31, 2010, we completed the acquisition of PTI. The results of operations for PTI from the date of acquisition are included in our consolidated financial statements.

	Fiscal Year Ended
	June 30, 2012			July 2, 2011(1)			July 3, 2010			June 27, 2009			June 28, 2008
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Net revenues	$	137,135		$	166,343		$	146,913		$	128,645		$	163,744
Cost of revenues		88,484			110,661			96,146			85,514			103,638
Gross profit		48,651			55,682			50,767			43,131			60,106
Operating expenses:
Research and development		21,722			20,230			17,208			16,697			17,159
Selling, general and administrative		29,648			29,447			26,478			22,833			23,624
Restructuring charge		—			—			—			584			—
Total operating expenses		51,370			49,677			43,686			40,114			40,783
Income (loss) from operations		(2,719	)		6,005			7,081			3,017			19,323
Interest and other income, net		3,684			15,142			5,252			5,613			5,513
Interest expense		(70	)		(765	)		(30	)		(65	)		(12	)
Other-than-temporary decline in value of investments		—			—			—			(506	)		(76	)
Income before income taxes		895			20,382			12,303			8,059			24,748
Income tax expense		3,097			7,619			3,911			2,209			8,221
Net income (loss) from consolidated companies		(2,202	)		12,763			8,392			5,850			16,527
Equity in net income of unconsolidated affiliates		134			700			2,430			351			602
Net income (loss)		(2,068	)		13,463			10,822			6,201			17,129
Net income attributable to noncontrolling interests		—			—			(28	)		(114	)		(116	)
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463		$	10,794		$	6,087		$	17,013
Basic income (loss) per share to Pericom shareholders	$	(0.09	)	$	0.54		$	0.42		$	0.24		$	0.66
Diluted income (loss) per share to Pericom shareholders	$	(0.09	)	$	0.53		$	0.42		$	0.24		$	0.64
Shares used in computing basic income (loss) per share(2)		24,094			24,923			25,412			25,417			25,737
Shares used in computing diluted income (loss) per share(2)		24,094			25,254			25,717			25,626			26,611

 

	June 30, 2012		July 2, 2011(1)		July 3, 2010		June 27, 2009		June 28, 2008
	(in thousands)
Consolidated Balance Sheets Data:
Working capital	$	127,637	$	129,178	$	138,323	$	135,376	$	149,438
Total assets		275,806		301,016		256,048		246,314		231,839
Total long-term obligations		17,339		17,754		7,776		6,616		800
Total shareholders’ equity		233,635		242,725		221,906		213,696		208,829

 

(1)   On August 31, 2010, the Company completed the acquisition of PTI.

(2)   See Note 1 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used in computing basic and diluted earnings per share.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be reasonable given the circumstances. Actual results may vary from our estimates.

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and require the company to make its most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include revenue recognition and accounts receivable allowances, which impact the recording of revenues; valuation of inventories, which impacts costs of goods sold and gross margins; accounting for income taxes, which impacts the income tax provision and net income; impairment of goodwill, other intangible assets and investments, which impacts the goodwill, intangible asset and investment accounts; and share-based compensation, which impacts costs of goods sold and operating expenses. These policies and the estimates and judgments involved are discussed further below. We also have other important policies that we discuss in Note 1 to the Consolidated Financial Statements.

REVENUE RECOGNITION.   We recognize revenue from the sale of our products when:

•   Persuasive evidence of an arrangement exists;

•   Delivery has occurred;

•   The sales price is fixed or determinable; and

•   Collectability is reasonably assured.

Generally, the Company meets these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, the Company estimates and records provisions for future returns and other charges against revenue at the time of shipment.

We sell products to both large domestic and international distributors. We sell our products to domestic distributors at the price listed in our price book for that distributor. At the time of shipment, we record a sales reserve for the entire amount if the customer has the right to return the product. In addition, at the time of sale we record a sales reserve for ship from stock and debits (“SSD”s), stock rotation amounts expected to be returned, return material authorizations (“RMA”s), authorized price protection programs, and any special programs approved by management. These sales reserves offset revenues, which produces the net revenues amount we report in our consolidated financial statements.

The market price for our products can be significantly different from the book price at which we sold the product to the distributor. When the market price, as compared with the book price, of a particular sales opportunity from our distributor to their customer would result in low or negative margins to our distributor, we negotiate a ship from stock and debit with the distributor. We analyze our SSD history and use the history to develop SSD rates that form the basis of the SSD sales reserve we record each period. We use historical SSD rates to estimate the ultimate net sales price to the distributor.

Our distribution agreements provide for semi-annual stock rotation privileges in a range from 1% to 10% of net sales for the previous six-month period. The contractual stock rotation applies only to shipments at book price. Asian distributors typically buy our product at less than book price and therefore are not entitled to the 10% stock rotation privilege. In order to provide for routine inventory refreshing, for our benefit as well as theirs, we typically grant Asian distributors stock rotation privileges between 1% and 10% even though we are not contractually obligated

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to do so. Each month we adjust the sales reserve for the estimated stock rotation privilege anticipated to be utilized by our distributors.

From time to time, customers may request to return parts for various reasons including the customers’ belief that the parts are not performing to specification. Many such return requests are the result of customers incorrectly using the parts, not because the parts are defective. Our management reviews these requests and, if approved, we establish a RMA. We are only obligated to accept returns of defective parts. For customer convenience, we may approve a particular return request, even though we are not obligated to do so. Each month, we record a sales reserve for the approved RMAs that have not yet been returned. In the past, we have not kept a general warranty reserve because historically valid warranty returns, which are the result of a part not meeting specifications or being non-functional, have been immaterial and frequently we can resell parts to other customers for use in other applications. We monitor and assess RMA activity and overall materiality to assess whether a general warranty reserve has become appropriate.

We grant price protection solely at the discretion of our management. The purpose of price protection is to reduce our distributors’ cost of inventory as market prices fall, which reduces our SSD rates. Our sales management team prepares price protection proposals for individual products located at individual distributors. Our general management reviews these proposals and if a particular price protection arrangement is approved, we estimate the dollar impact based on the book price reduction per unit for the products approved and the number of units of those products in that distributor’s inventory. We record a sales reserve in that period for the estimated amount at the time revenue is recognized.

At the discretion of our management, we may offer rebates on specific products sold to specific end customers. The purpose of the rebates is to allow for pricing adjustments for large programs without affecting the pricing we charge our distributor customers. We record the customer’s rebate at the time of shipment.

Customers are typically granted payment terms of between 30 and 60 days and they generally pay within those terms. We grant relatively few customers any sales terms that include cash discounts. We invoice our distributors for shipments at our listed book price. When our distributors pay those invoices, they may claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, we confirm these debits are in line with our management’s prior authorizations and reduce the reserve we previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. When determining this net revenue, we must make significant judgments and estimates. We base our estimates on historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and our estimates. Our financial condition and operating results depend on our ability to make reliable estimates and we believe that our estimates are reasonable.

CASH AND CASH EQUIVALENTS.   Cash and cash equivalents consist of cash on hand and in banks and all highly liquid investments with an original or remaining maturity of three months or less at the time of purchase.

SHORT- AND LONG-TERM INVESTMENTS.   Our policy is to invest excess funds in instruments with investment grade credit ratings. We classify our investments as “available-for-sale”. Further, we classify our available-for-sale securities as either current or non-current based on the specific attributes of each security. We recognize unrealized gains and losses in our available-for sale securities as an increase or reduction in shareholders’ equity. We report our available-for-sale securities at their fair values. We evaluate our available-for-sale securities for impairment quarterly. We recognize the credit portion of an impairment loss as other than temporary decline in the value of investment in our consolidated statement of operations in the period in which we discover the impairment. Any non-credit portion of an impairment loss is recorded in other comprehensive income in our consolidated balance sheet for the period in which we discover the impairment.

We have also made other investments including loans and bridge loans convertible to equity as well as direct equity investments. We make these loans and investments with strategic intentions and, historically, are in privately held technology companies, which by their nature are high risk. These investments are included in other assets in the consolidated balance sheet and we carry them at the lower of cost, or market if the investment has experienced an “other than temporary” decline in value. We monitor these investments quarterly and make appropriate reductions in carrying value if we deem a decline in value is other than temporary.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS.   We evaluate our allowance for doubtful accounts using a combination of factors. We record a specific allowance in cases where we become aware of circumstances that may impair a specific customer’s ability to pay fully their financial obligation to us. For all other customers, we recognize an allowance based on the length of time the receivable balances are past due, based on the current economic environment and our historical experience.

INVENTORIES.   For our IC and certain FCP products we record inventories at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market value. We adjust the carrying value of inventory for excess and obsolete inventory based on inventory age, shipment history and our forecast of demand over a specific future period. The semiconductor markets that we serve are volatile and actual results may vary from our forecast or other assumptions, potentially affecting our assessment of excess and obsolete inventory resulting in material effects on our gross margin.

We record the inventories of the remainder of our FCP products at the lower of weighted-average cost (which approximates actual cost) or market value. Weighted average cost is comprised of average manufacturing costs weighted by the volume produced in each production run. We define market value as the net realizable value for our finished goods and replacement cost for raw materials and work in process.

We consider raw material inventory slow moving and fully reserve for it if it has not moved in 365 days. For assembled devices, we disaggregate the inventory by part number. We compare the quantities on hand in each part number category to the quantity we shipped in the previous twelve months, the quantity in backlog and to the quantity we expect to ship in the next twelve months. We record a reserve to the extent the value of each quantity on hand is in excess of the lesser of the three comparisons. In certain circumstances, management will determine, based on expected usage or other factors, that inventory considered excess by these guidelines should not be reserved. The Company does occasionally determine that last twelve months’ sales levels will not continue and reserves inventory in line with the quantity forecasted. We believe our method of evaluating our inventory fairly represents market conditions.

We consider the reserved material to be available for sale. We do not revalue the reserved inventory should market conditions change or if a market develops for the obsolete inventory. In the past, we have sold obsolete inventory that we have previously fully reserved. Refer to the Gross Profit discussion in this Item 7 of our annual report on Form 10-K for further discussion of sales of our obsolete inventory.

PROPERTY, PLANT AND EQUIPMENT.   We record our property, plant and equipment at cost and depreciate the cost over the estimated useful lives of each asset classification, ranging between 3 and 40 years. Cost includes purchase cost, applicable taxes, freight, installation costs and interest incurred in the acquisition of any asset that requires a period of time to make it ready for use. In addition, we capitalize the cost of major replacements, improvements and betterments, while we expense normal maintenance and repair.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES.   We hold and have held ownership interests in various investees. Our ownership in these affiliates has varied from 20% to approximately 49%, which we classify as investments in unconsolidated affiliates in our consolidated balance sheets. We account for long-term investments in companies in which we have an ownership share larger than 20% and in which we have significant influence over the activities of the investee using the equity method. We recognize our proportionate share of each investee’s income or loss in the period in which the investee reports the income or loss. We eliminate all intercompany transactions in accounting for our equity method investments.

IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS.   Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The provisions of the accounting standard for goodwill and other intangibles require that we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of each to its carrying value. In general, our reporting units are one step below the segment level. We determine the fair value of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we estimate the fair value based on market multiples of revenue or earnings for comparable companies. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins

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used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions and determination of appropriate market comparables. The Company bases these fair value estimates on reasonable assumptions but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, the Company makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each reporting unit.

If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we record an impairment loss equal to the difference. We determined that no impairment of our goodwill or indefinite-lived intangible assets existed at June 30, 2012. We also evaluate other definite-lived intangible assets for impairment when events or changes in circumstances indicate that the assets might be impaired. We determined that no impairment indicators for these other definite-lived intangible assets existed at June 30, 2012.

SHARE-BASED COMPENSATION.   The Company recognizes employee share-based compensation through measurement at grant date based on the fair value of the award, and the fair value is recognized as an expense over the employee’s requisite service period. See Note 16 for further discussion of share-based compensation.

INCOME TAXES.   We account for income taxes using an asset and liability approach to recording deferred taxes. Our deferred income tax assets represent temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, including net operating loss carry forwards. Based on estimates, the carrying value of our net deferred tax assets assumes that it is more likely than not that we will be able to generate sufficient future taxable income in certain tax jurisdictions. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. If, in the future, we experience losses for a sustained period of time, we may not be able to conclude that it is more likely than not that we will be able to generate sufficient future taxable income to realize our deferred tax assets. If this occurs, we may be required to increase the valuation allowance against the deferred tax assets resulting in additional income tax expense.

The Company’s income tax calculations are based on application of the respective U.S. federal, state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based on its estimates of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Operations.

OVERVIEW

We incorporated Pericom Semiconductor Corporation in June 1990 in California. We completed our first profitable fiscal year on June 30, 1993. We design, develop and market high-performance integrated circuits and frequency control products used in many of today’s advanced electronic systems. Our first volume sales occurred in fiscal 1993 and consisted exclusively of 5-volt 8-bit interface logic circuits. We have introduced new products to the market every year since we produced our first shipments. In recent years, we have expanded our product offering by introducing the following products, among others:

• In fiscal 2010, we introduced a total of 47 new products across the Signal Conditioning, Timing, and Connectivity product areas:

•   Expanding our solutions for high-speed serial protocol signal conditioning, we introduced 11 new ReDriver^TM products — addressing SATA2, SATA3/SAS, USB3, and Display Port protocols. A number of these products were ‘first to market’, especially the USB3 and Display Port ReDrivers. These products target volume PC, server, storage, embedded, and networking applications.

•   Adding to high speed connectivity solutions, we introduced 18 new switching and connectivity products across PCIe, USB, VGA, HDMI, and Display Port protocols. The PCIe to USB2.0+PCIe product is the first to combine

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bridging and switching of multiple high-speed serial protocols, while a family of USB ‘sleep and charge’ products were also introduced with a high level of integration for a NB USB port charger IC. These products target the computing, server, networking, and embedded market segments.

•   Expanding our timing solutions for next generation platforms, we introduced 18 new products across crystal, XO, clock generator, and clock buffer product families. Included is an ASSP XO family of the most popular platform frequency products, and a new family of very small crystals for ultra-mobility products such as cell phones and smart cards.

• In fiscal 2011, we introduced a total of 54 new products across the Signal Conditioning, Timing, and Connectivity product areas, including:

•   17 products were introduced across our Signal Conditioning line of ReDriver^TM product families supporting the latest high speed serial protocols such as PCI Express GEN3, SATA3, SAS2, USB3, and Display Port.

•   11 products were introduced across our various families of Connectivity products, including ASSP switches, PCI Express bridges, USB charging solutions, and graphics display switches, offering support for PCI Express, Thunderbolt, USB, HDMI, Display Port, and other high speed serial protocols.

•   26 products were introduced across our various Timing product lines, including silicon clock, XO, and clock buffer families, supporting next generation high speed protocol jitter requirements as well as multi output timing products.

• In fiscal 2012, we introduced a total of 60 new products across the Signal Conditioning, Timing, and Connectivity product areas, including:

•   11 products were introduced across our Signal Conditioning line of ReDriver^TM product families supporting the latest high speed serial protocols such as PCI Express 3.0, 10GbE, SATA3, SAS2, USB3, and Display Port.

•   18 products were introduced across our various families of Connectivity products, including PCI Express 2.0 packet switches, USB mobile charging solutions, MCU and MPS supervisory products, and high speed analog switches for PCI Express 3.0, Thunderbolt, Display Port 1.2, DDR3, and other high speed serial protocols.

•   31 products were introduced across our various Timing product lines, including Crystal, VCXO, TCXO, multiple output clock generators, multiple output XO, and PCI Express 3.0 XO, clock generator and buffer solutions offering extremely low jitter performance.

As is typical in the semiconductor industry, we expect selling prices for our products to decline over the life of each product. Our ability to increase net revenues is highly dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products in quantities sufficient to compensate for the anticipated declines in selling prices of existing products. In order to have sufficient supply for increased unit sales, we seek to increase the wafer fabrication capacity allocations from our existing foundries, qualify new foundries, increase the number of die per wafer through die size reductions and improve the yields of good die through the implementation of advanced process technologies. There can be no assurance that we will be successful in these efforts. Magnachip, TSMC and GlobalFoundries manufactured over 70% of the wafers for our semiconductor products in fiscal years 2012, 2011 and 2010, with the balance coming from between two and five other suppliers.

Declining selling prices will adversely affect gross margins unless we are able to offset such declines with the sale of new, higher margin products or achieve commensurate reductions in unit costs. We seek to improve our overall gross margin through the development and introduction of selected new products that we believe will ultimately achieve higher gross margins. A higher gross margin for a new product is typically not achieved until some period after the initial introduction of the product; that is, after start-up expenses for that product have been incurred and once volume production begins. In general, costs are higher at the introduction of a new product due to the use of a more generalized design schematic, lower economies of scale in the assembly phase and lower die yield. Our ability to reduce unit cost depends on our ability to shrink the die sizes of our products, improve yields, obtain favorable subcontractor pricing and make in-house manufacturing operations more productive and efficient. There can be no assurance that these efforts, even if successful, will be sufficient to offset declining selling prices.

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RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a percentage of net revenues for the periods indicated:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Net revenues		100.0	%		100.0	%		100.0	%
Cost of revenues		64.5			66.5			65.5
Gross margin		35.5			33.5			34.5
Operating expenses:
Research and development		15.9			12.2			11.7
Selling, general and administrative		21.6			17.7			18.0
Total operating expenses		37.5			29.9			29.7
Income (loss) from operations		(2.0	)		3.6			4.8
Interest and other income, net		2.7			9.1			3.6
Interest expense		—			(0.4	)		—
Income before income taxes		0.7			12.3			8.4
Income tax expense		2.3			4.6			2.7
Net income (loss) from consolidated companies		(1.6	)		7.7			5.7
Equity in net income of unconsolidated affiliates		0.1			0.4			1.7
Net income (loss)		(1.5	)%		8.1	%		7.4	%

 

COMPARISON OF FISCAL 2012, 2011 AND 2010

NET REVENUES

The following table sets forth our revenues and the customer concentrations with respect to such revenues for the periods indicated:

	Fiscal Year Ended									Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			% Change			July 2, 2011			July 3, 2010			% Change
Net revenues	$	137,135		$	166,343			–17.6	%	$	166,343		$	146,913			13.2	%
Percentage of net revenues accounted for by top 5 direct customers(1)		47	%		51	%					51	%		54	%
Number of direct customers that each account for more than 10% of net revenues		2			2						2			2
Percentage of net revenues accounted for by top 5 end customers(2)		28	%		26	%					26	%		30	%
Number of end customers that each account for more than 10% of net revenues		—			—						—			1

 

(1)   Direct customers include distributors, contract manufacturers and OEMs.

(2)   End customers are OEMs and their products are manufactured using the Company’s products. End customers may purchase directly from the Company or from distributors or contract manufacturers. For end customer sales data, we rely on information provided by our direct distribution and contract manufacturing customers.

Net revenues consist of product sales, which we generally recognize upon shipment, less an estimate for returns and allowances.

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Our order backlog stood at $27.0 million as of June 30, 2012 and $25.4 million as of July 2, 2011. We expect to fulfill most of our backlogged orders as of June 30, 2012 within the first quarter of fiscal 2013. We remain heavily reliant on orders that book and ship in the same quarter (“turns orders”). Our reliance on turns orders, the uncertain strength of our end-markets and the uncertain growth rate of the world economy make it difficult to predict near-term demand.

Net revenue decreased $29.2 million or 17.6% in fiscal 2012 versus 2011 primarily as the result of:

•   A decrease of $25.6 million or 23.1% in sales of our IC products to $85.4 million, which included $13.3 million from the acquisition of PTI, and

•   a $3.6 million decrease in sales of FCP products to $51.7 million, for a 6.5% decline.

These sales decreases are primarily the result of declines in unit sales volumes of existing products, as opposed to price decreases.

Net revenue increased $19.4 million or 13.2% in fiscal 2011 versus 2010 primarily as the result of:

•   an increase of $18.7 million or 20.3% in sales of our IC products to $111.0 million, which included $16.6 million from the acquisition of PTI, and

•   a $715,000 increase in sales of FCP products to $55.3 million, for a 1.3% improvement.

These sales increases are primarily the result of changes in unit sales volumes of existing products as well as the introduction and sale of new products, as opposed to price increases. It should be noted that fiscal 2010 benefited from having 53 weeks, which added approximately $3.0 million to net revenues for that year, while fiscal 2011 consisted of 52 weeks.

For the years ended June 30, 2012 and July 2, 2011, net revenue was reduced by sales reserves in the amount of $6.0 million in each year. In the future, market conditions could become more difficult as other companies compete more aggressively for business. Pricing for our higher margin IC Analog Switch, Clock and Connect products, many of which are proprietary, is more stable, and new product introductions and cost reductions generally offset price declines.

The following table sets forth net revenues by country as a percentage of total net revenues for the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010:

	Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			July 3, 2010
Net sales to countries:
Taiwan		46.2	%		45.6	%		51.0	%
China (including Hong Kong)		35.1	%		34.8	%		27.3	%
United States		5.3	%		6.0	%		8.2	%
Others (less than 10% each)		13.4	%		13.6	%		13.5	%
Total net sales		100.0	%		100.0	%		100.0	%

 

Over the past three years, sales to Taiwan and China have constituted the majority of our sales. We expect this trend will continue in the future.

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GROSS PROFIT

	Fiscal Year Ended									Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			% Change			July 2, 2011			July 3, 2010			% Change
Net revenues	$	137,135		$	166,343			–17.6	%	$	166,343		$	146,913			13.2	%
Gross profit		48,651			55,682			–12.6	%		55,682			50,767			9.7	%
Gross profit percentage		35.5	%		33.5	%					33.5	%		34.5	%

 

The $7.0 million decrease in gross profit in fiscal 2012 as compared to fiscal 2011 is primarily the result of:

•   A 17.6% decrease in sales, which led to $9.8 million of decreased gross profit, partially offset by

•   higher margins at 35.5%, resulting in a $2.8 million increase in gross profit.

The $4.9 million increase in gross profit in fiscal 2011 as compared to fiscal 2010 is primarily the result of:

•   A 13.2% increase in sales, which led to $6.7 million of increased gross profit, and

•   lower margins at 33.5%, resulting in a $1.7 million decrease in gross profit.

During fiscal years 2012, 2011 and 2010, gross profits and gross margins benefited from the sale of inventory, previously valued at $188,000, $64,000 and $209,000, respectively, that we had previously identified as excess and reserved.

Future gross profit and gross margin are highly dependent on the level and product mix included in net revenues. This includes the mix of sales between lower margin FCP products and our higher margin integrated circuit products. Although we have been successful at favorably improving our integrated circuit product mix and penetrating new end markets, there can be no assurance that this will continue. Accordingly, we are not able to predict future gross profit levels or gross margins with certainty.

RESEARCH AND DEVELOPMENT

	Fiscal Year Ended									Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			% Change			July 2, 2011			July 3, 2010			% Change
Net revenues	$	137,135		$	166,343			–17.6	%	$	166,343		$	146,913			13.2	%
Research and development		21,722			20,230			7.4	%		20,230			17,208			17.6	%
R&D as a percentage of net revenues		15.9	%		12.2	%					12.2	%		11.7	%

 

Research and development (“R&D”) expenses consist primarily of costs related to personnel and overhead, non-recurring engineering charges and other costs associated with the design, prototyping and testing of new product concepts, manufacturing process support and customer applications support. The approximately $1.5 million expense increase for fiscal 2012 as compared with fiscal 2011 is primarily attributable to increases of $698,000 for masks and assembly expenditures, $550,000 for design consultants and other outside services and $183,000 in facilities-related expenses.

The approximately $3.0 million expense increase for fiscal 2011 as compared with fiscal 2010 is primarily attributable to the acquisition of PTI, which added approximately $2.8 million of R&D expenses, with overall increases of $2.1 million in compensation expenses and $904,000 in depreciation, amortization and supplies.

We believe that continued investment in research and development to develop new products and improve manufacturing processes is critical to our success and, consequently, we expect to increase research and development expenses in future periods over the long term.

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SELLING, GENERAL AND ADMINISTRATIVE

	Fiscal Year Ended									Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			% Change			July 2, 2011			July 3, 2010			% Change
Net revenues	$	137,135		$	166,343			–17.6	%	$	166,343		$	146,913			13.2	%
Selling, general and administrative		29,648			29,447			0.7	%		29,447			26,478			11.2	%
SG&A as a percentage of net revenues		21.6	%		17.7	%					17.7	%		18.0	%

 

Selling, general and administrative (“SG&A”) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The $201,000 expense increase for fiscal 2012 as compared with fiscal 2011 is attributable to $856,000 of notes receivable write-offs and increases of $232,000 in recruiting expenses, partially offset by an $856,000 reduction in compensation-related expenses including share-based compensation charges.

The $3.0 million expense increase for fiscal 2011 as compared with fiscal 2010 is attributable to $3.1 million of SG&A expenses at PTI after the acquisition, with overall increases of $1.4 million in compensation-related expenses including those for share-based compensation, $409,000 in travel and entertainment expenses, $1.5 million in rent, utilities, depreciation and amortization expenses and $1.2 million for various other department expenses. The increases were partially offset by decreased expenditures of $1.5 million for legal and accounting fees, which were high in the prior year due to the fiscal 2009 year-end accounting review, quarterly restatements and delayed 10-K filing.

We anticipate that selling, general and administrative expenses will increase in future periods as we add to our support and administrative staff, particularly in sales and marketing, and as we face increasing commission expense to the extent we achieve higher sales levels. We intend to continue to focus on controlling selling, general and administrative expenses.

INTEREST AND OTHER INCOME, NET

	Fiscal Year Ended							Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		% Change			July 2, 2011		July 3, 2010			% Change
Net revenues	$	137,135	$	166,343		–17.6	%	$	166,343	$	146,913			13.2	%
Interest income		3,460		4,448		–22.2	%		4,448		5,340			–16.7	%
Other income (expense)		224		10,694		n/m(1)			10,694		(88	)		n/m(1)
Total interest and other income, net	$	3,684	$	15,142				$	15,142	$	5,252

 

(1)   “n/m” means not meaningful.

The decrease in interest income including realized gains for fiscal 2012, as compared to fiscal 2011, was primarily the result of a $1.0 million decrease in realized gains from the sale of investment securities. Other income (expense) for fiscal 2011 included an $11.0 million gain on shares of PTI held prior to the acquisition.

The decrease in interest income including realized gains for fiscal 2011, as compared to fiscal 2010, was primarily the result of a $497,000 reduction in interest income due to a decline in securities income yields in 2011 as compared with 2010, and a $395,000 decrease in realized gains from the sale of investment securities. Other income (expense) for fiscal 2011 included an $11.0 million gain on shares of PTI held prior to the acquisition.

39

INTEREST EXPENSE

Interest expense decreased to $70,000 in fiscal 2012 from $765,000 in fiscal 2011 primarily because fiscal 2011 included the interest accretion of $688,000 on the PTI contingent earn-out liability and the interest on short-term debt incurred to finance a portion of the PTI acquisition. Interest expense increased to $765,000 in fiscal 2011 from $30,000 in fiscal 2010 as a result of the PTI acquisition.

PROVISION FOR INCOME TAXES

	Fiscal Year Ended									Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			% Change			July 2, 2011			July 3, 2010			% Change
Pre-tax income	$	895		$	20,382			–95.6	%	$	20,382		$	12,303			65.7	%
Income tax provision		3,097			7,619			–59.4	%		7,619			3,911			94.8	%
Effective tax rate		346.0	%		37.4	%					37.4	%		31.8	%

 

Our effective tax rate differs from the federal statutory rate primarily due to state income taxes, the effect of foreign income tax and foreign losses, the utilization of research and development tax credits and changes in the deferred tax asset valuation allowance.

The effective tax rate for fiscal 2012 increased from fiscal 2011 primarily due to an increase in the valuation allowance of $3.2 million. This resulted from the establishment of a $2.8 million deferred tax asset valuation allowance relating to California tax credits that are not more likely than not to be utilized in the future, with the balance from increases in net operating losses generated in non-US subsidiaries.

The effective tax rate for fiscal 2011 increased from fiscal 2010 primarily due to a higher unfavorable impact from foreign income and withholding taxes and reduced benefits from resolution of certain tax audits and expiration of statute of limitations. A reconciliation of our tax rates for fiscal years 2012, 2011 and 2010 is detailed in Note 19 to the Consolidated Financial Statements contained in this report on Form 10-K.

EQUITY IN NET INCOME OF UNCONSOLIDATED AFFILIATES

	Fiscal Year Ended							Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		% Change			July 2, 2011		July 3, 2010		% Change
Equity in net income of PTI	$	—	$	467		(100.0	)%	$	467	$	2,071		(77.5	)%
Equity in net income of JCP		134		233		(42.5	)%		233		359		(35.1	)%
Total equity in net income of unconsolidated affiliates	$	134	$	700		(80.9	)%	$	700	$	2,430		(71.2	)%

 

Equity in net income of unconsolidated affiliates includes our allocated portion of the net income of PTI, a British Virgin Islands corporation with facilities in Shanghai and Hong Kong, until we acquired the remaining interest on August 31, 2010. Prior to the acquisition of PTI, we accounted for our investment using the equity method of accounting. Our allocated portion of PTI’s results was income of $2.1 million in fiscal 2010, and we recorded $467,000 of income in fiscal 2011 prior to the acquisition.

For additional information concerning the PTI transaction, see Note 6 of Notes to Consolidated Financial Statements in this report.

Equity in net income of unconsolidated affiliates also includes the Company’s allocated portion of the net income of Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”), an FCP manufacturing company located in Science Park of Jiyuan City, Henan Province, China. JCP is a key manufacturing partner of PSE-TW, and PSE-TW has acquired a 49% equity interest in JCP. For fiscal 2012, the Company’s allocated portion of JCP’s results was income of $134,000, as compared with $233,000 and $359,000 for fiscal 2011 and 2010, respectively.

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NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

For the years ended June 30, 2012 and July 2, 2011, we had no net income attributable to noncontrolling interests. For the year ended July 3, 2010, net income attributable to noncontrolling interests in income of our consolidated subsidiary PSE-TW was $28,000, and we acquired the noncontrolling interest of PSE-TW during that year.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2012, our principal sources of liquidity included continuing operations as well as cash, cash equivalents, and short-term and long-term investments of approximately $127.8 million, as compared with $127.6 million at July 2, 2011 and $118.9 million at July 3, 2010. In fiscal 2011, we acquired all remaining outstanding shares of PTI capital stock not previously owned by us for approximately $30.5 million in cash, plus earn-out and bonus of $6 million that was paid in the first half of fiscal 2012. In fiscal 2010 we made no acquisitions of other companies other than purchase of noncontrolling interests in our consolidated subsidiaries.

The Company’s investment in debt securities includes government securities, corporate debt securities and mortgage backed and asset backed securities. Government securities include US treasury securities, US federal agency securities, foreign government and agency securities, and US state and municipal bond obligations. Many of the municipal bonds are insured; those that are not are nearly all AAA/Aaa rated. The corporate debt securities are all investment grade and nearly all are single A-rated or better. The asset-backed securities are AAA/Aaa rated and are backed by auto loans, student loans, credit card balances and residential or commercial mortgages. Most of our mortgage-backed securities are collateralized by prime residential mortgages issued by government agencies including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and Federal Home Loan Banks. Those issued by commercial banks are AAA-rated. At June 30, 2012, unrealized gains on marketable securities, net of taxes were $194,000. When assessing marketable securities for other than temporary declines in value, we consider a number of factors. Our analyses of the severity and duration of price declines, portfolio manager reports, economic forecasts and the specific circumstances of issuers indicate that it is reasonable to expect marketable securities with unrealized losses at June 30, 2012 to recover in fair value up to our cost basis within a reasonable period of time. We have the ability and intent to hold investments with unrealized losses until maturity, when the obligors are required to redeem them at full face value or par, and we believe the obligors have the financial resources to redeem the debt securities. Accordingly, we do not consider our investments to be other than temporarily impaired at June 30, 2012.

As of June 30, 2012, we owned assets classified as cash and cash equivalents of $24.3 million as compared to $30.0 million at July 2, 2011 and $29.5 million at July 3, 2010. The maturities of our short-term investments are staggered throughout the year to ensure we meet our cash requirements. Because we are primarily a fabless semiconductor manufacturer, we have lower capital equipment requirements than other semiconductor manufacturers that own fabrication foundries. During the 2012 fiscal year, we purchased $4.3 million of property and equipment as compared to $11.7 million and $10.4 million in fiscal 2011 and 2010, respectively.

We generated approximately $3.7 million of interest and other income, net during the fiscal year ended June 30, 2012 compared to $15.1 million and $5.3 million in the fiscal years ended July 2, 2011 and July 3, 2010, respectively. 2011 included an $11.0 million gain on shares of PTI held prior to the acquisition. In the longer term, we may generate less interest and other income if our total invested balance decreases and the decrease is not offset by rising interest rates or realized gains on the sale of investment securities.

In fiscal 2012, our net cash provided by operating activities of $27.7 million was the result of $18.3 million in net favorable non-cash adjustments to a net loss of $2.1 million, and favorable changes in assets and liabilities of $11.5 million. The favorable adjustments to the net loss were primarily comprised of depreciation and amortization of $11.9 million, share-based compensation of $3.7 million, $1.8 million in deferred taxes, $856,000 in notes receivable writeoffs, share-based compensation tax benefit of $512,000 and $354,000 of property and equipment writeoffs, partially offset by $673,000 of realized gain on investments and $134,000 of non-cash equity in net income of our unconsolidated affiliates. The favorable changes in assets and liabilities primarily included a $6.3 million decrease in accounts receivable, a $5.0 million decrease in net inventory, a $676,000 decrease in other assets, a $2.7 million increase in accounts payable and a $453,000 increase in long term liabilities, partially offset by an $883,000 increase in prepaid expenses and other current assets and a $2.7 million decrease in accrued liabilities.

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In fiscal 2011, our net cash provided by operating activities of $23.6 million was the result of net income of $13.5 million plus $6.4 million in net favorable non-cash adjustments to net income, and favorable changes in assets and liabilities of $3.7 million. The favorable adjustments to net income were primarily comprised of depreciation and amortization of $11.0 million, stock based compensation of $4.3 million, $4.0 million in deferred taxes and stock compensation tax benefit of $782,000, partially offset by $11.0 million gain on previously held shares of PTI, $1.9 million of realized gain on investments, and $700,000 of non-cash equity in net income of our unconsolidated affiliates. The favorable changes in assets and liabilities primarily included a $2.2 million decrease in accounts receivable, a $6.1 million decrease in net inventory, a $285,000 decrease in prepaids and other current assets, and a $1.9 million increase in long term liabilities, partially offset by a $4.8 million decrease in accounts payable and a $1.6 million decrease in accrued liabilities.

In fiscal 2010, our net cash provided by operating activities of $8.4 million was the result of net income of $10.8 million plus $7.9 million in net favorable non-cash adjustments to net income, less unfavorable changes in assets and liabilities of $10.3 million. The favorable adjustments to net income were primarily comprised of depreciation and amortization of $8.0 million, stock based compensation of $4.0 million, $344,000 in deferred taxes and stock compensation tax benefit of $291,000, partially offset by $2.3 million of realized gain on investments, and $2.4 million of non-cash equity in net income of our unconsolidated affiliates. The unfavorable changes in assets and liabilities primarily included a $2.1 million increase in accounts receivable, a $7.0 million increase in net inventory, a $2.2 million increase in prepaids and other current assets, and a $5.7 million decrease in accrued liabilities, partially offset by a $4.8 million increase in accounts payable and a $3.0 million increase in long term liabilities.

In fiscal 2012, we used $15.2 million of cash in our investing activities, which was primarily comprised of final payouts of $8.1 million to complete the PTI acquisition, purchases of property and equipment of $4.3 million, and net purchases of investments of $5.7 million, partially offset by a $2.9 million reduction in restricted cash balances.

In fiscal 2011, we used cash in our investing activities of $28.9 million, which was primarily the result of purchases of property and equipment of $11.7 million, the acquisition of the remaining interest in PTI for $17.5 million net of the cash acquired and a $2.9 million increase in restricted cash, partially offset by net maturities of investments of $3.3 million.

In fiscal 2010, we used cash in our investing activities of $8.7 million, which was primarily the result of purchases of property and equipment of $10.4 million and the acquisition of the noncontrolling interest in PSE-TW for $1.2 million, partially offset by a decrease in restricted cash of $3.2 million. Of the purchases of property and equipment, $7.1 million was incurred in the completion of our new FCP plant in Jinan, China.

In fiscal 2012, we used cash in financing activities of $17.6 million, which consisted of $11.6 million used to repurchase common stock and $6.9 million of net paydowns of short-term bank loans, partially offset by $918,000 of proceeds from employee stock option exercises and purchases under the Employee Stock Purchase Plan.

In fiscal 2011, our cash provided by financing activities of $4.2 million was the result of $8.0 million of proceeds from short-term bank loans and $1.5 million of proceeds from employee stock option exercises and purchases under the Employee Stock Purchase Plan, partially offset by $5.4 million used to repurchase common stock.

In fiscal 2010, we used cash in financing activities of $8.3 million to repurchase common stock for $8.7 million and $1.7 million to prepay mortgage financing at our former PTL subsidiary, partially offset by $2.0 million of proceeds from employee stock option exercises and purchases under the Employee Stock Purchase Plan.

We believe our existing cash balances, as well as cash expected to be generated from operating activities, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

On April 29, 2008, the Board authorized the repurchase of $30 million worth of common stock. During the year ended July 3, 2010, the Company repurchased 907,545 shares for an aggregate cost of $8.7 million. During the year ended July 2, 2011, the Company repurchased 613,331 shares for an aggregate cost of $5.4 million. During the year ended June 30, 2012, the Company repurchased 1,482,572 shares for an aggregate cost of $11.6 million. As of June 30, 2012, approximately $701,000 remained under the 2008 authority. On April 26, 2012, the Board authorized the repurchase of an additional $25 million of common stock shares.

42

We may use a portion of our cash to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we may evaluate potential acquisitions of such businesses, products or technologies.

Our long-term future capital requirements will depend on many factors, including our level of revenues, the timing and extent of spending to support our product development efforts, the expansion of sales and marketing activities, the timing of our introductions of new products, the costs to ensure access to adequate manufacturing capacity, and the continuing market acceptance of our products. We could be required, or could elect, to seek additional funding through public or private equity or debt financing and additional funds may not be available on terms acceptable to us or at all.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table depicts our contractual obligations as of June 30, 2012:

	Payments Due by Period
(in thousands) Contractual obligation	Total		Less than 1 Year		1-3 Years		3-5 Years		Thereafter
Short-term debt	$	1,364	$	1,364	$	—	$	—	$	—
Operating leases and operating expense commitments		2,574		1,546		1,020		8		—
Capital equipment purchase commitments		969		969		—		—		—
Yangzhou capital injection		15,000		7,000		8,000		—		—
Total contractual cash obligations	$	19,907	$	10,879	$	9,020	$	8	$	—

 

The Company leases certain facilities under operating leases with termination dates on or before December 2013. Generally, these leases have multiple options to extend for a period of years upon termination of the original lease term or previously exercised option to extend.

As of June 30, 2012, we have no purchase obligations other than routine purchase orders and the capital equipment purchase commitments shown in the table. However, on July 6, 2012, we entered into an agreement to purchase a building to serve as our new corporate headquarters in Milpitas, California. The purchase, for $7.6 million, closed on August 9, 2012.

We completed the initial phase of our FCP facility in Jinan, PRC and the plant commenced operations during fiscal 2010. While further expansion of the plant is anticipated in the future, we have not yet begun planning for the next phase and do not anticipate significant outlays in the next twelve months.

On December 1, 2009, the Company entered into an R&D Center Investment Agreement (the “R&D Agreement”) with the Administrative Committee of the Yangzhou Economic and Technology Development Zone (the “Committee”) in China. Under the terms of the agreement, the Committee is to provide a funding, along with national and local tax incentives and other incentives. The funding would be paid in installments based on scheduled progress of the R&D Center’s development and our injection of paid-in capital. We made a $6 million capital injection in 2011 and applied for the initial agreed-upon subsidies of approximately $3.9 million. To date we have received only $773,000 which is recorded as a deferred credit under “Other long-term liabilities” on our consolidated balance sheets. We are currently negotiating with the Yangzhou government to terminate the R&D Agreement. If the termination is successful, the additional capital injections in the above table would not be made, although there may be additional terms or conditions involved in any settlement agreement.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2012, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4) of SEC Regulation S-K.

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RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which requires comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income, rather than in a footnote or as part of a statement of changes to shareholders equity. The amendment does not change what items are reported in other comprehensive income or the requirement to report reclassification of items from other comprehensive income to net income. This standard will be effective for our fiscal year beginning July 1, 2012 with retrospective application required. As this standard impacts presentation requirements only, the adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350) — Testing Goodwill for Impairment”, which provides updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for our fiscal year beginning July 1, 2012, with early adoption permitted. We are currently evaluating this guidance, but it is not expected that the adoption will have a material effect on our consolidated financial statements.

ITEM 7A. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK DISCLOSURE

At June 30, 2012, the Company’s investment portfolio consisted primarily of fixed income securities, excluding those classified as cash equivalents, with fair value of $103.6 million (see Note 1 of Notes to Financial Statements). These securities are subject to interest rate risk and will decline in value if market interest rates increase. We could realize a loss on these securities if we were forced to sell them in a period when interest rates are higher than current rates. We do not expect such a scenario to occur. For example, if market interest rates were to increase immediately and uniformly by 10% from levels as of June 30, 2012, such as from 2.00% to 2.20%, the decline in the fair value of the portfolio would be approximately $9.4 million. On the other hand, if interest rates were to decline the effect on our portfolio would be in the opposite direction.

When the general economy weakens significantly, as it did in 2008 and 2009, the credit profile, financial strength and growth prospects of certain issuers of interest-bearing securities held in our investment portfolios may deteriorate, and our interest-bearing securities may lose value either temporarily or other than temporarily. We may implement investment strategies of different types with varying duration and risk/return trade-offs that do not perform well. At June 30, 2012, we held a significant portion of our corporate cash in diversified portfolios of investment-grade marketable securities, mortgage- and asset-backed securities, and other securities that had net unrealized gains of $194,000 net of tax. Although we consider unrealized gains and losses on individual securities to be temporary, there is a risk that we may incur other-than-temporary impairment charges if credit and equity markets are unstable and adversely impact securities issuers.

The Company transacts business in various non-U.S. currencies, primarily the New Taiwan Dollar, the Hong Kong Dollar and the Chinese Renminbi. The Company is exposed to fluctuations in foreign currency exchange rates on accounts receivable and accounts payable from sales and purchases in these foreign currencies and the net monetary assets and liabilities of our foreign subsidiaries. A hypothetical 10% unfavorable change in the foreign currency exchange rate would reduce cash by approximately $1.1 million as those monetary assets are converted to cash.

44

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page No.
1.	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
	The following Consolidated Financial Statements are filed as part of this report:
	Report of Independent Registered Public Accounting Firm		52
	Consolidated Balance Sheets as of June 30, 2012 and July 2, 2011		53
	Consolidated Statements of Operations for each of the three fiscal years in the period ended June 30, 2012		54
	Consolidated Statements of Shareholders’ Equity and Comprehensive Income for each of the three fiscal years in the period ended June 30, 2012		55
	Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended June 30, 2012		56
	Notes to Consolidated Financial Statements		57
2.	INDEX TO FINANCIAL STATEMENT SCHEDULE
	The following financial statement schedule of Pericom Semiconductor Corporation for the years ended June 30, 2012, July 2, 2011 and July 3, 2010 is filed as part of this report and should be read in conjunction with the Consolidated Financial Statements of Pericom Semiconductor Corporation.
	Schedule II — Valuation and Qualifying Accounts for each of the three fiscal years in the period ended June 30, 2012		Sii

 

Schedules other than those listed above have been omitted since they are either not required, not applicable or the information is otherwise included.

45

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of June 30, 2012, our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e), under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-K and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting as of June 30, 2012. In making this assessment, our management used the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).Our management has concluded that, as of June 30, 2012, our internal control over financial reporting is effective based on these criteria.

Our independent registered public accounting firm, Burr Pilger Mayer, Inc., which audited the financial statements in this Annual Report on Form 10-K, independently assessed the effectiveness of the Company’s internal control over financial reporting. Burr Pilger Mayer, Inc. has issued an attestation report, which appears as part of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders
of Pericom Semiconductor Corporation

We have audited the internal control over financial reporting of Pericom Semiconductor Corporation and its subsidiaries (the “Company”) as of June 30, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, included in Item 9A. Our responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2012, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pericom Semiconductor Corporation and its subsidiaries as of June 30, 2012 and July 2, 2011, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2012, and the related financial statement schedule and our report dated August 31, 2012 expressed an unqualified opinion on those consolidated financial statements and the related financial statement schedule.

/s/ Burr Pilger Mayer, Inc.

San Jose, California
August 31, 2012

47

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to the Company’s Definitive Proxy Statement related to the Annual Meeting of Shareholders to be held December 6, 2012, to be filed by the Company with the SEC (the “Proxy Statement”).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The security ownership information required by this item is incorporated by reference to the Proxy Statement.

EQUITY COMPENSATION PLANS

The following table summarizes share and exercise price information about our equity compensation plans as of June 30, 2012.

Plan Category	Number of securities to be issued upon exercise of outstanding options and RSUs			Weighted average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under plans
Equity compensation plans approved by shareholders:
Stock incentive plans		2,949,414	(1)	$	10.34	(2)		2,065,971
Employee stock purchase plan		—						1,835,939
Equity compensation plans not approved by shareholders:
SaRonix Inducement options		7,634		$	10.00			—
Total		2,957,048		$	10.34			3,901,910

 

(1)   Represents shares of the Company’s Common Stock issuable upon exercise of outstanding options under the following equity compensation plans: the 2004 Stock Incentive Plan, the 2001 Stock Incentive Plan and the 1995 Stock Option Plan, and 503,880 shares underlying outstanding restricted stock unit awards granted under the 2004 Stock Incentive Plan that may be delivered in the future upon satisfaction of vesting requirements.

(2)   This calculation does not take into account shares underlying restricted stock unit awards.

Material Features of Equity Compensation Plans Not Approved by Shareholders

In connection with Pericom’s October 1, 2003 acquisition of substantially all of the assets of SaRonix, LLC, Pericom granted options to purchase an aggregate of 383,600 shares of Pericom common stock to certain former employees of SaRonix as an inducement for them to join Pericom. Under the agreements pertaining to such options, twenty percent of the options vested on October 1, 2004 and 1/48 of the remaining shares vested monthly for the following four years so that the options were fully vested on October 1, 2008. The exercise price of the options is $10.00 per share and the options expire if unexercised on October 1, 2013. In the event of a change in control transaction, the options shall become fully vested and exercisable if they are not assumed or replaced as part of the transaction.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the Proxy Statement.

48

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   The following documents are filed as part of this report:

(1)   Financial Statements and Financial Statement Schedule — See Index to Financial Statements and Financial Statement Schedule at Item 8 of this annual report on Form 10-K.

(2)   Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this Report:

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of August 9, 2010, by and among Pericom Semiconductor Corporation, PTI Acquisition Subsidiary Inc., Pericom Technology Inc., and Yuk Kin Wong in his capacity as the representative of the Securityholders, filed as Exhibit 2.1 to the Company’s Form 8-K filed August 12, 2010, and incorporated herein by reference.
3.1	Restated Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference.
3.2	Amended and Restated Bylaws of the Company (as amended by an amendment adopted on October 31, 2007), filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 29, 2007, and incorporated herein by reference.
3.3	Amended and Restated Certificate of Determination of the Series D Junior Participating Preferred Shares, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 8, 2012, and incorporated herein by reference.
4.1	Rights Agreement between Pericom Semiconductor Corporation and Computershare Trust Company, N.A., dated as of March 6, 2012, including Form of Right Certificate attached thereto as Exhibit B, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 8, 2012, and incorporated herein by reference.
10.1*	Pericom’s 1995 Stock Option Plan, including Form of Agreement thereunder, filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed September 10, 1997, and incorporated herein by reference.
10.2*	Form of Indemnification Agreement, filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed September 10, 1997, and incorporated herein by reference.
10.3*	Pericom’s 2000 Employee Stock Purchase Plan, including Forms of Agreement thereunder, filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2000, and incorporated herein by reference.
10.4*	Form of Notice of Grant of Stock Option and Option Agreement for Inducement Options, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2003, and incorporated herein by reference.
10.5	Lease, dated October 27, 2003 by and between CarrAmerica Realty Corporation as Landlord and the Company as Tenant, as amended, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2003, and incorporated herein by reference.
10.6*	Amended and Restated 2001 Stock Incentive Plan including Form of Agreement thereunder, filed as Exhibit 10.2 to the Company’s Form 8-K filed December 21, 2004, and incorporated herein by reference.

49

Exhibit	Description
10.7**	English translation of Cooperation Agreement between Pericom Semiconductor Corporation and the Jinan Hi-Tech Industries Development Zone Commission, dated as of January 26, 2008, filed as Exhibit 10.1 to the Company’s Form 8-K/A filed May 5, 2008, and incorporated herein by reference.
10.8*	Forms of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under each of the Amended and Restated Pericom 2001 Stock Incentive Plan and the Amended and Restated Pericom 2004 Stock Incentive Plan, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2008, and incorporated herein by reference.
10.9*	Amended and Restated Change of Control Agreement, filed as Exhibit 10.1 to the Company’s Form 8-K filed December 17, 2008, and incorporated herein by reference.
10.10*	Amended and Restated 2004 Stock Incentive Plan, attached as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on October 23, 2008, and incorporated herein by reference.
10.11*	Pericom’s 2010 Employee Stock Purchase Plan, attached as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed October 23, 2009, and incorporated herein by reference.
10.12**	English translation of R&D Center Investment Agreement, dated as of December 1, 2009, between Yangzhou Economic and Technological Development Zone and Pericom Asia Limited, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 26, 2009, and incorporated herein by reference.
10.13	Purchase and Sale Agreement, dated July 6, 2012, between Pericom Semiconductor Corporation and Barber Lane Investors, LLC for the acquisition of the office building at 1545 Barber Lane, Milpitas, California.
10.14	First Amendment to the Purchase and Sale Agreement between Pericom Semiconductor Corporation and Barber Lane Investors, LLC dated August 6, 2012.
14.1	Pericom Semiconductor Corporation Code of Business Conduct and Ethics, filed as Exhibit 14.1 to the Company’s Form 10-K for the year ended June 26, 2004 and incorporated herein by reference.
21.1	Subsidiaries of Pericom Semiconductor Corporation
23.1	Consent of Burr Pilger Mayer, Inc. Independent Registered Public Accounting Firm
24.1	Power of Attorney (see signature page)
31.1	Certification of Alex C. Hui, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Aaron Tachibana, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Alex C. Hui, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Aaron Tachibana, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS#	XBRL Instance Document
101.SCH#	XBRL Taxonomy Extension Schema Document
101.CAL#	XBRL Taxonomy Extension Calculation Linkbase Document

50

Exhibit	Description
101.DEF#	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB#	XBRL Taxonomy Extension Label Linkbase Document
101.PRE#	XBRL Taxonomy Extension Presentation Linkbase Document

 

* Management contract or compensatory plan or arrangement.

** Portions of this exhibit have been omitted pursuant to a confidential treatment request that was granted by the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

# XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

(b) Exhibits: See list of exhibits under (a)(2) above.

(c) Financial Statement Schedules: See list of schedules under (a)(1) above

51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Pericom Semiconductor Corporation

We have audited the accompanying consolidated balance sheets of Pericom Semiconductor Corporation and its subsidiaries (the “Company”) as of June 30, 2012 and July 2, 2011 and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2012. Our audits also included the financial statement schedule listed in the Index to this Annual Report on Form 10-K at Part IV Item 15(a)(1). These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pericom Semiconductor Corporation and its subsidiaries as of June 30, 2012 and July 2, 2011 and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2012 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of June 30, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 31, 2012 expressed an unqualified opinion thereon.

/s/ Burr Pilger Mayer, Inc.

San Jose, California
August 31, 2012

52

PERICOM SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	June 30, 2012		July 2, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	24,283	$	30,023
Restricted cash		—		2,947
Short-term investments in marketable securities		79,924		76,266
Accounts receivable:
Trade (net of reserves and allowances of $2,566 and $1,947)		24,010		28,185
Other receivables		3,674		5,859
Inventories		16,604		21,942
Prepaid expenses and other current assets		2,425		1,929
Deferred income taxes		1,549		2,564
Total current assets		152,469		169,715
Property, plant and equipment — net		56,102		60,859
Investments in unconsolidated affiliates		2,474		2,596
Deferred income taxes — non current		2,447		4,324
Long-term investments in marketable securities		23,628		21,282
Goodwill		16,797		16,669
Intangible assets (net of accumulated amortization of $6,629 and $3,868)		12,831		15,690
Other assets		9,058		9,881
Total assets	$	275,806	$	301,016
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	1,364	$	8,671
Accounts payable		14,860		12,221
Accrued liabilities		8,608		19,645
Total current liabilities		24,832		40,537
Industrial development subsidy		8,577		9,075
Deferred tax liabilities		6,191		6,605
Other long-term liabilities		2,571		2,074
Total liabilities		42,171		58,291
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock and paid in capital — no par value, 60,000,000 shares authorized; shares issued and outstanding: at June 30, 2012, 23,565,000; at July 2, 2011, 24,716,000		123,362		130,960
Retained earnings		100,694		102,762
Accumulated other comprehensive income, net of tax		9,579		9,003
Total shareholders’ equity		233,635		242,725
Total liabilities and shareholders’ equity	$	275,806	$	301,016

 

See notes to consolidated financial statements.

53

PERICOM SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Net revenues	$	137,135		$	166,343		$	146,913
Cost of revenues		88,484			110,661			96,146
Gross profit		48,651			55,682			50,767
Operating expenses:
Research and development		21,722			20,230			17,208
Selling, general and administrative		29,648			29,447			26,478
Total operating expenses		51,370			49,677			43,686
Income (loss) from operations		(2,719	)		6,005			7,081
Interest and other income, net		3,684			15,142			5,252
Interest expense		(70	)		(765	)		(30	)
Income before income taxes		895			20,382			12,303
Income tax expense		3,097			7,619			3,911
Net income (loss) from consolidated companies		(2,202	)		12,763			8,392
Equity in net income of unconsolidated affiliates		134			700			2,430
Net income (loss)	$	(2,068	)	$	13,463		$	10,822
Net income attributable to noncontrolling interests		—			—			(28	)
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463		$	10,794
Basic income (loss) per share to Pericom shareholders	$	(0.09	)	$	0.54		$	0.42
Diluted income (loss) per share to Pericom shareholders	$	(0.09	)	$	0.53		$	0.42
Shares used in computing basic earnings (loss) per share		24,094			24,923			25,412
Shares used in computing diluted earnings (loss) per share		24,094			25,254			25,717

 

See notes to consolidated financial statements.

54

PERICOM SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

										Accumulated
										Other
	Common Stock									Comprehensive						Total
							Retained			Income (Loss),			Noncontrolling			Shareholders’
	Shares			Amount			Earnings			Net			Interest			Equity
BALANCES, June 27, 2009		25,462		$	133,162		$	78,505		$	797		$	1,233		$	213,697
Net income		—			—			10,794			—			28			10,822
Change in unrealized gain on investments, net		—			—			—			114			—			114
Currency translation adjustment		—			—			—			1,160			—			1,160
Total comprehensive income		—			—			—			—			—			12,096
Acquisition of noncontrolling interest		—			37			—			—			(1,261	)		(1,224	)
Issuance of common stock under employee stock plans		344			1,978			—			—			—			1,978
Share-based compensation expense		—			4,049			—			—			—			4,049
Tax benefit resulting from stock option transactions		—			(11	)		—			—			—			(11	)
Repurchase and retirement of common stock		(908	)		(8,679	)		—			—			—			(8,679	)
BALANCES, July 3, 2010		24,898			130,536			89,299			2,071			—			221,906
Net income		—			—			13,463			—			—			13,463
Change in unrealized gain on investments, net		—			—			—			(549	)		—			(549	)
Currency translation adjustment		—			—			—			7,481			—			7,481
Total comprehensive income		—			—			—			—			—			20,395
Issuance of common stock under employee stock plans		431			1,528			—			—			—			1,528
Share-based compensation expense		—			4,286			—			—			—			4,286
Tax expense resulting from stock option transactions		—			58			—			—			—			58
Repurchase and retirement of common stock		(613	)		(5,448	)		—			—			—			(5,448	)
BALANCES, July 2, 2011		24,716			130,960			102,762			9,003			—			242,725
Net loss		—			—			(2,068	)		—			—			(2,068	)
Change in unrealized gain on investments, net		—			—			—			(59	)		—			(59	)
Currency translation adjustment		—			—			—			635			—			635
Total comprehensive loss		—			—			—			—			—			(1,492	)
Issuance of common stock under employee stock plans		332			918			—			—			—			918
Share-based compensation expense		—			3,723			—			—			—			3,723
Tax benefit resulting from stock option transactions		—			(612	)		—			—			—			(612	)
Repurchase and retirement of common stock		(1,483	)		(11,627	)		—			—			—			(11,627	)
BALANCES, June 30, 2012		23,565		$	123,362		$	100,694		$	9,579		$	—		$	233,635

 

See notes to consolidated financial statements.

55

PERICOM SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(2,068	)	$	13,463		$	10,822
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		11,898			11,000			7,958
Stock based compensation		3,736			4,286			4,049
Tax benefit resulting from stock option transactions		512			782			291
Excess tax benefit resulting from stock option transactions		(4	)		(84	)		(97	)
Write-off of notes receivable		856			—			—
Gain on sale of investments		(673	)		(1,922	)		(2,348	)
Write-off of property and equipment		354			75			152
Gain on previously held shares in PTI		—			(11,004	)		—
Equity in net income of unconsolidated affiliates		(134	)		(700	)		(2,430	)
Deferred taxes		1,753			4,020			344
Changes in assets and liabilities net of effects of entities acquired:
Accounts receivable		6,289			2,204			(2,108	)
Inventories		5,008			6,103			(7,014	)
Prepaid expenses and other current assets		(883	)		285			(2,183	)
Other assets		676			(261	)		(744	)
Accounts payable		2,688			(4,841	)		4,757
Accrued liabilities		(2,735	)		(1,610	)		(5,731	)
Other long-term liabilities		453			1,850			2,719
Net cash provided by operating activities		27,726			23,646			8,437
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property plant and equipment		(4,324	)		(11,715	)		(10,353	)
Acquisition of PTI, net of cash acquired		(8,077	)		(17,514	)		—
Purchase of available-for-sale investments		(97,726	)		(220,822	)		(120,722	)
Maturities and sales of available-for-sale investments		91,981			224,111			120,353
Cash paid for noncontrolling interest acquisition		—			—			(1,223	)
Change in restricted cash balance		2,947			(2,947	)		3,200
Net cash used in investing activities		(15,199	)		(28,887	)		(8,745	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance under stock plans		918			1,528			1,978
Excess tax benefit resulting from stock option transactions		4			84			97
Paydowns on mortgage financing		—			—			(1,725	)
Proceeds from short-term debt		10,744			8,003			—
Payments on short-term debt		(17,635	)		—			—
Repurchase of common stock		(11,627	)		(5,448	)		(8,679	)
Net cash provided by (used in) financing activities		(17,596	)		4,167			(8,329	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(671	)		1,602			811
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(5,740	)		528			(7,826	)
CASH AND CASH EQUIVALENTS:
Beginning of year		30,023			29,495			37,321
End of year	$	24,283		$	30,023		$	29,495
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	1,722		$	4,361		$	2,166
Cash paid during the period for interest	$	75		$	77		$	30
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Initial contingent earn-out liability	$	—		$	4,087		$	—
Accrued acquisition-related liabilities	$	—		$	3,541		$	—

 

See notes to consolidated financial statements

56

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Pericom Semiconductor Corporation (the “Company” or “Pericom”) was incorporated in June 1990 in the state of California. The Company designs, manufactures and markets high performance digital, analog and mixed-signal integrated circuits (“ICs”) and frequency control products (“FCPs”) used for the transfer, routing, and timing of digital and analog signals within and between computer, networking, datacom and telecom systems.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION — These consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Semiconductor (HK) Limited (“PSC-HK”), Pericom Asia Limited (“PAL”) and PSE Technology Corporation (“PSE-TW”). In addition PAL has three wholly-owned subsidiaries, PSE Technology (Shandong) Corporation (“PSE-SD”) and Pericom Technology Yangzhou Corporation (“PSC-YZ”) for the Jinan, China and Yangzhou, China operations, respectively, and Pericom Technology Inc. (“PTI”). PTI became a wholly-owned subsidiary in the first quarter of fiscal 2011 (See Note 6 of Notes to Consolidated Financial Statements in this Form 10-K for further details). PSE-TW was formerly known as the SaRonix-eCERA Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

On March 28, 2010, the Company completed the merger of our two wholly owned subsidiaries, PSE-TW and PTL, with PSE-TW as the surviving entity. As a result of the change in legal structure, we determined that we would be able to utilize certain deferred tax assets and our valuation allowance was reduced accordingly. In accordance with the guidance for a change in reporting entity, this change has been retrospectively applied to all prior periods presented. As substantially all of the deferred tax assets arose prior to the periods being presented, the impact of the reduction in valuation allowance was an increase to our deferred tax assets of approximately $256,000 for all periods presented as well as an increase to our opening retained earnings.

The Company has significant operations in the PRC, where certain political, economic and currency restrictions may apply. Insofar as can be reasonably determined, the effect of foreign exchange restrictions upon the consolidated financial position and results of the Company are not material.

FISCAL PERIOD — For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of June. The year ended July 3, 2010 contains 53 weeks, whereas all other fiscal years presented herein include 52 weeks.

CASH EQUIVALENTS — The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value.

SHORT-TERM AND LONG-TERM INVESTMENTS IN MARKETABLE SECURITIES — The Company’s policy is to invest in instruments with investment grade credit ratings. The Company classifies its short-term investments as “available-for-sale” securities and the Company bases the cost of securities sold using the specific identification method. The Company accounts for unrealized gains and losses on its available-for-sale securities as a separate component of shareholders’ equity in the consolidated balance sheets in the period in which the gain or loss occurs. The Company classifies its available-for-sale securities as current or noncurrent based on each security’s attributes. At June 30, 2012 and July 2, 2011, investments, and any difference between the fair market value and the underlying cost of such investments, consisted of the following:

57

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Available-for-Sale Securities:

	As of June 30, 2012
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,344	$	—	$	—		$	—		$	10,344
US Treasury securities		3,639		—		(5	)		(5	)		3,634
National government and agency securities		6,582		167		—			167			6,749
State and municipal bond obligations		1,772		1		(1	)		—			1,772
Corporate bonds and notes		61,374		461		(197	)		264			61,638
Asset backed securities		10,148		19		(86	)		(67	)		10,081
Mortgage backed securities		9,313		98		(77	)		21			9,334
Total	$	103,172	$	746	$	(366	)	$	380		$	103,552

 

	As of July 2, 2011
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,740	$	—	$	—		$	—		$	10,740
US Treasury securities		600		2		—			2			602
National government and agency securities		9,065		128		(7	)		121			9,186
State and municipal bond obligations		1,250		8		—			8			1,258
Corporate bonds and notes		53,346		458		(105	)		353			53,699
Asset backed securities		11,381		32		(75	)		(43	)		11,338
Mortgage backed securities		10,767		41		(83	)		(42	)		10,725
Total	$	97,149	$	669	$	(270	)	$	399		$	97,548

 

The following tables show the gross unrealized losses and fair values of the Company’s investments that have unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2012 and July 2, 2011:

	Continuous Unrealized Losses at June 30, 2012
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	3,434	$	5	$	—	$	—	$	3,434	$	5
National government and agency securities		327		—		—		—		327		—
State and municipal bond obligations		1,033		1		—		—		1,033		1
Corporate bonds and notes		12,117		85		3,782		112		15,899		197
Asset backed securities		1,784		15		1,595		71		3,379		86
Mortgage backed securities		659		—		403		77		1,062		77
	$	19,354	$	106	$	5,780	$	260	$	25,134	$	366

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

	Continuous Unrealized Losses at July 2, 2011
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
National government and agency securities		2,254		7		—		—		2,254		7
State and municipal bond obligations		—		—		—		—		—		—
Corporate bonds and notes		12,765		103		251		2		13,016		105
Asset backed securities		4,867		64		149		11		5,016		75
Mortgage backed securities		3,407		10		336		73		3,743		83
	$	23,293	$	184	$	736	$	86	$	24,029	$	270

 

The unrealized losses are of a temporary nature due to the Company’s intent and ability to hold the investments until maturity or until the cost is recoverable. The unrealized losses are primarily due to fluctuations in market interest rates. The Company reports unrealized gains and losses on its “available-for-sale” securities in accumulated other comprehensive income, net of tax, in shareholders’ equity.

The Company records gains or losses realized on sales of available-for-sale securities in interest and other income on its consolidated income statement. The cost of securities sold is based on the specific identification of the security and its amortized cost. In fiscal 2012, 2011 and 2010 realized gains on available-for-sale securities were $673,000, $1.9 million and $2.3 million, respectively.

The following table lists the fair value of the Company’s short- and long-term investments by length of time to maturity as of June 30, 2012 and July 2, 2011:

(In thousands)	June 30, 2012		July 2, 2011
One year or less	$	21,254	$	10,316
Between one and three years		52,106		37,983
Greater than three years		22,084		25,021
Multiple Dates		8,108		24,228
	$	103,552	$	97,548

 

Securities with maturities over multiple dates are mortgage-backed securities (MBS) or asset-backed securities (ABS) featuring periodic principle paydowns through 2041.

FAIR VALUE OF FINANCIAL INSTRUMENTS — The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities and/or variable interest rates. Available-for-sale investments are reported at their fair value based on quoted market prices. A further discussion of the fair value of financial instruments is detailed in Note 18 to the Consolidated Financial Statements contained in this report on Form 10-K.

ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company computes its allowance for doubtful accounts using a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to the Company, the Company records a specific allowance against amounts due to the Company, reducing the net recognized receivable to the amount the Company reasonably believes it will collect. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and its historical experience.

INVENTORIES — For IC and certain FCP products, the Company records inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. The carrying value

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1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast of demand over a specific future period. The semiconductor markets that the Company serves are volatile and actual results may vary from forecast or other assumptions, potentially affecting the Company’s assessment of excess and obsolete inventory, resulting in material effects on gross margin.

The inventories of the remainder of the FCP products are recorded at the lower of weighted-average cost, which approximates actual cost, or market value. Weighted average cost is comprised of average manufacturing costs weighted by the volume produced in each production run. Market value is defined as the net realizable value for finished goods, and replacement cost for raw materials and work in process.

Raw material inventory is considered slow moving and is fully reserved if it has not moved in 365 days. For assembled devices, the inventory is disaggregated by part number. The quantities on hand in each part number category are compared to the quantity that was shipped in the previous twelve months, the quantity in backlog and to the quantity expected to ship in the next twelve months. A reserve is recorded to the extent the value of each quantity on hand is in excess of the lesser of the three comparisons. The Company also periodically reviews inventory for obsolescence beyond the established formulaic tests. The Company believes this method of evaluating inventory fairly represents market conditions.

The Company considers the reserved material to be available for sale. The reserved inventory is not revalued should market conditions change or if a market develops for the obsolete inventory. In the past, the Company has sold obsolete inventory that was previously fully reserved.

PROPERTY, PLANT AND EQUIPMENT — The Company states its property, plant and equipment at cost. Cost includes purchase cost, applicable taxes, freight, installation costs and interest incurred in the acquisition of any asset that requires a period of time to make it ready for use. We compute depreciation and amortization using the straight-line method over estimated useful lives of three to eight years except for buildings, which we depreciate using the straight-line method over estimated useful lives of twenty to forty years. We depreciate leasehold improvements over the shorter of the lease term or the improvement’s estimated useful life. In addition, we capitalize the cost of major replacements, improvements and betterments, while we expense normal maintenance and repair.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES — The Company holds or has held ownership interests in various investees. Our ownership in these affiliates has varied from 20% to approximately 49%. We classify these investments as investments in unconsolidated affiliates in our consolidated balance sheets. The Company accounts for long-term investments in companies in which it has an ownership share larger than 20% and in which it has significant influence over the activities of the investee using the equity method. We recognize our proportionate share of each investee’s income or loss in the period in which the investee reports the income or loss. We eliminate all intercompany transactions in accounting for our equity method investments.

OTHER ASSETS — The Company’s other assets classification includes investments in privately held companies in which we have less than a 20% interest, land use rights and deposits. The Company reports its investments in privately held companies at the lower of cost or market. The Company’s management reviews the investment in these companies for losses that may be other than temporary on a quarterly basis. Should management determine that such an impairment exists, the Company will reduce the value of the Company’s investment in the period in which management discovers the impairment and charge the impairment to the consolidated statement of operations. The Company’s management performed such an evaluation as of June 30, 2012 and determined that no impairment existed. Two of the Company’s subsidiaries, PSE-SD and PTI, hold land use rights that were acquired from the local Chinese government which entitle the Company to use the land for 15 to 50 years. The cost of the land use rights is recorded as a component of other assets and is being depreciated over 15 to 50 years, the useful life of the rights.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

LONG-LIVED ASSETS — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, the Company will recognize an impairment loss as the amount of the difference between carrying value and fair value as determined by discounted cash flows.

GOODWILL AND OTHER INTANGIBLE ASSETS — Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired and liabilities assumed. The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least on an annual basis in the fourth quarter of the fiscal year or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable from its estimated future cash flow. In accordance with the guidance on Accounting Standards Codification (″ASC″) 350, Intangibles-Goodwill and Other, a two-step test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In the first step, the fair value of each reporting unit is compared to its carrying value to determine if the goodwill is impaired. In general, the Company’s reporting units are one step below the segment level. The fair value of the reporting units is determined based on a weighting of income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, the Company estimates the fair value based on market multiples of revenue or earnings for comparable companies. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions and determination of appropriate market comparables. The Company bases these fair value estimates on reasonable assumptions but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, the Company makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each reporting unit.

If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired and no further testing is required. If the carrying value of the net assets assigned to the reporting unit was to exceed its fair value, then the second step is performed in order to determine the implied fair value of the reporting unit’s goodwill, and an impairment loss is recorded for an amount equal to the difference between the implied fair value and the carrying value of the goodwill. The goodwill impairment analysis did not result in an impairment charge for the years presented.

BUSINESS COMBINATIONS — Effective July 4, 2010, the Company adopted ASC 805, Business Combinations (“ASC 805”). ASC 805 updated guidance related to business combinations. The updated guidance establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The updated standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The updated standard also provides guidance for recognizing changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals that result from a business combination transaction as adjustments to income tax expense. The updated guidance had a material impact on the Company’s consolidated financial statements during the year ended July 2, 2011. In fiscal 2011, the Company completed the acquisition of PTI. Under the updated guidance, the Company expensed the transaction costs of approximately $0.6 million associated with the PTI acquisition, while under the prior accounting standards such costs would have been capitalized. In addition, the Company recognized the fair value of a contingent earn-out liability in connection with the PTI acquisition of $4.1 million, and subsequently recognized an expense of $0.7 million related to the change in the estimated fair value of contingent earn-out liability, while under the prior

61

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

accounting standards the earn-out would not have been recognized as part of the consideration transferred until the contingency was resolved. Further, the Company acquired in-process research and development of approximately $3.3 million in connection with the PTI acquisition which has been capitalized in accordance with the updated guidance, whereas under prior authoritative guidance the amount would have been expensed immediately. Therefore, the adoption of the updated guidance related to business combinations has had and likely will continue to have a material impact on our future consolidated financial statements.

INCOME TAXES — The Company accounts for income taxes following the Financial Accounting Standards Board’s statements and related interpretations, which require an asset and liability approach to recording deferred taxes. We record a valuation allowance to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company’s income tax calculations are based on application of the respective U.S. federal, state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based on its estimates of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Operations.

FOREIGN CURRENCY TRANSLATION — The functional currency of the Company’s foreign subsidiaries is the local currency. In consolidation, the Company translates assets and liabilities at exchange rates in effect at the balance sheet date. The Company translates revenue and expense accounts at average exchange rates during the period in which the transaction takes place. Net gains or (losses) from foreign currency translation of assets and liabilities of $635,000 and $7.5 million in fiscal 2012 and 2011, respectively, are included in the cumulative translation adjustment component of accumulated other comprehensive income, net of tax, a component of shareholders’ equity. Net gains or (losses) arising from transactions denominated in currencies other than the functional currency were $334,000, $(321,000) and $(197,000) in fiscal 2012, 2011 and 2010 respectively, and are included in interest and other income, net.

SHARE-BASED COMPENSATION — The Company recognizes employee share-based compensation through measurement at grant date based on the fair value of the award, and the fair value is recognized as an expense over the employee’s requisite service period. See Note 16 for further discussion of share-based compensation.

REVENUE RECOGNITION — The Company recognizes revenue from the sale of its products when:

•   Persuasive evidence of an arrangement exists;

•   Delivery has occurred;

•   The sales price is fixed or determinable; and

•   Collectability is reasonably assured.

Generally, the Company meets these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, the Company estimates and records provisions for future returns and other charges against revenue at the time of shipment consistent with the terms of sale.

The Company sells products to large, domestic distributors at the price listed in its price book for that distributor. At the time of sale the Company records a sales reserve for ship from stock and debits (“SSD”s), stock rotations, return material authorizations (“RMA”s), authorized price protection programs, and any special programs approved by management. The Company offsets the sales reserve against revenues, producing the net revenue amount reported in the consolidated statements of operations.

The market price for the Company’s products can be significantly different from the book price at which the Company sold the product to the distributor. When the market price, as compared to the Company’s original book price, of a particular distributor’s sales opportunity to their own customer would result in low or negative margins

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

for our distributor, the Company negotiates a ship from stock and debit with the distributor. Management analyzes the Company’s SSD history to develop current SSD rates that form the basis of the SSD sales reserve recorded each period. The Company obtains the historical SSD rates from its internal records.

The Company’s distribution agreements provide for semi-annual stock rotation privileges of typically 10% of net sales for the previous six-month period. The contractual stock rotation applies only to shipments at the Company’s listed book price. Asian distributors typically buy the Company’s product at less than standard price and therefore are not entitled to the 10% stock rotation privilege. In order to provide for routine inventory refreshing, for the Company’s benefit as well as theirs, the Company grants Asian distributors stock rotation privileges between 1% and 10% even though the Company is not contractually obligated to do so. Each month the Company adjusts the sales reserve for the estimated stock rotation privilege anticipated to be utilized by the distributors.

From time to time, customers may request to return parts for various reasons including the customers’ belief that the parts are not performing to specification. Many such return requests are the result of customers incorrectly using the parts, not because the parts are defective. Management reviews these requests and, if approved, the Company prepares a RMA. The Company is only obligated to accept defective parts returns. To accommodate the Company’s customers, the Company may approve particular return requests, even though it is not obligated to do so. Each month the Company records a sales reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns, which are the result of a part not meeting specifications or being non-functional, have been immaterial and the Company can frequently resell returned parts to other customers for use in other applications. The Company monitors and assesses RMA activity and overall materiality to assess whether a general warranty reserve has become appropriate.

The Company grants price protection solely at the discretion of Pericom management. The purpose of price protection is to reduce the distributor’s cost of inventory as market prices fall thus reducing SSD rates. Pericom sales management prepares price protection proposals for individual products located at individual distributors. Pericom general management reviews and approves or disapproves these proposals. If a particular price protection arrangement is approved, the Company estimates the dollar impact based on the sales price reduction per unit for the products approved and the number of units of those products in that distributor’s inventory. The Company records a sales reserve in that period for the estimated amount at the time revenue is recognized.

At the discretion of Pericom management, the Company may offer rebates on specific products sold to specific end customers. The purpose of the rebates is to allow for pricing adjustments for large programs without affecting the pricing the Company charges its distributor customers. The Company records the rebate at the time of shipment.

Pericom typically grants payment terms of between 30 and 60 days to its customers. The Company’s customers generally pay within those terms. The Company grants relatively few customers sales terms that include cash discounts. Distributors are invoiced for shipments at listed book price. When the distributors pay the Company’s invoices, they may claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, the Company processes the requests against the prior authorizations and reduces the reserve previously established for that customer.

The revenue the Company records for sales to its distributors is net of estimated provisions for these programs. When determining this net revenue, the Company must make significant judgments and estimates. The Company bases its estimates on historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and the Company’s estimates. The Company’s financial condition and operating results depend on its ability to make reliable estimates and Pericom believes that such estimates are reasonable.

63

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

PRODUCT WARRANTY — The Company offers a standard one-year product replacement warranty. In the past, the Company has not had to accrue for a general warranty reserve, but assesses the level and materiality of RMAs and determines whether it is appropriate to accrue for estimated returns of defective products at the time revenue is recognized. On occasion, management may determine to accept product returns beyond the standard one-year warranty period. In those instances, the Company accrues for the estimated cost at the time management decides to accept the return. Because of the Company’s standardized manufacturing processes and product testing procedures, returns of defective product are infrequent and the quantities have not been significant. Accordingly, historical warranty costs have not been material.

SHIPPING COSTS — We charge shipping costs to cost of revenues as incurred.

CONCENTRATION OF CREDIT RISK — The Company primarily sells its products to a relatively small number of companies and generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains allowances for estimated bad debt losses. The Company also purchases substantially all of its wafers from three suppliers and purchases other manufacturing services from a relatively small number of suppliers.

The following table indicates the percentage of our net revenues and accounts receivable in excess of 10% with any single customer:

		Percentage of
Fiscal Year Ended:		Net Revenues			Trade Accounts Receivable
June 30, 2012	Customer A		18	%		26	%
	Customer B		14			6
	All others		68			68
			100	%		100	%
July 2, 2011	Customer A		18	%		16	%
	Customer B		15			12
	All others		67			72
			100	%		100	%
July 3, 2010	Customer A		22	%		26	%
	Customer B		14			9
	All others		64			65
			100	%		100	%

 

The Company maintains cash, cash equivalents and short- and long-term investments with various high credit quality financial institutions. The Company has designed its investment policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that manage its investments. The Company is exposed to credit risk in the event of default by the financial institutions or issuers of securities to the extent of the amounts reported in the consolidated balance sheets.

RECENTLY ISSUED ACCOUNTING STANDARDS — In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which requires comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income, rather than in a footnote or as part of a statement of changes to shareholders equity. The amendment does not change what items are reported in other comprehensive income or the requirement to report reclassification of items from other comprehensive income to net income. This standard will be effective for the Company’s fiscal year beginning July 1, 2012 with retrospective application

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

required. As this standard impacts presentation requirements only, the adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350) — Testing Goodwill for Impairment”, which provides updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for the Company’s fiscal year beginning July 1, 2012, with early adoption permitted. The Company is currently evaluating this guidance, but it is not expected that the adoption will have a material effect on the consolidated financial statements.

EARNINGS (LOSS) PER SHARE — The Company bases its basic earnings (loss) per share upon the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Basic and diluted earnings (loss) per share for each of the three years in the period ended June 30, 2012 is as follows:

	Fiscal Year Ended
(In thousands, except for per share data)	June 30, 2012			July 2, 2011		July 3, 2010
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463	$	10,794
Computation of common shares outstanding — basic earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Basic earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.54	$	0.42
Computation of common shares outstanding — diluted earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Dilutive shares using the treasury stock method		—			331		305
Shares used in computing diluted earnings (loss) per share		24,094			25,254		25,717
Diluted earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.53	$	0.42

 

As the Company incurred a loss for the year ended June 30, 2012, diluted loss per share is the same as basic loss per share since the addition of any contingently issuable share would be anti-dilutive. Options to purchase 2.5 million shares of common stock, and restricted stock units of 504,000 shares were outstanding during the year ended June 30, 2012 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.4 million shares of common stock, and restricted stock units of 43,000 shares were outstanding during the year ended July 2, 2011 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.8 million shares of common stock, and restricted stock units of 76,000 shares were outstanding during the year ended July 3, 2010 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive.

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. OTHER RECEIVABLES

Other receivables consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Interest receivable	$	832	$	597
VAT and other tax receivables		1,928		3,226
Government subsidy receivable		823		1,546
Other accounts receivable		91		490
	$	3,674	$	5,859

 

3. INVENTORIES

Inventories consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Finished goods	$	5,252	$	5,905
Work-in-process		3,981		4,701
Raw materials		7,371		11,336
	$	16,604	$	21,942

 

As of June 30, 2012, the Company had reserved for $3.8 million of inventory as compared to $4.2 million at July 2, 2011.

4. PROPERTY, PLANT AND EQUIPMENT — NET

	As of the year ended
(in thousands)	June 30, 2012			July 2, 2011
Machinery and equipment	$	53,649		$	50,268
Buildings		30,104			23,200
Computer equipment and software		15,303			15,389
Land		3,666			3,805
Furniture and fixtures		1,441			1,361
Leasehold improvements		1,277			1,174
Vehicles		153			152
Total		105,593			95,349
Accumulated depreciation and amortization		(51,164	)		(44,662	)
Construction-in-progress		1,673			10,172
Property, plant and equipment — net	$	56,102		$	60,859

 

Depreciation expense for the years ended June 30, 2012, July 2, 2011 and July 3, 2010 was $8.0 million, $7.7 million and $6.7 million, respectively.

5. OTHER ASSETS

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Land use rights	$	6,890	$	6,938
Investments in privately held companies		1,303		1,354
Deposits		263		239
Other		602		1,350
Total	$	9,058	$	9,881

 

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. OTHER ASSETS (Continued)

The Company purchased land use rights from the People’s Republic of China (PRC) in 2008 for the construction of its Jinan facility and its operation for a period of 50 years. In addition, the PTI acquisition in 2011 included land use rights for PTI’s properties in Shanghai.

The Company has investments in certain privately held companies which it accounts for under the cost method. The Company reviews these investments for impairment on a periodic basis. No impairment charges relating to investments in privately held companies were recorded during fiscal 2012, 2011 or 2010. For the year ended June 30, 2012, the Company wrote off $856,000 of promissory notes receivable due from two privately held technology companies which was recorded as a charge to general and administrative expense.

6. BUSINESS COMBINATION

Acquisition of PTI

On August 31, 2010, the Company completed the acquisition and obtained control of PTI for cash consideration of $30.2 million. An additional approximately $6 million in earn-out consideration and bonus payments were also paid by the Company in fiscal 2012 for achievement of gross profit milestones for fiscal year 2011.

Fair Value of Consideration Transferred (in thousands):

Cash consideration	$	30,236
Acquisition date fair value of contingent earn-out consideration		4,087
Acquisition date fair value of previously held interest in PTI		23,672
Total	$	57,995

 

Immediately prior to the acquisition, remeasurement of our interest in PTI led to a gain of $11.0 million, which amount was recorded in interest and other income, net in the fiscal 2011 consolidated statement of operations. This fair value measurement was based on the per share consideration paid in the transaction, including the fair value of the earn-out, applied to the number of shares held by the Company immediately prior to closing.

In accordance with ASC 805, a liability was recognized for the estimated acquisition date fair value of $4.1 million for the contingent consideration based on the probability of the achievement of PTI’s gross profit target. Actual achievement of PTI’s gross profit target exceeded 100% of the threshold, and the PTI stockholders earned the maximum consideration of $4.8 million. The payout of this amount was completed in the third quarter of fiscal year 2012.

Allocation of Consideration Transferred

The acquisition was accounted for as a business combination under ASC 805. The purchase price of $58.0 million was allocated to the net tangible and intangible assets acquired and liabilities assumed based on their fair values as of the date of the completion of the acquisition as follows (in thousands):

Net tangible assets	$	26,665
Amortizable intangible assets:
Existing and core technology		7,165
Customer relationships		5,368
Backlog		365
Indefinite-lived intangible asset:
In-process research and development		3,223
Goodwill		15,209
Total	$	57,995

 

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. BUSINESS COMBINATION (Continued)

As of the date of acquisition, inventories are required to be measured at fair value. The fair value of inventory of $3.4 million was based on assumptions applied to the PTI acquired inventory balance. For finished goods and work-in-progress inventory, the Company assumed that estimated selling prices would yield gross margins consistent with actual margins earned by PTI during the second half of fiscal year 2010. The Company assumed that selling cost as a percentage of revenue would be consistent with actual rates experienced by PTI during the second half of fiscal year 2010.

The fair value of the acquired land and buildings in Shanghai, China was estimated based on the recent real estate transactions of comparable properties in the same geographic area. The acquired land and buildings are being depreciated over estimated useful lives of 15 to 48 years.

Existing and core technology consisted of products which have reached technological feasibility and relate to the PTI products. The value of the developed technology was determined by discounting estimated net future cash flows of these products. The Company is amortizing the existing and core technology on a straight-line basis over an estimated life of 6 years.

Customer relationships relate to the Company’s ability to sell existing and future versions of products to existing PTI customers. The fair value of the customer relationships was determined by discounting estimated net future cash flows from the customer contracts. The Company is amortizing customer relationships on a straight-line basis over an estimated life of 6 years.

The backlog fair value relates to the estimated selling cost to generate backlog at August 31, 2010. The fair value of backlog at closing was amortized over an estimated life of 3 months and is fully amortized.

In-process research and development (“IPRD”) consisted of the in-process projects to complete development of certain PTI products. The value assigned to IPRD was determined by considering the importance of products under development to the overall development plan, estimating costs to develop the purchased IPRD into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value. This methodology is referred to as the income approach, which discounts expected future cash flows to present value. The discount rate used in the present value calculations was derived from a weighted-average cost of capital analysis, adjusted to reflect additional risks related to the product’s development and success as well as the product’s stage of completion. Acquired IPRD assets were initially recognized at fair value and were classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the acquisition date, the assets were not amortized as charges to earnings. Development of the PTI IPRD products was completed in the third quarter of fiscal year 2012. At this point the acquired IPRD projects were considered a finite-lived intangible asset and amortization commenced over an expected life of 6 years.

The deferred tax liability of $3.0 million associated with the estimated fair value adjustments of assets acquired and liabilities assumed was recorded using the estimated statutory tax rate in the jurisdictions where the fair value adjustments occurred.

Of the total estimated purchase price paid at the time of acquisition, approximately $15.5 million was allocated to goodwill. Subsequently, goodwill was reduced by approximately $335,000 as a result of working capital adjustments and indemnification claims. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets and is not deductible for tax purposes. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets was the acquisition of an assembled workforce of experienced semiconductor engineers, synergies in products, technologies, skill sets, operations, customer base and organizational cultures that can be leveraged to enable the Company to build an enterprise greater than the sum of its parts. In accordance with ASC 350, Intangibles — Goodwill and Other, goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. In the event that management determines that

68

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. BUSINESS COMBINATION (Continued)

the value of goodwill has become impaired, the Company will record an expense for the amount impaired during the fiscal quarter in which the determination is made.

The amount of PTI net revenues included in the Company’s consolidated statement of operations for the fiscal year ended June 30, 2012 was $13.3 million, and from the PTI acquisition date of August 31, 2010 to July 2, 2011, was approximately $16.6 million.

Pro Forma Data for the PTI Acquisition

The following table presents the unaudited pro forma results of the Company as though the PTI acquisition described above occurred at the beginning of the fiscal year ended July 3, 2010. The data below includes the historical results of the Company and PTI on a standalone basis through the closing date of acquisition, with adjustments as noted in the supplemental information. The pro forma results presented do not purport to be indicative of the results that would have been achieved had the acquisition been made as of that date nor of the results which may occur in the future.

	Year Ended			Year Ended
(unaudited)	July 2,			July 3,
(in thousands except per share)	2011			2010
Revenue	$	170,509		$	163,643
Net income		9,568			17,091
Net income per share — basic		0.38			0.67
Net income per share — diluted		0.38			0.66
Supplemental Information on Pro Forma Adjustments
Pro forma adjustment to revenue
Eliminate intercompany sales	$	(383	)	$	(1,139	)
Total revenue adjustment	$	(383	)	$	(1,139	)
Pro forma adjustments to net income
Depreciation and amortization	$	511		$	(2,737	)
Earnout and compensation expense accruals		1,614			(1,613	)
Eliminate the Company’s share of PTI income		(468	)		(2,071	)
Acquisition related costs		761			(761	)
Gain on previously held interest in PTI		(7,263	)		8,938
Other		(155	)		(313	)
Total net income adjustments	$	(5,000	)	$	1,443

 

7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investment in unconsolidated affiliates is comprised of the following:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,474	$	2,596

 

69

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES (Continued)

Prior to completing the PTI acquisition on August 31, 2010, the Company had a 42.04% ownership interest in PTI. Pericom accounted for its investment in PTI prior to the acquisition using the equity method due to the Company’s significant influence over its operations. PTI was incorporated in 1994, and in 1995 established a design center and sales office to pursue opportunities and participate in joint ventures in China. Prior to the acquisition, the Company purchased $383,000 and $1.1 million in goods and services from PTI during the years ended July 2, 2011 and July 3, 2010, respectively. PTI owed the Company $65,000 at July 3, 2010 for reimbursement of certain administrative expenses incurred by the Company on behalf of PTI and for advances made to PTI by the Company. Condensed financial information of PTI at July 3, 2010 is as follows:

	(Unaudited) As of and for the year ended
(in thousands)	July 3, 2010
Total assets	$	26,875
Total liabilities	$	2,546
Total equity	$	24,329
Revenue	$	17,869
Cost of revenues		8,798
Gross profit		9,071
Operating expenses		4,427
Income from operations		4,644
Interest and other income		440
Income tax expense		230
Net income	$	4,854

 

The percentage at which the Company recognized its proportionate share of the income of PTI was equal to the percentage of ownership held in successive rounds of financing of PTI in which the Company participated.

PSE-TW has a 49% equity interest in Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”), an FCP manufacturing company located in Science Park of Jiyuan City, Henan Province, China. JCP is a key manufacturing partner of PSE-TW.

The Company holds or has held ownership interests in various other privately held companies. The ownership in these affiliates varied from 20% to approximately 49%. For those companies in which the ownership interest is more than 20% and in which the Company has the ability to exercise significant influence on the affiliate’s operations, the investment is valued using the equity method of accounting. As of June 30, 2012, the amount of consolidated retained earnings of the Company represented by undistributed earnings of 50% or less entities accounted for by the equity method was approximately $3.6 million.

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. ACQUISITION OF NONCONTROLLING INTEREST IN SUBSIDIARIES

Acquisition of remaining minority interest in PSE-TW

Prior to fiscal 2010, Pericom owned approximately 97.3% of PSE-TW with the remaining interest owned by other parties. In fiscal 2010, the Company purchased the remaining 2.71% of the outstanding shares of PSE-TW for approximately $1.2 million. As Pericom retained its controlling interest in PSE-TW, this was treated as an equity transaction in accordance with the provisions of ASC 810, Consolidation.

9. GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the activity related to the carrying value of our goodwill during the years ended June 30, 2012 and July 2, 2011:

	As of
(in thousands)	June 30, 2012			July 2, 2011
Goodwill
Beginning balance	$	16,669		$	1,681
Acquisition of PTI, net		—			14,218
Other adjustments		(239	)		(96	)
Cumulative translation adjustments		367			866
Ending balance	$	16,797		$	16,669

 

The Company’s acquired intangible assets associated with completed acquisitions for each of the following fiscal years are composed of:

	As of the year ended
	June 30, 2012							July 2, 2011
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	5,906	$	(1,888	)	$	4,018	$	5,777	$	(909	)	$	4,868
eCERA trade name		44		(43	)		1		45		(38	)		7
Core developed technology		13,110		(4,698	)		8,412		12,040		(2,648	)		9,392
SaRonix supplier relationship		—		—			—		398		(273	)		125
Total amortizable purchased intangible assets		19,060		(6,629	)		12,431		18,260		(3,868	)		14,392
IPRD		—		—			—		883		—			883
SaRonix trade name		400		—			400		415		—			415
Total purchased intangible assets	$	19,460	$	(6,629	)	$	12,831	$	19,558	$	(3,868	)	$	15,690

 

Amortization expense related to finite-lived purchased intangible assets was approximately $3.1 million in fiscal 2012, $2.8 million in fiscal 2011 and $331,000 in fiscal 2010. Amortization of intangible assets in fiscal 2012 included accelerated amortization related to a supplier relationship of approximately $125,000 and subsequent write-off.

The Company performs an annual impairment review of its long-lived assets, including its intangible assets. Based on the results of its most recent annual impairment tests, the Company determined that no impairment of the intangible assets existed as of June 30, 2012 or July 2, 2011. However, future impairment tests could result in a charge to earnings.

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PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. GOODWILL AND INTANGIBLE ASSETS (Continued)

The finite-lived purchased intangible assets consist of supplier relationships, trade name, and core developed technology, which have remaining weighted average useful lives of approximately two years. We expect our future amortization expense over the next five years associated with these assets to be:

	Fiscal Years Ending
(in thousands)	2013		2014		2015		2016		2017 and beyond		Total
Expected Amortization
Customer relationships	$	965	$	965	$	965	$	965	$	158	$	4,018
eCERA trade name		1		—		—		—		—		1
Core developed technology		2,120		1,945		1,866		1,866		615		8,412
	$	3,086	$	2,910	$	2,831	$	2,831	$	773	$	12,431

 

10. ACCRUED LIABILITIES

Accrued liabilities consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Accrued compensation	$	5,886	$	6,979
Acquisition-related liabilities		—		3,541
Contingent earn-out liability		—		4,774
Accrued construction liabilities		845		2,316
Income taxes payable		2		249
Sales commissions		497		545
Other accrued expenses		1,378		1,241
	$	8,608	$	19,645

 

11. DEBT

As of June 30, 2012, the Company’s subsidiary PSE-TW has made short-term borrowings under its credit facilities totaling approximately $1.4 million. The loans are denominated in U.S. Dollars and Japanese Yen and carry variable rates of interest currently at 1.3% per annum. The loans have maturities ranging from 28 to 84 days.

12. RESTRICTED ASSETS

As of June 30, 2012, the Company had pledged and restricted assets of $4.3 million consisting of land and buildings PSE-TW has pledged for loan and credit facilities. The PSE-TW loan and credit facility is for equipment purchases or inventory financing and $1.4 million was outstanding under this facility as of June 30, 2012.

As of July 2, 2011, the Company had pledged and restricted assets of $7.4 million. These consist of $4.5 million in land and buildings PSE-TW has pledged for loan and credit facilities and $2.9 million of restricted cash at PAL. The PSE-TW loan and credit facility is for equipment purchases or inventory financing and $5.0 million was outstanding under this facility as of July 2, 2011. The PAL restricted cash was in an escrow account for contingent remaining liabilities related to the PTI acquisition.

72

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. COMMITMENTS AND CONTINGENCIES

The future minimum commitments at June 30, 2012 are as follows:

	Fiscal Year
(in thousands)	2013		2014		2015		2016 and beyond		Total
Short-term debt	$	1,364	$	—	$	—	$	—	$	1,364
Operating lease payments		1,546		824		196		8		2,574
Capital equipment purchase commitments		969		—		—		—		969
Yangzhou capital injection		7,000		8,000		—		—		15,000
Total	$	10,879	$	8,824	$	196	$	8	$	19,907

 

The operating lease commitments are primarily the lease on the Company’s corporate headquarters, which expires in 2013.

We have no purchase obligations other than routine purchase orders and the capital equipment purchase commitments shown in the table as of June 30, 2012. However, on July 6, 2012, we entered into an agreement to purchase a building to serve as our new corporate headquarters in Milpitas, California. The purchase, for $7.6 million, closed on August 9, 2012.

On December 1, 2009, the Company entered into an R&D Center Investment Agreement (the “R&D Agreement”) with the Administrative Committee of the Yangzhou Economic and Technology Development Zone (the “Committee”) in China. Under the terms of the agreement, the Committee is to provide a funding, along with national and local tax incentives and other incentives. The funding would be paid in installments based on scheduled progress of the R&D Center’s development and our injection of paid-in capital. The Company made a $6 million capital injection in 2011 and applied for the initial agreed-upon subsidies of approximately $3.9 million. To date the Company has received only $773,000 which is recorded as a deferred credit under “Other long-term liabilities” on the consolidated balance sheets. The Company is currently negotiating with the Yangzhou government to terminate the R&D Agreement. If the termination is successful, the additional capital injections in the above table would not be made, although there may be additional terms or conditions involved in any settlement agreement.

Rent expense during the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010 was $1.9 million, $1.9 million and $1.7 million, respectively.

14. INDUSTRIAL DEVELOPMENT SUBSIDY

As of June 30, 2012, industrial development subsidies in the amount of $12.5 million have been earned and applied for by PSE-SD from the Jinan Hi-Tech Industries Development Zone Commission based on meeting certain pre-defined criteria. The subsidies may be used for the acquisition of assets or to cover business expenses. When a subsidy is used to acquire assets, the subsidy will be amortized over the useful life of the asset. When a subsidy is used for expenses incurred, the subsidy is regarded as earned upon the incurrence of the expenditure. The remaining balance of the subsidies at June 30, 2012 was $8.6 million, which amount is expected to be recognized over the next three to twenty years.

We recognized $1.3 million and $1.3 million of industrial development subsidy as a reduction of cost of goods sold and $180,000 and $239,000 of industrial development subsidy as a reduction of operating expenses in the consolidated statement of operations for the years ended June 30, 2012 and July 2, 2011, respectively.

73

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. EQUITY AND COMPREHENSIVE INCOME

Effective with the beginning of fiscal 2010, the Company adopted the FASB’s new guidance regarding the accounting for noncontrolling interests. The new rules require the recognition of a noncontrolling interest as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest is shown on the face of the consolidated statements of operations.

The Company’s subsidiary PSE-TW had noncontrolling interests for the first four months of fiscal 2010. Parties other than the Company owned approximately 2.71% of the outstanding shares of PSE-TW, and these shares were acquired by the Company in November 2009 for approximately $1.2 million.

Comprehensive income (loss) consists of net income (loss), changes in net unrealized gains (losses) on available-for-sale investments and changes in cumulative currency translation adjustments at consolidated subsidiaries.

As of June 30, 2012, accumulated other comprehensive income consists of $194,000 of unrealized gains net of tax and $9.4 million of accumulated currency translation gains.

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

PREFERRED STOCK

The Company’s shareholders have authorized the Board of Directors to issue 5,000,000 shares of preferred stock from time to time in one or more series and to fix the rights, privileges and restrictions of each series. As of June 30, 2012, the Company has issued no shares of preferred stock.

STOCK OPTION PLANS

At June 30, 2012 the Company had four stock option plans and one employee stock purchase plan, including the 1995 Stock Option Plan, 2001 Stock Option Plan, SaRonix Acquisition Stock Option Plan, 2004 Stock Incentive Plan and the 2010 Employee Stock Purchase Plan (“ESPP”). The Company’s aggregate compensation cost due to option and restricted stock unit grants and the ESPP for the twelve months ended June 30, 2012 totaled $3.7 million, as compared with $4.3 million and $4.0 million for fiscal 2011 and 2010, respectively. The Company recognized $1.2 million, $1.4 million, and $1.2 million in income tax benefit in the consolidated statements of operations for fiscal 2012, 2011 and 2010, respectively, related to the Company’s share-based compensation arrangements. The net impact of share-based compensation for the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010 was a reduction in net income of $2.5 million, $2.9 million and $2.9 million, respectively, or a reduction of $0.10, $0.11 and $0.11 per diluted share, respectively.

Under the Company’s 2004, 2001, and 1995 stock option plans and the SaRonix Acquisition Stock Option plan, the Company has reserved 5.4 million shares of common stock as of June 30, 2012 for issuance to employees, officers, directors, independent contractors and consultants of the Company in the form of incentive and nonqualified stock options and restricted stock units.

The Company may grant options at the fair value on grant date for incentive stock options and nonqualified stock options. Options vest over periods of generally 48 months as determined by the Board of Directors. Options granted under the Plans expire 10 years from the grant date.

The Company estimates the fair value of each employee option on the date of grant using the Black-Scholes option valuation model and expenses that value as compensation using a straight-line method over the option’s vesting period, which corresponds to the requisite employee service period. The Company estimates expected stock price volatility based on actual historical volatility for periods that the Company believes represent predictors of future volatility. The Company uses historical data to estimate option exercises, expected option holding periods and option forfeitures. The Company bases the risk-free interest rate on the U.S. Treasury note yield for periods equal to the expected term of the option.

74

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Continued)

The following table lists the assumptions the Company used to value stock options:

	Fiscal Year Ended
	June 30, 2012	July 2, 2011	July 3, 2010
Expected life	5.5 years	5.5 years	5.4–5.5 years
Risk-free interest rate	2.46%	2.46%	2.45–2.60%
Volatility range	54%	53–54%	53%–54%
Dividend yield	0.00%	0.00%	0.00%

 

The following table summarizes the Company’s stock option plans as of June 27, 2009 and changes during the three fiscal periods ended June 30, 2012:

	Outstanding Options
Options	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)					(in thousands)
Options outstanding at June 27, 2009		3,755			14.00	$	427
Options granted (weighted average grant date fair value of $5.11)		470			10.24
Options exercised		(105	)		8.72
Options forfeited or expired		(643	)		23.71
Options outstanding at July 3, 2010		3,477		$	11.85	$	872
Options granted (weighted average grant date fair value of $4.51)		183			8.87
Options exercised		(67	)		8.33
Options forfeited or expired		(619	)		15.97
Options outstanding at July 2, 2011		2,974		$	10.89	$	645
Options granted (weighted average grant date fair value of $3.89)		142			7.65
Options exercised		(21	)		7.77
Options forfeited or expired		(642	)		12.37
Options outstanding at June 30, 2012		2,453		$	10.34	$	912

 

At June 30, 2012, 2,066,000 shares were available for future grants under the option plans. The aggregate intrinsic value of options exercised during the year ended June 30, 2012 was $8,000. The status of options vested and expected to vest and options that are currently exercisable as of June 30, 2012 is as follows:

	Options Vested and Expected to Vest		Options Currently Exercisable
Shares (millions)		2.4		2.1
Aggregate intrinsic value (thousand $)	$	888	$	683
Weighted average contractual term (years)		5.1		4.5
Weighted average exercise price	$	10.36	$	10.59

 

The Company has unamortized share-based compensation expense related to options of $1.4 million, which will be amortized to expense over a weighted average period of 2.1 years.

75

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Continued)

Additional information regarding options outstanding as of June 30, 2012 is as follows:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding as of June 30, 2012		Weighted Average Remaining Contractual Term (Years)		Weighted Average Exercise Price		Number Exercisable as of June 30, 2012		Weighted Average Exercise Price
$   4.89    $  8.03		501,969		5.48	$	7.72		364,151	$	7.76
8.10        8.70		497,840		4.18		8.48		415,323		8.46
8.71      10.01		534,488		5.87		9.70		406,579		9.64
10.15      12.16		494,359		4.41		10.91		461,888		10.88
13.33      18.10		424,512		5.65		15.77		417,256		15.78
$   4.89    $18.10		2,453,168		5.12	$	10.34		2,065,197	$	10.59

 

Restricted Stock Units

Restricted stock units (“RSUs”) are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of 4 years and are expensed ratably on a straight-line basis over their respective vesting period net of estimated forfeitures. The fair value of RSUs granted pursuant to the Company’s 2004 Stock Incentive Plan is the product of the number of shares granted and the grant date fair value of our common stock. The following table summarizes the RSUs as of June 27, 2009 and changes during the three fiscal periods ended June 30, 2012:

	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Term		Aggregate Intrinsic Value
	(in thousands)					(years)		(in thousands)
RSUs outstanding at June 27, 2009		349		$	10.18		2.08	$	2,980
Awarded		303			10.52
Released		(39	)		12.76
Forfeited		(22	)		10.41
RSUs outstanding at July 3, 2010		591		$	10.18		1.66	$	5,403
Awarded		249			8.70
Released		(208	)		9.77
Forfeited		(40	)		9.92
RSUs outstanding at July 2, 2011		592		$	9.73		1.60	$	5,253
Awarded		156			7.78
Released		(203	)		9.91
Forfeited		(41	)		9.73
RSUs outstanding at June 30, 2012		504		$	9.06		1.42	$	4,535
RSUs vested and expected to vest after June 30, 2012		449		$	9.11		1.34	$	4,043

 

The Company has unamortized share-based compensation expense related to RSUs of $3.0 million, which will be amortized to expense over a weighted average period of 2.1 years.

76

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Continued)

2010 EMPLOYEE STOCK PURCHASE PLAN

The Company’s 2010 Employee Stock Purchase Plan (the “Stock Purchase Plan”) allows eligible employees of the Company to purchase shares of Common Stock through payroll deductions. The Company reserved 2.0 million shares of the Company’s Common Stock for issuance under the Stock Purchase Plan, of which 1.8 million remain available at June 30, 2012. The Stock Purchase Plan permits eligible employees to purchase Common Stock at a discount through payroll deductions during six-month purchase periods. The six-month periods come to an end on or about May 1 and November 1 and the purchases are then made. Participants in the Stock Purchase Plan may purchase stock at 85% of the lower of the stock’s fair market value on the first day and last day of the purchase period. The maximum number of shares of Common Stock that any employee may purchase under the Stock Purchase Plan during any offering period is 1,000 shares, and an employee may not accrue more than $10,000 for share purchases in any offering period. During fiscal year 2012, 2011 and 2010, the Company issued 109,000, 157,000 and 200,000 shares of common stock under this plan and the predecessor 2000 Stock Purchase Plan at weighted average prices of $6.96, $6.23 and $5.33, respectively. The weighted average grant date fair value of the fiscal 2012, 2011 and 2010 awards were $2.22, $2.36 and $3.39 per share, respectively.

The Company estimates the fair value of stock purchase rights granted under the Company’s Stock Purchase Plan on the date of grant using the Black-Scholes option valuation model. ASC Topic 718, Stock Based Compensation, states that a “lookback” pricing provision with a share limit should be considered a combination of stock and a call option. The valuation results for these elements have been combined to value the specific features of the stock purchase rights. The Company bases volatility on the expected volatility of the Company’s stock during the accrual period. The expected term is determined by the time from enrollment until purchase. The Company uses historical data to determine expected forfeitures and the U.S. Treasury yield for the risk-free interest rate for the expected term.

The following table lists the values of the assumptions the Company used to value stock compensation in the Stock Purchase Plan:

	Fiscal Year Ended
	June 30, 2012	July 2, 2011	July 3, 2010
Expected life	6 months	3–6 months	4.5–13.5 months
Risk-free interest rate	0.10%	0.10–0.16%	0.17–0.63%
Volatility range	43%–64%	39%–58%	50%–70%
Dividend yield	0.00%	0.00%	0.00%

 

The following table summarizes activity in the Company’s employee stock purchase plan during the fiscal year ended June 30, 2012:

	Shares			Weighted Average Purchase
Beginning Available		1,944,707
Purchases		(108,768	)	$	6.96
Ending Available		1,835,939

 

At June 30, 2012, the Company has $75,000 in unamortized share-based compensation related to its employee stock purchase plan. We estimate this expense will be amortized and recognized in the consolidated statements of operations over the next four months.

77

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Continued)

REPORTING SHARE-BASED COMPENSATION

The following table shows total share-based compensation expense classified by consolidated statement of operations reporting caption generated from the plans mentioned above:

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Cost of revenues	$	211	$	250	$	286
Research and development		1,434		1,536		1,506
Selling, general and administrative		2,091		2,500		2,257
Pre-tax stock-based compensation expense		3,736		4,286		4,049
Income tax effect		1,229		1,409		1,159
Net stock-based compensation expense	$	2,507	$	2,877	$	2,890

 

The amount of share-based compensation expense in inventory at June 30, 2012, July 2, 2011 and July 3, 2010 is immaterial.

Share-based compensation expense categorized by the type of award from which it arose is as follows for fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010:

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Stock option plans	$	3,492	$	3,972	$	3,376
Less income tax effect		1,229		1,409		1,159
Net stock option plan expense		2,263		2,563		2,217
Employee stock purchase plan		244		314		673
Less income tax effect		—		—		—
Net employee stock purchase plan expense		244		314		673
	$	2,507	$	2,877	$	2,890

 

STOCK REPURCHASE PLAN

On April 26, 2007, the Company’s Board of Directors authorized the repurchase of 2.0 million shares of our common stock, on April 29, 2008, the Board authorized the repurchase of an additional $30 million of common stock and on April 29, 2012, the Board authorized the repurchase of a further $25 million worth of common stock. The Company was authorized to repurchase the shares from time to time in the open market or private transactions, at the discretion of the Company’s management. During the year ended June 30, 2012, the Company repurchased 1,482,572 shares for an aggregate cost of $11.6 million. During the year ended July 2, 2011, the Company repurchased 613,331 shares for an aggregate cost of $5.4 million. During the year ended July 3, 2010, the Company repurchased 907,545 shares for an aggregate cost of $8.7 million.

Current cash balances and the proceeds from stock option exercises and purchases in the stock purchase plan have funded stock repurchases in the past, and the Company expects to fund future stock repurchases from these same sources.

78

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. SHAREHOLDER RIGHTS PLAN

On March 6, 2012, the Company adopted a shareholder rights plan and declared a dividend of one preferred share purchase right for each share of common stock held by shareholders of record as of that date. Each right entitles shareholders, after the rights become exercisable, to purchase one one-thousandth of a share of our Series D Junior Participating Preferred Stock.

The Company designed the rights plan to protect the long-term value of the Company for its shareholders during any future unsolicited acquisition attempt. The Company did not adopt the rights plan in response to any specific attempt to acquire the Company or its shares and the Company is not aware of any current efforts to do so. The rights will become exercisable only upon the occurrence of certain events specified in the plan, including the acquisition of 15% of the Company’s outstanding common stock by a person or group. Should a person or group acquire 15% or more of the outstanding common stock or announce an unsolicited tender offer, the consummation of which would result in a person or group acquiring 15% or more of the outstanding common stock, shareholders other than the acquiring person may exercise the rights, unless the Board of Directors has approved the transaction in advance. Each right entitles the holder, other than an acquiring person, to purchase shares of the Company’s common stock (or, in the event that there are insufficient authorized common stock shares, substitute consideration such as cash, property, or other securities of the Company, such as Preferred Stock) at a 50% discount to the then prevailing market price. Prior to the acquisition by a person or group of 15% or more of the outstanding common stock, the Company may redeem the rights for $0.001 per right at the option of the Board of Directors. The rights will expire on March 6, 2022. As of June 30, 2012, there were 23,565,000 rights outstanding.

18. FAIR VALUE MEASUREMENTS

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

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

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

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

The following table represents our fair value hierarchy for financial assets (cash equivalents and investments) measured at fair value on a recurring basis. Level 1 available-for-sale investments are primarily comprised of investments in U.S. Treasury securities, valued using market prices in active markets. Most of the investments are classified as Level 2. Level 2 pricing is provided by third party sources of market information obtained through the Company’s investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities it holds are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

The Company’s Level 2 securities include time deposits, government securities, corporate debt securities and mortgage backed and asset backed securities. Government securities include US federal agency securities, foreign

79

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. FAIR VALUE MEASUREMENTS (Continued)

government and agency securities, and US state and municipal bond obligations. Many of the municipal bonds are insured; those that are not are nearly all AAA/Aaa rated. The corporate debt securities are all investment grade and most are single A-rated or better. The asset-backed securities are AAA/Aaa rated and are backed by auto loans, student loans, credit card balances and residential or commercial mortgages.

Assets measured at fair value are summarized as follows:

	As of June 30, 2012
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Commercial paper	$	3,500	$	—	$	3,500	$	—
Time deposits		11,815		—		11,815		—
US Treasury securities		3,634		3,634		—		—
National government and agency securities		6,749		—		6,749		—
State and municipal bond obligations		1,772		—		1,772		—
Corporate bonds and notes		61,638		—		61,638		—
Asset backed securities		10,081		—		10,081		—
Mortgage backed securities		9,334		—		9,334		—
Total	$	108,523	$	3,634	$	104,889	$	—

 

	As of July 2, 2011
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Time deposits	$	10,740	$	—	$	10,740	$	—
US Treasury securities		602		602		—		—
National government and agency securities		9,186		—		9,186		—
State and municipal bond obligations		1,258		—		1,258		—
Corporate bonds and notes		53,699		—		53,699		—
Asset backed securities		11,338		—		11,338		—
Mortgage backed securities		10,725		—		10,725		—
Total	$	97,548	$	602	$	96,946	$	—

 

(1)   At June 30, 2012, the commercial paper and $1,471 of the time deposits are included in cash and cash equivalents; the balance of the investments at June 30, 2012 and July 2, 2011 are included in short-term and long-term investments in marketable securities on the consolidated balance sheet.

The Company had no transfers in between Level 1 and Level 2 during the years ended June 30, 2012 and July 2, 2011.

When assessing marketable securities for other-than-temporary declines in value, a number of factors are considered. Analyses of the severity and duration of price declines, remaining years to maturity, portfolio manager reports, economic forecasts, and the specific circumstances of issuers indicate that it is reasonable to expect marketable securities with unrealized losses at June 30, 2012 to recover in fair value up to the Company’s cost bases within a reasonable period of time. The Company does not intend to sell investments with unrealized losses before maturity, when the obligors are required to redeem them at full face value or par. The Company believes the obligors have the financial resources to redeem the debt securities. Accordingly, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2012.

80

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. FAIR VALUE MEASUREMENTS (Continued)

The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, deposits, accounts payable, accrued liabilities and debt approximate fair value because of their short maturities and/or variable interest rates.

19. INCOME TAXES

Income tax expense consists of Federal, state and foreign current and deferred income taxes as follows:

	Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			July 3, 2010
Income before income taxes
U.S.	$	341		$	21,009		$	10,024
Foreign		554			(627	)		2,279
		895			20,382			12,303
Federal:
Current		941			3,155			3,502
Deferred		(641	)		4,064			(179	)
		300			7,219			3,323
State:
Current		(522	)		(3	)		7
Deferred		2,768			16			(315	)
		2,246			13			(308	)
Foreign:
Current		551			387			855
Deferred		—			—			41
		551			387			896
Total current		970			3,539			4,364
Total deferred		2,127			4,080			(453	)
Total income tax expense	$	3,097		$	7,619		$	3,911

 

The reconciliation between the Company’s effective tax rate and the U.S. statutory rate is as follows:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Tax provision at federal statutory rate		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(33.4	)		—			(0.9	)
Foreign income and withholding taxes		34.1			3.8			1.3
Benefits from resolution of certain tax audits and expiration of statute of limitations		(15.4	)		(0.6	)		(2.7	)
Share-based compensation		20.5			0.3			1.6
Research and development tax credits		(2.2	)		0.3			(0.4	)
Change in valuation allowance		307.3			—			(1.1	)
Other		1.1			(0.4	)		—
Income tax expense		346.0	%		37.4	%		31.8	%

 

81

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. INCOME TAXES (Continued)

The components of the net deferred tax assets were as follows (in thousands):

	As of the year ended
	June 30, 2012			July 2, 2011
Deferred tax assets:
Credit carryforwards	$	3,183		$	3,181
Accruals and reserves		1,737			1,867
Cumulative loss on investment		339			371
Depreciation and amortization		(1,480	)		(1,538	)
Net operating loss carryforward		876			642
Share-based compensation		2,904			2,989
Other		742			438
Total		8,301			7,950
Valuation allowance		(4,305	)		(1,062	)
Deferred tax assets	$	3,996		$	6,888
Deferred tax liabilities:
Gain on previously held shares in unconsolidated affiliate	$	(3,873	)	$	(3,876	)
Acquired PTI intangibles and other		(2,318	)		(2,729	)
Deferred tax liabilities	$	(6,191	)	$	(6,605	)

 

As of June 30, 2012, the Company has net operating loss carryforwards of approximately $1.1 million, $3.8 million, and $5.0 million for PSE-TW in Taiwan, PSE-SD in China, PTI in Hong Kong, which will begin to expire in 2015, 2014 and no expiration, respectively. In addition, the Company has research and development tax credit carryforwards of approximately $4.2 million to offset future state taxable income and no research and development tax credit carryforward to offset federal taxable income. The state research and development tax credit carryforwards do not have an expiration date and may be carried forward indefinitely. The Company has $31,000 of research and development tax credit carryforwards for PSE-TW in Taiwan, which begins to expire in 2012.

The Company provides a valuation allowance for deferred tax assets when it is more likely than not, based upon currently available evidence and other factors, that some portion or all of the deferred tax asset will not be realized. The change in valuation allowance for the year ended June 30, 2012 was an increase of $3.2 million, which resulted primarily from the establishment of a $2.8 million deferred tax asset valuation allowance relating to California tax credits that are not more likely than not to be utilized in the future. The change in valuation allowance for the year ended July 2, 2011 was an increase of $97,000, primarily from an increase in the net operating losses generated in non-US subsidiaries during the periods.

82

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. INCOME TAXES (Continued)

Consolidated income before income taxes includes non-U.S. income (loss) of approximately $554,000, $(627,000) and $2.3 million for the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010, respectively. Pericom has not provided U.S. income taxes on a cumulative total of approximately $17.3 million of undistributed earnings reported by certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

The Company recorded $1.6 million for unrecognized tax benefits as of June 30, 2012. A reconciliation of the beginning and ending amount of unrecognized tax benefit for the three fiscal years from June 27, 2009 through June 30, 2012 is as follows:

Balance as of June 27, 2009	$	(756,000	)
Gross decreases — prior period tax positions		3,000
Gross increases — prior period tax positions		(27,000	)
Gross increases — current period tax positions		(91,000	)
Reductions as a result of a lapse of statute of limitations		326,000
Balance as of July 3, 2010	$	(545,000	)
Gross increases — prior period tax positions		(152,000	)
Gross increases — current period tax positions		(188,000	)
Reductions as a result of a lapse of statute of limitations		130,000
Balance as of July 2, 2011	$	(755,000	)
Gross increases — prior period tax positions		(515,000	)
Gross increases — current period tax positions		(475,000	)
Reductions as a result of a lapse of statute of limitations		138,000
Balance as of June 30, 2012	$	(1,607,000	)

 

$1.5 million of the balance at June 30, 2012 would affect the Company’s effective tax rate if recognized. The Company is subject to examination by federal, foreign, and various state jurisdictions for the years 2006 through 2012. The Company has been notified there will be an examination of the federal tax returns for fiscal 2010 and 2011.

As of June 30, 2012, the Company has accrued $256,000 for interest and penalties related to the unrecognized tax benefits. The balance of unrecognized tax benefits and the related interest and penalties is recorded as a noncurrent liability on our consolidated balance sheet.

Within the next 12 months, we do not anticipate a material decrease in the unrecognized tax benefit or any other significant changes to our tax reserves during that period.

20. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) tax-deferred savings plan under which eligible employees may elect to have a portion of their salary deferred and contributed to the plan. The Board of Directors determines the employer matching contributions at their discretion. There were no employer-matching contributions in fiscal 2012, 2011 or 2010.

83

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. INDUSTRY AND GEOGRAPHICAL SEGMENT INFORMATION

The Company has three operating segments which aggregate into one reportable segment, the interconnectivity device supply market. The Company designs, develops, manufactures and markets high performance integrated circuits and frequency control products. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by ASC No. 280, Disclosures about Segments Reporting (“ASC 280”).

For geographical reporting, the Company attributes net sales to the country where customers are located (the “bill to” location). The Company neither conducts business in nor sells to persons in Iran, Syria, Sudan, or North Korea, countries located in the referenced regions that are identified as state sponsors of terrorism by the U.S. Department of State, and are subject to U.S. economic sanctions and export controls. Long-lived assets consist of all non-monetary assets, excluding non-current deferred tax assets, goodwill and intangible assets. The Company attributes long-lived assets to the country where they are located. The following presents net sales for each of the three years in the period ended June 30, 2012; and the net book value of long-lived assets as of June 30, 2012, July 2, 2011 and July 3, 2010 by geographical segment:

	Fiscal year ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Net sales to countries:
Taiwan	$	63,301	$	75,800	$	74,905
China (including Hong Kong)		48,178		57,957		40,120
United States		7,242		10,022		11,981
Others (less than 10% each)		18,414		22,564		19,907
Total net sales	$	137,135	$	166,343	$	146,913
(in thousands)
Long-lived assets:
China (including Hong Kong)	$	37,761	$	40,112	$	27,883
Taiwan		15,005		16,459		17,519
United States		2,304		2,913		3,751
Korea		650		898		1,161
Others (less than 10% each)		382		477		446
Total long-lived assets	$	56,102	$	60,859	$	50,760

 

84

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. QUARTERLY FINANCIAL DATA (Unaudited)

Following is a summary of quarterly operating results and share data for the years ended June 30, 2012 and July 2, 2011:

PERICOM SEMICONDUCTOR CORPORATION
QUARTERLY FINANCIAL DATA
(in thousands, except per share data)
(Unaudited)

	For the Quarter Ended
	June 30, 2012			March 31, 2012			Dec 31, 2011			Oct 1, 2011
Net revenues	$	37,944		$	33,378		$	30,481		$	35,332
Cost of revenues		24,396			21,789			19,504			22,795
Gross profit		13,548			11,589			10,977			12,537
Operating expenses:
Research and development		5,460			5,669			5,277			5,316
Selling, general and administrative		8,135			7,114			7,060			7,339
Total operating expenses		13,595			12,783			12,337			12,655
Income (loss) from operations		(47	)		(1,194	)		(1,360	)		(118	)
Interest and other income, net		1,059			847			638			1,070
Income (loss) before income tax expense		1,012			(347	)		(722	)		952
Income tax expense (benefit)		2,974			(76	)		(335	)		534
Net income (loss) from consolidated companies		(1,962	)		(271	)		(387	)		418
Equity in net income of unconsolidated affiliates		51			4			52			27
Net income (loss)	$	(1,911	)	$	(267	)	$	(335	)	$	445
Basic income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Diluted income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Shares used in computing basic income (loss) per share		23,611			24,030			24,244			24,491
Shares used in computing diluted income (loss) per share		23,611			24,030			24,244			24,583

 

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011			Jan 1, 2011		Oct 2, 2010
Net revenues	$	43,342	$	39,555		$	40,671	$	42,775
Cost of revenues		28,173		27,190			27,058		28,240
Gross profit		15,169		12,365			13,613		14,535
Operating expenses:
Research and development		5,535		5,238			5,060		4,397
Selling, general and administrative		7,487		7,231			6,986		7,742
Total operating expenses		13,022		12,469			12,046		12,139
Income (loss) from operations		2,147		(104	)		1,567		2,396
Interest and other income, net		695		1,132			614		11,936
Income before income tax expense		2,842		1,028			2,181		14,332
Income tax expense		1,281		514			446		5,378

85

PERICOM SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. QUARTERLY FINANCIAL DATA (Unaudited) (Continued)

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011		Jan 1, 2011		Oct 2, 2010
Net income from consolidated companies		1,561		514		1,735		8,954
Equity in net income of unconsolidated affiliates		48		17		77		556
Net income	$	1,609	$	531	$	1,812	$	9,510
Basic income per share	$	0.06	$	0.02	$	0.07	$	0.38
Diluted income per share	$	0.06	$	0.02	$	0.07	$	0.38
Shares used in computing basic income per share		24,917		24,993		24,894		24,890
Shares used in computing diluted income per share		25,140		25,341		25,270		25,263

 

23. SUBSEQUENT EVENT

On July 6, 2012, the Company entered into an agreement for the purchase of a building to serve as its new corporate headquarters located in Milpitas, California. Subsequent due diligence was completed and the purchase, for $7.6 million, closed on August 9, 2012.

86

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PERICOM SEMICONDUCTOR CORPORATION
By:	/s/ ALEX C. HUI
	Alex C. Hui Chief Executive Officer, President and Chairman of the Board of Directors
Date:	August 31, 2012

 

87

POWER OF ATTORNEY

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alex C. Hui and Aaron Tachibana and each of them, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ ALEX C. HUIAlex C. Hui	Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer)	August 31, 2012
/s/ AARON TACHIBANAAaron Tachibana	Chief Financial Officer (Principal Financial Officer and AccountingOfficer)	August 31, 2012
/s/ JOHN CHI-HUNG HUIJohn Chi-Hung Hui	Senior Vice President, R&D and Director	August 31, 2012
/s/ HAU L LEEHau L. Lee	Director	August 31, 2012
/s/ SIMON WONGSimon Wong	Director	August 31, 2012
/s/ MICHAEL SOPHIEMichael Sophie	Director	August 31, 2012
/s/ EDWARD YANGEdward Yang	Director	August 31, 2012

 

88

Schedule II

PERICOM SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

	Balance at Beginning of Period		Charged to Revenues		Deductions			Balance at End of Period
Reserves for returns and pricing adjustments
Fiscal year ended June 30, 2012	$	1,718	$	5,982	$	(5,178	)	$	2,522
Fiscal year ended July 2, 2011		2,366		6,044		(6,692	)		1,718
Fiscal year ended July 3, 2010		1,895		5,416		(4,945	)		2,366

 

	Balance at Beginning of Period		Charged to Expense		Deductions/ Write-offs			Balance at End of Period
Allowance for doubtful accounts
Fiscal year ended June 30, 2012	$	229	$	92	$	(277	)	$	44
Fiscal year ended July 2, 2011		299		32		(102	)		229
Fiscal year ended July 3, 2010		268		64		(33	)		299

 

	Balance at Beginning of Period		Charged to Expense		Deductions/ Write-offs		Balance at End of Period
Deferred tax valuation allowance
Fiscal year ended June 30, 2012	$	1,062	$	3,243	$	—	$	4,305
Fiscal year ended July 2, 2011		965		97		—		1,062
Fiscal year ended July 3, 2010		819		146		—		965

 

Sii

EX-10.13

EXHIBIT 10.13

AGREEMENT OF PURCHASE AND SALE

          THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) dated as of July 6, 2012, is by and between BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Seller”), and PERICOM SEMICONDUCTOR CORPORATION, a California corporation (collectively, “Buyer”).

ARTICLE I

PURCHASE AND SALE OF PROPERTY

          Section 1.1 Sale. Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees to purchase from Seller, subject to the terms and conditions set forth herein, the following:

                    (a) that certain real property commonly known as 1545 Barber Lane, and located in the City of Milpitas, County of Santa Clara, State of California, and being more particularly described in Exhibit A attached hereto (the “Real Property”);

                    (b) all of Seller’s right, title and interest in and to all rights, privileges and easements appurtenant to the Real Property, including, without limitation, all minerals, oil, gas and other hydrocarbon substances on and under the Real Property, as well as all development rights, air rights, water, water rights, riparian rights and water stock relating to the Real Property and any rights-of-way or other appurtenances used in connection with the beneficial use and enjoyment of the Real Property and all of Seller’s right, title and interest in and to all roads and alleys adjoining or servicing the Real Property (collectively, the “Appurtenances”);

                    (c) all of Seller’s right, title and interest in and to all improvements and fixtures located on the Real Property, including, without limitation, all apparatus, equipment and appliances used in connection with the operation or occupancy of the Real Property, such as heating and air conditioning systems and facilities used to provide any utility, refrigeration, ventilation, garbage disposal, or other services on the Real Property (collectively, the “Improvements”);

                    (d) the personal property owned by Seller, if any, located on the Real Property and used exclusively in the operation or maintenance of the Real Property, as described on Schedule 1 attached hereto (the “Personal Property”); and

                    (e) any intangible personal property now or hereafter owned by Seller and used in the ownership, use or operation of the Real Property, Improvements and Personal Property, including, without limitation, any Leases (defined below), and Seller’s interest in all security deposits and prepaid rent, if any, under Leases and any and all guaranties of the Leases), utility contracts, any contracts or other agreements or rights relating to the ownership, use and operation of the Property, as defined below (except that, to the extent that any such contracts or other agreements are part of portfolio agreements, they shall not be assignable) (collectively, the “Intangible Property”).

1

          All of the items referred to in subsections (a), (b), (c), (d) and (e) above are collectively referred to as the “Property.”

          Section 1.2 Purchase Price; Independent Contract Consideration.

                    (a) The purchase price of the Property is Seven Million Six Hundred Ninety-Six Thousand Dollars ($7,696,000) (the “Purchase Price”).

                    (b) The Purchase Price shall be paid as follows:

                              (i) Upon execution of this Agreement, Buyer shall deposit in escrow with First American Title Insurance Company, 1737 N. 1st St., Suite 500, San Jose, California 95112, Attention Linda Tugade (the “Title Company”) an all cash payment in the amount of Five Hundred Thousand Dollars ($500,000) (the “Initial Deposit”). Except as otherwise expressly provided in this Agreement, following the expiration of the Contingency Period, the Initial Deposit shall be non-refundable to Buyer. The Initial Deposit shall be held in an interest bearing account and all interest thereon shall be deemed a part of the Initial Deposit. At the Closing, as defined in Section 1.2(b)(iv) below, the Initial Deposit shall be paid to Seller and credited against the Purchase Price.

                              (ii) If Buyer delivers an Approval Notice (as herein defined), then on or before the end of the Contingency Period (as herein defined), Buyer shall deposit in escrow with the Title Company an all cash payment in the amount of Five Hundred Thousand Dollars ($500,000), which shall be in addition to the Initial Deposit (the “Second Deposit;” and, together with the Initial Deposit, is herein referred to as the “Deposit”). Except as otherwise expressly provided in this Agreement, the Second Deposit shall be non-refundable to Buyer. The Second Deposit shall be held in an interest bearing account and all interest thereon shall be deemed a part of the Second Deposit. At the Closing, the Second Deposit shall be paid to Seller and credited against the Purchase Price.

                              (iii) IF THE SALE OF THE PROPERTY IS NOT CONSUMMATED DUE TO THE FAILURE OF ANY CONDITION PRECEDENT, THEN THE TITLE COMPANY SHALL RETURN THE DEPOSIT TO BUYER. IF THE SALE OF THE PROPERTY IS NOT CONSUMMATED SOLELY DUE TO SELLER’S DEFAULT HEREUNDER, THEN, AS BUYER’S SOLE AND EXCLUSIVE REMEDY, BUYER MAY EITHER: (1) TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT AND REIMBURSEMENT BY SELLER OF BUYER’S ACTUAL THIRD PARTY COSTS INCURRED IN CONNECTION WITH THIS AGREEMENT (NOT TO EXCEED $75,000 IN THE AGGREGATE), IN WHICH EVENT NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER (EXCEPT AS PROVIDED IN SECTIONS 7.1, 10.3 AND 10.12 BELOW), OR (2) ENFORCE SPECIFIC PERFORMANCE OF THIS AGREEMENT. THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL DAMAGES IN THE EVENT OF A FAILURE TO CONSUMMATE THE SALE DUE TO BUYER’S DEFAULT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. AFTER NEGOTIATION, THE PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE

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AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT SELLER WOULD INCUR IN THE EVENT OF BUYER’S DEFAULT. IN THE EVENT BUYER FAILS, WITHOUT LEGAL EXCUSE, TO COMPLETE THE PURCHASE OF THE PROPERTY, THE DEPOSIT MADE BY BUYER SHALL BE FORFEITED TO SELLER AS THE SOLE AND EXCLUSIVE REMEDY AVAILABLE TO SELLER FOR SUCH FAILURE. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION. THIS SECTION 1.2(b)(iii) IS NOT INTENDED TO LIMIT SELLER’S RIGHTS UNDER SECTIONS 7.1, 10.3 AND 10.12 OF THIS AGREEMENT.

Initials:
	Seller	Buyer

                              (iv) The balance of the Purchase Price shall be paid to Seller in immediately available funds via wire transfer at the consummation of the purchase and sale contemplated hereunder (the “Closing”).

                    (c) A portion of the Deposit equal to the amount of One Hundred Dollars ($100) (the “Independent Contract Consideration”), which amount Seller and Buyer agree has been bargained for as consideration for Seller’s execution and delivery of this Agreement and Buyer’s right to inspect the Property pursuant to this Agreement, shall be independent of any other consideration or payment provided for in this Agreement and is non-refundable in all events. Buyer’s obligation to pay the Independent Contract Consideration shall survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.

ARTICLE II

CONDITIONS

               Section 2.1 Buyer’s Conditions Precedent. Buyer’s obligation to purchase the Property is conditioned upon the following:

                    (a) Buyer’s review and approval of a commitment for title insurance, together with copies of the underlying documents (the “Title Commitment”), and a current “as built” survey in sufficient detail to support the issuance of the Title Policy as provided in Section 4.2 (the “Survey”). Seller has delivered to Buyer an existing survey of the Property in Seller’s possession and control. Buyer, at its sole cost and expense, shall obtain the Survey and deliver the Survey to the Title Company at least ten (10) business days prior to the expiration of the Contingency Period.

                              (i) Buyer shall advise Seller by written notice, four (4) business days prior to the end of the Contingency Period, what exceptions to title, if any, will be accepted by Buyer. Seller shall have two (2) business days after receipt of Buyer’s objections to give Buyer: (A) notice that Seller will remove such objectionable exceptions on or before the Closing Date

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(as defined in Section 9.2 below); or (B) notice that Seller elects not to cause such exceptions to be removed. If Seller gives Buyer notice under clause (B), Buyer may elect on or before the expiration of the Contingency Period to (X) waive its objections to title and proceed with the purchase without offset or credit against the Purchase Price, or (Y) terminate this Agreement and receive a refund of the Deposit, in which event neither party shall have any further rights or obligations hereunder (except as provided in Sections 7.1, 10.3 and 10.12 below). If Seller fails to give Buyer notice within two (2) business days after receipt of Buyer’s objections, then Seller shall be deemed to have elected to give Buyer notice under clause (B). If Seller gives Buyer notice under clause (B), and Buyer fails to give Seller notice of its election on or before the expiration of the Contingency Period, then Buyer shall be deemed to have elected to terminate this Agreement, the Deposit shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below. If Seller shall give notice pursuant to clause (A) and shall fail to remove any such objectionable exceptions from title prior to the Closing Date, then Buyer may elect to terminate this Agreement, the Deposit shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below. All deed of trust liens are deemed objected to by Buyer.

                              (ii) Whether or not Buyer shall have furnished to Seller any notice of title objections pursuant to the foregoing provisions of this Agreement, Buyer may, at or prior to Closing, notify Seller in writing of any objections to title first raised by the Title Company between (a) the expiration of the Contingency Period, and (b) the date on which the transaction contemplated herein is scheduled to close, and which: (1) are not the result of Buyer’s acts, (2) do not constitute exceptions which Buyer has approved or waived pursuant to Section 2.1(a)(i) above, and (3) do not constitute exceptions arising as a result of the Survey. Buyer shall advise Seller of its additional title objections by written notice within two (2) business days of learning of the additional title matter. Seller shall have until the earlier of (x) two (2) business days after receipt of Buyer’s objections, or (y) the Closing Date, to give Buyer notice that (i) Seller will remove such objectionable exceptions; or (ii) Seller elects not to cause such exceptions to be removed. If Seller gives Buyer notice under clause (ii), Buyer may elect within one (1) business day after receipt of Seller’s notice to (i) waive its objections to title and proceed with the purchase without offset or credit against the Purchase Price, or (ii) terminate this Agreement and receive a refund of the Deposit, in which event neither party shall have any further rights or obligations hereunder (except as provided in Sections 7.1, 10.3 and 10.12 below). If Seller fails to give Buyer notice within (x) two (2) business days after receipt of Buyer’s objections, or (y) the Closing Date, whichever is earlier, then Seller shall be deemed to have elected to give Buyer notice under clause (ii). If Seller gives Buyer notice under clause (ii), and Buyer fails to give Seller notice of its election within one (1) business day after receipt of Seller’s notice, then Buyer shall be deemed to have elected to terminate this Agreement, the Deposit shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below. If Seller shall give notice pursuant to clause (i) and shall fail to remove any such objectionable exception on or before the Closing Date (as it may be extended pursuant to any extension right provided in this Agreement), then Buyer may elect to terminate this Agreement, the Deposit shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below. If Seller elects to attempt to cure any such additional title objections, the date for Closing shall be automatically extended until Seller completes the cure,

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but in no event shall the extension exceed thirty (30) days after the date for Closing set forth in Section 9.2 hereof.

                              (iii) As of the Effective Date (as defined in Section 10.20 below), the Property is encumbered by a certain Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by Seller, as trustor, in favor of a trustee for the benefit of Wells Fargo Bank, National Association (“Seller’s Lender”), which agreement secures a loan made by Seller’s Lender to Seller. As a condition to Buyer’s obligation to close the transaction contemplated by this Agreement, Buyer shall have approved Lender’s Consent (as defined below) no later than the Lender Approval Deadline in accordance with this Section 2.1(a)(iii). Within five (5) business days after the Effective Date, Seller shall deliver to Buyer a copy of Seller’s Lender’s written consent (“Lender’s Consent”) approving this Agreement and the transaction contemplated herein. Any such Lender’s Consent shall be redacted to maintain the confidentiality of certain terms of the loan made by Seller’s Lender to Seller. Within two (2) business days after Buyer’s receipt of the Lender’s Consent from Seller (the “Lender Approval Deadline”), Buyer shall either (A) approve such Lender’s Consent by delivery of written notice thereof (a “Consent Approval Notice”) to Seller within such two (2) business day period, in which case the closing condition set forth in this Section 2.1(a)(iii) shall be deemed satisfied, or (B) disapprove of the Lender’s Consent, in which case this Agreement shall automatically terminate and neither party shall have any further rights or obligations hereunder except as provided in Section 7.1, 10.3 and 10.12 below. If Buyer fails to deliver a Consent Approval Notice within the aforementioned two (2) business day period, then Buyer shall be deemed to have elected to disapprove of Lender’s Consent under clause (B) above.

                    (b) Buyer’s review and approval of an economic feasibility study.

                    (c) Buyer’s review and approval of all tenant leases and any other occupancy agreements (hereinafter collectively referred to as the “Lease(s)”).

                    (d) Buyer’s inspection and approval of the physical condition of the Property, including, without limitation, the environmental condition of the Property.

                    (e) Buyer’s review and approval of service contracts, and other contracts or agreements of significance to the Property (hereinafter collectively referred to as “Contracts”). Buyer shall determine which, if any, of the Contracts Buyer will assume and so notify Seller prior to the expiration of the Contingency Period; provided, that (i) to the extent that any such Contracts are part of portfolio agreements, they shall not be assignable, and (ii) to the extent that any such Contracts are not terminable by Seller in the time frame between the expiration of the Contingency Period and the Closing, Buyer shall assume such Contracts.

                    (f) Buyer’s review and approval of all the items described on Schedule 2 hereto (the “Due Diligence Documentation”). To the extent in Seller’s possession or control, Seller has delivered to Buyer (and Buyer acknowledges such delivery) all of the items described on Schedule 2.

          Section 2.2 Contingency Period. Buyer shall have until 5:00 p.m., Pacific Time, on August 6, 2012, to review and approve the matters described in Section 2.1(a)–(f) above (such

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period being referred to herein as the “Contingency Period”). Buyer’s approval or disapproval of such matters shall be at Buyer’s sole discretion. If Buyer elects to proceed with the purchase of the Property, then Buyer shall, before the end of the Contingency Period, (i) notify Seller in writing that Buyer has approved all of the matters described in Section 2.1(a)–(f) above (“the “Approval Notice”), and (ii) deposit the Second Deposit into escrow with the Title Company. If before the end of the Contingency Period Buyer fails to give Seller the Approval Notice or deposit the Second Deposit, then Buyer shall be deemed to have elected to terminate this Agreement, the Deposit shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below.

          Section 2.3 Seller’s Conditions Precedent. Notwithstanding anything to the contrary in this Agreement, each of Seller’s obligations (a) to sell the Property to Buyer and to close the transaction contemplated by this Agreement or (b) to reimburse Buyer pursuant to Section 1.2(iii)(1) above, shall be conditioned upon Buyer’s approval of Lender’s Consent no later than the Lender Approval Deadline in accordance with Section 2.1(a)(iii) above.

ARTICLE III

BUYER’S EXAMINATION

          Section 3.1 Buyer’s Independent Investigation.

                    (a) Buyer acknowledges and agrees that it has been given or will be given before the end of the Contingency Period, a full opportunity to inspect and investigate each and every aspect of the Property, either independently or through agents of Buyer’s choosing, including, without limitation:

                              (i) All matters relating to title, together with all governmental and other legal requirements such as taxes, assessments, zoning, use permit requirements and building codes.

                              (ii) The physical condition of the Property, including, without limitation, the interior, the exterior, the structure, the paving, the utilities, and all other physical and functional aspects of the Property. Such examination of the physical condition of the Property shall include an examination for the presence or absence of Hazardous Materials (as defined below), which shall be performed or arranged by Buyer at Buyer’s sole expense.

                              (iii) Any easements and/or access rights affecting the Property.

                              (iv) The Leases and all matters in connection therewith, including, without limitation, the ability of the tenants to pay the rent.

                              (v) The Contracts.

                              (vi) All other matters of material significance affecting the Property.

                     (b) BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5.1 BELOW, SELLER IS

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SELLING AND BUYER IS PURCHASING THE PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING, WITHOUT LIMITATION: (i) the quality, nature, adequacy and physical condition of the Property, including, but not limited to, the structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities and the electrical, mechanical, HVAC, plumbing, sewage, and utility systems, facilities and appliances, (ii) the quality, nature, adequacy, and physical condition of soils, geology and any groundwater, (iii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property, (iv) the development potential of the Property, and the Property’s use, habitability, merchantability, or fitness, suitability, value or adequacy of the Property for any particular purpose, (v) the zoning or other legal status of the Property or any other public or private restrictions on use of the Property, (vi) the compliance of the Property or its operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity, (vii) the presence of Hazardous Materials on, under or about the Property or the adjoining or neighboring property, (viii) the quality of any labor and materials used in any improvements on the Real Property, (ix) the condition of title to the Property, (x) the Leases or Contracts and (xi) the economics of the operation of the Property.

          Section 3.2 Release.

                    (a) Without limiting the above, except with respect to a breach by Seller of any of the representations and warranties contained in Section 5.1 hereof or Seller’s fraud, Buyer on behalf of itself and its successors and assigns waives its right to recover from, and forever releases and discharges, Seller, Seller’s affiliates, Seller’s investment manager, the partners, trustees, shareholders, directors, officers, employees and agents of each of them, and their respective heirs, successors, personal representatives and assigns, from any and all demands, claims, legal or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever (including, without limitation, attorneys’ fees and costs), whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with the physical condition of the Property or any law or regulation applicable thereto, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 5101 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the California Hazardous Waste Control Law (California Health and Safety Code Sections 25100-25600), the Porter-Cologne Water Quality Control Act (California Water Code Section 13000 et seq.), and the Safe Drinking Water and Toxic Enforcement Act (California Health and Safety Code Section 25249.5 et seq.).

                    (b) In connection with subsection (a) above, Buyer expressly waives the benefits of Section 1542 of the California Civil Code, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR

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DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

                    (c) The provisions of this Section 3.2 shall survive the Closing.

ARTICLE IV

TITLE

          Section 4.1 Conditions of Title.

                    (a) At the Closing, Seller shall convey title to the Real Property to Buyer by good and sufficient grant deed in the form of Exhibit B attached hereto (the “Deed”).

                    (b) At the Closing, Seller shall transfer title to the Personal Property by a bill of sale in the form attached hereto as Exhibit C (the “Bill of Sale”).

                    (c) At the Closing, Seller shall transfer title to the Intangible Property by an assignment and assumption of leases in the form attached hereto as Exhibit D (the “Assignment and Assumption of Leases”), and an assignment and assumption of Contracts, Warranties and Guaranties and other intangible property in the form attached hereto as Exhibit E (the “Assignment and Assumption of Contracts”).

          Section 4.2 Evidence of Title. Delivery of title in accordance with the foregoing shall be evidenced by the willingness of the Title Company to issue, at Closing, its extended Owner’s American Land Title Association Policy of Title Insurance in the amount of the Purchase Price showing title to the Real Property vested in Buyer, subject to no exceptions other than the following (the “Title Policy”):

                    (a) Interests of tenants in possession;

                    (b) Non-delinquent liens for local real estate taxes and assessments; and

                    (c) Any standard, preprinted conditions or exceptions to the Title Commitment required by the Title Company, any exceptions disclosed by the Title Commitment or any supplement thereto which Buyer has approved or waived pursuant to Section 2.1(a)(i) or (ii) above, any exceptions to title which would be disclosed by an inspection and/or survey of the Property, and any exceptions or matters created by Buyer, its agents, employees or representatives.

          All of the foregoing exceptions shall be referred to collectively as the “Conditions of Title.”

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ARTICLE V

SELLER’S REPRESENTATIONS AND WARRANTIES

          Section 5.1 Representations and Warranties of Seller. Seller represents and warrants to Buyer that:

                    (a) Seller is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware. This Agreement (i) is and at the time of Closing will be duly authorized, executed and delivered by Seller, (ii) is and at the time of Closing will be legal, valid and binding obligations of Seller, and (iii) does not and at the time of Closing will not violate any provision of any agreement or judicial order to which Seller is a party or to which Seller or the Property is subject. All documents executed by Seller which are to be delivered to Buyer at Closing (i) are or at the time of Closing will be duly authorized, executed and delivered by Seller, (ii) are or at the time of Closing will be legal, valid and binding obligations of Seller, and (iii) do not and at the time of Closing will not violate any provision of any agreement or judicial order to which Seller is a party or to which Seller or the Property is subject.

                    (b) Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Federal Code.

                    (c) To the best of Seller’s knowledge, the list of leases in Schedule 3 attached hereto is a complete list of all of the Leases covering the Property as of the date hereof. To the best of Seller’s knowledge, the list of service contracts in Schedule 4 attached hereto is a complete list of all of the service contracts affecting the Property as of the date hereof (“Service Contracts”). To the best of Seller’s knowledge, as of the Effective Date, no written notice of default has been given or received under any of the Leases, except as listed on Schedule 3.

                    (d) To the best of Seller’s knowledge, Seller has not received written notice from any applicable governmental authority that the Property is in violation of any laws, ordinances or regulations of any applicable governmental authority having jurisdiction thereover or control thereof.

                    (e) To the best of Seller’s knowledge, Seller has not received written notice from any applicable governmental authority of any pending or threatened special assessments or condemnation actions with respect to the Property.

                    (f) To the best of Seller’s knowledge, Seller has received no written notice that the Property is in violation of any federal, state, local or administrative agency ordinance, law, rule, regulation, order or requirement relating to environmental conditions or Hazardous Material (“Environmental Laws”). For the purposes hereof, “Hazardous Material” shall mean any substance, chemical, waste or other material which is listed, defined or otherwise identified as “hazardous” or “toxic” under any federal, state, local or administrative agency ordinance or law, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. and the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., or any regulation, order, rule or requirement adopted thereunder, as

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well as any formaldehyde, urea, polychlorinated biphenyls, petroleum, petroleum product or by product, crude oil, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel or mixture thereof, radon, asbestos, and “source,” “special nuclear” and “by product” material as defined in the Atomic Energy Act of 1954, 42 U.S.C. §§ 2011 et seq., as amended.

                    (g) Seller has not been the subject of any filing of a petition under the Federal Bankruptcy Law or any federal or state insolvency laws or laws for composition of indebtedness or for the reorganization of debtors.

                    (h) Except as disclosed in Schedule 5 attached hereto, there is no litigation filed against Seller that would adversely affect the current use or operation of the Property or the ability of Seller to perform its obligations under this Agreement.

          Section 5.2 Certain Limitations on Seller’s Representations and Warranties. Notwithstanding anything to the contrary contained in this Agreement, no claim for a breach of a representation or warranty by Buyer shall be actionable if the breach in question results from or is based on a condition, state of facts or other matter with respect to which Buyer has knowledge on or prior to the Closing (such conditions, state of facts or other matters are herein referred to as “Exception Matters”). If Buyer obtains knowledge of any Exception Matters before the end of the Contingency Period and Buyer determines to proceed with the purchase of the Property pursuant to Article II, then Buyer shall consummate the acquisition of the Property subject to such Exception Matters and without any adjustment to the Purchase Price. If Buyer obtains knowledge of any Exception Matters after the end of the Contingency Period and prior to Closing, Buyer may elect to either (i) proceed with the purchase of the Property subject to such Exception Matters and without any adjustment to the Purchase Price, or (ii) upon fifteen (15) days’ prior written notice to Seller specifying the nature of the Exception Matters, Buyer may terminate this Agreement and receive a refund of the Deposit; provided, that if Buyer so elects to terminate this Agreement, Seller shall have the right, but not the obligation, to cure such Exception Matters within such fifteen (15) day period (and the Closing shall be delayed to the extent necessary to allow Seller the entire fifteen (15) day period within which to effect such cure) and if Seller cures such Exception Matters, then Buyer’s right to terminate this Agreement as a result of such Exception Matters shall be null and void and this Agreement shall continue without termination (and, if the Closing Date is extended, Closing shall occur on the date that is five (5) days after Seller cures such Exception Matters). If Buyer fails to make the election in (ii) within five (5) days after obtaining knowledge of an Exception Matter, then Buyer shall be deemed to have made the election under (i) above. Upon a termination of this Agreement pursuant to this Section 5.2, neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below.

          Section 5.3 Survival; Limitation of Liability. All representations and warranties of Seller contained in this Agreement shall survive the Closing, provided that Buyer must give Seller written notice of any claim it may have against Seller for a breach of any such representation or warranty, or for breach of any covenants of Seller contained in this Agreement, within two hundred seventy (270) days of the Closing Date. Any claim which Buyer may have at any time, whether known or unknown, which is not asserted within such two hundred seventy (270) day period shall not be valid or effective, and Seller shall have no liability with respect thereto. Without limiting the foregoing, Buyer may not bring any action against Seller for a

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breach of any representation, warranty, indemnity or covenant of Seller contained in this Agreement or in any agreement delivered by Seller to Buyer at Closing unless and until the aggregate amount of all liability and losses arising out of any such breach exceeds $25,000, it being Seller’s desire to curtail any frivolous lawsuits. In addition, in no event will Seller’s liability for all such breaches exceed, in the aggregate, five percent (5%) of the Purchase Price. The provisions of this Section 5.3 shall survive the Closing.

          Section 5.4 Seller’s Knowledge. Buyer expressly understands and agrees that the phrase “to the best of Seller’s knowledge” as used in Section 5.1 means the actual knowledge only and not any implied, imputed or constructive knowledge of Mr. Michael Biggar and Mr. Tyler Higgins without any independent investigation having been made.

ARTICLE VI

RISK OF LOSS AND INSURANCE PROCEEDS

          Section 6.1 Loss. Seller shall give Buyer notice of the occurrence of damage or destruction of, or the commencement of condemnation proceedings affecting, any portion of the Property. In the event that all or any material portion of the Property is condemned, or destroyed or damaged by fire or other casualty prior to the Closing and the cost to repair or restore any loss or damage caused thereby is greater than ten percent (10%) of the Purchase Price, then Buyer may, at its option to be exercised within ten (10) days of Seller’s notice of the occurrence of the damage or destruction or the commencement of condemnation proceedings, either terminate this Agreement or consummate the purchase for the full Purchase Price as required by the terms hereof. If Buyer elects to terminate this Agreement or fails to give Seller notice within such ten (10) day period that Buyer will proceed with the purchase, then this Agreement shall terminate at the end of such ten (10) day period and the Deposit shall be returned to Buyer and neither party shall have any further rights or obligations hereunder except as provided in Sections 7.1, 10.3 and 10.12 below. If (a) a portion of the Property is condemned or destroyed or damaged by fire or other casualty prior to the Closing and the cost to repair or restore any loss or damage caused thereby is equal to or less than ten percent (10%) of the Purchase Price, or (b) Buyer elects within the aforesaid ten (10) day period to proceed with the purchase, then this Agreement shall not terminate and upon the Closing, there shall be a credit against the Purchase Price due hereunder equal to the amount of any insurance proceeds or condemnation awards collected by Seller as a result of any such damage or destruction or condemnation, plus the amount of any insurance deductible, less any sums expended by Seller toward the restoration or repair of the Property (but in no event shall the amount of such credit exceed the Purchase Price). If the proceeds or awards have not been collected as of the Closing, then such proceeds or awards shall be assigned to Buyer, except to the extent needed to reimburse Seller for sums expended to collect such proceeds or repair or restore the Property, and Buyer shall not receive any credit against the Purchase Price with respect to such proceeds or awards; provided, that if the amount of proceeds or awards subsequently received by Buyer exceeds the Purchase Price, then Buyer shall pay to Seller any such excess within ten (10) days after Buyer’s receipt of such proceeds or awards. The provisions of this Section 6.1 shall survive the Closing.

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ARTICLE VII

BROKERS AND EXPENSES

          Section 7.1 Brokers. The parties represent and warrant to each other that except for Kidder Mathews (representing the Buyer) and CBRE, Inc. (representing the Seller) (collectively, the “Broker”), whose commissions shall be paid by Seller upon Closing in accordance with the provisions of a separate written agreement between Seller and Seller’s broker, no broker or finder was instrumental in arranging or bringing about this transaction and that there are no claims or rights for brokerage commissions or finder’s fees in connection with the transactions contemplated by this Agreement. If any person brings a claim for a commission or finder’s fee based upon any contact, dealings or communication with Buyer or Seller, then the party through whom such person makes his claim shall defend the other party (the “Indemnified Party”) from such claim, and shall indemnify the Indemnified Party and hold the Indemnified Party harmless from any and all costs, damages, claims, liabilities or expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by the Indemnified Party in defending against the claim. The provisions of this Section 7.1 shall survive the Closing or, if the purchase and sale is not consummated, any termination of this Agreement.

          Section 7.2 Expenses. Except as provided in Section 9.5 below, each party hereto shall pay its own expenses incurred in connection with this Agreement and the transactions contemplated hereby.

ARTICLE VIII

LEASES AND OTHER AGREEMENTS

          Section 8.1 Buyer’s Approval of New Leases and Agreements Affecting the Property. Between the Effective Date and the Closing Date (as defined in Section 9.2 below), Seller shall not enter into any new Lease or other agreement affecting the Property, or modify or terminate any existing Lease or other agreement affecting the Property, without first obtaining Buyer’s approval, which may be withheld in Buyer’s sole discretion. Seller shall submit an actual copy of such new Lease or other agreement, Lease or agreement modification, or Lease or agreement termination at the time that Seller seeks Buyer’s approval. If Buyer fails to give Seller notice of its approval or disapproval of any such proposed action within three (3) days after Seller notifies Buyer of Seller’s desire to take such action, then Buyer shall be deemed to have given its disapproval. Notwithstanding anything to the contrary contained in this Section 8.1, prior to the Closing Date, Seller may enter into any service contract affecting the Property, or modify or terminate any existing service contracts affecting the Property, without obtaining Buyer’s approval; provided, however that such service contracts shall be terminable upon thirty (30) days prior notice.

          Section 8.2 Intentionally Omitted.

          Section 8.3 Tenant Notices. At the Closing, Seller shall furnish Buyer with one (1) original signed notice in the form attached hereto as Exhibit F, disclosing that the Property has been sold to Buyer and that, after the Closing, all rents should be paid to Buyer (the “Tenant

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Notice Letter”). After the Closing, Buyer shall distribute copies of the Tenant Notice Letter to each tenant of the Property.

ARTICLE IX

CLOSING AND ESCROW

          Section 9.1 Escrow Instructions. Upon execution of this Agreement, the parties hereto shall deposit an executed counterpart of this Agreement with the Title Company, and this instrument shall serve as the instructions to the Title Company as the escrow holder for consummation of the purchase and sale contemplated hereby. Seller and Buyer agree to execute such reasonable additional and supplementary escrow instructions as may be appropriate to enable the Title Company to comply with the terms of this Agreement; provided, however, that in the event of any conflict between the provisions of this Agreement and any supplementary escrow instructions, the terms of this Agreement shall control.

          Section 9.2 Closing. The Closing hereunder shall be held, and delivery of all items to be made at the Closing under the terms of this Agreement shall be made, at the offices of the Title Company. The Closing shall occur on a date (the “Closing Date”) specified by Seller upon five (5) days written notice to Buyer, but in no event shall such Closing Date occur (i) earlier than five (5) days after the expiration of the Contingency Period, or (ii) later than ten (10) days after the expiration of the Contingency Period. Such date and time may not be extended without the prior written approval of both Seller and Buyer, except as otherwise expressly provided for in this Agreement. Closing shall occur and Buyer’s funds shall be received on or before 11:00 A.M. Pacific Time on the Closing Date, or such other time as designated by Seller’s lender, if any.

          Section 9.3 Deposit of Documents.

                     (a) At or before the Closing, Seller shall deposit into escrow the following items:

                              (i) the duly executed and acknowledged Deed conveying the Real Property to Buyer subject to the Conditions of Title;

                              (ii) two (2) duly executed counterparts of the Bill of Sale;

                              (iii) two (2) duly executed counterparts of the Assignment and Assumption of Leases;

                              (iv) two (2) duly executed counterparts of the Assignment and Assumption of Contracts;

                              (v) an affidavit pursuant to Section 1445(b)(2) of the United States Internal Revenue Code of 1986, as amended (the “Federal Code”) in the form attached hereto as Exhibit G, and on which Buyer is entitled to rely, that Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Federal Code;

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                              (vi) one (1) duly executed Tenant Notice Letter; and

                              (vii) a properly executed California Form 593-C.

                    (b) At or before Closing, Buyer shall deposit into escrow the following items:

                              (i) funds necessary to close this transaction;

                              (ii) two (2) duly executed counterparts of the Bill of Sale;

                              (iii) two (2) duly executed counterparts of the Assignment and Assumption of Leases; and

                              (iv) two (2) duly executed counterparts of the Assignment and Assumption of Contracts.

                    (c) Buyer and Seller shall each deposit such other instruments as are reasonably required by the Title Company or otherwise required to close the escrow and consummate the purchase and sale of the Property in accordance with the terms hereof. Buyer and Seller hereby designate Title Company as the “Real Estate Reporting Person” for the transaction pursuant to Section 6045(e) of the Federal Code and the regulations promulgated thereunder.

                    (d) Seller shall deliver to Buyer originals (or to the extent originals are not available, copies) of the Leases and originals (or to the extent originals are not available, copies) of any other items which Seller was required to furnish Buyer copies of or make available at the Property pursuant to Section 2.1 above, within five (5) business days after the Closing Date. Seller shall deliver to Buyer a set of keys to the Property on the Closing Date.

          Section 9.4 Estoppel Certificates.

                    (a) Seller shall use its reasonable efforts to obtain estoppel certificates in the form attached hereto as Exhibit H from each of the tenants of the Property; provided that Buyer shall accept an estoppel certificate in lieu of that attached as Exhibit H, provided that such certificate shall be in the form of an estoppel which the applicable tenant is entitled to deliver under the terms of its Lease.

                    (b) If Seller is unable to obtain estoppel certificates from such tenant(s) of the Property, Seller may, but shall not be obligated to, deliver to Buyer and warrant and represent to Buyer, with respect to such missing estoppel certificates that as of the date represented and warranted: (A) to the best of Seller’s knowledge the Leases for those tenants are in full force and effect; (B) the amount of the tenants’ security deposits; (C) the dates through which rent has been paid; and (D) to the best of Seller’s knowledge, neither any of those tenants nor Seller is in default thereunder; provided, however, that notwithstanding anything to the contrary set forth in this Section 9.4(b), Seller shall be obligated to make such representations and warranties only to the extent they are accurate. Subject to Section 9.4(c) below, Buyer shall be obligated to accept Seller’s certification in lieu of any missing estoppel certificates. Seller’s certification shall be of no further force and effect upon Buyer’s receipt of an estoppel certificate from the applicable

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tenant pursuant to Section 9.4(a) above. Seller’s representations and warranties in the certificate shall survive the Closing, provided that upon delivery to Buyer of an estoppel from the actual tenant which satisfies the requirements set forth in Section 9.4(a) above, Seller’s estoppel delivered with respect to such tenant shall be terminated and of no further force or effect..

                    (c) If the conditions contained in Sections 9.4(a) and (b) above are not satisfied on or before the Closing Date, and/or the content of the estoppel certificates delivered by Seller to Buyer in lieu thereof materially deviate from those described in Section 9.4(a) and 9.4(b), respectively, Buyer may deliver written notice to Seller of any such unsatisfactory condition or material deviation and of Buyer’s election to terminate this Agreement. Buyer shall deliver such notice to Seller within two (2) business days after receipt of such estoppel. Buyer’s failure to deliver such notice within such two (2) business day period shall be deemed Buyer’s approval of such estoppel. If Buyer timely objects to such estoppel, this Agreement shall terminate, in which event the Deposit shall be returned to Buyer and neither party shall have any further rights or obligations hereunder except as provided in Section 7.1 above and Sections 10.3 and 10.12 below.

          Section 9.5 Prorations.

                    (a) With respect to the Property, Seller shall be entitled to all income produced from the operation of the Property which is allocable to the period prior to Closing and shall be responsible for all expenses allocable to that period; and Buyer shall be entitled to all income and responsible for all expenses allocable to the period beginning at 12:01 A.M. on the day Closing occurs. At the Closing, all items of income and expense with respect to the Property listed below shall be prorated in accordance with the foregoing principles and the rules for the specific items set forth hereafter; provided, that Seller shall cause the existing management contract for the Property to be terminated as of the Closing Date:

                              (i) Seller shall arrange for a billing under all those Service Contracts for which fees are based on usage and with utility companies for a billing for utilities, to include all utilities or service used up to the day Closing occurs, and Seller shall pay the resultant bills. In the event any of the Service Contracts set forth in Schedule 4 extend over periods beyond the Closing the same shall be prorated on a per diem basis.

                               (ii) All real estate taxes together with installments of special assessments payable therewith attributable to the Property due and payable in the calendar year in which the Closing occurs shall be prorated as of the Closing Date. Any real estate taxes together with installments of special assessments payable therewith due and payable in any calendar year which is (A) prior to the calendar year in which Closing occurs shall be the obligation of Seller, and (B) subsequent to the calendar year in which the Closing occurs shall be the obligation of Buyer. In the event that as of the date Closing occurs the actual tax bills for the tax year or years in question are not available then the amount of tax to be prorated as aforesaid shall be based upon the rates, millages and assessed valuation of the previous year, with known changes. With respect to any assessments which can be paid in installments, Seller shall only be responsible for installments which are payable on or before the Closing Date. Seller shall receive credit for any previously paid or prepaid taxes attributable to periods from and after the date of Closing.

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                              (iii) Gas, water, electricity, heat, fuel, sewer and other utilities charges, and annual fees for governmental licenses, permits and inspections relating to the Property, shall be prorated on a per diem basis.

                              (iv) Rent under the Leases shall be apportioned as of the Closing Date to the extent such rent has actually been collected as of such date. With respect to any rent arrearages arising under the Leases for the period prior to the month in which the Closing occurs, after Closing Buyer shall pay to Seller any rent actually collected which is applicable to the period preceding the Closing Date; provided, however, that all rent collected by Buyer shall be applied first to all unpaid rent accruing after the Closing Date, and then to unpaid rent accruing prior to the Closing Date.

                              (v) Where the Leases contain tenant obligations for taxes, common area expenses, operating expenses or additional charges of any other nature (“Expense Reimbursements”), and where Seller shall have collected any portion thereof in excess of amounts owed by Seller for such items for the period prior to the Closing Date, then there shall be an adjustment and credit given to Buyer on the Closing Date for such excess amounts collected. Buyer shall apply all such excess amounts to the charges owed by Buyer for such items for the period after the Closing Date and, if required by the Leases, shall rebate or credit the tenants with any remainder and shall indemnify, defend and hold Seller harmless with respect to such obligation of Buyer. If it is determined that the amount collected during Seller’s ownership period exceeded expenses incurred during the same period by less than the amount previously credited to Buyer, then Buyer shall promptly pay to Seller the difference. If it is determined that the amount collected during Seller’s ownership period was less than the expenses incurred by Seller during the same period, then Buyer shall promptly pay to Seller the amount of such deficiency upon collection of same from the tenants. Seller shall not receive at Closing any credit for Expense Reimbursements which have not actually been incurred by Seller and collected from the tenants. To the extent Buyer collects any Expense Reimbursements after the Closing, such amounts shall be applied by Buyer in the same order as rent is to be applied pursuant to Subsection (iv) above.

                              (vi) All prepaid rentals and other prepaid payments attributable to Buyer’s period of ownership, security deposits not applied against tenant’s obligations under the tenant Leases, electric, gas, sewer and water deposits deposited with Seller by tenants (including all accrued interest on all of the foregoing, unless Seller is entitled to retain the benefit thereof) under any Leases, license agreements or concession agreements relating to the Property, shall all belong to Buyer and all shall be assigned and delivered to Buyer at the Closing. Notwithstanding the foregoing, the amount of any security deposits received by Seller and not applied against tenant’s obligations under the tenant Leases shall be credited against the Purchase Price and Seller shall be entitled to retain such deposits. The Purchase Price shall be increased by the amount of any utility deposits paid by Seller with respect to the Property. Buyer shall indemnify, defend and hold Seller harmless with respect to any prepaid amounts or security deposits delivered or credited to Buyer at Closing.

                    (b) Seller shall determine the aforesaid prorations and deliver such prorations to Buyer on or before the date that is three (3) business days before the Closing Date. Upon approval by Buyer, the parties shall deliver the approved prorations statement to the Title

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Company. If any of the aforesaid prorations cannot be calculated accurately as of the date that is three (3) business days prior to the Closing Date, then the parties shall prorate based upon reasonable estimates of the applicable costs and expenses. All prorations made pursuant to the terms of this Section 9.5 shall be final and binding upon Buyer and Seller as of Closing and shall not be subject to subsequent adjustments after Closing.

                    (c) Buyer shall pay for (i) the Survey (including, without limitation, the cost to update, recertify or otherwise revise any existing survey for the Property), (ii) the premium for the Title Policy (to the extent not required to be paid by Seller pursuant to subsection (v) below), the cost of any endorsements to the Title Policy, and the cost of any related title examination charges, and (iii) all costs relating to any financing obtained by Buyer (including, without limitation, mortgage recording taxes, if applicable). Seller shall pay for (i) any escrow fees and expenses, (ii) any and all county and state transfer taxes or documentary stamp taxes applicable to the sale of the Property, (iii) any personal property taxes applicable to the sale of the Property, (iv) any recording charges, and (v) the premium attributable to the “CLTA” or standard coverage portion of the Title Policy. Seller and Buyer shall pay their respective attorneys’ fees. All other fees and expenses applicable to the sale shall be prorated between Buyer and Seller in accordance with customary practice for Santa Clara County, California.

                    (d) The provisions of this Section 9.5 shall survive the Closing.

ARTICLE X

MISCELLANEOUS

          Section 10.1 Notices. Subject to Section 8.2, any notices required or permitted to be given hereunder shall be given in writing and shall be delivered (a) in person, (b) by certified mail, postage prepaid, return receipt requested, (c) by a commercial overnight courier that guarantees next day delivery and provides a receipt, or (d) by telefacsimile, telecopy or email in PDF format, and such notices shall be addressed as follows:

If to Buyer:	Pericom Semiconductor Corporation
	3545 N. First Street
	San Jose, CA 95134
	Attention: Aaron Tachibana
	Telephone: (408) 435-0800 x273
	Telecopy: (408) 435-1100
	Email: atachibana@pericom.com
With a copy to:	Hopkins & Carley
	200 Page Mill Road, Suite 200
	Palo Alto, CA 94306
	Attention: Garth E. Pickett, Esq.
	Telephone: (650) 804-7611
	Telecopy: (408) 938-6249
	Email: gpickett@hopkinscarley.com

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If to Seller:	Barber Lane Investors, LLC
	c/o Orchard Partners, LLC
	615 National Avenue, Suite 200
	Mountain View, CA 94043
	Attention: Michael Biggar
	Telephone: (650) 938-9900
	Telecopy: (650) 938-4318
	Email: mbiggar@orchardpartners.com
With a copy to:	Barber Lane Investors, LLC
	c/o Pacific Coast Capital Partners, LLC
	555 California Street, Suite 3450
	San Francisco, CA 94104
	Attention: Mason Ross
	Telephone: (415) 732-7492
	Telecopy: (415) 732-7547
	Email: mross@pccpllc.com
With a copy to:	Morrison & Foerster llp
	755 Page Mill Road
	Palo Alto, California 94304-1018
	Attention: Philip J. Levine, Esq.
	Telephone: (650) 813-5613
	Telecopy: (650) 494-0792
	Email: plevine@mofo.com

or to such other address as either party may from time to time specify in writing to the other party. Any notice shall be deemed delivered when actually delivered, if such delivery is in person, upon deposit with the U.S. Postal Service, if such delivery is by certified mail, upon deposit with the overnight courier service, if such delivery is by an overnight courier service, and upon transmission, if such delivery is by telefacsimile, telecopy or email in PDF format.

          Section 10.2 Entire Agreement. This Agreement, together with the Exhibits attached hereto, contain all representations, warranties and covenants made by Buyer and Seller and constitute the entire understanding between the parties hereto with respect to the subject matter hereof. Any prior correspondence, memoranda or agreements are replaced in total by this Agreement together with the Exhibits hereto.

          Section 10.3 Entry and Indemnity. In connection with any entry by Buyer, or its agents, employees or contractors onto the Property, Buyer shall give Seller reasonable advance notice of such entry and shall conduct such entry and any inspections in connection therewith so as to minimize, to the greatest extent possible, interference with Seller’s business and the business of Seller’s tenants and otherwise in a manner reasonably acceptable to Seller. Without limiting the foregoing, prior to any entry to perform any on-site testing, Buyer shall give Seller notice thereof, including the identity of the company or persons who will perform such testing and the proposed scope of the testing. In the event that Buyer proposes to perform any

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destructive or invasive testing, Seller shall approve or disapprove, in Seller’s sole and absolute discretion, the proposed destructive or invasive testing within three (3) business days after receipt of such notice. Seller’s failure to provide such notice shall be deemed disapproval. If Buyer or its agents, employees or contractors take any sample from the Property in connection with any such approved testing, at Seller’s request, Buyer shall provide to Seller a portion of such sample being tested to allow Seller, if it so chooses, to perform its own testing. Seller or its representative may be present to observe any testing or other inspection performed on the Property. Upon Seller’s request, Buyer shall promptly deliver to Seller copies of any reports relating to any testing or other inspection of the Property performed by Buyer or its agents, employees or contractors. Buyer shall maintain, and shall ensure that its contractors maintain, statutory workers compensation coverage and at least $1,000,000 of public liability and property damage insurance, each such policy naming Seller and its affiliates as additional insures, and otherwise in form and substance adequate to insure against all liability of Buyer and its agents, employees or contractors, arising out of any entry or inspections of the Property pursuant to the provisions hereof, and Buyer shall provide Seller with evidence of such insurance coverage upon request by Seller. Buyer shall indemnify, defend and hold Seller harmless from and against any costs, damages, liabilities, losses, expenses, liens or claims (including, without limitation, reasonable attorneys’ fees) arising out of or relating to any entry on the Property by Buyer, its agents, employees or contractors in the course of performing the inspections, testing or inquiries provided for in this Agreement. The foregoing indemnity shall survive beyond the Closing, or, if the sale is not consummated, beyond the termination of this Agreement.

          Section 10.4 Time. Time is of the essence in the performance of each of the parties’ respective obligations contained herein.

          Section 10.5 1031 Exchange. The parties acknowledge and agree that either party may elect to assign their interest in this Agreement to an exchange facilitator by means of one or more escrows for the purpose of completing an exchange of such Property in a transaction which will qualify for treatment as a tax deferred exchange pursuant to the provisions of Section 1031 of the Internal Revenue Code of 1986 and applicable state revenue and taxation code sections (a “1031 Exchange”). Each party agrees to reasonably cooperate with any party so electing in implementing any such assignment and 1031 Exchange, provided that such cooperation shall not entail any additional expense to the non-electing party, cause such party to take title to any other property or cause such party exposure to any liability or loss of rights or benefits contemplated by this Agreement, and the electing party shall indemnify, defend and hold the non-electing party harmless from any liability, damage, loss, cost or other expense including, without limitation, reasonable attorneys’ fees and costs, resulting or arising from the implementation of any such assignment and 1031 Exchange. No such assignment by any party shall relieve such party from any of its obligations hereunder, nor shall such party’s ability to consummate a tax deferred exchange be a condition to the performance of such party’s obligations under this Agreement.

          Section 10.6 Attorneys’ Fees. If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party (including such other party’s broker) on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs

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and reasonable attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment.

          Section 10.7 Jury Trial Waiver & Judicial Reference.

                    (a) The parties hereby agree to waive any right to trial by jury with respect to any action or proceeding (i) brought by either party or any other party, relating to (A) this Agreement and/or any understandings or prior dealings between the parties hereto, or (B) the Property or any part thereof, or (ii) to which Seller is a party. The parties hereby acknowledge and agree that this Agreement constitutes a written consent to waiver of trial by jury pursuant to any applicable state statutes.

                    (b) If the waiver of jury trial set forth in Section 10.7(a) above is not enforceable for any reason, then the parties hereby agree that, to the extent allowed by law, any dispute, controversy or other claim arising out of or relating to this Agreement for the breach or interpretation hereof shall, at the written request of either party, be resolved by general Judicial Reference pursuant to California Code of Civil Procedure Sections 638 and 641 through 645 or any successor statutes hereto. The parties shall select a single neutral referee, who shall be a retired state or federal judge. In the event the parties cannot agree upon a referee, the referee shall be appointed by the court. The referee shall determine all issues relating to the dispute, controversy or claim, and shall report a statement of decision to the court. The parties shall equally bear the fees and expenses of the referee, unless the referee otherwise provides in the statement of decision. However, the prevailing party shall be entitled to reimbursement of attorney fees, costs, and expenses incurred in connection with the reference. The parties agree that each party shall have the right to cause an appeal to be taken from the referee’s decision to a court of competent jurisdiction in the same manner as a judicial appeal arising out of an order or judgment from a California superior court in a civil action and all of the same rules, rights and remedies shall be applied to both parties with respect to any such appeal including matters of fact, matters of law, standards for review and substantive and procedural laws. Judgment may be entered upon any such final decision in accordance with applicable law in any court having jurisdiction thereof. The referee (if permitted under applicable law) or such court may issue a writ of execution to enforce the referee’s decision.

          Section 10.8 No Merger. The obligations contained herein that expressly survive the Closing shall not merge with the transfer of title to the Property but shall remain in effect until fulfilled.

          Section 10.9 Assignment. Buyer’s rights and obligations hereunder shall not be assignable without the prior written consent of Seller, in its sole discretion; provided, that Buyer may assign this Agreement, without Seller’s consent but on prior written notice to Seller given at least four (4) business days prior to the Closing, to an entity controlled by, controlling of or under common control with Buyer. In no event shall Buyer be released from any of its obligations or liabilities hereunder in the event of any assignment of this Agreement. Subject to

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the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

          Section 10.10 Counterparts and Electronic Transmissions. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. The parties contemplate that they may be executing counterparts of this Agreement transmitted by facsimile or email in PDF format and agree and intend that a signature by either facsimile machine or email in PDF format shall bind the party so signing with the same effect as though the signature were an original signature.

          Section 10.11 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

          Section 10.12 Confidentiality. Buyer and Seller shall each maintain as confidential any and all material obtained about the other and, in the case of Buyer, about the Property, and shall not disclose such information to any third party except for disclosures required by court order or subpoena or to Buyer’s agents, brokers or attorneys who are made aware of the restrictions set forth in this Section 10.12. In addition, neither party shall issue any press release or other public announcement regarding this transaction without first obtaining the other party’s written approval with respect to the release or announcement and the content thereof. Notwithstanding the foregoing, Buyer shall not disclose any information regarding the economic terms of this transaction. Furthermore, Buyer agrees to maintain as confidential any terms of the Lender’s Consent for the benefit of Seller’s Lender, as a third party beneficiary under this Agreement. This provision shall survive the Closing (for a period of six (6) months) or any termination of this Agreement.

          Section 10.13 Maintenance of the Property, Insurance. Between Seller’s execution of this Agreement and the Closing, Seller shall maintain the Property in the same manner as before the making of this Agreement, as if Seller were retaining the Property; provided that Seller shall not be obligated to make any extraordinary repairs or make any capital improvements to the Property. Through the Closing Date, Seller shall maintain or cause to be maintained, at Seller’s sole cost and expense, Seller’s existing policy or policies of insurance insuring the Property.

          Section 10.14 Interpretation of Agreement. The article, section and other headings of this Agreement are for convenience of reference only and shall not be construed to affect the meaning of any provision contained herein. Where the context so requires, the use of the singular shall include the plural and vice versa and the use of the masculine shall include the feminine and the neuter. The term “person” shall include any individual, partnership, joint venture, corporation, trust, unincorporated association, any other entity and any government or any department or agency thereof, whether acting in an individual, fiduciary or other capacity. All references to time are to Pacific Time Zone time (“Pacific Time”) unless expressly stated otherwise.

          Section 10.15 General Rules of Construction. The parties acknowledge that this Agreement has been freely negotiated by both parties, that each party has had the opportunity to review and revise this Agreement, that each party has had the opportunity to consult with counsel

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with regard to this Agreement, and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any amendments or exhibits to this Agreement.

          Section 10.16 Authority of Buyer. Buyer represents and warrants to Seller that Buyer is a corporation, duly organized, validly existing, and in good standing under the laws of the State of California. Buyer further represents and warrants to Seller that this Agreement and all documents executed by Buyer which are to be delivered to Seller at Closing (a) are or at the time of Closing will be duly authorized, executed and delivered by Buyer, (b) are or at the time of Closing will be legal, valid and binding obligations of Buyer, and (c) do not and at the time of Closing will not violate any provision of any agreement or judicial order to which Buyer is party or to which Buyer is subject. Buyer represents and warrants to Seller that neither Buyer nor an affiliate of Buyer is subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 23, 2001) (the “Terrorism Executive Order”) or is similarly designated under any related enabling legislation or any other similar Executive Orders (collectively with the Terrorism Executive Order, the “Executive Orders”), the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”), any sanctions and regulations promulgated under authority granted by the Trading with the Enemy Act, 50 U.S.C. App. 1-44, as amended from time to time, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-07, as amended from time to time, the Iraq Sanctions Act, Publ. L. No. 101-513; United Nations Participation Act, 22 U.S.C. § 287c, as amended from time to time, the International Security and Development Cooperation Act, 22 U.S.C. § 2349 aa-9, as amended from time to time, The Cuban Democracy Act, 22 U.S.C. §§ 6001-10, as amended from time to time, The Cuban Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 6021-6091, as amended from time to time, and The Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§ 1901-1908, 8 U.S.C. § 1182, as amended from time to time. The Buyer’s representations and warranties set forth in this Section 10.16 and anywhere else in this Agreement shall survive the Closing or any termination of this Agreement.

          Section 10.17 Limited Liability. The obligations of Seller shall not be personally binding upon, nor shall any resort be had to, the private properties of any of its members, managers, trustees, officers, directors or shareholders, the members, managers, general partners, officers, directors or shareholders thereof, or any employees or agents of Seller.

          Section 10.18 Amendments. This Agreement may be amended or modified only by a written instrument signed by Buyer and Seller.

          Section 10.19 No Recording. Neither this Agreement or any memorandum or short form thereof may be recorded by Buyer.

          Section 10.20 Effective Date. As used herein, the term “Effective Date” shall mean the first date on which both Seller and Buyer shall have executed this Agreement.

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          Section 10.21 Deadlines on Non-Business Days. In the event any deadline specified herein falls on a day which is not a regular business day (including, without limitation, any day where the banks in San Francisco, California or the offices of the Escrow Agent in San Francisco, California, are closed), then the deadline shall be extended to the end of the next following regular business day.

          Section 10.22 Joint and Several Obligations. If two (2) or more individuals, corporations, or other entities constitute Buyer (even though the defined term for Buyer is used in the singular), all agreements, covenants, representations and warranties of Buyer herein are the joint and several obligations of the individuals or entities constituting Buyer. If the individuals constituting Buyer are husband and wife, their joint and several obligations hereunder shall be binding upon both their community property and the sole and separate property and all other assets of each. If two (2) or more individuals, corporations, or other entities constitute Buyer, Seller shall have the right to join one or all of them in any proceeding or to proceed against them in any order.

          Section 10.23 Marketing Rights. Seller shall have the right to continue to market the Property and to negotiate and enter into back-up offers during the term of this Agreement.

[Intentionally left blank]

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                    The parties hereto have executed this Agreement as of the respective dates written below.

SELLER:	BARBER LANE INVESTORS, LLC,
	a Delaware limited liability company
	By BH Barber Lane, LLC, a California limited
	liability company, its administrative member

Date:	By:
	Name:
	Title:

	BUYER:	PERICOM SEMICONDUCTOR
		CORPORATION
		a California corporation
Date:		By:
		Name:
		Title:
[Parties must also initial Section 1.2(b)(iii)]

S-1

SCHEDULE 1

PERSONAL PROPERTY

None.

SCHEDULE 2

DUE DILIGENCE DOCUMENTATION

1.	First and Second Floor Plans;
2.	Reidenbaugh Hufford Property Condition Report dated September 26, 2007;
3.	Kier & Wright ALTA Survey dated October 3, 2007;
4.	2012 Budget for the Property;
5.	The following Contracts: Moreno Janitorial, Otis Elevator (not signed), Perfection Parking Lot Sweeping, Dismore Landscaping;
6.	AT&T Antenna Site License dated November 12, 2003; First Amendment dated June 24, 2009; and Second Amendment dated October 6, 2011; and
7.	Final URS Phase I Environmental Site Assessment dated October 8, 2007.

1

SCHEDULE 3

LIST OF LEASES AND NOTICES OF DEFAULT UNDER SUCH LEASES

1. AT&T Antenna Site License dated November 12, 2003, First Amendment dated June 24, 2009, Second Amendment dated October 6, 2011

1

SCHEDULE 4

LIST OF SERVICE CONTRACTS

1.	Dinsmore Landscape Company dated September 12, 2011
2.	Perfection Sweeping dated September 27, 2011
3.	Moreno & Associates (Janitorial) dated October 1, 2011
4.	Otis Elevator Company dated February 14, 2012
5.	RFI Fire Monitoring Contract dated March 20, 2012

1

SCHEDULE 5

LITIGATION LIST

None.

1

EXHIBIT A

DESCRIPTION OF REAL PROPERTY

Real property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

PARCEL 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP, BEING ALL OF PARCEL E, ETC”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JANUARY 11, 1980 IN BOOK 457 OF MAPS, AT PAGE(S) 18, AND AS CORRECTED BY THAT CERTIFICATE OF CORRECTION, RECORDED AUGUST 11, 1980 IN BOOK F497 OF OFFICIAL RECORDS, PAGE 35.

APN: 086-03-038 ARB: 086-03-001-06-02

A–1

EXHIBIT B

GRANT DEED

Recording Requested By and

When Recorded Return To:

Attention: 

Documentary Transfer Tax is not of public record and is shown on a separate sheet attached to this deed.

(Space above this line for Recorder’s use)

GRANT DEED

          FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BARBER LANE INVESTORS, LLC, a Delaware limited liability company, hereby grants to __________________________, a __________________________, the real property located in the City of Milpitas, County of Santa Clara, State of California, described on Exhibit A attached hereto and made a part hereof.

          Provided, however, that this Deed and the warranty of title contained herein is made expressly subject to the following:

          A. Real property taxes not yet due and payable;

          B. All zoning and other regulatory laws and ordinances affecting the Property;

          C. All restrictions, reservations, covenants, conditions, declarations, easements and rights of way of record and all other matters of record affecting the Property;

          D. All matters shown or that would be shown on a current ALTA survey of the Property; and

          E. All those matters set forth on the list of Permitted Exceptions attached hereto as Exhibit B and made a part hereof.

B–1

          Executed as of this _____ day of __________, 2012.

BARBER LANE INVESTORS, LLC,
a Delaware limited liability company
By BH Barber Lane, LLC, a California limited
liability company, its administrative member
	By:
	Name:
	Title:

B–2

State of California	)
	) ss.
County of ___________________	)

          On _________________________ before me, (here insert name and title of the officer), personally appeared ______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

          I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

          Witness my hand and official seal.

Signature  ___________________________ (Seal)

B–3

EXHIBIT A TO DEED

REAL PROPERTY DESCRIPTION

Real property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

PARCEL 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP, BEING ALL OF PARCEL E, ETC”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JANUARY 11, 1980 IN BOOK 457 OF MAPS, AT PAGE(S) 18, AND AS CORRECTED BY THAT CERTIFICATE OF CORRECTION, RECORDED AUGUST 11, 1980 IN BOOK F497 OF OFFICIAL RECORDS, PAGE 35.

APN: 086-03-038 ARB: 086-03-001-06-02

B–4

EXHIBIT B TO DEED

PERMITTED EXCEPTIONS

B–5

_______________, 2012

_______________ County Recorder
______________________________
_______________, California _____

Re:	Request That Statement of Documentary
	Transfer Tax Not be Recorded

Dear Sir or Madam:

          Request is hereby made in accordance with Section 11932 of the Revenue and Taxation Code that this statement of tax due not be recorded with the attached deed but be affixed to the deed after recordation and before return as directed on the deed.

          The attached deed names BARBER LANE INVESTORS, LLC, a Delaware limited liability company, as grantor and __________________________, a __________________________, as grantee.

          The property being transferred and described in the attached deed is located in the City of Milpitas, County of Santa Clara, State of California.

          The amount of Documentary Transfer Tax due on the attached deed is $__________ computed on full value of the property conveyed.

SELLER:	BARBER LANE INVESTORS, LLC, a Delaware limited liability company
	By BH Barber Lane, LLC, a California limited liability company, its administrative member
		By:
		Name:
		Title:

B–6

EXHIBIT C

BILL OF SALE

          For good and valuable consideration, the receipt of which is hereby acknowledged, BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Seller”), does hereby sell, transfer, and convey to __________________________, a __________________________ (collectively, “Buyer”), any and all personal property owned by Seller and located on and used in connection with the operation of that certain real property located in the City of Milpitas, County of Santa Clara, State of California, described on Exhibit A attached hereto and made a part hereof, as such personal property is more particularly described in the attached Schedule 1.

          BUYER ACKNOWLEDGES THAT SELLER IS SELLING AND BUYER IS PURCHASING SUCH PERSONAL PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER, ITS AGENTS, OR BROKERS AS TO ANY MATTERS CONCERNING SUCH PERSONAL PROPERTY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AS TO TITLE OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

          This Bill of Sale may be executed in two or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

C–1

          Dated this _____ day of __________, 2012.

SELLER:	BARBER LANE INVESTORS, LLC, a Delaware limited liability company
	By BH Barber Lane, LLC, a California limited liability company, its administrative member
		By:
		Name:
		Title:

BUYER:	__________________________,
	a __________________________
	By:
	Name:
	Title:

C–2

SCHEDULE 1 TO BILL OF SALE

LIST OF PERSONAL PROPERTY

[to come]

C–3

EXHIBIT A TO BILL OF SALE

REAL PROPERTY DESCRIPTION

Real property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

PARCEL 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP, BEING ALL OF PARCEL E, ETC”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JANUARY 11, 1980 IN BOOK 457 OF MAPS, AT PAGE(S) 18, AND AS CORRECTED BY THAT CERTIFICATE OF CORRECTION, RECORDED AUGUST 11, 1980 IN BOOK F497 OF OFFICIAL RECORDS, PAGE 35.

APN: 086-03-038 ARB: 086-03-001-06-02

C–4

EXHIBIT D

ASSIGNMENT AND ASSUMPTION OF LEASE

          THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this “Assignment”) dated as of__________________, 2012, is between BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Assignor”), and __________________________, a __________________________ (“Assignee”).

          A. Assignor is the lessor under that certain lease executed with respect to that certain real property and improvements thereon located in the City of Milpitas, County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto (the “Property”), which lease is described in Schedule 1 attached hereto (the “Lease”).

          B. Assignor and Assignee have entered into an Agreement of Purchase and Sale dated as of __________, 2012 (the “Agreement”), pursuant to which Assignee agreed to purchase the Property from Assignor and Assignor agreed to sell the Property to Assignee, on the terms and conditions contained therein.

Assignor desires to assign its interest as Lessor in the Lease to Assignee, and Assignee desires to accept the assignment thereof, on the terms and conditions below.

          ACCORDINGLY, the parties hereby agree as follows:

          1. As of the date on which the Property is conveyed to Assignee pursuant to the Agreement (the “Conveyance Date”), Assignor hereby assigns to Assignee all of its right, title and interest in and to the Lease; provided, that Assignor reserves its right to sue a tenant under a Lease for damages suffered by Assignor as a result of such tenant’s failure to have paid any rents to Assignor which were payable prior to the Conveyance Date so long as any such suit does not seek a termination of the Lease.

          2. Assignor hereby agrees to indemnify Assignee against and hold Assignee harmless from any and all liabilities, losses, claims, damages, costs or expenses, including, without limitation, reasonable attorneys’ fees and costs (collectively, “Claims”), originating prior to the Conveyance Date and arising out of the landlord’s obligations under the Lease.

          3. As of the Conveyance Date, Assignee hereby assumes all of Assignor’s obligations under the Lease and agrees to indemnify Assignor against and hold Assignor harmless from any and all Claims originating on or subsequent to the Conveyance Date and arising out of the landlord’s obligations under the Lease.

          4. In the event of any dispute between Assignor and Assignee arising out of the obligations of the parties under this Assignment or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such dispute, including, without limitation, reasonable attorneys’ fees and costs.

          5. This Assignment shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

D–1

          6. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

          7. The obligations of Assignor are intended to be binding only on the property of the Assignor and shall not be personally binding upon, nor shall any resort be had to, the private property of any of its trustees, officers, directors or shareholders, its investment manager, the partners, officers, directors or shareholders thereof, or any employees or agents of the Assignor or the investment manager. The obligations of Assignor are subject to the limitations on liability contained in Section 5.3 of the Agreement.

          Assignor and Assignee have executed this Assignment the day and year first above written.

ASSIGNOR:	BARBER LANE INVESTORS, LLC, a Delaware limited liability company
	By BH Barber Lane, LLC, a California limited liability company, its administrative member
		By:
		Name:
		Title:
ASSIGNEE:	__________________________,
	a__________________________
	By:
	Name:
	Title:

D–2

EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF LEASES

REAL PROPERTY DESCRIPTION

Real property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

PARCEL 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP, BEING ALL OF PARCEL E, ETC”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JANUARY 11, 1980 IN BOOK 457 OF MAPS, AT PAGE(S) 18, AND AS CORRECTED BY THAT CERTIFICATE OF CORRECTION, RECORDED AUGUST 11, 1980 IN BOOK F497 OF OFFICIAL RECORDS, PAGE 35.

APN: 086-03-038 ARB: 086-03-001-06-02

D–3

SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION OF LEASES

LIST OF LEASES

1. [to come]

D–4

EXHIBIT E

ASSIGNMENT AND ASSUMPTION OF CONTRACTS,
WARRANTIES AND GUARANTIES AND OTHER INTANGIBLE PROPERTY

          THIS ASSIGNMENT AND ASSUMPTION OF CONTRACTS, WARRANTIES AND GUARANTIES AND OTHER INTANGIBLE PROPERTY (this “Assignment”) dated as of__________, 2012, is between BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Assignor”), and __________________________, a __________________________ (“Assignee”).

          A. Assignor owns certain real property and certain improvements thereon located in the City of Milpitas, County of Santa Clara, State of California, and more particularly described in attached Exhibit A (the “Property”).

          B. Assignor has entered into certain contracts which affect the Property, which contracts are described on Exhibit B attached hereto (the “Contracts”).

          C. Assignor and Assignee have entered into an Agreement of Purchase and Sale dated as of __________, 2012 (the “Agreement”), pursuant to which Assignee agreed to purchase the Property from Assignor and Assignor agreed to sell the Property to Assignee, on the terms and conditions contained therein.

          D. Assignor desires to assign to Assignee its interest in the Contracts and in certain warranties, guaranties, and intangible personal property with respect to the Property (except that, to the extent that any such Contracts or other agreements are part of portfolio agreements, they shall not be assignable), and Assignee desires to accept the assignment thereof, on the terms and conditions below.

          ACCORDINGLY, the parties hereby agree as follows:

          1. As of the date on which the Property is conveyed to Assignee pursuant to the Agreement (the “Conveyance Date”), Assignor hereby assigns without recourse or warranty of enforceability all of its right, title and interest in and to the following:

                    (a) all of the Contracts approved by Assignee and listed on Exhibit B;

                    (b) any warranties and guaranties (“Warranties and Guaranties”) made by or received from any third party with respect to any improvements owned by Assignor on the Property; and

                    (c) any intangible property now owned by Assignor in connection with the Property excluding claims by Assignor, if any, arising out of matters occurring before the Conveyance Date.

          2. Assignor hereby agrees to indemnify Assignee against and hold Assignee harmless from any and all liabilities, losses, damages, claims, costs or expenses, including,

E–1

without limitation, reasonable attorneys’ fees and costs (collectively, “Claims”), originating prior to the Conveyance Date and arising out of Assignor’s obligations under the Contracts.

          3. Concurrently with the conveyance of Assignor’s interest in the Property to Assignee, Assignee hereby assumes all of Assignor’s obligations under the Contracts and agrees to indemnify Assignor against and hold Assignor harmless from any and all Claims originating on or subsequent to the Conveyance Date and arising out of Assignee’s obligations under the Contracts.

          4. In the event of any dispute between Assignor and Assignee arising out of the obligations of Assignor under this Assignment or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party’s costs and expenses of such dispute, including, without limitation, reasonable attorneys’ fees and costs.

          5. This Assignment shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

          6. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

          7. The obligations of Assignor are intended to be binding only on the property of the Assignor and shall not be personally binding upon, nor shall any resort be had to, the private properties of any of its trustees, officers, directors or shareholders, its investment manager, the partners, officers, directors or shareholders thereof, or any employees or agents of the Assignor or the investment manager. The obligations of Assignor are subject to the limitations on liability contained in Section 5.3 of the Agreement.

          Assignor and Assignee have executed this Assignment the day and year first above written.

E–2

ASSIGNOR:	BARBER LANE INVESTORS, LLC, a Delaware limited liability company
	By BH Barber Lane, LLC, a California limited liability company, its administrative member
		By:
		Name:
		Title:
ASSIGNEE:	________________________,
	a __________________________
	By:
	Name:
	Title:

E–3

EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF CONTRACTS

REAL PROPERTY DESCRIPTION

Real property in the City of Milpitas, County of Santa Clara, State of California, described as follows:

PARCEL 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP, BEING ALL OF PARCEL E, ETC”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JANUARY 11, 1980 IN BOOK 457 OF MAPS, AT PAGE(S) 18, AND AS CORRECTED BY THAT CERTIFICATE OF CORRECTION, RECORDED AUGUST 11, 1980 IN BOOK F497 OF OFFICIAL RECORDS, PAGE 35.

APN: 086-03-038 ARB: 086-03-001-06-02

E–4

EXHIBIT B TO ASSIGNMENT AND ASSUMPTION OF CONTRACTS

LIST OF APPROVED CONTRACTS

E–5

EXHIBIT F

TENANT NOTICE LETTER

__________, 2012

To:	________________________________ (“Tenant”)
RE:	Assignment of Lease between Barber Lane Investors, LLC, a Delaware limited liability company (“Lessor”), and Tenant for the space located at 1545 Barber Lane, Suite _____, Milpitas, California (the “Premises”)

          This is to notify you that the Premises have been acquired by, and the Lessor’s interest in the Lease has been assigned to, __________________________, a __________________________ (collectively “Buyer”).

          You are further notified that all rental payments under your Lease shall be paid to [INSERT PROPERTY MANAGER NAME] (“Property Manager”), at

PROPERTY MANAGER

ADDRESS

CITY, STATE ZIP

TELEPHONE:

FACSIMILE:

in accordance with the terms of your Lease unless you are otherwise notified in writing by Buyer.

          If you have any questions, please contact Property Manager at the address set forth above.

Very truly yours,
BARBER LANE INVESTORS, LLC, a Delaware limited liability company
By BH Barber Lane, LLC, a California limited liability company, its administrative member
	By:
	Name:
	Title:

F–1

EXHIBIT G

CERTIFICATE OF TRANSFEROR OTHER THAN AN INDIVIDUAL
(FIRPTA AFFIDAVIT)

          Section 1445 of the Internal Revenue Code provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform the transferee that withholding of tax is not required upon the disposition of a U.S. real property interest by BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Transferor”), the undersigned hereby certifies the following on behalf of Seller:

1.	Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);
2.	Transferor is not a disregarded entity as defined in §1.1445-2(b)(2)(iii);
3.	Transferor’s U.S. employer identification number is: __________; and
4.	Transferor’s office address is ___________________________________.

          Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment or both.

          Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Transferor.

G–1

Dated: ___________, _______
	SELLER:	BARBER LANE INVESTORS, LLC,
		a Delaware limited liability company
		By BH Barber Lane, LLC, a California limited liability company, its administrative member

By:

Name: 

Title: 

Notice to Transferee (Buyer): You are required by law to retain this Certificate until the end of the fifth tax year following the tax year in which the transfer takes place and make the Certificate available to the Internal Revenue Service if requested to do so during that period.

G–2

EXHIBIT H

TENANT ESTOPPEL CERTIFICATE

          The undersigned, NEW CINGULAR WIRELESS PCS, LLC, a Delaware limited liability company (“Licensee”), hereby certifies to PERICOM SEMICONDUCTOR CORPORATION, a California corporation, and its successors and assigns (collectively “Buyer”), and any lenders and their successors and assigns that provide Buyer financing in connection with the purchase of the real property commonly known as 1545 Barber Lane, Milpitas, California (the “Property”), in which Licensee leases space, hereby certifies the following information with respect to the License (as defined below) and agrees that you may rely upon the same in purchasing the Property:

          1. The Antenna Site License Agreement dated November 12, 2003 between Barber Lane Investors, LLC, a California limited liability company, as successor in interest to Limar Realty Corp. #1 (“Licensor”), as licensor, and New Cingular Wireless PCS, LLC, a Delaware limited liability company, as successor in interest to Bay Area Cellular Telephone Company, a California general partnership (“Licensee”), as licensee, as amended by that certain First Amendment to Antenna Site License Agreement dated June 24, 2009 and that certain Second Amendment to Antenna Site License Agreement dated October 6, 2011 (collectively, the “License”), is in full force and effect and has not been modified except as follows (if none, so state): None.

          2. Licensee has not assigned or entered into any sublicense of the License, except for the following (if none, so state): ___________________________________.

          3. Neither Licensee nor, to the best of Licensee’s knowledge, Licensor is in default thereunder and Licensee claims no defenses or offsets to the payment of rent or other charges under the License, except as follows (if none, so state): ___________________________________.

          4. All rent and other charges payable under the License have been paid through __________, 2012.

          5. Licensee has paid a security deposit to the Licensor in the amount of $ 0.

          6. After receipt of notice from Licensor, that the sale has been completed, Licensee will honor the assignment of the Licensor’s interest in the License.

[Signature page follows]

I–1

Dated: _____________, 2012.
	LICENSEE:	New Cingular Wireless PCS, LLC,
		a Delaware limited liability company
		By:	AT&T Mobility Corporation
		Its:	Manager

By:

Name: 

Title: 

I–2

EX-10.14

EXHIBIT 10.14

FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

This First Amendment to Agreement of Purchase and Sale (“First Amendment”) is made and entered into as of this 6th day of August, 2012, by and between BARBER LANE INVESTORS, LLC, a Delaware limited liability company (“Seller”), and PERICOM SEMICONDUCTOR CORPORATION, a California corporation (“Buyer”).

Recitals

A.    Seller and Buyer are parties to that certain Agreement of Purchase and Sale dated as of July 6, 2012 (the “Purchase Agreement”), pursuant to which Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, the Property (as defined in the Purchase Agreement).

B.    Seller and Buyer now desire to amend the Purchase Agreement as provided herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.    Recitals.  The Recitals set forth above are true and correct and are hereby incorporated into the body of this First Amendment as though fully set forth herein.

2.    Defined Terms.  Capitalized terms used herein, unless otherwise defined in this First Amendment, shall have the meanings ascribed to them in the Purchase Agreement.

3.    Purchase Price.  The Purchase Price is reduced to Seven Million Five Hundred Ninety-Six Thousand Dollars ($7,596,000).

4.    Contingency Period.  The Contingency Period set forth in Section 2.2 of the Purchase Agreement is terminated. Buyer hereby approves all of the matters described in Section 2.1(a) — (f) of the Purchase Agreement. This First Amendment constitutes Buyer’s Approval Notice, and Buyer hereby waives its right to terminate the Purchase Agreement pursuant to Sections 2.1 and 2.2 thereof. Concurrently herewith, Buyer shall deposit the Second Deposit with the Title Company.

5.    Closing Date.  The Closing Date shall be August 9, 2012.

6.    Authority.  Each party hereto represents to the other that it is duly authorized to execute and deliver this First Amendment and that this First Amendment is binding upon and enforceable against such party in accordance with the terms of this First Amendment. Each party hereto further represents to the other that the individual executing this First Amendment on behalf of such party is authorized to execute this First Amendment on behalf of such party.

7.    Counterparts.  This First Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The parties contemplate that they may be executing counterparts of this First Amendment transmitted by facsimile or email in PDF format and agree and intend that a signature by either facsimile machine or email in PDF format shall bind the party so signing with the same effect as though the signature were an original signature.

-1-

8.    No Further Modifications.  Except as set forth herein, the terms of the Purchase Agreement shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms of this First Amendment and the Purchase Agreement, the terms of this First Amendment shall control.

9.    Governing Law.  This First Amendment shall be governed by, construed and enforced in accordance with the laws of the State of California.

[Remainder of Page Intentionally Left Blank; Signature Page(s) Immediately Follows]

-2-

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date and year first written above.

SELLER:	BARBER LANE INVESTORS, LLC, a Delaware limited liability company
	By:	BH Barber Lane, LLC, a California limited liability company, its administrative member
		By:Name:Title:
BUYER:	PERICOM SEMICONDUCTOR CORPORATION, a California corporation
	By:Name:Title:

 

-3-

EX-21.1

EXHIBIT 21.1

LIST OF SUBSIDIARIES

Name	Jurisdiction of Incorporation
PSE Technology Corporation	Taiwan
Pericom Semiconductor (HK) Limited	Hong Kong
Pericom Asia Limited	Hong Kong
PSE Technology (Shandong) Corporation	Shandong, China
Pericom Technology (Yangzhou) Corporation	Yangzhou, China
Pericom Technology Inc.	British Virgin Islands

 

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-39055, 333-43934, 333-51229, 333-58522, 333-122387, 333-156807 and 333-166927) of Pericom Semiconductor Corporation of our reports dated August 31, 2012 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting which appear in this Annual Report on Form 10-K.

/s/ Burr Pilger Mayer, Inc.

San Jose, California
August 31, 2012

EX-31.1

EXHIBIT 31.1

PERICOM SEMICONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Alex C. Hui, certify that:

1.   I have reviewed this annual report on Form 10-K of Pericom Semiconductor Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2012

/s/ Alex C. Hui
Alex C. Hui
Chief Executive Officer
Pericom Semiconductor Corporation

EX-31.2

EXHIBIT 31.2

PERICOM SEMICONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Aaron Tachibana, certify that:

1.   I have reviewed this annual report on Form 10-K of Pericom Semiconductor Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 31, 2012

/s/ Aaron Tachibana
Aaron Tachibana
Chief Financial Officer
Pericom Semiconductor Corporation

EX-32.1

EXHIBIT 32.1

PERICOM SEMICONDUCTOR CORPORATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report of Pericom Semiconductor Corporation (the “Company”) on Form 10-K for the twelve months ended June 30, 2012 (the “Report”), I, Alex C. Hui, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)   the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

August 31, 2012

By:	/s/ Alex C. Hui
	Alex C. Hui Chief Executive Officer Pericom Semiconductor Corporation

 

EX-32.2

EXHIBIT 32.2

PERICOM SEMICONDUCTOR CORPORATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this annual report of Pericom Semiconductor Corporation (the “Company”) on Form 10-K for the twelve months ended June 30, 2012 (the “Report”), I, Aaron Tachibana, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)   the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

August 31, 2012

By:	/s/ Aaron Tachibana
	Aaron Tachibana Chief Financial Officer Pericom Semiconductor Corporation

 

XML

Accrued Liabilities (Tables)

12 Months Ended

Jun. 30, 2012

Accrued Liabilities [Abstract]

Accrued liabilities

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Accrued compensation	$	5,886	$	6,979
Acquisition-related liabilities		—		3,541
Contingent earn-out liability		—		4,774
Accrued construction liabilities		845		2,316
Income taxes payable		2		249
Sales commissions		497		545
Other accrued expenses		1,378		1,241
	$	8,608	$	19,645

XML

Inventories (Details Textual) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Inventories (Textual)
Inventory reserved	$ 3.8	$ 4.2

XML

Business and Significant Accounting Policies (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
The fair value of the Company’s short- and long-term investments by length of time to maturity
Fair value of investments	$ 103,552	$ 97,548
One year or less [Member]
The fair value of the Company’s short- and long-term investments by length of time to maturity
Fair value of investments	21,254	10,316
Between one and three years [Member]
The fair value of the Company’s short- and long-term investments by length of time to maturity
Fair value of investments	52,106	37,983
Greater than three years [Member]
The fair value of the Company’s short- and long-term investments by length of time to maturity
Fair value of investments	22,084	25,021
Multiple Dates [Member]
The fair value of the Company’s short- and long-term investments by length of time to maturity
Fair value of investments	$ 8,108	$ 24,228

XML

Goodwill And Intangible Assets (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Goodwill and Intangible Assets (Textual)
Amortization expense related to finite-lived purchased intangible assets	$ 3,100,000	$ 2,800,000	$ 331,000
Impairment of intangible assets	0	0
Accelerated amortization to a supplier relationship	$ 125,000
Customer relationships [Member]
Goodwill and Intangible Assets (Textual)
Finite lived intangible assets weighted average useful lives	2 years
eCERA trade name [Member]
Goodwill and Intangible Assets (Textual)
Finite lived intangible assets weighted average useful lives	2 years
Core developed technology [Member]
Goodwill and Intangible Assets (Textual)
Finite lived intangible assets weighted average useful lives	2 years

XML

Property Plant and Equipment Net (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Property, Plant and Equipment
Total	$ 105,593	$ 95,349
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	(51,164)	(44,662)
Construction-in-progress	1,673	10,172
Property, plant and equipment - net	56,102	60,859
Machinery and equipment [Member]
Property, Plant and Equipment
Total	53,649	50,268
Buildings [Member]
Property, Plant and Equipment
Total	30,104	23,200
Computer equipment and software [Member]
Property, Plant and Equipment
Total	15,303	15,389
Land [Member]
Property, Plant and Equipment
Total	3,666	3,805
Furniture and fixtures [Member]
Property, Plant and Equipment
Total	1,441	1,361
Leasehold improvements [Member]
Property, Plant and Equipment
Total	1,277	1,174
Vehicles [Member]
Property, Plant and Equipment
Total	$ 153	$ 152

XML

Shareholders Equity and Share-Based Compensation (Details) (Stock Option [Member])	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Stock Option [Member]
Assumptions of the Company used to value stock options:
Expected life	5 years 6 months	5 years 6 months
Expected life, Minimum			5 years 4 months 24 days
Expected life, Maximum			5 years 6 months
Risk-free interest rate	2.46%	2.46%
Risk-free interest rate, Minimum			2.45%
Risk-free interest rate, Maximum			2.60%
Volatility range	54.00%
Volatility range, Minimum		53.00%	53.00%
Volatility range, Maximum		54.00%	54.00%
Dividend yield	0.00%	0.00%	0.00%

XML

Business and Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Available-for-Sale Securities
Amortized Cost	$ 103,172	$ 97,149
Unrealized Gains	746	669
Unrealized Losses	(366)	(270)
Net Unrealized Gains (Losses)	380	399
Fair Value	103,552	97,548
Time Deposits [Member]
Available-for-Sale Securities
Amortized Cost	10,344	10,740
Unrealized Gains
Unrealized Losses
Net Unrealized Gains (Losses)
Fair Value	10,344	10,740
US Treasury Securities [Member]
Available-for-Sale Securities
Amortized Cost	3,639	600
Unrealized Gains		2
Unrealized Losses	(5)
Net Unrealized Gains (Losses)	(5)	2
Fair Value	3,634	602
National government and agency securities [Member]
Available-for-Sale Securities
Amortized Cost	6,582	9,065
Unrealized Gains	167	128
Unrealized Losses		(7)
Net Unrealized Gains (Losses)	167	121
Fair Value	6,749	9,186
State and municipal bond obligations [Member]
Available-for-Sale Securities
Amortized Cost	1,772	1,250
Unrealized Gains	1	8
Unrealized Losses	(1)
Net Unrealized Gains (Losses)		8
Fair Value	1,772	1,258
Corporate bonds and notes [Member]
Available-for-Sale Securities
Amortized Cost	61,374	53,346
Unrealized Gains	461	458
Unrealized Losses	(197)	(105)
Net Unrealized Gains (Losses)	264	353
Fair Value	61,638	53,699
Asset backed Securities [Member]
Available-for-Sale Securities
Amortized Cost	10,148	11,381
Unrealized Gains	19	32
Unrealized Losses	(86)	(75)
Net Unrealized Gains (Losses)	(67)	(43)
Fair Value	10,081	11,338
Mortgage backed securities [Member]
Available-for-Sale Securities
Amortized Cost	9,313	10,767
Unrealized Gains	98	41
Unrealized Losses	(77)	(83)
Net Unrealized Gains (Losses)	21	(42)
Fair Value	$ 9,334	$ 10,725

XML

Inventories (Tables)

12 Months Ended

Jun. 30, 2012

Inventory Disclosure [Abstract]

Inventories

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Finished goods	$	5,252	$	5,905
Work-in-process		3,981		4,701
Raw materials		7,371		11,336
	$	16,604	$	21,942

XML

Shareholders Equity and Share-Based Compensation (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jun. 27, 2009
Stock Option Plan
Beginning Balance, Option Outstanding	2,974	3,477	3,755
Option Outstanding, granted	142	183	470
Option Outstanding, exercised	(21)	(67)	(105)
Option Outstanding, forfeited / expired	(642)	(619)	(643)
Ending Balance, Option Outstanding	2,453	2,974	3,477
Beginning Balance, Weighted Average Exercise Price	$ 10.89	$ 11.85	$ 14.00
Weighted Average Exercise Price, granted	$ 7.65	$ 8.87	$ 10.24
Weighted Average Exercise Price, Exercised	$ 7.77	$ 8.33	$ 8.72
Weighted Average Exercise Price, forfeited / expired	$ 12.37	$ 15.97	$ 23.71
Ending Balance, Weighted Average Exercise Price	$ 10.34	$ 10.89	$ 11.85
Ending Balance, Options outstanding, Aggregate Intrinsic Value	$ 912	$ 645	$ 872	$ 427

XML

Restricted Assets (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Restricted Assets (Textual)
Other Restricted Assets, Total		$ 7.4
PSE-TW [Member]
Restricted Assets (Textual)
Other Restricted Assets, Total	4.3	4.5
Credit facility outstanding	1.4	5.0
PAL [Member]
Restricted Assets (Textual)
Other Restricted Assets, Total		$ 2.9

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Fair Value [Member]
Fair value mesurement
Fair value measurement of assets	$ 108,523	$ 97,548
Fair Value [Member] | Commercial paper [Member]
Fair value mesurement
Fair value measurement of assets	3,500
Fair Value [Member] | Time deposits [Member]
Fair value mesurement
Fair value measurement of assets	11,815	10,740
Fair Value [Member] | US Treasury Securities [Member]
Fair value mesurement
Fair value measurement of assets	3,634	602
Fair Value [Member] | National government and agency securities [Member]
Fair value mesurement
Fair value measurement of assets	6,749	9,186
Fair Value [Member] | State and municipal bond obligations [Member]
Fair value mesurement
Fair value measurement of assets	1,772	1,258
Fair Value [Member] | Corporate bonds and notes [Member]
Fair value mesurement
Fair value measurement of assets	61,638	53,699
Fair Value [Member] | Asset backed Securities [Member]
Fair value mesurement
Fair value measurement of assets	10,081	11,338
Fair Value [Member] | Mortgage backed securities [Member]
Fair value mesurement
Fair value measurement of assets	9,334	10,725
Level 1 [Member]
Fair value mesurement
Fair value measurement of assets	3,634	602
Level 1 [Member] | Commercial paper [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | Time deposits [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | US Treasury Securities [Member]
Fair value mesurement
Fair value measurement of assets	3,634	602
Level 1 [Member] | National government and agency securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | State and municipal bond obligations [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | Corporate bonds and notes [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | Asset backed Securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 1 [Member] | Mortgage backed securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 2 [Member]
Fair value mesurement
Fair value measurement of assets	104,889	96,946
Level 2 [Member] | Commercial paper [Member]
Fair value mesurement
Fair value measurement of assets	3,500
Level 2 [Member] | Time deposits [Member]
Fair value mesurement
Fair value measurement of assets	11,815	10,740
Level 2 [Member] | US Treasury Securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 2 [Member] | National government and agency securities [Member]
Fair value mesurement
Fair value measurement of assets	6,749	9,186
Level 2 [Member] | State and municipal bond obligations [Member]
Fair value mesurement
Fair value measurement of assets	1,772	1,258
Level 2 [Member] | Corporate bonds and notes [Member]
Fair value mesurement
Fair value measurement of assets	61,638	53,699
Level 2 [Member] | Asset backed Securities [Member]
Fair value mesurement
Fair value measurement of assets	10,081	11,338
Level 2 [Member] | Mortgage backed securities [Member]
Fair value mesurement
Fair value measurement of assets	9,334	10,725
Level 3 [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | Commercial paper [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | Time deposits [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | US Treasury Securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | National government and agency securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | State and municipal bond obligations [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | Corporate bonds and notes [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | Asset backed Securities [Member]
Fair value mesurement
Fair value measurement of assets
Level 3 [Member] | Mortgage backed securities [Member]
Fair value mesurement
Fair value measurement of assets

XML

Other Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Other Assets
Land use rights	$ 6,890	$ 6,938
Investments in privately held companies	1,303	1,354
Deposits	263	239
Other	602	1,350
Total	$ 9,058	$ 9,881

XML

Industrial Development Subsidy (Details) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011
Industrial Development Subsidy (Textual)
Subsidy recieved	$ 12,500,000
Remaining Subsidy	8,600,000
Period over which remaining subsidy to be recognized	Three to twenty years
Subsidy used in reduction in cost of oods sold	1,300,000	1,300,000
Subsidy used in reduction in operating expenses	$ 180,000	$ 239,000

XML

Shareholders Equity and Share-Based Compensation (Details 8) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Share-based compensation expense categorized by the type of award
Pre-tax stock-based compensation expense	$ 3,736	$ 4,286	$ 4,049
Income tax effect	1,229	1,409	1,159
Net stock-based compensation expense	2,507	2,877	2,890
Stock Purchase Plan [Member]
Share-based compensation expense categorized by the type of award
Pre-tax stock-based compensation expense	3,492	3,972	3,376
Income tax effect	1,229	1,409	1,159
Net stock-based compensation expense	2,263	2,563	2,217
Employee stock purchase plan [Member]
Share-based compensation expense categorized by the type of award
Pre-tax stock-based compensation expense	244	314	673
Income tax effect
Net stock-based compensation expense	$ 244	$ 314	$ 673

XML

Shareholders Equity and Share-Based Compensation (Details 3) (USD $)	12 Months Ended
	Jun. 30, 2012
Exercise price range one [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 4.89
Range of exercise price, Upper range limit	$ 8.03
Exercise price range, Weighted Number of outstanding options	501,969
Exercise price range outstanding options, Weighted average remaining conteractual term	5 years 5 months 24 days
Exercise price range outstanding options, Number average exercise price	$ 7.72
Exercise price range exercisable options, Number exercisable	364,151
Exercise price range exercisable options, Weighted average exercise price	$ 7.76
Exercise price range two [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 8.10
Range of exercise price, Upper range limit	$ 8.70
Exercise price range, Weighted Number of outstanding options	497,840
Exercise price range outstanding options, Weighted average remaining conteractual term	4 years 2 months 5 days
Exercise price range outstanding options, Number average exercise price	$ 8.48
Exercise price range exercisable options, Number exercisable	415,323
Exercise price range exercisable options, Weighted average exercise price	$ 8.46
Exercise price range three [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 8.71
Range of exercise price, Upper range limit	$ 10.01
Exercise price range, Weighted Number of outstanding options	534,488
Exercise price range outstanding options, Weighted average remaining conteractual term	5 years 10 months 13 days
Exercise price range outstanding options, Number average exercise price	$ 9.70
Exercise price range exercisable options, Number exercisable	406,579
Exercise price range exercisable options, Weighted average exercise price	$ 9.64
Exercise price range four [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 10.15
Range of exercise price, Upper range limit	$ 12.16
Exercise price range, Weighted Number of outstanding options	494,359
Exercise price range outstanding options, Weighted average remaining conteractual term	4 years 4 months 28 days
Exercise price range outstanding options, Number average exercise price	$ 10.91
Exercise price range exercisable options, Number exercisable	461,888
Exercise price range exercisable options, Weighted average exercise price	$ 10.88
Exercise price range five [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 13.33
Range of exercise price, Upper range limit	$ 18.10
Exercise price range, Weighted Number of outstanding options	424,512
Exercise price range outstanding options, Weighted average remaining conteractual term	5 years 7 months 24 days
Exercise price range outstanding options, Number average exercise price	$ 15.77
Exercise price range exercisable options, Number exercisable	417,256
Exercise price range exercisable options, Weighted average exercise price	$ 15.78
Exercise price range six [Member]
Share based compensation arrangement by share based payment award options outstanding exercise price range
Range of exercise price, lower range limit	$ 4.89
Range of exercise price, Upper range limit	$ 18.10
Exercise price range, Weighted Number of outstanding options	2,453,168
Exercise price range outstanding options, Weighted average remaining conteractual term	5 years 1 month 13 days
Exercise price range outstanding options, Number average exercise price	$ 10.34
Exercise price range exercisable options, Number exercisable	2,065,197
Exercise price range exercisable options, Weighted average exercise price	$ 10.59

XML

Shareholders Equity and Share-Based Compensation (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Apr. 29, 2012	Apr. 29, 2008	Apr. 26, 2007
Shareholders equity and share based compensation (Textual)
Weighted Average Exercise Price, granted	$ 7.65	$ 8.87	$ 10.24
Preferred stock, shares authorized	5,000,000
Preferred stock, shares issued
Income tax benefits recognized	$ 1,200,000	$ 1,400,000	$ 1,200,000
Reduction in net income due to share based compensation	2,500,000	2,900,000	2,900,000
Reduction in net income per diluted share due to share based compensation	$ 0.10	$ 0.11	$ 0.11
Repurchase of common stock, Authorized				25,000,000	30,000,000	2,000,000
Stock repurchased during period, Value	11,600,000	5,400,000	8,700,000
Stock repurchased during period, Shares	1,482,572	613,331	907,545
Restricted Stock Units (RSUs) [Member]
Shareholders equity and share based compensation (Textual)
Option vesting period	4 years
Unamortized share based compensation expenses	3,000,000
Weighted average period of recognition	2 years 1 month 6 days
Stock option plan [Member]
Shareholders equity and share based compensation (Textual)
Number of option plan	4
Reserve of common stock for issuance to employees and officers	5,400,000
Option vesting period	48 months
Option expiration period	10 years
Option, weighted average grant date fair value	$ 3.89	$ 4.51	$ 5.11
Shares available for future grant	2,066,000
Aggregate intrinsic value of option exercised	8,000
Unamortized share based compensation expenses	1,400,000
Weighted average period of recognition	2 years 1 month 6 days
Employee stock purchase plan [Member]
Shareholders equity and share based compensation (Textual)
Number of option plan	1
Aggregate compensation expenses related to grant of option and restricted stock units	3,700,000	4,300,000	4,000,000
Reserve of common stock for issuance to employees and officers	2,000,000
Option, weighted average grant date fair value	$ 2.22	$ 2.36	$ 3.39
Shares available for future grant	1,800,000
Unamortized share based compensation expenses	75,000
Weighted average period of recognition	4 months
Purchase option for participants in purchase period	85% of the lower of the stock's fair market value on the first day and last day of the purchase period.
Maximum number of common stock by employees in purchase period	1,000
Maximum amount that can be accrued in offering periog for stock purchased	$ 10,000
Sahre issued under ESOP plan	109,000	157,000	200,000
Weighted Average Exercise Price, granted	$ 6.96	$ 6.23	$ 5.33

XML

Equity and Comprehensive Income (Details) (USD $)	Jun. 30, 2012
Equity and Comprehensive Income (Textual)
Unrealized gains net of tax included in accumulated other comprehensive income	$ 194,000
Accumulated currency translation gains included in accumulated other comprehensive income	9,400,000
PSE-TW [Member]
Equity and Comprehensive Income (Textual)
Additional ownership interest purchased	2.71%
Value of additional ownership interest purchased	$ 1,200,000

XML

Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Accrued Liabilities
Accrued compensation	$ 5,886	$ 6,979
Acquisition-related liabilities		3,541
Contingent earn-out liability		4,774
Accrued construction liabilities	845	2,316
Income taxes payable	2	249
Sales commissions	497	545
Other accrued expenses	1,378	1,241
Accrued Liabilities, Current, Total	$ 8,608	$ 19,645

XML

Income Taxes

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

19. INCOME TAXES

Income tax expense consists of Federal, state and foreign current and deferred income taxes as follows:

	Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			July 3, 2010
Income before income taxes
U.S.	$	341		$	21,009		$	10,024
Foreign		554			(627	)		2,279
		895			20,382			12,303
Federal:
Current		941			3,155			3,502
Deferred		(641	)		4,064			(179	)
		300			7,219			3,323
State:
Current		(522	)		(3	)		7
Deferred		2,768			16			(315	)
		2,246			13			(308	)
Foreign:
Current		551			387			855
Deferred		—			—			41
		551			387			896
Total current		970			3,539			4,364
Total deferred		2,127			4,080			(453	)
Total income tax expense	$	3,097		$	7,619		$	3,911

The reconciliation between the Company’s effective tax rate and the U.S. statutory rate is as follows:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Tax provision at federal statutory rate		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(33.4	)		—			(0.9	)
Foreign income and withholding taxes		34.1			3.8			1.3
Benefits from resolution of certain tax audits and expiration of statute of limitations		(15.4	)		(0.6	)		(2.7	)
Share-based compensation		20.5			0.3			1.6
Research and development tax credits		(2.2	)		0.3			(0.4	)
Change in valuation allowance		307.3			—			(1.1	)
Other		1.1			(0.4	)		—
Income tax expense		346.0	%		37.4	%		31.8	%

The components of the net deferred tax assets were as follows (in thousands):

	As of the year ended
	June 30, 2012			July 2, 2011
Deferred tax assets:
Credit carryforwards	$	3,183		$	3,181
Accruals and reserves		1,737			1,867
Cumulative loss on investment		339			371
Depreciation and amortization		(1,480	)		(1,538	)
Net operating loss carryforward		876			642
Share-based compensation		2,904			2,989
Other		742			438
Total		8,301			7,950
Valuation allowance		(4,305	)		(1,062	)
Deferred tax assets	$	3,996		$	6,888
Deferred tax liabilities:
Gain on previously held shares in unconsolidated affiliate	$	(3,873	)	$	(3,876	)
Acquired PTI intangibles and other		(2,318	)		(2,729	)
Deferred tax liabilities	$	(6,191	)	$	(6,605	)

As of June 30, 2012, the Company has net operating loss carryforwards of approximately $1.1 million, $3.8 million, and $5.0 million for PSE-TW in Taiwan, PSE-SD in China, PTI in Hong Kong, which will begin to expire in 2015, 2014 and no expiration, respectively. In addition, the Company has research and development tax credit carryforwards of approximately $4.2 million to offset future state taxable income and no research and development tax credit carryforward to offset federal taxable income. The state research and development tax credit carryforwards do not have an expiration date and may be carried forward indefinitely. The Company has $31,000 of research and development tax credit carryforwards for PSE-TW in Taiwan, which begins to expire in 2012.

The Company provides a valuation allowance for deferred tax assets when it is more likely than not, based upon currently available evidence and other factors, that some portion or all of the deferred tax asset will not be realized. The change in valuation allowance for the year ended June 30, 2012 was an increase of $3.2 million, which resulted primarily from the establishment of a $2.8 million deferred tax asset valuation allowance relating to California tax credits that are not more likely than not to be utilized in the future. The change in valuation allowance for the year ended July 2, 2011 was an increase of $97,000, primarily from an increase in the net operating losses generated in non-US subsidiaries during the periods.

Consolidated income before income taxes includes non-U.S. income (loss) of approximately $554,000, $(627,000) and $2.3 million for the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010, respectively. Pericom has not provided U.S. income taxes on a cumulative total of approximately $17.3 million of undistributed earnings reported by certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

The Company recorded $1.6 million for unrecognized tax benefits as of June 30, 2012. A reconciliation of the beginning and ending amount of unrecognized tax benefit for the three fiscal years from June 27, 2009 through June 30, 2012 is as follows:

Balance as of June 27, 2009	$	(756,000	)
Gross decreases — prior period tax positions		3,000
Gross increases — prior period tax positions		(27,000	)
Gross increases — current period tax positions		(91,000	)
Reductions as a result of a lapse of statute of limitations		326,000
Balance as of July 3, 2010	$	(545,000	)
Gross increases — prior period tax positions		(152,000	)
Gross increases — current period tax positions		(188,000	)
Reductions as a result of a lapse of statute of limitations		130,000
Balance as of July 2, 2011	$	(755,000	)
Gross increases — prior period tax positions		(515,000	)
Gross increases — current period tax positions		(475,000	)
Reductions as a result of a lapse of statute of limitations		138,000
Balance as of June 30, 2012	$	(1,607,000	)

$1.5 million of the balance at June 30, 2012 would affect the Company’s effective tax rate if recognized. The Company is subject to examination by federal, foreign, and various state jurisdictions for the years 2006 through 2012. The Company has been notified there will be an examination of the federal tax returns for fiscal 2010 and 2011.

As of June 30, 2012, the Company has accrued $256,000 for interest and penalties related to the unrecognized tax benefits. The balance of unrecognized tax benefits and the related interest and penalties is recorded as a noncurrent liability on our consolidated balance sheet.

Within the next 12 months, we do not anticipate a material decrease in the unrecognized tax benefit or any other significant changes to our tax reserves during that period.

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Business and Significant Accounting Policies (Details 4) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Basic and diluted earnings per share
Net income (loss) attributable to Pericom shareholders									$ (2,068)	$ 13,463	$ 10,794
Computation of common shares outstanding – basic earnings (loss) per share:
Shares used in computing basic earnings (loss) per share	23,611	24,030	24,244	24,491	24,917	24,993	24,894	24,890	24,094	24,923	25,412
Basic earnings (loss) per share attributable to Pericom shareholders	$ (0.08)	$ (0.01)	$ (0.01)	$ 0.02	$ 0.06	$ 0.02	$ 0.07	$ 0.38	$ (0.09)	$ 0.54	$ 0.42
Computation of common shares outstanding – diluted earnings (loss) per share:
Weighted average shares of common stock									24,094,000	24,923,000	25,412,000
Dilutive shares using the treasury stock method										331	305
Shares used in computing diluted earnings (loss) per share	23,611	24,030	24,244	24,583	25,140	25,341	25,270	25,263	24,094	25,254	25,717
Diluted earnings (loss) per share attributable to Pericom shareholders	$ (0.08)	$ (0.01)	$ (0.01)	$ 0.02	$ 0.06	$ 0.02	$ 0.07	$ 0.38	$ (0.09)	$ 0.53	$ 0.42

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Fair Value Measurements (Tables)

12 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair value measurements

	As of June 30, 2012
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Commercial paper	$	3,500	$	—	$	3,500	$	—
Time deposits		11,815		—		11,815		—
US Treasury securities		3,634		3,634		—		—
National government and agency securities		6,749		—		6,749		—
State and municipal bond obligations		1,772		—		1,772		—
Corporate bonds and notes		61,638		—		61,638		—
Asset backed securities		10,081		—		10,081		—
Mortgage backed securities		9,334		—		9,334		—
Total	$	108,523	$	3,634	$	104,889	$	—

	As of July 2, 2011
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Time deposits	$	10,740	$	—	$	10,740	$	—
US Treasury securities		602		602		—		—
National government and agency securities		9,186		—		9,186		—
State and municipal bond obligations		1,258		—		1,258		—
Corporate bonds and notes		53,699		—		53,699		—
Asset backed securities		11,338		—		11,338		—
Mortgage backed securities		10,725		—		10,725		—
Total	$	97,548	$	602	$	96,946	$	—

(1) At June 30, 2012, the commercial paper and $1,471 of the time deposits are included in cash and cash equivalents; the balance of the investments at June 30, 2012 and July 2, 2011 are included in short-term and long-term investments in marketable securities on the consolidated balance sheet.

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Commitments and Contingencies (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jul. 06, 2012
Commitments and contingencies (Textual)
Lease commitment expration year	Dec. 31, 2013
Capital injection	$ 6,000,000
Amount for subsidy applied	3,900,000
Deferred credit under Other long-term liabilities	773,000
Purchase price of building				7,600,000
Rent expense	$ 1,900,000	$ 1,900,000	$ 1,700,000

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Industry and Geographical Segment Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Schedule of net sales and net book value of long-lived assets by geographical segment
Total net sales	$ 137,135	$ 166,343	$ 146,913
Total long-lived assets	56,102	60,859	50,760
Segment Reporting (Textual)
Number of operating segments	3
Taiwan [Member]
Schedule of net sales and net book value of long-lived assets by geographical segment
Total net sales	63,301	75,800	74,905
Total long-lived assets	15,005	16,459	17,519
China (including Hong Kong) [Member]
Schedule of net sales and net book value of long-lived assets by geographical segment
Total net sales	48,178	57,957	40,120
Total long-lived assets	37,761	40,112	27,883
United States [Member]
Schedule of net sales and net book value of long-lived assets by geographical segment
Total net sales	7,242	10,022	11,981
Total long-lived assets	2,304	2,913	3,751
Others (less than 10% each) [Member]
Schedule of net sales and net book value of long-lived assets by geographical segment
Total net sales	18,414	22,564	19,907
Total long-lived assets	382	477	446
Korea [Member]
Schedule of net sales and net book value of long-lived assets by geographical segment
Total long-lived assets	$ 650	$ 898	$ 1,161

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Investments in Unconsolidated Affiliates (Tables)

12 Months Ended

Jun. 30, 2012

Investments In and Advances To Affiliates, Schedule Of Investments [Abstract]

Investment in unconsolidated affiliates

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,474	$	2,596

Condensed financial information

:

	(Unaudited) As of and for the year ended
(in thousands)	July 3, 2010
Total assets	$	26,875
Total liabilities	$	2,546
Total equity	$	24,329
Revenue	$	17,869
Cost of revenues		8,798
Gross profit		9,071
Operating expenses		4,427
Income from operations		4,644
Interest and other income		440
Income tax expense		230
Net income	$	4,854

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Other Receivables (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Components of other receivables
Interest receivable	$ 832	$ 597
VAT and other tax receivables	1,928	3,226
Government subsidy receivable	823	1,546
Other accounts receivable	91	490
Other receivables	$ 3,674	$ 5,859

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Goodwill And Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011
Schedule of goodwill
Beginning balance	$ 16,669	$ 1,681
Acquisition of PTI, net		14,218
Other adjustments	(239)	(96)
Cumulative translation adjustments	367	866
Ending balance	$ 16,797	$ 16,669

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Business Combination (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jul. 02, 2011	Jul. 03, 2010
Supplemental Information on Pro Forma Adjustment
Revenue	$ 170,509	$ 163,643
Net income	9,568	17,091
Net income per share - basic	$ 0.38	$ 0.67
Net income per share - diluted	$ 0.38	$ 0.66
Pro forma adjustment to revenue
Eliminate intercompany sales	(383)	(1,139)
Total revenue adjustment	(383)	(1,139)
Pro forma adjustments to net income
Depreciation and amortization	511	(2,737)
Earnout and compensation expense accruals	1,614	(1,613)
Eliminate the Company's share of PTI income	(468)	(2,071)
Acquisition related costs	761	(761)
Gain on previously held interest in PTI	(7,263)	8,938
Other	(155)	(313)
Total net income adjustments	$ (5,000)	$ 1,443

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Business and Significant Accounting Policies (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	$ 19,354	$ 23,293
Less Than 12 Months, Unrealized Losses	106	184
12 Months or Longer, Fair Value	5,780	736
12 Months or Longer, Unrealized Losses	260	86
Total, Fair Value	25,134	24,029
Total, Unrealized Losses	366	270
US Treasury Securities [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	3,434
Less Than 12 Months, Unrealized Losses	5
12 Months or Longer, Fair Value
12 Months or Longer, Unrealized Losses
Total, Fair Value	3,434
Total, Unrealized Losses	5
National government and agency securities [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	327	2,254
Less Than 12 Months, Unrealized Losses		7
12 Months or Longer, Fair Value
12 Months or Longer, Unrealized Losses
Total, Fair Value	327	2,254
Total, Unrealized Losses		7
State and municipal bond obligations [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	1,033
Less Than 12 Months, Unrealized Losses	1
12 Months or Longer, Fair Value
12 Months or Longer, Unrealized Losses
Total, Fair Value	1,033
Total, Unrealized Losses	1
Corporate bonds and notes [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	12,117	12,765
Less Than 12 Months, Unrealized Losses	85	103
12 Months or Longer, Fair Value	3,782	251
12 Months or Longer, Unrealized Losses	112	2
Total, Fair Value	15,899	13,016
Total, Unrealized Losses	197	105
Asset backed Securities [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	1,784	4,867
Less Than 12 Months, Unrealized Losses	15	64
12 Months or Longer, Fair Value	1,595	149
12 Months or Longer, Unrealized Losses	71	11
Total, Fair Value	3,379	5,016
Total, Unrealized Losses	86	75
Mortgage backed securities [Member]
Gross unrealized losses and fair market values of the Company’s investments
Less Than 12 Months, Fair Value	659	3,407
Less Than 12 Months, Unrealized Losses		10
12 Months or Longer, Fair Value	403	336
12 Months or Longer, Unrealized Losses	77	73
Total, Fair Value	1,062	3,743
Total, Unrealized Losses	$ 77	$ 83

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Inventories

12 Months Ended

Jun. 30, 2012

Inventory Disclosure [Abstract]

Inventories

3. INVENTORIES

Inventories consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Finished goods	$	5,252	$	5,905
Work-in-process		3,981		4,701
Raw materials		7,371		11,336
	$	16,604	$	21,942

As of June 30, 2012, the Company had reserved for $3.8 million of inventory as compared to $4.2 million at July 2, 2011.

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Business Combination (Details Textual) (USD $)	3 Months Ended								12 Months Ended				10 Months Ended	12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Aug. 31, 2010	Jul. 02, 2011 PTI [Member]	Jun. 30, 2012 PTI [Member]	Jul. 02, 2011 PTI [Member]
Business Combination (Textual)
Business combination, remeasurement gain															$ 11,000,000
Change in the estimated fair value of contingent earn-out liability														4,100,000
Percentage achievement of PTI’s gross profit target of threshold														100.00%
Maximum consideration earned by PTI stockholders														4,800,000
Purchase price														58,000,000
Fair value of inventory based on assumptions														3,400,000
Estimated useful lives of acquired land and buildings									15 to 48 years
Total net sales	37,944,000	33,378,000	30,481,000	35,332,000	43,342,000	39,555,000	40,671,000	42,775,000	137,135,000	166,343,000	146,913,000		16,600,000	13,300,000
Cash consideration	30,236,000								30,236,000			30,200,000
Earn out consideration and bonus payments										6,000,000
Estimated life of customer relationshipson a straight line basis									6 years
Estimated life of amortization of fair value of backlog									3 months
Estimated life of amortization of core technology on a straight-line basis									6 years
Estimated life of finite-lived intangible asset and amortization									6 years
Deferred tax liability associated with the estimated fair value	3,000,000								3,000,000
Total estimated purchase price paid at the time of acquisition	15,500,000								15,500,000
Reduction in amount of goodwill as a result of working capital adjustments									$ 335,000

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Income Taxes (Tables)

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income tax expense consists of Federal, state and foreign current and deferred income taxes

	Fiscal Year Ended
(in thousands)	June 30, 2012			July 2, 2011			July 3, 2010
Income before income taxes
U.S.	$	341		$	21,009		$	10,024
Foreign		554			(627	)		2,279
		895			20,382			12,303
Federal:
Current		941			3,155			3,502
Deferred		(641	)		4,064			(179	)
		300			7,219			3,323
State:
Current		(522	)		(3	)		7
Deferred		2,768			16			(315	)
		2,246			13			(308	)
Foreign:
Current		551			387			855
Deferred		—			—			41
		551			387			896
Total current		970			3,539			4,364
Total deferred		2,127			4,080			(453	)
Total income tax expense	$	3,097		$	7,619		$	3,91

Reconciliation between Company’s effective tax rate and U.S. statutory rate

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Tax provision at federal statutory rate		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(33.4	)		—			(0.9	)
Foreign income and withholding taxes		34.1			3.8			1.3
Benefits from resolution of certain tax audits and expiration of statute of limitations		(15.4	)		(0.6	)		(2.7	)
Share-based compensation		20.5			0.3			1.6
Research and development tax credits		(2.2	)		0.3			(0.4	)
Change in valuation allowance		307.3			—			(1.1	)
Other		1.1			(0.4	)		—
Income tax expense		346.0	%		37.4	%		31.8	%

Components of net deferred tax assets

	As of the year ended
	June 30, 2012			July 2, 2011
Deferred tax assets:
Credit carryforwards	$	3,183		$	3,181
Accruals and reserves		1,737			1,867
Cumulative loss on investment		339			371
Depreciation and amortization		(1,480	)		(1,538	)
Net operating loss carryforward		876			642
Share-based compensation		2,904			2,989
Other		742			438
Total		8,301			7,950
Valuation allowance		(4,305	)		(1,062	)
Deferred tax assets	$	3,996		$	6,888
Deferred tax liabilities:
Gain on previously held shares in unconsolidated affiliate	$	(3,873	)	$	(3,876	)
Acquired PTI intangibles and other		(2,318	)		(2,729	)
Deferred tax liabilities	$	(6,191	)	$	(6,605	)

Reconciliation of beginning and ending amount of unrecognized tax benefit

Balance as of June 27, 2009	$	(756,000	)
Gross decreases — prior period tax positions		3,000
Gross increases — prior period tax positions		(27,000	)
Gross increases — current period tax positions		(91,000	)
Reductions as a result of a lapse of statute of limitations		326,000
Balance as of July 3, 2010	$	(545,000	)
Gross increases — prior period tax positions		(152,000	)
Gross increases — current period tax positions		(188,000	)
Reductions as a result of a lapse of statute of limitations		130,000
Balance as of July 2, 2011	$	(755,000	)
Gross increases — prior period tax positions		(515,000	)
Gross increases — current period tax positions		(475,000	)
Reductions as a result of a lapse of statute of limitations		138,000
Balance as of June 30, 2012	$	(1,607,000	)

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Subsequent Event

12 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Event

23. SUBSEQUENT EVENT

On July 6, 2012, the Company entered into an agreement for the purchase of a building to serve as its new corporate headquarters located in Milpitas, California. Subsequent due diligence was completed and the purchase, for $7.6 million, closed on August 9, 2012.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Jun. 30, 2012

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

22. QUARTERLY FINANCIAL DATA (Unaudited)

Following is a summary of quarterly operating results and share data for the years ended June 30, 2012 and July 2, 2011:

	For the Quarter Ended
	June 30, 2012			March 31, 2012			Dec 31, 2011			Oct 1, 2011
Net revenues	$	37,944		$	33,378		$	30,481		$	35,332
Cost of revenues		24,396			21,789			19,504			22,795
Gross profit		13,548			11,589			10,977			12,537
Operating expenses:
Research and development		5,460			5,669			5,277			5,316
Selling, general and administrative		8,135			7,114			7,060			7,339
Total operating expenses		13,595			12,783			12,337			12,655
Income (loss) from operations		(47	)		(1,194	)		(1,360	)		(118	)
Interest and other income, net		1,059			847			638			1,070
Income (loss) before income tax expense		1,012			(347	)		(722	)		952
Income tax expense (benefit)		2,974			(76	)		(335	)		534
Net income (loss) from consolidated companies		(1,962	)		(271	)		(387	)		418
Equity in net income of unconsolidated affiliates		51			4			52			27
Net income (loss)	$	(1,911	)	$	(267	)	$	(335	)	$	445
Basic income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Diluted income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Shares used in computing basic income (loss) per share		23,611			24,030			24,244			24,491
Shares used in computing diluted income (loss) per share		23,611			24,030			24,244			24,583

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011			Jan 1, 2011		Oct 2, 2010
Net revenues	$	43,342	$	39,555		$	40,671	$	42,775
Cost of revenues		28,173		27,190			27,058		28,240
Gross profit		15,169		12,365			13,613		14,535
Operating expenses:
Research and development		5,535		5,238			5,060		4,397
Selling, general and administrative		7,487		7,231			6,986		7,742
Total operating expenses		13,022		12,469			12,046		12,139
Income (loss) from operations		2,147		(104	)		1,567		2,396
Interest and other income, net		695		1,132			614		11,936
Income before income tax expense		2,842		1,028			2,181		14,332
Income tax expense		1,281		514			446		5,378

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011		Jan 1, 2011		Oct 2, 2010
Net income from consolidated companies		1,561		514		1,735		8,954
Equity in net income of unconsolidated affiliates		48		17		77		556
Net income	$	1,609	$	531	$	1,812	$	9,510
Basic income per share	$	0.06	$	0.02	$	0.07	$	0.38
Diluted income per share	$	0.06	$	0.02	$	0.07	$	0.38
Shares used in computing basic income per share		24,917		24,993		24,894		24,890
Shares used in computing diluted income per share		25,140		25,341		25,270		25,263

XML

Property Plant and Equipment Net (Details Textual) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Property plant and equipment net (Textual)
Depreciation expense	$ 8.0	$ 7.7	$ 6.7

XML

Industry and Geographical Segment Information (Tables)

12 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Schedule of net sales and net book value of long-lived assets by geographical segment

	Fiscal year ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Net sales to countries:
Taiwan	$	63,301	$	75,800	$	74,905
China (including Hong Kong)		48,178		57,957		40,120
United States		7,242		10,022		11,981
Others (less than 10% each)		18,414		22,564		19,907
Total net sales	$	137,135	$	166,343	$	146,913
(in thousands)
Long-lived assets:
China (including Hong Kong)	$	37,761	$	40,112	$	27,883
Taiwan		15,005		16,459		17,519
United States		2,304		2,913		3,751
Korea		650		898		1,161
Others (less than 10% each)		382		477		446
Total long-lived assets	$	56,102	$	60,859	$	50,760

XML

Business and Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

USE OF ESTIMATES

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION

BASIS OF PRESENTATION — These consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Semiconductor (HK) Limited (“PSC-HK”), Pericom Asia Limited (“PAL”) and PSE Technology Corporation (“PSE-TW”). In addition PAL has three wholly-owned subsidiaries, PSE Technology (Shandong) Corporation (“PSE-SD”) and Pericom Technology Yangzhou Corporation (“PSC-YZ”) for the Jinan, China and Yangzhou, China operations, respectively, and Pericom Technology Inc. (“PTI”). PTI became a wholly-owned subsidiary in the first quarter of fiscal 2011 (See Note 6 of Notes to Consolidated Financial Statements in this Form 10-K for further details). PSE-TW was formerly known as the SaRonix-eCERA Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

On March 28, 2010, the Company completed the merger of our two wholly owned subsidiaries, PSE-TW and PTL, with PSE-TW as the surviving entity. As a result of the change in legal structure, we determined that we would be able to utilize certain deferred tax assets and our valuation allowance was reduced accordingly. In accordance with the guidance for a change in reporting entity, this change has been retrospectively applied to all prior periods presented. As substantially all of the deferred tax assets arose prior to the periods being presented, the impact of the reduction in valuation allowance was an increase to our deferred tax assets of approximately $256,000 for all periods presented as well as an increase to our opening retained earnings.

The Company has significant operations in the PRC, where certain political, economic and currency restrictions may apply. Insofar as can be reasonably determined, the effect of foreign exchange restrictions upon the consolidated financial position and results of the Company are not material.

FISCAL PERIOD

FISCAL PERIOD — For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of June. The year ended July 3, 2010 contains 53 weeks, whereas all other fiscal years presented herein include 52 weeks.

CASH EQUIVALENTS

CASH EQUIVALENTS — The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value.

SHORT-TERM AND LONG-TERM INVESTMENTS IN MARKETABLE SECURITIES

SHORT-TERM AND LONG-TERM INVESTMENTS IN MARKETABLE SECURITIES — The Company’s policy is to invest in instruments with investment grade credit ratings. The Company classifies its short-term investments as “available-for-sale” securities and the Company bases the cost of securities sold using the specific identification method. The Company accounts for unrealized gains and losses on its available-for-sale securities as a separate component of shareholders’ equity in the consolidated balance sheets in the period in which the gain or loss occurs. The Company classifies its available-for-sale securities as current or noncurrent based on each security’s attributes. At June 30, 2012 and July 2, 2011, investments, and any difference between the fair market value and the underlying cost of such investments, consisted of the following:

Available-for-Sale Securities:

	As of June 30, 2012
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,344	$	—	$	—		$	—		$	10,344
US Treasury securities		3,639		—		(5	)		(5	)		3,634
National government and agency securities		6,582		167		—			167			6,749
State and municipal bond obligations		1,772		1		(1	)		—			1,772
Corporate bonds and notes		61,374		461		(197	)		264			61,638
Asset backed securities		10,148		19		(86	)		(67	)		10,081
Mortgage backed securities		9,313		98		(77	)		21			9,334
Total	$	103,172	$	746	$	(366	)	$	380		$	103,552

	As of July 2, 2011
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,740	$	—	$	—		$	—		$	10,740
US Treasury securities		600		2		—			2			602
National government and agency securities		9,065		128		(7	)		121			9,186
State and municipal bond obligations		1,250		8		—			8			1,258
Corporate bonds and notes		53,346		458		(105	)		353			53,699
Asset backed securities		11,381		32		(75	)		(43	)		11,338
Mortgage backed securities		10,767		41		(83	)		(42	)		10,725
Total	$	97,149	$	669	$	(270	)	$	399		$	97,548

The following tables show the gross unrealized losses and fair values of the Company’s investments that have unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2012 and July 2, 2011:

	Continuous Unrealized Losses at June 30, 2012
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	3,434	$	5	$	—	$	—	$	3,434	$	5
National government and agency securities		327		—		—		—		327		—
State and municipal bond obligations		1,033		1		—		—		1,033		1
Corporate bonds and notes		12,117		85		3,782		112		15,899		197
Asset backed securities		1,784		15		1,595		71		3,379		86
Mortgage backed securities		659		—		403		77		1,062		77
	$	19,354	$	106	$	5,780	$	260	$	25,134	$	366

	Continuous Unrealized Losses at July 2, 2011
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
National government and agency securities		2,254		7		—		—		2,254		7
State and municipal bond obligations		—		—		—		—		—		—
Corporate bonds and notes		12,765		103		251		2		13,016		105
Asset backed securities		4,867		64		149		11		5,016		75
Mortgage backed securities		3,407		10		336		73		3,743		83
	$	23,293	$	184	$	736	$	86	$	24,029	$	270

The unrealized losses are of a temporary nature due to the Company’s intent and ability to hold the investments until maturity or until the cost is recoverable. The unrealized losses are primarily due to fluctuations in market interest rates. The Company reports unrealized gains and losses on its “available-for-sale” securities in accumulated other comprehensive income, net of tax, in shareholders’ equity.

The Company records gains or losses realized on sales of available-for-sale securities in interest and other income on its consolidated income statement. The cost of securities sold is based on the specific identification of the security and its amortized cost. In fiscal 2012, 2011 and 2010 realized gains on available-for-sale securities were $673,000, $1.9 million and $2.3 million, respectively.

The following table lists the fair value of the Company’s short- and long-term investments by length of time to maturity as of June 30, 2012 and July 2, 2011:

(In thousands)	June 30, 2012		July 2, 2011
One year or less	$	21,254	$	10,316
Between one and three years		52,106		37,983
Greater than three years		22,084		25,021
Multiple Dates		8,108		24,228
	$	103,552	$	97,548

Securities with maturities over multiple dates are mortgage-backed securities (MBS) or asset-backed securities (ABS) featuring periodic principle paydowns through 2041.

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS — The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities and/or variable interest rates. Available-for-sale investments are reported at their fair value based on quoted market prices. A further discussion of the fair value of financial instruments is detailed in Note 18 to the Consolidated Financial Statements contained in this report on Form 10-K.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company computes its allowance for doubtful accounts using a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to the Company, the Company records a specific allowance against amounts due to the Company, reducing the net recognized receivable to the amount the Company reasonably believes it will collect. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and its historical experience.

INVENTORIES

INVENTORIES — For IC and certain FCP products, the Company records inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. The carrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast of demand over a specific future period. The semiconductor markets that the Company serves are volatile and actual results may vary from forecast or other assumptions, potentially affecting the Company’s assessment of excess and obsolete inventory, resulting in material effects on gross margin.

The inventories of the remainder of the FCP products are recorded at the lower of weighted-average cost, which approximates actual cost, or market value. Weighted average cost is comprised of average manufacturing costs weighted by the volume produced in each production run. Market value is defined as the net realizable value for finished goods, and replacement cost for raw materials and work in process.

Raw material inventory is considered slow moving and is fully reserved if it has not moved in 365 days. For assembled devices, the inventory is disaggregated by part number. The quantities on hand in each part number category are compared to the quantity that was shipped in the previous twelve months, the quantity in backlog and to the quantity expected to ship in the next twelve months. A reserve is recorded to the extent the value of each quantity on hand is in excess of the lesser of the three comparisons. The Company also periodically reviews inventory for obsolescence beyond the established formulaic tests. The Company believes this method of evaluating inventory fairly represents market conditions.

The Company considers the reserved material to be available for sale. The reserved inventory is not revalued should market conditions change or if a market develops for the obsolete inventory. In the past, the Company has sold obsolete inventory that was previously fully reserved.

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT — The Company states its property, plant and equipment at cost. Cost includes purchase cost, applicable taxes, freight, installation costs and interest incurred in the acquisition of any asset that requires a period of time to make it ready for use. We compute depreciation and amortization using the straight-line method over estimated useful lives of three to eight years except for buildings, which we depreciate using the straight-line method over estimated useful lives of twenty to forty years. We depreciate leasehold improvements over the shorter of the lease term or the improvement’s estimated useful life. In addition, we capitalize the cost of major replacements, improvements and betterments, while we expense normal maintenance and repair.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES — The Company holds or has held ownership interests in various investees. Our ownership in these affiliates has varied from 20% to approximately 49%. We classify these investments as investments in unconsolidated affiliates in our consolidated balance sheets. The Company accounts for long-term investments in companies in which it has an ownership share larger than 20% and in which it has significant influence over the activities of the investee using the equity method. We recognize our proportionate share of each investee’s income or loss in the period in which the investee reports the income or loss. We eliminate all intercompany transactions in accounting for our equity method investments.

OTHER ASSETS

OTHER ASSETS — The Company’s other assets classification includes investments in privately held companies in which we have less than a 20% interest, land use rights and deposits. The Company reports its investments in privately held companies at the lower of cost or market. The Company’s management reviews the investment in these companies for losses that may be other than temporary on a quarterly basis. Should management determine that such an impairment exists, the Company will reduce the value of the Company’s investment in the period in which management discovers the impairment and charge the impairment to the consolidated statement of operations. The Company’s management performed such an evaluation as of June 30, 2012 and determined that no impairment existed. Two of the Company’s subsidiaries, PSE-SD and PTI, hold land use rights that were acquired from the local Chinese government which entitle the Company to use the land for 15 to 50 years. The cost of the land use rights is recorded as a component of other assets and is being depreciated over 15 to 50 years, the useful life of the rights.

LONG-LIVED ASSETS

LONG-LIVED ASSETS — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, the Company will recognize an impairment loss as the amount of the difference between carrying value and fair value as determined by discounted cash flows.

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS — Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired and liabilities assumed. The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least on an annual basis in the fourth quarter of the fiscal year or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable from its estimated future cash flow. In accordance with the guidance on Accounting Standards Codification (″ASC″) 350, Intangibles-Goodwill and Other, a two-step test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In the first step, the fair value of each reporting unit is compared to its carrying value to determine if the goodwill is impaired. In general, the Company’s reporting units are one step below the segment level. The fair value of the reporting units is determined based on a weighting of income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, the Company estimates the fair value based on market multiples of revenue or earnings for comparable companies. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions and determination of appropriate market comparables. The Company bases these fair value estimates on reasonable assumptions but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, the Company makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each reporting unit.

If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired and no further testing is required. If the carrying value of the net assets assigned to the reporting unit was to exceed its fair value, then the second step is performed in order to determine the implied fair value of the reporting unit’s goodwill, and an impairment loss is recorded for an amount equal to the difference between the implied fair value and the carrying value of the goodwill. The goodwill impairment analysis did not result in an impairment charge for the years presented.

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS — Effective July 4, 2010, the Company adopted ASC 805, Business Combinations (“ASC 805”). ASC 805 updated guidance related to business combinations. The updated guidance establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The updated standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The updated standard also provides guidance for recognizing changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals that result from a business combination transaction as adjustments to income tax expense. The updated guidance had a material impact on the Company’s consolidated financial statements during the year ended July 2, 2011. In fiscal 2011, the Company completed the acquisition of PTI. Under the updated guidance, the Company expensed the transaction costs of approximately $0.6 million associated with the PTI acquisition, while under the prior accounting standards such costs would have been capitalized. In addition, the Company recognized the fair value of a contingent earn-out liability in connection with the PTI acquisition of $4.1 million, and subsequently recognized an expense of $0.7 million related to the change in the estimated fair value of contingent earn-out liability, while under the prior accounting standards the earn-out would not have been recognized as part of the consideration transferred until the contingency was resolved. Further, the Company acquired in-process research and development of approximately $3.3 million in connection with the PTI acquisition which has been capitalized in accordance with the updated guidance, whereas under prior authoritative guidance the amount would have been expensed immediately. Therefore, the adoption of the updated guidance related to business combinations has had and likely will continue to have a material impact on our future consolidated financial statements.

INCOME TAXES

INCOME TAXES — The Company accounts for income taxes following the Financial Accounting Standards Board’s statements and related interpretations, which require an asset and liability approach to recording deferred taxes. We record a valuation allowance to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company’s income tax calculations are based on application of the respective U.S. federal, state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based on its estimates of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Operations.

FOREIGN CURRENCY TRANSLATION

FOREIGN CURRENCY TRANSLATION — The functional currency of the Company’s foreign subsidiaries is the local currency. In consolidation, the Company translates assets and liabilities at exchange rates in effect at the balance sheet date. The Company translates revenue and expense accounts at average exchange rates during the period in which the transaction takes place. Net gains or (losses) from foreign currency translation of assets and liabilities of $635,000 and $7.5 million in fiscal 2012 and 2011, respectively, are included in the cumulative translation adjustment component of accumulated other comprehensive income, net of tax, a component of shareholders’ equity. Net gains or (losses) arising from transactions denominated in currencies other than the functional currency were $334,000, $(321,000) and $(197,000) in fiscal 2012, 2011 and 2010 respectively, and are included in interest and other income, net.

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION — The Company recognizes employee share-based compensation through measurement at grant date based on the fair value of the award, and the fair value is recognized as an expense over the employee’s requisite service period. See Note 16 for further discussion of share-based compensation.

REVENUE RECOGNITION

REVENUE RECOGNITION — The Company recognizes revenue from the sale of its products when:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred;

• The sales price is fixed or determinable; and

• Collectability is reasonably assured.

Generally, the Company meets these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, the Company estimates and records provisions for future returns and other charges against revenue at the time of shipment consistent with the terms of sale.

The Company sells products to large, domestic distributors at the price listed in its price book for that distributor. At the time of sale the Company records a sales reserve for ship from stock and debits (“SSD”s), stock rotations, return material authorizations (“RMA”s), authorized price protection programs, and any special programs approved by management. The Company offsets the sales reserve against revenues, producing the net revenue amount reported in the consolidated statements of operations.

The market price for the Company’s products can be significantly different from the book price at which the Company sold the product to the distributor. When the market price, as compared to the Company’s original book price, of a particular distributor’s sales opportunity to their own customer would result in low or negative margins for our distributor, the Company negotiates a ship from stock and debit with the distributor. Management analyzes the Company’s SSD history to develop current SSD rates that form the basis of the SSD sales reserve recorded each period. The Company obtains the historical SSD rates from its internal records.

The Company’s distribution agreements provide for semi-annual stock rotation privileges of typically 10% of net sales for the previous six-month period. The contractual stock rotation applies only to shipments at the Company’s listed book price. Asian distributors typically buy the Company’s product at less than standard price and therefore are not entitled to the 10% stock rotation privilege. In order to provide for routine inventory refreshing, for the Company’s benefit as well as theirs, the Company grants Asian distributors stock rotation privileges between 1% and 10% even though the Company is not contractually obligated to do so. Each month the Company adjusts the sales reserve for the estimated stock rotation privilege anticipated to be utilized by the distributors.

From time to time, customers may request to return parts for various reasons including the customers’ belief that the parts are not performing to specification. Many such return requests are the result of customers incorrectly using the parts, not because the parts are defective. Management reviews these requests and, if approved, the Company prepares a RMA. The Company is only obligated to accept defective parts returns. To accommodate the Company’s customers, the Company may approve particular return requests, even though it is not obligated to do so. Each month the Company records a sales reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns, which are the result of a part not meeting specifications or being non-functional, have been immaterial and the Company can frequently resell returned parts to other customers for use in other applications. The Company monitors and assesses RMA activity and overall materiality to assess whether a general warranty reserve has become appropriate.

The Company grants price protection solely at the discretion of Pericom management. The purpose of price protection is to reduce the distributor’s cost of inventory as market prices fall thus reducing SSD rates. Pericom sales management prepares price protection proposals for individual products located at individual distributors. Pericom general management reviews and approves or disapproves these proposals. If a particular price protection arrangement is approved, the Company estimates the dollar impact based on the sales price reduction per unit for the products approved and the number of units of those products in that distributor’s inventory. The Company records a sales reserve in that period for the estimated amount at the time revenue is recognized.

At the discretion of Pericom management, the Company may offer rebates on specific products sold to specific end customers. The purpose of the rebates is to allow for pricing adjustments for large programs without affecting the pricing the Company charges its distributor customers. The Company records the rebate at the time of shipment.

Pericom typically grants payment terms of between 30 and 60 days to its customers. The Company’s customers generally pay within those terms. The Company grants relatively few customers sales terms that include cash discounts. Distributors are invoiced for shipments at listed book price. When the distributors pay the Company’s invoices, they may claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, the Company processes the requests against the prior authorizations and reduces the reserve previously established for that customer.

The revenue the Company records for sales to its distributors is net of estimated provisions for these programs. When determining this net revenue, the Company must make significant judgments and estimates. The Company bases its estimates on historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and the Company’s estimates. The Company’s financial condition and operating results depend on its ability to make reliable estimates and Pericom believes that such estimates are reasonable.

PRODUCT WARRANTY

PRODUCT WARRANTY — The Company offers a standard one-year product replacement warranty. In the past, the Company has not had to accrue for a general warranty reserve, but assesses the level and materiality of RMAs and determines whether it is appropriate to accrue for estimated returns of defective products at the time revenue is recognized. On occasion, management may determine to accept product returns beyond the standard one-year warranty period. In those instances, the Company accrues for the estimated cost at the time management decides to accept the return. Because of the Company’s standardized manufacturing processes and product testing procedures, returns of defective product are infrequent and the quantities have not been significant. Accordingly, historical warranty costs have not been material.

SHIPPING COSTS

SHIPPING COSTS — We charge shipping costs to cost of revenues as incurred.

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK — The Company primarily sells its products to a relatively small number of companies and generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains allowances for estimated bad debt losses. The Company also purchases substantially all of its wafers from three suppliers and purchases other manufacturing services from a relatively small number of suppliers.

The following table indicates the percentage of our net revenues and accounts receivable in excess of 10% with any single customer:

		Percentage of
Fiscal Year Ended:		Net Revenues			Trade Accounts Receivable
June 30, 2012	Customer A		18	%		26	%
	Customer B		14			6
	All others		68			68
			100	%		100	%
July 2, 2011	Customer A		18	%		16	%
	Customer B		15			12
	All others		67			72
			100	%		100	%
July 3, 2010	Customer A		22	%		26	%
	Customer B		14			9
	All others		64			65
			100	%		100	%

The Company maintains cash, cash equivalents and short- and long-term investments with various high credit quality financial institutions. The Company has designed its investment policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that manage its investments. The Company is exposed to credit risk in the event of default by the financial institutions or issuers of securities to the extent of the amounts reported in the consolidated balance sheets.

RECENTLY ISSUED ACCOUNTING STANDARDS

RECENTLY ISSUED ACCOUNTING STANDARDS — In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which requires comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income, rather than in a footnote or as part of a statement of changes to shareholders equity. The amendment does not change what items are reported in other comprehensive income or the requirement to report reclassification of items from other comprehensive income to net income. This standard will be effective for the Company’s fiscal year beginning July 1, 2012 with retrospective application required. As this standard impacts presentation requirements only, the adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350) — Testing Goodwill for Impairment”, which provides updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for the Company’s fiscal year beginning July 1, 2012, with early adoption permitted. The Company is currently evaluating this guidance, but it is not expected that the adoption will have a material effect on the consolidated financial statements.

EARNINGS PER SHARE

EARNINGS (LOSS) PER SHARE — The Company bases its basic earnings (loss) per share upon the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Basic and diluted earnings (loss) per share for each of the three years in the period ended June 30, 2012 is as follows:

	Fiscal Year Ended
(In thousands, except for per share data)	June 30, 2012			July 2, 2011		July 3, 2010
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463	$	10,794
Computation of common shares outstanding — basic earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Basic earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.54	$	0.42
Computation of common shares outstanding — diluted earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Dilutive shares using the treasury stock method		—			331		305
Shares used in computing diluted earnings (loss) per share		24,094			25,254		25,717
Diluted earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.53	$	0.42

As the Company incurred a loss for the year ended June 30, 2012, diluted loss per share is the same as basic loss per share since the addition of any contingently issuable share would be anti-dilutive. Options to purchase 2.5 million shares of common stock, and restricted stock units of 504,000 shares were outstanding during the year ended June 30, 2012 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.4 million shares of common stock, and restricted stock units of 43,000 shares were outstanding during the year ended July 2, 2011 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.8 million shares of common stock, and restricted stock units of 76,000 shares were outstanding during the year ended July 3, 2010 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive.

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Business and Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Available for Sale Securities

Available-for-Sale Securities:

	As of June 30, 2012
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,344	$	—	$	—		$	—		$	10,344
US Treasury securities		3,639		—		(5	)		(5	)		3,634
National government and agency securities		6,582		167		—			167			6,749
State and municipal bond obligations		1,772		1		(1	)		—			1,772
Corporate bonds and notes		61,374		461		(197	)		264			61,638
Asset backed securities		10,148		19		(86	)		(67	)		10,081
Mortgage backed securities		9,313		98		(77	)		21			9,334
Total	$	103,172	$	746	$	(366	)	$	380		$	103,552

	As of July 2, 2011
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,740	$	—	$	—		$	—		$	10,740
US Treasury securities		600		2		—			2			602
National government and agency securities		9,065		128		(7	)		121			9,186
State and municipal bond obligations		1,250		8		—			8			1,258
Corporate bonds and notes		53,346		458		(105	)		353			53,699
Asset backed securities		11,381		32		(75	)		(43	)		11,338
Mortgage backed securities		10,767		41		(83	)		(42	)		10,725
Total	$	97,149	$	669	$	(270	)	$	399		$	97,548

The gross unrealized losses and fair market values of investments that have unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position

	Continuous Unrealized Losses at June 30, 2012
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	3,434	$	5	$	—	$	—	$	3,434	$	5
National government and agency securities		327		—		—		—		327		—
State and municipal bond obligations		1,033		1		—		—		1,033		1
Corporate bonds and notes		12,117		85		3,782		112		15,899		197
Asset backed securities		1,784		15		1,595		71		3,379		86
Mortgage backed securities		659		—		403		77		1,062		77
	$	19,354	$	106	$	5,780	$	260	$	25,134	$	366

	Continuous Unrealized Losses at July 2, 2011
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
National government and agency securities		2,254		7		—		—		2,254		7
State and municipal bond obligations		—		—		—		—		—		—
Corporate bonds and notes		12,765		103		251		2		13,016		105
Asset backed securities		4,867		64		149		11		5,016		75
Mortgage backed securities		3,407		10		336		73		3,743		83
	$	23,293	$	184	$	736	$	86	$	24,029	$	270

The fair market value of the Company’s short- and long-term investments by length of time to maturity

(In thousands)	June 30, 2012		July 2, 2011
One year or less	$	21,254	$	10,316
Between one and three years		52,106		37,983
Greater than three years		22,084		25,021
Multiple Dates		8,108		24,228
	$	103,552	$	97,54

The percentage of our net revenues and accounts receivable in excess of 10% with any single customer

		Percentage of
Fiscal Year Ended:		Net Revenues			Trade Accounts Receivable
June 30, 2012	Customer A		18	%		26	%
	Customer B		14			6
	All others		68			68
			100	%		100	%
July 2, 2011	Customer A		18	%		16	%
	Customer B		15			12
	All others		67			72
			100	%		100	%
July 3, 2010	Customer A		22	%		26	%
	Customer B		14			9
	All others		64			65
			100	%		100	%

Basic and diluted earnings per share

	Fiscal Year Ended
(In thousands, except for per share data)	June 30, 2012			July 2, 2011		July 3, 2010
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463	$	10,794
Computation of common shares outstanding — basic earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Basic earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.54	$	0.42
Computation of common shares outstanding — diluted earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Dilutive shares using the treasury stock method		—			331		305
Shares used in computing diluted earnings (loss) per share		24,094			25,254		25,717
Diluted earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.53	$	0.42

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Other Receivables

12 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Other Receivables

2. OTHER RECEIVABLES

Other receivables consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Interest receivable	$	832	$	597
VAT and other tax receivables		1,928		3,226
Government subsidy receivable		823		1,546
Other accounts receivable		91		490
	$	3,674	$	5,859

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Other Receivables (Tables)

12 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Other receivables

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Interest receivable	$	832	$	597
VAT and other tax receivables		1,928		3,226
Government subsidy receivable		823		1,546
Other accounts receivable		91		490
	$	3,674	$	5,859

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Shareholders Equity and Share-Based Compensation (Details 5) (Stock purchase plan [Member])	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Stock purchase plan [Member]
Assumption used to value stock compensation under stock purchase plan
Expected life	6 months
Expected life, Minimum		3 months	4 months 15 days
Expected life, Maximum		6 months	13 months 15 days
Risk-free interest rate	0.10%
Risk-free interest rate, Minimum		0.10%	0.17%
Risk-free interest rate, Maximum		0.16%	0.63%
Volatility range, Minimum	43.00%	39.00%	50.00%
Volatility range, Maximum	64.00%	58.00%	70.00%
Dividend yield	0.00%	0.00%	0.00%

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Commitments and Contingencies (Tables)

12 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Future minimum commitments

	Fiscal Year
(in thousands)	2013		2014		2015		2016 and beyond		Total
Short-term debt	$	1,364	$	—	$	—	$	—	$	1,364
Operating lease payments		1,546		824		196		8		2,574
Capital equipment purchase commitments		969		—		—		—		969
Yangzhou capital injection		7,000		8,000		—		—		15,000
Total	$	10,879	$	8,824	$	196	$	8	$	19,907

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Inventories
Finished goods	$ 5,252	$ 5,905
Work-in-process	3,981	4,701
Raw materials	7,371	11,336
Inventories	$ 16,604	$ 21,942

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Debt (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011
Debt (Textual)
Interest rate on loan		1.30%
Loan maturity period, Minimum	24 days
Loan maturity period, Maximum	84 days
PSE-TW [Member]
Debt (Textual)
Short-term borrowings	1.4

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Current assets:
Cash and cash equivalents	$ 24,283	$ 30,023
Restricted cash		2,947
Short-term investments in marketable securities	79,924	76,266
Accounts receivable:
Trade (net of reserves and allowances of $2,566 and $1,947)	24,010	28,185
Other receivables	3,674	5,859
Inventories	16,604	21,942
Prepaid expenses and other current assets	2,425	1,929
Deferred income taxes	1,549	2,564
Total current assets	152,469	169,715
Property, plant and equipment – net	56,102	60,859
Investments in unconsolidated affiliates	2,474	2,596
Deferred income taxes – non current	2,447	4,324
Long-term investments in marketable securities	23,628	21,282
Goodwill	16,797	16,669
Intangible assets (net of accumulated amortization of $6,629 and $3,868)	12,831	15,690
Other assets	9,058	9,881
Total assets	275,806	301,016
Current liabilities:
Short-term debt	1,364	8,671
Accounts payable	14,860	12,221
Accrued liabilities	8,608	19,645
Total current liabilities	24,832	40,537
Industrial development subsidy	8,577	9,075
Deferred tax liabilities	6,191	6,605
Other long-term liabilities	2,571	2,074
Total liabilities	42,171	58,291
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock and paid in capital - no par value, 60,000,000 shares authorized; shares issued and outstanding: at June 30, 2012, 23,565,000; at July 2, 2011, 24,716,000	123,362	130,960
Retained earnings	100,694	102,762
Accumulated other comprehensive income, net of tax	9,579	9,003
Total shareholders’ equity	233,635	242,725
Total liabilities and shareholders' equity	$ 275,806	$ 301,016

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Quarterly Financial Data (Tables)

12 Months Ended

Jun. 30, 2012

Quarterly Financial Information Disclosure [Abstract]

Summary of quarterly operating results and share data

	For the Quarter Ended
	June 30, 2012			March 31, 2012			Dec 31, 2011			Oct 1, 2011
Net revenues	$	37,944		$	33,378		$	30,481		$	35,332
Cost of revenues		24,396			21,789			19,504			22,795
Gross profit		13,548			11,589			10,977			12,537
Operating expenses:
Research and development		5,460			5,669			5,277			5,316
Selling, general and administrative		8,135			7,114			7,060			7,339
Total operating expenses		13,595			12,783			12,337			12,655
Income (loss) from operations		(47	)		(1,194	)		(1,360	)		(118	)
Interest and other income, net		1,059			847			638			1,070
Income (loss) before income tax expense		1,012			(347	)		(722	)		952
Income tax expense (benefit)		2,974			(76	)		(335	)		534
Net income (loss) from consolidated companies		(1,962	)		(271	)		(387	)		418
Equity in net income of unconsolidated affiliates		51			4			52			27
Net income (loss)	$	(1,911	)	$	(267	)	$	(335	)	$	445
Basic income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Diluted income (loss) per share	$	(0.08	)	$	(0.01	)	$	(0.01	)	$	0.02
Shares used in computing basic income (loss) per share		23,611			24,030			24,244			24,491
Shares used in computing diluted income (loss) per share		23,611			24,030			24,244			24,583

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011			Jan 1, 2011		Oct 2, 2010
Net revenues	$	43,342	$	39,555		$	40,671	$	42,775
Cost of revenues		28,173		27,190			27,058		28,240
Gross profit		15,169		12,365			13,613		14,535
Operating expenses:
Research and development		5,535		5,238			5,060		4,397
Selling, general and administrative		7,487		7,231			6,986		7,742
Total operating expenses		13,022		12,469			12,046		12,139
Income (loss) from operations		2,147		(104	)		1,567		2,396
Interest and other income, net		695		1,132			614		11,936
Income before income tax expense		2,842		1,028			2,181		14,332
Income tax expense		1,281		514			446		5,378

	For the Quarter Ended
	July 2, 2011		Apr 2, 2011		Jan 1, 2011		Oct 2, 2010
Net income from consolidated companies		1,561		514		1,735		8,954
Equity in net income of unconsolidated affiliates		48		17		77		556
Net income	$	1,609	$	531	$	1,812	$	9,510
Basic income per share	$	0.06	$	0.02	$	0.07	$	0.38
Diluted income per share	$	0.06	$	0.02	$	0.07	$	0.38
Shares used in computing basic income per share		24,917		24,993		24,894		24,890
Shares used in computing diluted income per share		25,140		25,341		25,270		25,263

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Employee Benefit Plan (Details) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Compensation and Retirement (Textual)
Employer-matching contributions, percentage

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (2,068)	$ 13,463	$ 10,822
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	11,898	11,000	7,958
Stock based compensation	3,736	4,286	4,049
Tax benefit resulting from stock option transactions	512	782	291
Excess tax benefit resulting from stock option transactions	(4)	(84)	(97)
Write-off of notes receivable	856
Gain on sale of investments	(673)	(1,922)	(2,348)
Write-off of property and equipment	354	75	152
Gain on previously held shares in PTI		(11,004)
Equity in net income of unconsolidated affiliates	(134)	(700)	(2,430)
Deferred taxes	1,753	4,020	344
Changes in assets and liabilities net of effects of entities acquired:
Accounts receivable	6,289	2,204	(2,108)
Inventories	5,008	6,103	(7,014)
Prepaid expenses and other current assets	(883)	285	(2,183)
Other assets	676	(261)	(744)
Accounts payable	2,688	(4,841)	4,757
Accrued liabilities	(2,735)	(1,610)	(5,731)
Other long-term liabilities	453	1,850	2,719
Net cash provided by operating activities	27,726	23,646	8,437
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property plant and equipment	(4,324)	(11,715)	(10,353)
Acquisition of PTI, net of cash acquired	(8,077)	(17,514)
Purchase of available-for-sale investments	(97,726)	(220,822)	(120,722)
Maturities and sales of available-for-sale investments	91,981	224,111	120,353
Cash paid for noncontrolling interest acquisition			(1,223)
Change in restricted cash balance	2,947	(2,947)	3,200
Net cash used in investing activities	(15,199)	(28,887)	(8,745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance under stock plans	918	1,528	1,978
Excess tax benefit resulting from stock option transactions	4	84	97
Paydowns on mortgage financing			(1,725)
Proceeds from short-term debt	10,744	8,003
Payments on short-term debt	(17,635)
Repurchase of common stock	(11,627)	(5,448)	(8,679)
Net cash provided by (used in) financing activities	(17,596)	4,167	(8,329)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(671)	1,602	811
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(5,740)	528	(7,826)
CASH AND CASH EQUIVALENTS:
Beginning of year	30,023	29,495	37,321
End of year	24,283	30,023	29,495
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	1,722	4,361	2,166
Cash paid during the period for interest	75	77	30
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Initial contingent earn-out liability		4,087
Accrued acquisition-related liabilities		$ 3,541

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Income Taxes (Details 3) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Reconciliation of beginning and ending amount of unrecognized tax benefit
Beginning balance	$ (755,000)	$ (545,000)	$ (756,000)
Gross decreases - prior period tax positions			3,000
Gross increases - prior period tax positions	(515,000)	(152,000)	(27,000)
Gross increases - current-period tax positions	(475,000)	(188,000)	(91,000)
Reductions as a result of a lapse of statute of limitations	138,000	130,000	326,000
Balance as of June 30, 2012	$ (1,607,000)	$ (755,000)	$ (545,000)

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Business Combination (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Aug. 31, 2010
Fair Value of Consideration Transferred
Cash consideration	$ 30,236	$ 30,200
Acquisition date fair value of contingent earn-out consideration	4,087
Acquisition date fair value of previously held interest in PTI	23,672
Total	$ 57,995

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Subsequent Event (Details) (USD $) In Millions, unless otherwise specified	Aug. 09, 2012
Subsequent Events (Textual)
Purchase of a building, agreement	$ 7.6

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Other Assets (Tables)

12 Months Ended

Jun. 30, 2012

Other Assets [Abstract]

Other assets

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Land use rights	$	6,890	$	6,938
Investments in privately held companies		1,303		1,354
Deposits		263		239
Other		602		1,350
Total	$	9,058	$	9,881

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Investments in Unconsolidated Affiliates (Details Textual) (USD $)	3 Months Ended								12 Months Ended					12 Months Ended				12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jun. 30, 2012 Maximum [Member]	Jun. 30, 2012 Minimum [Member]	Jul. 02, 2011 PTI [Member]	Jul. 03, 2010 PTI [Member]	Jul. 03, 2010 PTI [Member]	Aug. 31, 2010 PTI [Member]	Jun. 30, 2012 JCP [Member]
Investment In Unconsolidated Affiliates (Textual)
Ownership interest												49.00%	20.00%				42.04%
Cost of Goods and Services Sold, Total														$ 383,000	$ 1,100,000
Selling, general and administrative	8,135,000	7,114,000	7,060,000	7,339,000	7,487,000	7,231,000	6,986,000	7,742,000	29,648,000	29,447,000	26,478,000					65,000
Equity interest																		49.00%
Noncontrolling Interest, Description									is more than 20%
Percentage of net earnings									50% or less
Amount of consolidated retained earnings of the Company represented by undistributed earnings of 50% or less	$ 3,600,000								$ 3,600,000

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Shareholders Equity and Share-Based Compensation

12 Months Ended

Jun. 30, 2012

Shareholders Equity and Share Based Compensation Abstract

Shareholders Equity and Share-Based Compensation

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

PREFERRED STOCK

The Company’s shareholders have authorized the Board of Directors to issue 5,000,000 shares of preferred stock from time to time in one or more series and to fix the rights, privileges and restrictions of each series. As of June 30, 2012, the Company has issued no shares of preferred stock.

STOCK OPTION PLANS

At June 30, 2012 the Company had four stock option plans and one employee stock purchase plan, including the 1995 Stock Option Plan, 2001 Stock Option Plan, SaRonix Acquisition Stock Option Plan, 2004 Stock Incentive Plan and the 2010 Employee Stock Purchase Plan (“ESPP”). The Company’s aggregate compensation cost due to option and restricted stock unit grants and the ESPP for the twelve months ended June 30, 2012 totaled $3.7 million, as compared with $4.3 million and $4.0 million for fiscal 2011 and 2010, respectively. The Company recognized $1.2 million, $1.4 million, and $1.2 million in income tax benefit in the consolidated statements of operations for fiscal 2012, 2011 and 2010, respectively, related to the Company’s share-based compensation arrangements. The net impact of share-based compensation for the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010 was a reduction in net income of $2.5 million, $2.9 million and $2.9 million, respectively, or a reduction of $0.10, $0.11 and $0.11 per diluted share, respectively.

Under the Company’s 2004, 2001, and 1995 stock option plans and the SaRonix Acquisition Stock Option plan, the Company has reserved 5.4 million shares of common stock as of June 30, 2012 for issuance to employees, officers, directors, independent contractors and consultants of the Company in the form of incentive and nonqualified stock options and restricted stock units.

The Company may grant options at the fair value on grant date for incentive stock options and nonqualified stock options. Options vest over periods of generally 48 months as determined by the Board of Directors. Options granted under the Plans expire 10 years from the grant date.

The Company estimates the fair value of each employee option on the date of grant using the Black-Scholes option valuation model and expenses that value as compensation using a straight-line method over the option’s vesting period, which corresponds to the requisite employee service period. The Company estimates expected stock price volatility based on actual historical volatility for periods that the Company believes represent predictors of future volatility. The Company uses historical data to estimate option exercises, expected option holding periods and option forfeitures. The Company bases the risk-free interest rate on the U.S. Treasury note yield for periods equal to the expected term of the option.

The following table lists the assumptions the Company used to value stock options:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Expected life	5.5 years			5.5 years			5.4–5.5 years
Risk-free interest rate		2.46	%		2.46	%		2.45–2.60	%
Volatility range		54	%		53–54	%		53%–54	%
Dividend yield		0.00	%		0.00	%		0.00	%

The following table summarizes the Company’s stock option plans as of June 27, 2009 and changes during the three fiscal periods ended June 30, 2012:

	Outstanding Options
Options	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)					(in thousands)
Options outstanding at June 27, 2009		3,755			14.00	$	427
Options granted (weighted average grant date fair value of $5.11)		470			10.24
Options exercised		(105	)		8.72
Options forfeited or expired		(643	)		23.71
Options outstanding at July 3, 2010		3,477		$	11.85	$	872
Options granted (weighted average grant date fair value of $4.51)		183			8.87
Options exercised		(67	)		8.33
Options forfeited or expired		(619	)		15.97
Options outstanding at July 2, 2011		2,974		$	10.89	$	645
Options granted (weighted average grant date fair value of $3.89)		142			7.65
Options exercised		(21	)		7.77
Options forfeited or expired		(642	)		12.37
Options outstanding at June 30, 2012		2,453		$	10.34	$	912

At June 30, 2012, 2,066,000 shares were available for future grants under the option plans. The aggregate intrinsic value of options exercised during the year ended June 30, 2012 was $8,000. The status of options vested and expected to vest and options that are currently exercisable as of June 30, 2012 is as follows:

	Options Vested and Expected to Vest		Options Currently Exercisable
Shares (millions)		2.4		2.1
Aggregate intrinsic value (thousand $)	$	888	$	683
Weighted average contractual term (years)		5.1		4.5
Weighted average exercise price	$	10.36	$	10.59

The Company has unamortized share-based compensation expense related to options of $1.4 million, which will be amortized to expense over a weighted average period of 2.1 years.

Additional information regarding options outstanding as of June 30, 2012 is as follows:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding as of June 30, 2012		Weighted Average Remaining Contractual Term (Years)		Weighted Average Exercise Price		Number Exercisable as of June 30, 2012		Weighted Average Exercise Price
$ 4.89 $ 8.03		501,969		5.48	$	7.72		364,151	$	7.76
8.10 8.70		497,840		4.18		8.48		415,323		8.46
8.71 10.01		534,488		5.87		9.70		406,579		9.64
10.15 12.16		494,359		4.41		10.91		461,888		10.88
13.33 18.10		424,512		5.65		15.77		417,256		15.78
$ 4.89 $18.10		2,453,168		5.12	$	10.34		2,065,197	$	10.59

Restricted Stock Units

Restricted stock units (“RSUs”) are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of 4 years and are expensed ratably on a straight-line basis over their respective vesting period net of estimated forfeitures. The fair value of RSUs granted pursuant to the Company’s 2004 Stock Incentive Plan is the product of the number of shares granted and the grant date fair value of our common stock. The following table summarizes the RSUs as of June 27, 2009 and changes during the three fiscal periods ended June 30, 2012:

	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Term		Aggregate Intrinsic Value
	(in thousands)					(years)		(in thousands)
RSUs outstanding at June 27, 2009		349		$	10.18		2.08	$	2,980
Awarded		303			10.52
Released		(39	)		12.76
Forfeited		(22	)		10.41
RSUs outstanding at July 3, 2010		591		$	10.18		1.66	$	5,403
Awarded		249			8.70
Released		(208	)		9.77
Forfeited		(40	)		9.92
RSUs outstanding at July 2, 2011		592		$	9.73		1.60	$	5,253
Awarded		156			7.78
Released		(203	)		9.91
Forfeited		(41	)		9.73
RSUs outstanding at June 30, 2012		504		$	9.06		1.42	$	4,535
RSUs vested and expected to vest after June 30, 2012		449		$	9.11		1.34	$	4,043

The Company has unamortized share-based compensation expense related to RSUs of $3.0 million, which will be amortized to expense over a weighted average period of 2.1 years.

2010 EMPLOYEE STOCK PURCHASE PLAN

The Company’s 2010 Employee Stock Purchase Plan (the “Stock Purchase Plan”) allows eligible employees of the Company to purchase shares of Common Stock through payroll deductions. The Company reserved 2.0 million shares of the Company’s Common Stock for issuance under the Stock Purchase Plan, of which 1.8 million remain available at June 30, 2012. The Stock Purchase Plan permits eligible employees to purchase Common Stock at a discount through payroll deductions during six-month purchase periods. The six-month periods come to an end on or about May 1 and November 1 and the purchases are then made. Participants in the Stock Purchase Plan may purchase stock at 85% of the lower of the stock’s fair market value on the first day and last day of the purchase period. The maximum number of shares of Common Stock that any employee may purchase under the Stock Purchase Plan during any offering period is 1,000 shares, and an employee may not accrue more than $10,000 for share purchases in any offering period. During fiscal year 2012, 2011 and 2010, the Company issued 109,000, 157,000 and 200,000 shares of common stock under this plan and the predecessor 2000 Stock Purchase Plan at weighted average prices of $6.96, $6.23 and $5.33, respectively. The weighted average grant date fair value of the fiscal 2012, 2011 and 2010 awards were $2.22, $2.36 and $3.39 per share, respectively.

The Company estimates the fair value of stock purchase rights granted under the Company’s Stock Purchase Plan on the date of grant using the Black-Scholes option valuation model. ASC Topic 718, Stock Based Compensation, states that a “lookback” pricing provision with a share limit should be considered a combination of stock and a call option. The valuation results for these elements have been combined to value the specific features of the stock purchase rights. The Company bases volatility on the expected volatility of the Company’s stock during the accrual period. The expected term is determined by the time from enrollment until purchase. The Company uses historical data to determine expected forfeitures and the U.S. Treasury yield for the risk-free interest rate for the expected term.

The following table lists the values of the assumptions the Company used to value stock compensation in the Stock Purchase Plan:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Expected life	6 months			3–6 months			4.5–13.5 months
Risk-free interest rate		0.10	%		0.10–0.16	%		0.17–0.63	%
Volatility range		43%–64	%		39%–58	%		50%–70	%
Dividend yield		0.00	%		0.00	%		0.00	%

The following table summarizes activity in the Company’s employee stock purchase plan during the fiscal year ended June 30, 2012:

	Shares			Weighted Average Purchase
Beginning Available		1,944,707
Purchases		(108,768	)	$	6.96
Ending Available		1,835,939

At June 30, 2012, the Company has $75,000 in unamortized share-based compensation related to its employee stock purchase plan. We estimate this expense will be amortized and recognized in the consolidated statements of operations over the next four months.

REPORTING SHARE-BASED COMPENSATION

The following table shows total share-based compensation expense classified by consolidated statement of operations reporting caption generated from the plans mentioned above:

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Cost of revenues	$	211	$	250	$	286
Research and development		1,434		1,536		1,506
Selling, general and administrative		2,091		2,500		2,257
Pre-tax stock-based compensation expense		3,736		4,286		4,049
Income tax effect		1,229		1,409		1,159
Net stock-based compensation expense	$	2,507	$	2,877	$	2,890

The amount of share-based compensation expense in inventory at June 30, 2012, July 2, 2011 and July 3, 2010 is immaterial.

Share-based compensation expense categorized by the type of award from which it arose is as follows for fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010:

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Stock option plans	$	3,492	$	3,972	$	3,376
Less income tax effect		1,229		1,409		1,159
Net stock option plan expense		2,263		2,563		2,217
Employee stock purchase plan		244		314		673
Less income tax effect		—		—		—
Net employee stock purchase plan expense		244		314		673
	$	2,507	$	2,877	$	2,890

STOCK REPURCHASE PLAN

On April 26, 2007, the Company’s Board of Directors authorized the repurchase of 2.0 million shares of our common stock, on April 29, 2008, the Board authorized the repurchase of an additional $30 million of common stock and on April 29, 2012, the Board authorized the repurchase of a further $25 million worth of common stock. The Company was authorized to repurchase the shares from time to time in the open market or private transactions, at the discretion of the Company’s management. During the year ended June 30, 2012, the Company repurchased 1,482,572 shares for an aggregate cost of $11.6 million. During the year ended July 2, 2011, the Company repurchased 613,331 shares for an aggregate cost of $5.4 million. During the year ended July 3, 2010, the Company repurchased 907,545 shares for an aggregate cost of $8.7 million.

Current cash balances and the proceeds from stock option exercises and purchases in the stock purchase plan have funded stock repurchases in the past, and the Company expects to fund future stock repurchases from these same sources.

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Business Combination (Tables)

12 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Fair value of consideration transferred

Cash consideration	$	30,236
Acquisition date fair value of contingent earn-out consideration		4,087
Acquisition date fair value of previously held interest in PTI		23,672
Total	$	57,995

Liabilities assumed based on their fair values

Net tangible assets	$	26,665
Amortizable intangible assets:
Existing and core technology		7,165
Customer relationships		5,368
Backlog		365
Indefinite-lived intangible asset:
In-process research and development		3,223
Goodwill		15,209
Total	$	57,995

Business acquisition, Pro forma information

	Year Ended			Year Ended
(unaudited)	July 2,			July 3,
(in thousands except per share)	2011			2010
Revenue	$	170,509		$	163,643
Net income		9,568			17,091
Net income per share — basic		0.38			0.67
Net income per share — diluted		0.38			0.66
Supplemental Information on Pro Forma Adjustments
Pro forma adjustment to revenue
Eliminate intercompany sales	$	(383	)	$	(1,139	)
Total revenue adjustment	$	(383	)	$	(1,139	)
Pro forma adjustments to net income
Depreciation and amortization	$	511		$	(2,737	)
Earnout and compensation expense accruals		1,614			(1,613	)
Eliminate the Company’s share of PTI income		(468	)		(2,071	)
Acquisition related costs		761			(761	)
Gain on previously held interest in PTI		(7,263	)		8,938
Other		(155	)		(313	)
Total net income adjustments	$	(5,000	)	$	1,443

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Quarterly Financial Data (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jul. 03, 2010
Summary of quarterly operating results and share data
Net revenues	$ 37,944	$ 33,378	$ 30,481	$ 35,332	$ 43,342	$ 39,555	$ 40,671	$ 42,775	$ 137,135	$ 166,343	$ 146,913
Cost of revenues	24,396	21,789	19,504	22,795	28,173	27,190	27,058	28,240	88,484	110,661	96,146
Gross profit	13,548	11,589	10,977	12,537	15,169	12,365	13,613	14,535	48,651	55,682	50,767
Operating expenses:
Research and development	5,460	5,669	5,277	5,316	5,535	5,238	5,060	4,397	21,722	20,230	17,208
Selling, general and administrative	8,135	7,114	7,060	7,339	7,487	7,231	6,986	7,742	29,648	29,447	26,478
Total operating expenses	13,595	12,783	12,337	12,655	13,022	12,469	12,046	12,139	51,370	49,677	43,686
Income (loss) from operations	(47)	(1,194)	(1,360)	(118)	2,147	(104)	1,567	2,396	(2,719)	6,005	7,081
Interest and other income, net	1,059	847	638	1,070	695	1,132	614	11,936	3,684	15,142	5,252
Income before income taxes	1,012	(347)	(722)	952	2,842	1,028	2,181	14,332	895	20,382	12,303
Income tax expense (benefits)	2,974	(76)	(335)	534	1,281	514	446	5,378	3,097	7,619	3,911
Net income (loss) from consolidated companies	(1,962)	(271)	(387)	418	1,561	514	1,735	8,954	(2,202)	12,763	8,392
Equity in net income of unconsolidated affiliates	51	4	52	27	48	17	77	556	134	700	2,430
Net income (loss)	$ (1,911)	$ (267)	$ (335)	$ 445	$ 1,609	$ 531	$ 1,812	$ 9,510	$ (2,068)	$ 13,463	$ 10,822	$ 10,822
Basic income (loss) per share to Pericom shareholders	$ (0.08)	$ (0.01)	$ (0.01)	$ 0.02	$ 0.06	$ 0.02	$ 0.07	$ 0.38	$ (0.09)	$ 0.54	$ 0.42
Diluted income (loss) per share	$ (0.08)	$ (0.01)	$ (0.01)	$ 0.02	$ 0.06	$ 0.02	$ 0.07	$ 0.38	$ (0.09)	$ 0.53	$ 0.42
Shares used in computing basic earnings (loss) per share	23,611	24,030	24,244	24,491	24,917	24,993	24,894	24,890	24,094	24,923	25,412
Shares used in computing diluted earnings (loss) per share	23,611	24,030	24,244	24,583	25,140	25,341	25,270	25,263	24,094	25,254	25,717

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Fair Value Measurements

12 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

18. FAIR VALUE MEASUREMENTS

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

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

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

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

The following table represents our fair value hierarchy for financial assets (cash equivalents and investments) measured at fair value on a recurring basis. Level 1 available-for-sale investments are primarily comprised of investments in U.S. Treasury securities, valued using market prices in active markets. Most of the investments are classified as Level 2. Level 2 pricing is provided by third party sources of market information obtained through the Company’s investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities it holds are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

The Company’s Level 2 securities include time deposits, government securities, corporate debt securities and mortgage backed and asset backed securities. Government securities include US federal agency securities, foreign government and agency securities, and US state and municipal bond obligations. Many of the municipal bonds are insured; those that are not are nearly all AAA/Aaa rated. The corporate debt securities are all investment grade and most are single A-rated or better. The asset-backed securities are AAA/Aaa rated and are backed by auto loans, student loans, credit card balances and residential or commercial mortgages.

Assets measured at fair value are summarized as follows:

	As of June 30, 2012
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Commercial paper	$	3,500	$	—	$	3,500	$	—
Time deposits		11,815		—		11,815		—
US Treasury securities		3,634		3,634		—		—
National government and agency securities		6,749		—		6,749		—
State and municipal bond obligations		1,772		—		1,772		—
Corporate bonds and notes		61,638		—		61,638		—
Asset backed securities		10,081		—		10,081		—
Mortgage backed securities		9,334		—		9,334		—
Total	$	108,523	$	3,634	$	104,889	$	—

	As of July 2, 2011
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Investments(1)
Time deposits	$	10,740	$	—	$	10,740	$	—
US Treasury securities		602		602		—		—
National government and agency securities		9,186		—		9,186		—
State and municipal bond obligations		1,258		—		1,258		—
Corporate bonds and notes		53,699		—		53,699		—
Asset backed securities		11,338		—		11,338		—
Mortgage backed securities		10,725		—		10,725		—
Total	$	97,548	$	602	$	96,946	$	—

(1) At June 30, 2012, the commercial paper and $1,471 of the time deposits are included in cash and cash equivalents; the balance of the investments at June 30, 2012 and July 2, 2011 are included in short-term and long-term investments in marketable securities on the consolidated balance sheet.

The Company had no transfers in between Level 1 and Level 2 during the years ended June 30, 2012 and July 2, 2011.

When assessing marketable securities for other-than-temporary declines in value, a number of factors are considered. Analyses of the severity and duration of price declines, remaining years to maturity, portfolio manager reports, economic forecasts, and the specific circumstances of issuers indicate that it is reasonable to expect marketable securities with unrealized losses at June 30, 2012 to recover in fair value up to the Company’s cost bases within a reasonable period of time. The Company does not intend to sell investments with unrealized losses before maturity, when the obligors are required to redeem them at full face value or par. The Company believes the obligors have the financial resources to redeem the debt securities. Accordingly, the Company does not consider the investments to be other-than-temporarily impaired at June 30, 2012.

The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, deposits, accounts payable, accrued liabilities and debt approximate fair value because of their short maturities and/or variable interest rates.

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Goodwill And Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Indefinite-lived intangible asset:
Finite lived intangible assets. Gross	$ 19,060	$ 18,260
Finite lived intangible assets, Accumulated Amortization	(6,629)	(3,868)
Finite lived intangible assets Net	12,431	14,392
Purchased intangible assets, Gross	19,460	19,558
Purchased intangible assets, Accumulated Amortization	(6,629)	(3,868)
Purchased intangible assets, Net	12,831	15,690
SaRonix trade name [Member]
Indefinite-lived intangible asset:
Indefinite lived intangible assets, Gross	400	415
Indefinite lived intangible assets, Net	400	415
In-process research and development [Member]
Indefinite-lived intangible asset:
Indefinite lived intangible assets, Gross		883
Indefinite lived intangible assets, Net		883
Customer relationships [Member]
Indefinite-lived intangible asset:
Finite lived intangible assets. Gross	5,906	5,777
Finite lived intangible assets, Accumulated Amortization	(1,888)	(909)
Finite lived intangible assets Net	4,018	4,868
eCERA trade name [Member]
Indefinite-lived intangible asset:
Finite lived intangible assets. Gross	44	45
Finite lived intangible assets, Accumulated Amortization	(43)	(38)
Finite lived intangible assets Net	1	7
Core developed technology [Member]
Indefinite-lived intangible asset:
Finite lived intangible assets. Gross	13,110	12,040
Finite lived intangible assets, Accumulated Amortization	(4,698)	(2,648)
Finite lived intangible assets Net	8,412	9,392
SaRonix supplier relationship [Member]
Indefinite-lived intangible asset:
Finite lived intangible assets. Gross		398
Finite lived intangible assets, Accumulated Amortization		(273)
Finite lived intangible assets Net		$ 125

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Business and Significant Accounting Policies

12 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Business and Significant Accounting Policies

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Pericom Semiconductor Corporation (the “Company” or “Pericom”) was incorporated in June 1990 in the state of California. The Company designs, manufactures and markets high performance digital, analog and mixed-signal integrated circuits (“ICs”) and frequency control products (“FCPs”) used for the transfer, routing, and timing of digital and analog signals within and between computer, networking, datacom and telecom systems.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION — These consolidated financial statements include the accounts of Pericom Semiconductor Corporation and its wholly owned subsidiaries, Pericom Semiconductor (HK) Limited (“PSC-HK”), Pericom Asia Limited (“PAL”) and PSE Technology Corporation (“PSE-TW”). In addition PAL has three wholly-owned subsidiaries, PSE Technology (Shandong) Corporation (“PSE-SD”) and Pericom Technology Yangzhou Corporation (“PSC-YZ”) for the Jinan, China and Yangzhou, China operations, respectively, and Pericom Technology Inc. (“PTI”). PTI became a wholly-owned subsidiary in the first quarter of fiscal 2011 (See Note 6 of Notes to Consolidated Financial Statements in this Form 10-K for further details). PSE-TW was formerly known as the SaRonix-eCERA Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

On March 28, 2010, the Company completed the merger of our two wholly owned subsidiaries, PSE-TW and PTL, with PSE-TW as the surviving entity. As a result of the change in legal structure, we determined that we would be able to utilize certain deferred tax assets and our valuation allowance was reduced accordingly. In accordance with the guidance for a change in reporting entity, this change has been retrospectively applied to all prior periods presented. As substantially all of the deferred tax assets arose prior to the periods being presented, the impact of the reduction in valuation allowance was an increase to our deferred tax assets of approximately $256,000 for all periods presented as well as an increase to our opening retained earnings.

The Company has significant operations in the PRC, where certain political, economic and currency restrictions may apply. Insofar as can be reasonably determined, the effect of foreign exchange restrictions upon the consolidated financial position and results of the Company are not material.

FISCAL PERIOD — For purposes of reporting the financial results, the Company’s fiscal years end on the Saturday closest to the end of June. The year ended July 3, 2010 contains 53 weeks, whereas all other fiscal years presented herein include 52 weeks.

CASH EQUIVALENTS — The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value.

SHORT-TERM AND LONG-TERM INVESTMENTS IN MARKETABLE SECURITIES — The Company’s policy is to invest in instruments with investment grade credit ratings. The Company classifies its short-term investments as “available-for-sale” securities and the Company bases the cost of securities sold using the specific identification method. The Company accounts for unrealized gains and losses on its available-for-sale securities as a separate component of shareholders’ equity in the consolidated balance sheets in the period in which the gain or loss occurs. The Company classifies its available-for-sale securities as current or noncurrent based on each security’s attributes. At June 30, 2012 and July 2, 2011, investments, and any difference between the fair market value and the underlying cost of such investments, consisted of the following:

Available-for-Sale Securities:

	As of June 30, 2012
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,344	$	—	$	—		$	—		$	10,344
US Treasury securities		3,639		—		(5	)		(5	)		3,634
National government and agency securities		6,582		167		—			167			6,749
State and municipal bond obligations		1,772		1		(1	)		—			1,772
Corporate bonds and notes		61,374		461		(197	)		264			61,638
Asset backed securities		10,148		19		(86	)		(67	)		10,081
Mortgage backed securities		9,313		98		(77	)		21			9,334
Total	$	103,172	$	746	$	(366	)	$	380		$	103,552

	As of July 2, 2011
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Net Unrealized Gains (Losses)			Fair Value
Available-for-Sale Securities
Time Deposits	$	10,740	$	—	$	—		$	—		$	10,740
US Treasury securities		600		2		—			2			602
National government and agency securities		9,065		128		(7	)		121			9,186
State and municipal bond obligations		1,250		8		—			8			1,258
Corporate bonds and notes		53,346		458		(105	)		353			53,699
Asset backed securities		11,381		32		(75	)		(43	)		11,338
Mortgage backed securities		10,767		41		(83	)		(42	)		10,725
Total	$	97,149	$	669	$	(270	)	$	399		$	97,548

The following tables show the gross unrealized losses and fair values of the Company’s investments that have unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 2012 and July 2, 2011:

	Continuous Unrealized Losses at June 30, 2012
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	3,434	$	5	$	—	$	—	$	3,434	$	5
National government and agency securities		327		—		—		—		327		—
State and municipal bond obligations		1,033		1		—		—		1,033		1
Corporate bonds and notes		12,117		85		3,782		112		15,899		197
Asset backed securities		1,784		15		1,595		71		3,379		86
Mortgage backed securities		659		—		403		77		1,062		77
	$	19,354	$	106	$	5,780	$	260	$	25,134	$	366

	Continuous Unrealized Losses at July 2, 2011
	Less Than 12 Months				12 Months or Longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
US Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
National government and agency securities		2,254		7		—		—		2,254		7
State and municipal bond obligations		—		—		—		—		—		—
Corporate bonds and notes		12,765		103		251		2		13,016		105
Asset backed securities		4,867		64		149		11		5,016		75
Mortgage backed securities		3,407		10		336		73		3,743		83
	$	23,293	$	184	$	736	$	86	$	24,029	$	270

The unrealized losses are of a temporary nature due to the Company’s intent and ability to hold the investments until maturity or until the cost is recoverable. The unrealized losses are primarily due to fluctuations in market interest rates. The Company reports unrealized gains and losses on its “available-for-sale” securities in accumulated other comprehensive income, net of tax, in shareholders’ equity.

The Company records gains or losses realized on sales of available-for-sale securities in interest and other income on its consolidated income statement. The cost of securities sold is based on the specific identification of the security and its amortized cost. In fiscal 2012, 2011 and 2010 realized gains on available-for-sale securities were $673,000, $1.9 million and $2.3 million, respectively.

The following table lists the fair value of the Company’s short- and long-term investments by length of time to maturity as of June 30, 2012 and July 2, 2011:

(In thousands)	June 30, 2012		July 2, 2011
One year or less	$	21,254	$	10,316
Between one and three years		52,106		37,983
Greater than three years		22,084		25,021
Multiple Dates		8,108		24,228
	$	103,552	$	97,548

Securities with maturities over multiple dates are mortgage-backed securities (MBS) or asset-backed securities (ABS) featuring periodic principle paydowns through 2041.

FAIR VALUE OF FINANCIAL INSTRUMENTS — The Company has determined that the amounts reported for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short maturities and/or variable interest rates. Available-for-sale investments are reported at their fair value based on quoted market prices. A further discussion of the fair value of financial instruments is detailed in Note 18 to the Consolidated Financial Statements contained in this report on Form 10-K.

ALLOWANCE FOR DOUBTFUL ACCOUNTS — The Company computes its allowance for doubtful accounts using a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to the Company, the Company records a specific allowance against amounts due to the Company, reducing the net recognized receivable to the amount the Company reasonably believes it will collect. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and its historical experience.

INVENTORIES — For IC and certain FCP products, the Company records inventories at the lower of standard cost (which generally approximates actual cost on a first-in, first-out basis) or market value. The carrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and the forecast of demand over a specific future period. The semiconductor markets that the Company serves are volatile and actual results may vary from forecast or other assumptions, potentially affecting the Company’s assessment of excess and obsolete inventory, resulting in material effects on gross margin.

The inventories of the remainder of the FCP products are recorded at the lower of weighted-average cost, which approximates actual cost, or market value. Weighted average cost is comprised of average manufacturing costs weighted by the volume produced in each production run. Market value is defined as the net realizable value for finished goods, and replacement cost for raw materials and work in process.

Raw material inventory is considered slow moving and is fully reserved if it has not moved in 365 days. For assembled devices, the inventory is disaggregated by part number. The quantities on hand in each part number category are compared to the quantity that was shipped in the previous twelve months, the quantity in backlog and to the quantity expected to ship in the next twelve months. A reserve is recorded to the extent the value of each quantity on hand is in excess of the lesser of the three comparisons. The Company also periodically reviews inventory for obsolescence beyond the established formulaic tests. The Company believes this method of evaluating inventory fairly represents market conditions.

The Company considers the reserved material to be available for sale. The reserved inventory is not revalued should market conditions change or if a market develops for the obsolete inventory. In the past, the Company has sold obsolete inventory that was previously fully reserved.

PROPERTY, PLANT AND EQUIPMENT — The Company states its property, plant and equipment at cost. Cost includes purchase cost, applicable taxes, freight, installation costs and interest incurred in the acquisition of any asset that requires a period of time to make it ready for use. We compute depreciation and amortization using the straight-line method over estimated useful lives of three to eight years except for buildings, which we depreciate using the straight-line method over estimated useful lives of twenty to forty years. We depreciate leasehold improvements over the shorter of the lease term or the improvement’s estimated useful life. In addition, we capitalize the cost of major replacements, improvements and betterments, while we expense normal maintenance and repair.

INVESTMENTS IN UNCONSOLIDATED AFFILIATES — The Company holds or has held ownership interests in various investees. Our ownership in these affiliates has varied from 20% to approximately 49%. We classify these investments as investments in unconsolidated affiliates in our consolidated balance sheets. The Company accounts for long-term investments in companies in which it has an ownership share larger than 20% and in which it has significant influence over the activities of the investee using the equity method. We recognize our proportionate share of each investee’s income or loss in the period in which the investee reports the income or loss. We eliminate all intercompany transactions in accounting for our equity method investments.

OTHER ASSETS — The Company’s other assets classification includes investments in privately held companies in which we have less than a 20% interest, land use rights and deposits. The Company reports its investments in privately held companies at the lower of cost or market. The Company’s management reviews the investment in these companies for losses that may be other than temporary on a quarterly basis. Should management determine that such an impairment exists, the Company will reduce the value of the Company’s investment in the period in which management discovers the impairment and charge the impairment to the consolidated statement of operations. The Company’s management performed such an evaluation as of June 30, 2012 and determined that no impairment existed. Two of the Company’s subsidiaries, PSE-SD and PTI, hold land use rights that were acquired from the local Chinese government which entitle the Company to use the land for 15 to 50 years. The cost of the land use rights is recorded as a component of other assets and is being depreciated over 15 to 50 years, the useful life of the rights.

LONG-LIVED ASSETS — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, the Company will recognize an impairment loss as the amount of the difference between carrying value and fair value as determined by discounted cash flows.

GOODWILL AND OTHER INTANGIBLE ASSETS — Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired and liabilities assumed. The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least on an annual basis in the fourth quarter of the fiscal year or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable from its estimated future cash flow. In accordance with the guidance on Accounting Standards Codification (″ASC″) 350, Intangibles-Goodwill and Other, a two-step test is required to identify potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In the first step, the fair value of each reporting unit is compared to its carrying value to determine if the goodwill is impaired. In general, the Company’s reporting units are one step below the segment level. The fair value of the reporting units is determined based on a weighting of income and market approaches. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, the Company estimates the fair value based on market multiples of revenue or earnings for comparable companies. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions and determination of appropriate market comparables. The Company bases these fair value estimates on reasonable assumptions but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, the Company makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each reporting unit.

If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired and no further testing is required. If the carrying value of the net assets assigned to the reporting unit was to exceed its fair value, then the second step is performed in order to determine the implied fair value of the reporting unit’s goodwill, and an impairment loss is recorded for an amount equal to the difference between the implied fair value and the carrying value of the goodwill. The goodwill impairment analysis did not result in an impairment charge for the years presented.

BUSINESS COMBINATIONS — Effective July 4, 2010, the Company adopted ASC 805, Business Combinations (“ASC 805”). ASC 805 updated guidance related to business combinations. The updated guidance establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The updated standard also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The updated standard also provides guidance for recognizing changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals that result from a business combination transaction as adjustments to income tax expense. The updated guidance had a material impact on the Company’s consolidated financial statements during the year ended July 2, 2011. In fiscal 2011, the Company completed the acquisition of PTI. Under the updated guidance, the Company expensed the transaction costs of approximately $0.6 million associated with the PTI acquisition, while under the prior accounting standards such costs would have been capitalized. In addition, the Company recognized the fair value of a contingent earn-out liability in connection with the PTI acquisition of $4.1 million, and subsequently recognized an expense of $0.7 million related to the change in the estimated fair value of contingent earn-out liability, while under the prior accounting standards the earn-out would not have been recognized as part of the consideration transferred until the contingency was resolved. Further, the Company acquired in-process research and development of approximately $3.3 million in connection with the PTI acquisition which has been capitalized in accordance with the updated guidance, whereas under prior authoritative guidance the amount would have been expensed immediately. Therefore, the adoption of the updated guidance related to business combinations has had and likely will continue to have a material impact on our future consolidated financial statements.

INCOME TAXES — The Company accounts for income taxes following the Financial Accounting Standards Board’s statements and related interpretations, which require an asset and liability approach to recording deferred taxes. We record a valuation allowance to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company’s income tax calculations are based on application of the respective U.S. federal, state or foreign tax laws. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based on its estimates of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the Consolidated Statements of Operations.

FOREIGN CURRENCY TRANSLATION — The functional currency of the Company’s foreign subsidiaries is the local currency. In consolidation, the Company translates assets and liabilities at exchange rates in effect at the balance sheet date. The Company translates revenue and expense accounts at average exchange rates during the period in which the transaction takes place. Net gains or (losses) from foreign currency translation of assets and liabilities of $635,000 and $7.5 million in fiscal 2012 and 2011, respectively, are included in the cumulative translation adjustment component of accumulated other comprehensive income, net of tax, a component of shareholders’ equity. Net gains or (losses) arising from transactions denominated in currencies other than the functional currency were $334,000, $(321,000) and $(197,000) in fiscal 2012, 2011 and 2010 respectively, and are included in interest and other income, net.

SHARE-BASED COMPENSATION — The Company recognizes employee share-based compensation through measurement at grant date based on the fair value of the award, and the fair value is recognized as an expense over the employee’s requisite service period. See Note 16 for further discussion of share-based compensation.

REVENUE RECOGNITION — The Company recognizes revenue from the sale of its products when:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred;

• The sales price is fixed or determinable; and

• Collectability is reasonably assured.

Generally, the Company meets these conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, the Company estimates and records provisions for future returns and other charges against revenue at the time of shipment consistent with the terms of sale.

The Company sells products to large, domestic distributors at the price listed in its price book for that distributor. At the time of sale the Company records a sales reserve for ship from stock and debits (“SSD”s), stock rotations, return material authorizations (“RMA”s), authorized price protection programs, and any special programs approved by management. The Company offsets the sales reserve against revenues, producing the net revenue amount reported in the consolidated statements of operations.

The market price for the Company’s products can be significantly different from the book price at which the Company sold the product to the distributor. When the market price, as compared to the Company’s original book price, of a particular distributor’s sales opportunity to their own customer would result in low or negative margins for our distributor, the Company negotiates a ship from stock and debit with the distributor. Management analyzes the Company’s SSD history to develop current SSD rates that form the basis of the SSD sales reserve recorded each period. The Company obtains the historical SSD rates from its internal records.

The Company’s distribution agreements provide for semi-annual stock rotation privileges of typically 10% of net sales for the previous six-month period. The contractual stock rotation applies only to shipments at the Company’s listed book price. Asian distributors typically buy the Company’s product at less than standard price and therefore are not entitled to the 10% stock rotation privilege. In order to provide for routine inventory refreshing, for the Company’s benefit as well as theirs, the Company grants Asian distributors stock rotation privileges between 1% and 10% even though the Company is not contractually obligated to do so. Each month the Company adjusts the sales reserve for the estimated stock rotation privilege anticipated to be utilized by the distributors.

From time to time, customers may request to return parts for various reasons including the customers’ belief that the parts are not performing to specification. Many such return requests are the result of customers incorrectly using the parts, not because the parts are defective. Management reviews these requests and, if approved, the Company prepares a RMA. The Company is only obligated to accept defective parts returns. To accommodate the Company’s customers, the Company may approve particular return requests, even though it is not obligated to do so. Each month the Company records a sales reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns, which are the result of a part not meeting specifications or being non-functional, have been immaterial and the Company can frequently resell returned parts to other customers for use in other applications. The Company monitors and assesses RMA activity and overall materiality to assess whether a general warranty reserve has become appropriate.

The Company grants price protection solely at the discretion of Pericom management. The purpose of price protection is to reduce the distributor’s cost of inventory as market prices fall thus reducing SSD rates. Pericom sales management prepares price protection proposals for individual products located at individual distributors. Pericom general management reviews and approves or disapproves these proposals. If a particular price protection arrangement is approved, the Company estimates the dollar impact based on the sales price reduction per unit for the products approved and the number of units of those products in that distributor’s inventory. The Company records a sales reserve in that period for the estimated amount at the time revenue is recognized.

At the discretion of Pericom management, the Company may offer rebates on specific products sold to specific end customers. The purpose of the rebates is to allow for pricing adjustments for large programs without affecting the pricing the Company charges its distributor customers. The Company records the rebate at the time of shipment.

Pericom typically grants payment terms of between 30 and 60 days to its customers. The Company’s customers generally pay within those terms. The Company grants relatively few customers sales terms that include cash discounts. Distributors are invoiced for shipments at listed book price. When the distributors pay the Company’s invoices, they may claim debits for SSDs, stock rotations, cash discounts, RMAs and price protection when appropriate. Once claimed, the Company processes the requests against the prior authorizations and reduces the reserve previously established for that customer.

The revenue the Company records for sales to its distributors is net of estimated provisions for these programs. When determining this net revenue, the Company must make significant judgments and estimates. The Company bases its estimates on historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual amounts and the Company’s estimates. The Company’s financial condition and operating results depend on its ability to make reliable estimates and Pericom believes that such estimates are reasonable.

PRODUCT WARRANTY — The Company offers a standard one-year product replacement warranty. In the past, the Company has not had to accrue for a general warranty reserve, but assesses the level and materiality of RMAs and determines whether it is appropriate to accrue for estimated returns of defective products at the time revenue is recognized. On occasion, management may determine to accept product returns beyond the standard one-year warranty period. In those instances, the Company accrues for the estimated cost at the time management decides to accept the return. Because of the Company’s standardized manufacturing processes and product testing procedures, returns of defective product are infrequent and the quantities have not been significant. Accordingly, historical warranty costs have not been material.

SHIPPING COSTS — We charge shipping costs to cost of revenues as incurred.

CONCENTRATION OF CREDIT RISK — The Company primarily sells its products to a relatively small number of companies and generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains allowances for estimated bad debt losses. The Company also purchases substantially all of its wafers from three suppliers and purchases other manufacturing services from a relatively small number of suppliers.

The following table indicates the percentage of our net revenues and accounts receivable in excess of 10% with any single customer:

		Percentage of
Fiscal Year Ended:		Net Revenues			Trade Accounts Receivable
June 30, 2012	Customer A		18	%		26	%
	Customer B		14			6
	All others		68			68
			100	%		100	%
July 2, 2011	Customer A		18	%		16	%
	Customer B		15			12
	All others		67			72
			100	%		100	%
July 3, 2010	Customer A		22	%		26	%
	Customer B		14			9
	All others		64			65
			100	%		100	%

The Company maintains cash, cash equivalents and short- and long-term investments with various high credit quality financial institutions. The Company has designed its investment policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that manage its investments. The Company is exposed to credit risk in the event of default by the financial institutions or issuers of securities to the extent of the amounts reported in the consolidated balance sheets.

RECENTLY ISSUED ACCOUNTING STANDARDS — In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which requires comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income, rather than in a footnote or as part of a statement of changes to shareholders equity. The amendment does not change what items are reported in other comprehensive income or the requirement to report reclassification of items from other comprehensive income to net income. This standard will be effective for the Company’s fiscal year beginning July 1, 2012 with retrospective application required. As this standard impacts presentation requirements only, the adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350) — Testing Goodwill for Impairment”, which provides updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for the Company’s fiscal year beginning July 1, 2012, with early adoption permitted. The Company is currently evaluating this guidance, but it is not expected that the adoption will have a material effect on the consolidated financial statements.

EARNINGS (LOSS) PER SHARE — The Company bases its basic earnings (loss) per share upon the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Basic and diluted earnings (loss) per share for each of the three years in the period ended June 30, 2012 is as follows:

	Fiscal Year Ended
(In thousands, except for per share data)	June 30, 2012			July 2, 2011		July 3, 2010
Net income (loss) attributable to Pericom shareholders	$	(2,068	)	$	13,463	$	10,794
Computation of common shares outstanding — basic earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Basic earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.54	$	0.42
Computation of common shares outstanding — diluted earnings (loss) per share:
Weighted average shares of common stock		24,094			24,923		25,412
Dilutive shares using the treasury stock method		—			331		305
Shares used in computing diluted earnings (loss) per share		24,094			25,254		25,717
Diluted earnings (loss) per share attributable to Pericom shareholders	$	(0.09	)	$	0.53	$	0.42

As the Company incurred a loss for the year ended June 30, 2012, diluted loss per share is the same as basic loss per share since the addition of any contingently issuable share would be anti-dilutive. Options to purchase 2.5 million shares of common stock, and restricted stock units of 504,000 shares were outstanding during the year ended June 30, 2012 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.4 million shares of common stock, and restricted stock units of 43,000 shares were outstanding during the year ended July 2, 2011 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive. Options to purchase 2.8 million shares of common stock, and restricted stock units of 76,000 shares were outstanding during the year ended July 3, 2010 and were excluded from the computation of diluted net earnings per share because such options and units were anti-dilutive.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Statement Of Financial Position [Abstract]
Allowances for Accounts receivable	$ 2,566	$ 1,947
Accumulated amortization on intangible assets	$ 6,629	$ 3,868
Common stock and paid in capital, no par value (in dollars per share)
Common stock and paid in capital, shares authorized	60,000,000	60,000,000
Common stock and paid in capital, shares issued	23,565,000	24,716,000
Common stock and paid in capital, shares outstanding	23,565,000	24,716,000

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Debt

12 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Debt

11. DEBT

As of June 30, 2012, the Company’s subsidiary PSE-TW has made short-term borrowings under its credit facilities totaling approximately $1.4 million. The loans are denominated in U.S. Dollars and Japanese Yen and carry variable rates of interest currently at 1.3% per annum. The loans have maturities ranging from 28 to 84 days.

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Deferred tax assets:
Credit carryforwards	$ 3,183	$ 3,181
Accruals and reserves	1,737	1,867
Cumulative loss on investment	339	371
Depreciation and amortization	(1,480)	(1,538)
Net operating loss carryforward	876	642
Share-based compensation	2,904	2,989
Other	742	438
Total	8,301	7,950
Valuation allowance	(4,305)	(1,062)
Deferred tax assets	3,996	6,888
Deferred tax liabilities:
Gain on previously held shares in unconsolidated affiliate	(3,873)	(3,876)
Acquired PTI intangibles and other	(2,318)	(2,729)
Deferred tax liabilities	$ (6,191)	$ (6,605)

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Income before income taxes
U.S.									$ 341	$ 21,009	$ 10,024
Foreign									554	(627)	2,279
Income before income taxes	1,012	(347)	(722)	952	2,842	1,028	2,181	14,332	895	20,382	12,303
Federal:
Current									941	3,155	3,502
Deferred									(641)	4,064	(179)
Federal Income Tax Expense (Benefit), Continuing Operations									300	7,219	3,323
State:
Current									(522)	(3)	7
Deferred									2,768	16	(315)
State and Local Income Tax Expense (Benefit), Continuing Operations, Total									2,246	13	(308)
Foreign:
Current									551	387	855
Deferred											41
Foreign income tax expense (benefit)									551	387	896
Total current									970	3,539	4,364
Total deferred									1,753	4,020	344
Total income tax expense									$ 3,097	$ 7,619	$ 3,911

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Document and Entity Information (USD $)	12 Months Ended
	Jun. 30, 2012	Aug. 29, 2012	Dec. 31, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	PERICOM SEMICONDUCTOR CORP
Entity Central Index Key	0001001426
Document Type	10-K
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--06-30
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		23,544,521
Entity Public Float			$ 170,130,000

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Restricted Assets

12 Months Ended

Jun. 30, 2012

Other Restricted Assets [Abstract]

Restricted Assets

12. RESTRICTED ASSETS

As of June 30, 2012, the Company had pledged and restricted assets of $4.3 million consisting of land and buildings PSE-TW has pledged for loan and credit facilities. The PSE-TW loan and credit facility is for equipment purchases or inventory financing and $1.4 million was outstanding under this facility as of June 30, 2012.

As of July 2, 2011, the Company had pledged and restricted assets of $7.4 million. These consist of $4.5 million in land and buildings PSE-TW has pledged for loan and credit facilities and $2.9 million of restricted cash at PAL. The PSE-TW loan and credit facility is for equipment purchases or inventory financing and $5.0 million was outstanding under this facility as of July 2, 2011. The PAL restricted cash was in an escrow account for contingent remaining liabilities related to the PTI acquisition.

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Shareholders Equity and Share-Based Compensation (Details 2) (USD $) In Thousands, except Share data in Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2012
Options vested and expected to vest and exercisable
Options vested and expected to vest, Number	2.4
Options vested and expected to vest, Aggregate intrinsic value	$ 888
Options vested and expected to vest, Weighted average contractual term	5 years 1 month 6 days
Options vested and expected to vest, Weighted average exerice price	$ 10.36
Options exercisable, Number	2.1
Options exercisable, Aggregate intrinsic value	$ 683
Options exercisable, Weighted average contractual term (years)	4 years 6 months
Options exercisable, Weighted average exercise price	$ 10.59

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Fair Value Measurements (Details Textual) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Fair Value Measurements (Textual)
Time deposits included in cash and cash equivalents	$ 1,471

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Income Statement [Abstract]
Net revenues	$ 137,135	$ 166,343	$ 146,913
Cost of revenues	88,484	110,661	96,146
Gross profit	48,651	55,682	50,767
Operating expenses:
Research and development	21,722	20,230	17,208
Selling, general and administrative	29,648	29,447	26,478
Total operating expenses	51,370	49,677	43,686
Income (loss) from operations	(2,719)	6,005	7,081
Interest and other income, net	3,684	15,142	5,252
Interest expense	(70)	(765)	(30)
Income before income taxes	895	20,382	12,303
Income tax expense	3,097	7,619	3,911
Net income (loss) from consolidated companies	(2,202)	12,763	8,392
Equity in net income of unconsolidated affiliates	134	700	2,430
Net income (loss)	(2,068)	13,463	10,822
Net income attributable to noncontrolling interests			(28)
Net income (loss) attributable to Pericom shareholders	$ (2,068)	$ 13,463	$ 10,794
Basic income (loss) per share to Pericom shareholders	$ (0.09)	$ 0.54	$ 0.42
Diluted earnings (loss) per share attributable to Pericom shareholders	$ (0.09)	$ 0.53	$ 0.42
Shares used in computing basic earnings (loss) per share	24,094	24,923	25,412
Shares used in computing diluted earnings (loss) per share	24,094	25,254	25,717

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Business Combination

12 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Business Combination

6. BUSINESS COMBINATION

Acquisition of PTI

On August 31, 2010, the Company completed the acquisition and obtained control of PTI for cash consideration of $30.2 million. An additional approximately $6 million in earn-out consideration and bonus payments were also paid by the Company in fiscal 2012 for achievement of gross profit milestones for fiscal year 2011.

Fair Value of Consideration Transferred (in thousands):

Cash consideration	$	30,236
Acquisition date fair value of contingent earn-out consideration		4,087
Acquisition date fair value of previously held interest in PTI		23,672
Total	$	57,995

Immediately prior to the acquisition, remeasurement of our interest in PTI led to a gain of $11.0 million, which amount was recorded in interest and other income, net in the fiscal 2011 consolidated statement of operations. This fair value measurement was based on the per share consideration paid in the transaction, including the fair value of the earn-out, applied to the number of shares held by the Company immediately prior to closing.

In accordance with ASC 805, a liability was recognized for the estimated acquisition date fair value of $4.1 million for the contingent consideration based on the probability of the achievement of PTI’s gross profit target. Actual achievement of PTI’s gross profit target exceeded 100% of the threshold, and the PTI stockholders earned the maximum consideration of $4.8 million. The payout of this amount was completed in the third quarter of fiscal year 2012.

Allocation of Consideration Transferred

The acquisition was accounted for as a business combination under ASC 805. The purchase price of $58.0 million was allocated to the net tangible and intangible assets acquired and liabilities assumed based on their fair values as of the date of the completion of the acquisition as follows (in thousands):

Net tangible assets	$	26,665
Amortizable intangible assets:
Existing and core technology		7,165
Customer relationships		5,368
Backlog		365
Indefinite-lived intangible asset:
In-process research and development		3,223
Goodwill		15,209
Total	$	57,995

As of the date of acquisition, inventories are required to be measured at fair value. The fair value of inventory of $3.4 million was based on assumptions applied to the PTI acquired inventory balance. For finished goods and work-in-progress inventory, the Company assumed that estimated selling prices would yield gross margins consistent with actual margins earned by PTI during the second half of fiscal year 2010. The Company assumed that selling cost as a percentage of revenue would be consistent with actual rates experienced by PTI during the second half of fiscal year 2010.

The fair value of the acquired land and buildings in Shanghai, China was estimated based on the recent real estate transactions of comparable properties in the same geographic area. The acquired land and buildings are being depreciated over estimated useful lives of 15 to 48 years.

Existing and core technology consisted of products which have reached technological feasibility and relate to the PTI products. The value of the developed technology was determined by discounting estimated net future cash flows of these products. The Company is amortizing the existing and core technology on a straight-line basis over an estimated life of 6 years.

Customer relationships relate to the Company’s ability to sell existing and future versions of products to existing PTI customers. The fair value of the customer relationships was determined by discounting estimated net future cash flows from the customer contracts. The Company is amortizing customer relationships on a straight-line basis over an estimated life of 6 years.

The backlog fair value relates to the estimated selling cost to generate backlog at August 31, 2010. The fair value of backlog at closing was amortized over an estimated life of 3 months and is fully amortized.

In-process research and development (“IPRD”) consisted of the in-process projects to complete development of certain PTI products. The value assigned to IPRD was determined by considering the importance of products under development to the overall development plan, estimating costs to develop the purchased IPRD into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value. This methodology is referred to as the income approach, which discounts expected future cash flows to present value. The discount rate used in the present value calculations was derived from a weighted-average cost of capital analysis, adjusted to reflect additional risks related to the product’s development and success as well as the product’s stage of completion. Acquired IPRD assets were initially recognized at fair value and were classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the acquisition date, the assets were not amortized as charges to earnings. Development of the PTI IPRD products was completed in the third quarter of fiscal year 2012. At this point the acquired IPRD projects were considered a finite-lived intangible asset and amortization commenced over an expected life of 6 years.

The deferred tax liability of $3.0 million associated with the estimated fair value adjustments of assets acquired and liabilities assumed was recorded using the estimated statutory tax rate in the jurisdictions where the fair value adjustments occurred.

Of the total estimated purchase price paid at the time of acquisition, approximately $15.5 million was allocated to goodwill. Subsequently, goodwill was reduced by approximately $335,000 as a result of working capital adjustments and indemnification claims. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets and is not deductible for tax purposes. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets was the acquisition of an assembled workforce of experienced semiconductor engineers, synergies in products, technologies, skill sets, operations, customer base and organizational cultures that can be leveraged to enable the Company to build an enterprise greater than the sum of its parts. In accordance with ASC 350, Intangibles — Goodwill and Other, goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. In the event that management determines that the value of goodwill has become impaired, the Company will record an expense for the amount impaired during the fiscal quarter in which the determination is made.

The amount of PTI net revenues included in the Company’s consolidated statement of operations for the fiscal year ended June 30, 2012 was $13.3 million, and from the PTI acquisition date of August 31, 2010 to July 2, 2011, was approximately $16.6 million.

Pro Forma Data for the PTI Acquisition

The following table presents the unaudited pro forma results of the Company as though the PTI acquisition described above occurred at the beginning of the fiscal year ended July 3, 2010. The data below includes the historical results of the Company and PTI on a standalone basis through the closing date of acquisition, with adjustments as noted in the supplemental information. The pro forma results presented do not purport to be indicative of the results that would have been achieved had the acquisition been made as of that date nor of the results which may occur in the future.

	Year Ended			Year Ended
(unaudited)	July 2,			July 3,
(in thousands except per share)	2011			2010
Revenue	$	170,509		$	163,643
Net income		9,568			17,091
Net income per share — basic		0.38			0.67
Net income per share — diluted		0.38			0.66
Supplemental Information on Pro Forma Adjustments
Pro forma adjustment to revenue
Eliminate intercompany sales	$	(383	)	$	(1,139	)
Total revenue adjustment	$	(383	)	$	(1,139	)
Pro forma adjustments to net income
Depreciation and amortization	$	511		$	(2,737	)
Earnout and compensation expense accruals		1,614			(1,613	)
Eliminate the Company’s share of PTI income		(468	)		(2,071	)
Acquisition related costs		761			(761	)
Gain on previously held interest in PTI		(7,263	)		8,938
Other		(155	)		(313	)
Total net income adjustments	$	(5,000	)	$	1,443

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Other Assets

12 Months Ended

Jun. 30, 2012

Other Assets [Abstract]

Other Assets

5. OTHER ASSETS

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Land use rights	$	6,890	$	6,938
Investments in privately held companies		1,303		1,354
Deposits		263		239
Other		602		1,350
Total	$	9,058	$	9,881

The Company purchased land use rights from the People’s Republic of China (PRC) in 2008 for the construction of its Jinan facility and its operation for a period of 50 years. In addition, the PTI acquisition in 2011 included land use rights for PTI’s properties in Shanghai.

The Company has investments in certain privately held companies which it accounts for under the cost method. The Company reviews these investments for impairment on a periodic basis. No impairment charges relating to investments in privately held companies were recorded during fiscal 2012, 2011 or 2010. For the year ended June 30, 2012, the Company wrote off $856,000 of promissory notes receivable due from two privately held technology companies which was recorded as a charge to general and administrative expense.

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Shareholder Rights Plan

12 Months Ended

Jun. 30, 2012

Warrants and Rights Note Disclosure [Abstract]

Shareholder Rights Plan

17. SHAREHOLDER RIGHTS PLAN

On March 6, 2012, the Company adopted a shareholder rights plan and declared a dividend of one preferred share purchase right for each share of common stock held by shareholders of record as of that date. Each right entitles shareholders, after the rights become exercisable, to purchase one one-thousandth of a share of our Series D Junior Participating Preferred Stock.

The Company designed the rights plan to protect the long-term value of the Company for its shareholders during any future unsolicited acquisition attempt. The Company did not adopt the rights plan in response to any specific attempt to acquire the Company or its shares and the Company is not aware of any current efforts to do so. The rights will become exercisable only upon the occurrence of certain events specified in the plan, including the acquisition of 15% of the Company’s outstanding common stock by a person or group. Should a person or group acquire 15% or more of the outstanding common stock or announce an unsolicited tender offer, the consummation of which would result in a person or group acquiring 15% or more of the outstanding common stock, shareholders other than the acquiring person may exercise the rights, unless the Board of Directors has approved the transaction in advance. Each right entitles the holder, other than an acquiring person, to purchase shares of the Company’s common stock (or, in the event that there are insufficient authorized common stock shares, substitute consideration such as cash, property, or other securities of the Company, such as Preferred Stock) at a 50% discount to the then prevailing market price. Prior to the acquisition by a person or group of 15% or more of the outstanding common stock, the Company may redeem the rights for $0.001 per right at the option of the Board of Directors. The rights will expire on March 6, 2022. As of June 30, 2012, there were 23,565,000 rights outstanding.

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Commitments and Contingencies

12 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

The future minimum commitments at June 30, 2012 are as follows:

	Fiscal Year
(in thousands)	2013		2014		2015		2016 and beyond		Total
Short-term debt	$	1,364	$	—	$	—	$	—	$	1,364
Operating lease payments		1,546		824		196		8		2,574
Capital equipment purchase commitments		969		—		—		—		969
Yangzhou capital injection		7,000		8,000		—		—		15,000
Total	$	10,879	$	8,824	$	196	$	8	$	19,907

The operating lease commitments are primarily the lease on the Company’s corporate headquarters, which expires in 2013.

We have no purchase obligations other than routine purchase orders and the capital equipment purchase commitments shown in the table as of June 30, 2012. However, on July 6, 2012, we entered into an agreement to purchase a building to serve as our new corporate headquarters in Milpitas, California. The purchase, for $7.6 million, closed on August 9, 2012.

On December 1, 2009, the Company entered into an R&D Center Investment Agreement (the “R&D Agreement”) with the Administrative Committee of the Yangzhou Economic and Technology Development Zone (the “Committee”) in China. Under the terms of the agreement, the Committee is to provide a funding, along with national and local tax incentives and other incentives. The funding would be paid in installments based on scheduled progress of the R&D Center’s development and our injection of paid-in capital. The Company made a $6 million capital injection in 2011 and applied for the initial agreed-upon subsidies of approximately $3.9 million. To date the Company has received only $773,000 which is recorded as a deferred credit under “Other long-term liabilities” on the consolidated balance sheets. The Company is currently negotiating with the Yangzhou government to terminate the R&D Agreement. If the termination is successful, the additional capital injections in the above table would not be made, although there may be additional terms or conditions involved in any settlement agreement.

Rent expense during the fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010 was $1.9 million, $1.9 million and $1.7 million, respectively.

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Shareholders Equity and Share-Based Compensation (Details 6) (USD $)	12 Months Ended
	Jun. 30, 2012
Options acivities under employee stock purchase plan
Beginning Balance, Available	1,944,707
Purchase	(108,768)
Ending Balance, Available	1,835,939
Purchase, Weighted average price	$ 6.96

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Goodwill and Intangible Assets

12 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

9. GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the activity related to the carrying value of our goodwill during the years ended June 30, 2012 and July 2, 2011:

	As of
(in thousands)	June 30, 2012			July 2, 2011
Goodwill
Beginning balance	$	16,669		$	1,681
Acquisition of PTI, net		—			14,218
Other adjustments		(239	)		(96	)
Cumulative translation adjustments		367			866
Ending balance	$	16,797		$	16,669

The Company’s acquired intangible assets associated with completed acquisitions for each of the following fiscal years are composed of:

	As of the year ended
	June 30, 2012							July 2, 2011
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	5,906	$	(1,888	)	$	4,018	$	5,777	$	(909	)	$	4,868
eCERA trade name		44		(43	)		1		45		(38	)		7
Core developed technology		13,110		(4,698	)		8,412		12,040		(2,648	)		9,392
SaRonix supplier relationship		—		—			—		398		(273	)		125
Total amortizable purchased intangible assets		19,060		(6,629	)		12,431		18,260		(3,868	)		14,392
IPRD		—		—			—		883		—			883
SaRonix trade name		400		—			400		415		—			415
Total purchased intangible assets	$	19,460	$	(6,629	)	$	12,831	$	19,558	$	(3,868	)	$	15,690

Amortization expense related to finite-lived purchased intangible assets was approximately $3.1 million in fiscal 2012, $2.8 million in fiscal 2011 and $331,000 in fiscal 2010. Amortization of intangible assets in fiscal 2012 included accelerated amortization related to a supplier relationship of approximately $125,000 and subsequent write-off.

The Company performs an annual impairment review of its long-lived assets, including its intangible assets. Based on the results of its most recent annual impairment tests, the Company determined that no impairment of the intangible assets existed as of June 30, 2012 or July 2, 2011. However, future impairment tests could result in a charge to earnings.

The finite-lived purchased intangible assets consist of supplier relationships, trade name, and core developed technology, which have remaining weighted average useful lives of approximately two years. We expect our future amortization expense over the next five years associated with these assets to be:

	Fiscal Years Ending
(in thousands)	2013		2014		2015		2016		2017 and beyond		Total
Expected Amortization
Customer relationships	$	965	$	965	$	965	$	965	$	158	$	4,018
eCERA trade name		1		—		—		—		—		1
Core developed technology		2,120		1,945		1,866		1,866		615		8,412
	$	3,086	$	2,910	$	2,831	$	2,831	$	773	$	12,431

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Business Combination (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Indefinite-lived intangible asset:
Goodwill	$ 16,797	$ 16,669	$ 1,681
Acquisition of PTI
Allocation of Consideration Transferred
Net tangible assets	26,665
Indefinite-lived intangible asset:
In-process research and development	3,223
Goodwill	15,209
Total	57,995
Existing and Core Technology [Member] | Acquisition of PTI
Allocation of Consideration Transferred
Amortizable intangible assets	7,165
Customer relationships [Member] | Acquisition of PTI
Allocation of Consideration Transferred
Amortizable intangible assets	5,368
Backlog [Member] | Acquisition of PTI
Allocation of Consideration Transferred
Amortizable intangible assets	$ 365

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Investments in Unconsolidated Affiliates

12 Months Ended

Jun. 30, 2012

Investments In and Advances To Affiliates, Schedule Of Investments [Abstract]

Investments in Unconsolidated Affiliates

7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investment in unconsolidated affiliates is comprised of the following:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Jiyuan Crystal Photoelectric Frequency Technology Ltd.	$	2,474	$	2,596

Prior to completing the PTI acquisition on August 31, 2010, the Company had a 42.04% ownership interest in PTI. Pericom accounted for its investment in PTI prior to the acquisition using the equity method due to the Company’s significant influence over its operations. PTI was incorporated in 1994, and in 1995 established a design center and sales office to pursue opportunities and participate in joint ventures in China. Prior to the acquisition, the Company purchased $383,000 and $1.1 million in goods and services from PTI during the years ended July 2, 2011 and July 3, 2010, respectively. PTI owed the Company $65,000 at July 3, 2010 for reimbursement of certain administrative expenses incurred by the Company on behalf of PTI and for advances made to PTI by the Company. Condensed financial information of PTI at July 3, 2010 is as follows:

	(Unaudited) As of and for the year ended
(in thousands)	July 3, 2010
Total assets	$	26,875
Total liabilities	$	2,546
Total equity	$	24,329
Revenue	$	17,869
Cost of revenues		8,798
Gross profit		9,071
Operating expenses		4,427
Income from operations		4,644
Interest and other income		440
Income tax expense		230
Net income	$	4,854

The percentage at which the Company recognized its proportionate share of the income of PTI was equal to the percentage of ownership held in successive rounds of financing of PTI in which the Company participated.

PSE-TW has a 49% equity interest in Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”), an FCP manufacturing company located in Science Park of Jiyuan City, Henan Province, China. JCP is a key manufacturing partner of PSE-TW.

The Company holds or has held ownership interests in various other privately held companies. The ownership in these affiliates varied from 20% to approximately 49%. For those companies in which the ownership interest is more than 20% and in which the Company has the ability to exercise significant influence on the affiliate’s operations, the investment is valued using the equity method of accounting. As of June 30, 2012, the amount of consolidated retained earnings of the Company represented by undistributed earnings of 50% or less entities accounted for by the equity method was approximately $3.6 million.

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Acquisition of Noncontrolling Interest In Subsidiaries

12 Months Ended

Jun. 30, 2012

Business Combination, Acquisition Of Less Than 100 Percent, Noncontrolling Interest [Abstract]

Acquisition of Noncontrolling Interest in Subsidiaries

8. ACQUISITION OF NONCONTROLLING INTEREST IN SUBSIDIARIES

Acquisition of remaining minority interest in PSE-TW

Prior to fiscal 2010, Pericom owned approximately 97.3% of PSE-TW with the remaining interest owned by other parties. In fiscal 2010, the Company purchased the remaining 2.71% of the outstanding shares of PSE-TW for approximately $1.2 million. As Pericom retained its controlling interest in PSE-TW, this was treated as an equity transaction in accordance with the provisions of ASC 810, Consolidation.

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Accrued Liabilities

12 Months Ended

Jun. 30, 2012

Accrued Liabilities [Abstract]

Accrued Liabilities

10. ACCRUED LIABILITIES

Accrued liabilities consist of:

	As of the year ended
(in thousands)	June 30, 2012		July 2, 2011
Accrued compensation	$	5,886	$	6,979
Acquisition-related liabilities		—		3,541
Contingent earn-out liability		—		4,774
Accrued construction liabilities		845		2,316
Income taxes payable		2		249
Sales commissions		497		545
Other accrued expenses		1,378		1,241
	$	8,608	$	19,645

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Investments in Unconsolidated Affiliates (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Oct. 01, 2011	Jul. 02, 2011	Apr. 02, 2011	Jan. 01, 2011	Oct. 02, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jul. 03, 2010	Jun. 27, 2009
Condensed financial information
Total assets	$ 275,806				$ 301,016				$ 275,806	$ 301,016
Total liabilities	42,171				58,291				42,171	58,291
Total shareholders’ equity	233,635				242,725				233,635	242,725	221,906	221,906	213,697
Revenue										170,509	163,643
Cost of revenues	24,396	21,789	19,504	22,795	28,173	27,190	27,058	28,240	88,484	110,661	96,146
Gross profit	13,548	11,589	10,977	12,537	15,169	12,365	13,613	14,535	48,651	55,682	50,767
Total operating expenses	13,595	12,783	12,337	12,655	13,022	12,469	12,046	12,139	51,370	49,677	43,686
Income from operations	(47)	(1,194)	(1,360)	(118)	2,147	(104)	1,567	2,396	(2,719)	6,005	7,081
Interest and other income, net	1,059	847	638	1,070	695	1,132	614	11,936	3,684	15,142	5,252
Income tax expense	2,974	(76)	(335)	534	1,281	514	446	5,378	3,097	7,619	3,911
Net income (loss)	(1,911)	(267)	(335)	445	1,609	531	1,812	9,510	(2,068)	13,463	10,822	10,822
PTI [Member]
Condensed financial information
Total assets											26,875	26,875
Total liabilities											2,546	2,546
Total shareholders’ equity											24,329	24,329
Revenue											17,869
Cost of revenues											8,798
Gross profit											9,071
Total operating expenses											4,427
Income from operations											4,644
Interest and other income, net											440
Income tax expense											230
Net income (loss)											$ 4,854

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Shareholders Equity and Share-Based Compensation (Details 7) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Share based compensation expenses classified by consolidated statement of operations
Pre-tax stock-based compensation expense	$ 3,736	$ 4,286	$ 4,049
Income tax effect	1,229	1,409	1,159
Net stock-based compensation expense	2,507	2,877	2,890
Cost of revenue [Member]
Share based compensation expenses classified by consolidated statement of operations
Pre-tax stock-based compensation expense	211	250	286
Research and development [Member]
Share based compensation expenses classified by consolidated statement of operations
Pre-tax stock-based compensation expense	1,434	1,536	1,506
Selling, general and administrative expenses [Member]
Share based compensation expenses classified by consolidated statement of operations
Pre-tax stock-based compensation expense	$ 2,091	$ 2,500	$ 2,257

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Acquisition of Noncontrolling Interest In Subsidiaries (Details) (PSE-TW [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2012
PSE-TW [Member]
Acquisition Of Noncontrolling Interest In Subsidiaries (Textual)
Ownership interest	97.30%
Additional ownership interest purchased	2.71%
Value of additional ownership interest purchased	$ 1.2

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Investments in Unconsolidated Affiliates (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Investment in unconsolidated affiliates
Jiyuan Crystal Photoelectric Frequency Technology Ltd	$ 2,474	$ 2,596

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Income Taxes (Details 1)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Reconciliation between Company’s effective tax rate and U.S. statutory rate
Tax provision at federal statutory rate	34.00%	34.00%	34.00%
State income taxes, net of federal benefit	(33.40%)		(0.90%)
Foreign income and withholding taxes	34.10%	3.80%	1.30%
Benefits from resolution of certain tax audits and expiration of statute of limitations	(15.40%)	(0.60%)	(2.70%)
Share-based compensation	20.50%	0.30%	1.60%
Research and development tax credits	(2.20%)	0.30%	(0.40%)
Change in valuation allowance	307.30%		(1.10%)
Other	1.10%	(0.40%)
Income tax expense	346.00%	37.40%	31.80%

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Property Plant and Equipment Net (Tables)

12 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

	As of the year ended
(in thousands)	June 30, 2012			July 2, 2011
Machinery and equipment	$	53,649		$	50,268
Buildings		30,104			23,200
Computer equipment and software		15,303			15,389
Land		3,666			3,805
Furniture and fixtures		1,441			1,361
Leasehold improvements		1,277			1,174
Vehicles		153			152
Total		105,593			95,349
Accumulated depreciation and amortization		(51,164	)		(44,662	)
Construction-in-progress		1,673			10,172
Property, plant and equipment — net	$	56,102		$	60,859

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Business and Significant Accounting Policies (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Mar. 31, 2010	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Business and Significant Accounting Policies (Textual)
Stock rotation privileges, Percentage		10.00%
Business and Significant Accounting Policies (Additional Textual)
Number of completed mergers	2
Change in deferred tax assets	$ 256,000,000
Maximum period of highly liquid investments		3 months
Gross realized gains on available-for-sale-securities		673,000	1,900,000	2,300,000
Inventory turnover period		365 days
Comparison of delivery periods for inventory, Description		The quantities on hand in each part number category are compared to the quantity that was shipped in the previous twelve months, the quantity in backlog and to the quantity expected to ship in the next twelve months.
Impairment charges		0
Description of an uncertain income tax position recognized		An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained
Net gains or (losses) from foreign currency translation of assets and liabilities		635,000	7,500,000
Net gains (losses) from foreign currency transaction		334,000	(321,000)	(197,000)
Period of warranty		1 year
Stock Options [Member]
Business and Significant Accounting Policies (Textual)
Number of shares excluded from the computation of diluted net earnings per share		2,500,000	2.4	2,800,000
Restricted Stock [Member]
Business and Significant Accounting Policies (Textual)
Number of shares excluded from the computation of diluted net earnings per share		504,000	43,000	76,000
PTI [Member]
Business and Significant Accounting Policies (Textual)
Acquisition costs			600,000
Fair value of contingent earn-out liability			4,100,000
Change in the estimated fair value of contingent earn-out liability			700,000
Minimum [Member]
Business and Significant Accounting Policies (Textual)
Ownership interest		20.00%
Stock rotation privileges, Percentage		1.00%
Period of payments from customers		30 days
Maximum [Member]
Business and Significant Accounting Policies (Textual)
Ownership interest		49.00%
Interest in privately held companies		20.00%
Stock rotation privileges, Percentage		10.00%
Period of payments from customers		60 days
Buildings [Member] | Minimum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		20 years
Buildings [Member] | Maximum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		40 years
Property and Equipement [Member] | Minimum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		3 years
Property and Equipement [Member] | Maximum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		8 years
Land [Member] | Minimum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		15 years
Land [Member] | Maximum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		50 years
Land use right [Member] | Minimum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		15 years
Land use right [Member] | Maximum [Member]
Business and Significant Accounting Policies (Textual)
Estimated useful life		50 years
Research and development [Member] | PTI [Member]
Business and Significant Accounting Policies (Textual)
Acquisition costs		$ 3,300,000

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Equity and Comprehensive Income

12 Months Ended

Jun. 30, 2012

Stockholders Equity Note [Abstract]

Equity and Comprehensive Income

15. EQUITY AND COMPREHENSIVE INCOME

Effective with the beginning of fiscal 2010, the Company adopted the FASB’s new guidance regarding the accounting for noncontrolling interests. The new rules require the recognition of a noncontrolling interest as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest is shown on the face of the consolidated statements of operations.

The Company’s subsidiary PSE-TW had noncontrolling interests for the first four months of fiscal 2010. Parties other than the Company owned approximately 2.71% of the outstanding shares of PSE-TW, and these shares were acquired by the Company in November 2009 for approximately $1.2 million.

Comprehensive income (loss) consists of net income (loss), changes in net unrealized gains (losses) on available-for-sale investments and changes in cumulative currency translation adjustments at consolidated subsidiaries.

As of June 30, 2012, accumulated other comprehensive income consists of $194,000 of unrealized gains net of tax and $9.4 million of accumulated currency translation gains.

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Employee Benefit Plan

12 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plan

20. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) tax-deferred savings plan under which eligible employees may elect to have a portion of their salary deferred and contributed to the plan. The Board of Directors determines the employer matching contributions at their discretion. There were no employer-matching contributions in fiscal 2012, 2011 or 2010.

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jun. 27, 2009
Income Tax (Textual)
Change in valuance allowance, deferred tax assets	$ 3,200,000	$ 97,000
Non-U.S. income (loss) before income tax	554,000	(627,000)	2,279,000
Undistributed earnings reported by certain foreign subsidiaries	17,300,000
Unrecognized tax benefits	(1,607,000)	(755,000)	(545,000)	(756,000)
Balance of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized	1,500,000
Income tax examination year under examination, range	2006 through 2012
Accrued interest and penalties related to unrecognized tax benefits	256,000
Federal taxable income [Member]
Income Tax (Textual)
Research and development tax credit carryforwards
State taxable income [Member]
Income Tax (Textual)
Research and development tax credit carryforwards	4,200,000
California tax credits [Member]
Income Tax (Textual)
Change in valuance allowance, deferred tax assets	2,800,000
PSE-TW in Taiwan
Income Tax (Textual)
Net operating loss carryforwards	1,100,000
Year in which net operating loss carryforwards begins to expire	2015
Research and development tax credit carryforwards	31,000,000
Year in which tax credit carryforwards begins to expire	2012
PSE-SD in China
Income Tax (Textual)
Net operating loss carryforwards	3,800,000
Year in which net operating loss carryforwards begins to expire	2014
PTI in Hong Kong
Income Tax (Textual)
Net operating loss carryforwards	$ 5,000,000
Year in which net operating loss carryforwards begins to expire	No expiration

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Business and Significant Accounting Policies (Details 3)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Net Revenues [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	100.00%	100.00%	100.00%
Net Revenues [Member] | Customer A [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	18.00%	18.00%	22.00%
Net Revenues [Member] | Customer B [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	14.00%	15.00%	14.00%
Net Revenues [Member] | All others [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	68.00%	67.00%	64.00%
Trade Accounts Receivable [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	100.00%	100.00%	100.00%
Trade Accounts Receivable [Member] | Customer A [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	26.00%	16.00%	26.00%
Trade Accounts Receivable [Member] | Customer B [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	6.00%	12.00%	9.00%
Trade Accounts Receivable [Member] | All others [Member]
The percentage of net revenues and accounts receivable in excess of 10% with any single customer
Concentration risk, Percentage	68.00%	72.00%	65.00%

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Shareholders Equity and Share-Based Compensation (Tables)

12 Months Ended

Jun. 30, 2012

Shareholders Equity and Share Based Compensation Abstract

Assumption of the Company used value stock options:

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Expected life	5.5 years			5.5 years			5.4–5.5 years
Risk-free interest rate		2.46	%		2.46	%		2.45–2.60	%
Volatility range		54	%		53–54	%		53%–54	%
Dividend yield		0.00	%		0.00	%		0.00	%

Company’s stock option plans

	Outstanding Options
Options	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)					(in thousands)
Options outstanding at June 27, 2009		3,755			14.00	$	427
Options granted (weighted average grant date fair value of $5.11)		470			10.24
Options exercised		(105	)		8.72
Options forfeited or expired		(643	)		23.71
Options outstanding at July 3, 2010		3,477		$	11.85	$	872
Options granted (weighted average grant date fair value of $4.51)		183			8.87
Options exercised		(67	)		8.33
Options forfeited or expired		(619	)		15.97
Options outstanding at July 2, 2011		2,974		$	10.89	$	645
Options granted (weighted average grant date fair value of $3.89)		142			7.65
Options exercised		(21	)		7.77
Options forfeited or expired		(642	)		12.37
Options outstanding at June 30, 2012		2,453		$	10.34	$	912

Options vested and expected to vest and currently exercisable

	Options Vested and Expected to Vest		Options Currently Exercisable
Shares (millions)		2.4		2.1
Aggregate intrinsic value (thousand $)	$	888	$	683
Weighted average contractual term (years)		5.1		4.5
Weighted average exercise price	$	10.36	$	10.59

Option outstanding under exercise price range

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding as of June 30, 2012		Weighted Average Remaining Contractual Term (Years)		Weighted Average Exercise Price		Number Exercisable as of June 30, 2012		Weighted Average Exercise Price
$ 4.89 $ 8.03		501,969		5.48	$	7.72		364,151	$	7.76
8.10 8.70		497,840		4.18		8.48		415,323		8.46
8.71 10.01		534,488		5.87		9.70		406,579		9.64
10.15 12.16		494,359		4.41		10.91		461,888		10.88
13.33 18.10		424,512		5.65		15.77		417,256		15.78
$ 4.89 $18.10		2,453,168		5.12	$	10.34		2,065,197	$	10.59

Summary of RSU's activities

	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Term		Aggregate Intrinsic Value
	(in thousands)					(years)		(in thousands)
RSUs outstanding at June 27, 2009		349		$	10.18		2.08	$	2,980
Awarded		303			10.52
Released		(39	)		12.76
Forfeited		(22	)		10.41
RSUs outstanding at July 3, 2010		591		$	10.18		1.66	$	5,403
Awarded		249			8.70
Released		(208	)		9.77
Forfeited		(40	)		9.92
RSUs outstanding at July 2, 2011		592		$	9.73		1.60	$	5,253
Awarded		156			7.78
Released		(203	)		9.91
Forfeited		(41	)		9.73
RSUs outstanding at June 30, 2012		504		$	9.06		1.42	$	4,535
RSUs vested and expected to vest after June 30, 2012		449		$	9.11		1.34	$	4,043

Assumption used to value stock purchase paln

	Fiscal Year Ended
	June 30, 2012			July 2, 2011			July 3, 2010
Expected life	6 months			3–6 months			4.5–13.5 months
Risk-free interest rate		0.10	%		0.10–0.16	%		0.17–0.63	%
Volatility range		43%–64	%		39%–58	%		50%–70	%
Dividend yield		0.00	%		0.00	%		0.00	%

Options activities under ESOP'S

	Shares			Weighted Average Purchase
Beginning Available		1,944,707
Purchases		(108,768	)	$	6.96
Ending Available		1,835,939

Share based compensation expenses classified by consolidated statement of operations

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Cost of revenues	$	211	$	250	$	286
Research and development		1,434		1,536		1,506
Selling, general and administrative		2,091		2,500		2,257
Pre-tax stock-based compensation expense		3,736		4,286		4,049
Income tax effect		1,229		1,409		1,159
Net stock-based compensation expense	$	2,507	$	2,877	$	2,890

Share-based compensation expense categorized by the type of award

	Fiscal Year Ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Stock option plans	$	3,492	$	3,972	$	3,376
Less income tax effect		1,229		1,409		1,159
Net stock option plan expense		2,263		2,563		2,217
Employee stock purchase plan		244		314		673
Less income tax effect		—		—		—
Net employee stock purchase plan expense		244		314		673
	$	2,507	$	2,877	$	2,890

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Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) (USD $) In Thousands	Total	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss), Net	Noncontrolling Interest
Balance at Jun. 27, 2009	$ 213,697	$ 133,162	$ 78,505	$ 797	$ 1,233
Balance (Shares) at Jun. 27, 2009		25,462
Net income (loss)	10,822		10,794		28
Change in unrealized gain on investments, net	114			114
Currency translation adjustment	1,160			1,160
Total comprehensive income (loss)	12,096
Acquisition of noncontrolling interest	(1,224)	37			(1,261)
Issuance of common stock under employee stock plans	1,978	1,978
Issuance of common stock under employee stock plans (Shares)		344
Share-based compensation expense	4,049	4,049
Tax benefit (expense) resulting from stock option transactions	(11)	(11)
Repurchase and retirement of common stock	(8,679)	(8,679)
Repurchase and retirement of common stock (Shares)		(908)
Balance at Jul. 03, 2010	221,906	130,536	89,299	2,071
Balance (Shares) at Jul. 03, 2010		24,898
Net income (loss)	13,463		13,463
Change in unrealized gain on investments, net	(549)			(549)
Currency translation adjustment	7,481			7,481
Total comprehensive income (loss)	20,395
Issuance of common stock under employee stock plans	1,528	1,528
Issuance of common stock under employee stock plans (Shares)		431
Share-based compensation expense	4,286	4,286
Tax benefit (expense) resulting from stock option transactions	58	58
Repurchase and retirement of common stock	(5,448)	(5,448)
Repurchase and retirement of common stock (Shares)		(613)
Balance at Jul. 02, 2011	242,725	130,960	102,762	9,003
Balance (Shares) at Jul. 02, 2011		24,716
Net income (loss)	(2,068)		(2,068)
Change in unrealized gain on investments, net	(59)			(59)
Currency translation adjustment	635			635
Total comprehensive income (loss)	(1,492)
Issuance of common stock under employee stock plans	918	918
Issuance of common stock under employee stock plans (Shares)		332
Share-based compensation expense	3,723	3,723
Tax benefit (expense) resulting from stock option transactions	(612)	(612)
Repurchase and retirement of common stock	(11,627)	(11,627)
Repurchase and retirement of common stock (Shares)		(1,483)
Balance at Jun. 30, 2012	$ 233,635	$ 123,362	$ 100,694	$ 9,579
Balance (Shares) at Jun. 30, 2012		23,565

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Shareholder Rights Plan (Details) (USD $)	12 Months Ended
	Jun. 30, 2012
Stockholder Rights Plan (Textual)
Condition for right to become exercisable	The rights will become exercisable only upon the occurrence of certain events specified in the plan, including the acquisition of 15% of the Company's outstanding common stock by a person or group. Should a person or group acquire 15% or more of the outstanding common stock or announce an unsolicited tender offer, the consummation of which would result in a person or group acquiring 15% or more of the outstanding common stock, shareholders other than the acquiring person may exercise the rights.
Discount rate on then prevailing market price	50.00%
Exercise price of rights	$ 0.001
Expiration date of rights	Mar. 06, 2022
Rights outstanding	23,565,000
Series D Junior Participating Preferred Stock [Member]
Stockholder Rights Plan (Textual)
Condition to exercise rights	To purchase one one-thousandth of a share

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Property Plant and Equipment Net

12 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment - Net

4. PROPERTY, PLANT AND EQUIPMENT — NET

	As of the year ended
(in thousands)	June 30, 2012			July 2, 2011
Machinery and equipment	$	53,649		$	50,268
Buildings		30,104			23,200
Computer equipment and software		15,303			15,389
Land		3,666			3,805
Furniture and fixtures		1,441			1,361
Leasehold improvements		1,277			1,174
Vehicles		153			152
Total		105,593			95,349
Accumulated depreciation and amortization		(51,164	)		(44,662	)
Construction-in-progress		1,673			10,172
Property, plant and equipment — net	$	56,102		$	60,859

Depreciation expense for the years ended June 30, 2012, July 2, 2011 and July 3, 2010 was $8.0 million, $7.7 million and $6.7 million, respectively.

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Other Assets (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010
Other assets (Textual)
Period of construction operation	50 years
Impairment charges relating to investments in privately held companies	$ 0	$ 0	$ 0
Promissory notes receivable write-off	$ 856,000
Number of privately held technology companies	2

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Shareholders Equity and Share-Based Compensation (Details 4) (Restricted Stock Units (Rsus) [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Jul. 02, 2011	Jul. 03, 2010	Jun. 27, 2009
Restricted Stock Units (Rsus) [Member]
Summary of RSU's activities
RSU's outstanding, Beginning Balance	592	591	349
RSU's outstanding, Awarded	156	249	303
RSU's outstanding, Released	(203)	(208)	(39)
RSU's outstanding, Forfieted	(41)	(40)	(22)
RSU's outstanding, Ending Balance	504	592	591	349
RSU's outstanding, Weighted average grant date fair vlaue, Beginning Balance	$ 9.73	$ 10.18	$ 10.18
RSUs awarded, Weighted average grant date fair vlaue	$ 7.78	$ 8.70	$ 10.52
RSU's realeased, Weighted average grant date fair vlaue	$ 9.91	$ 9.77	$ 12.76
RSU's forfieted, Weighted average grant date fair vlaue	$ 9.73	$ 9.92	$ 10.41
RSU's outstanding, Weighted average grant date fair vlaue, Ending Balance	$ 9.06	$ 9.73	$ 10.18	$ 10.18
RSU's outstanding, Weighted average remaining contractual term	1 year 5 months 1 day	1 year 7 months 6 days	1 year 7 months 28 days	2 years 29 days
RSU's outstanding, Aggregate intrinsic value, Beginning balance	$ 5,253	$ 5,403	$ 2,980
RSU's outstanding, Aggregate intrinsic value, Ending balance	4,535	5,253	5,403	2,980
RSU's vested and expected to vested, Number of Shares	449
RSU's vested and expected to vested, Weighted average grant date fair value	$ 9.11
RSU's vested and expected to vested, Weighted average remaing contractual term	1 year 4 months 2 days
RSU's vested and expected to vested, Aggregate intrinsic value	$ 4,043

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Goodwill And Intangible Assets (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Jul. 02, 2011
Summary of future amortization expense associated with intangible assets
2013	$ 3,086
2014	2,910
2015	2,831
2016	2,831
2017 and beyond	773
Finite lived intangible assets Net	12,431	14,392
Customer relationships [Member]
Summary of future amortization expense associated with intangible assets
2013	965
2014	965
2015	965
2016	965
2017 and beyond	158
Finite lived intangible assets Net	4,018	4,868
eCERA trade name [Member]
Summary of future amortization expense associated with intangible assets
2013	1
2014
2015
2016
2017 and beyond
Finite lived intangible assets Net	1	7
Core developed technology [Member]
Summary of future amortization expense associated with intangible assets
2013	2,120
2014	1,945
2015	1,866
2016	1,866
2017 and beyond	615
Finite lived intangible assets Net	$ 8,412	$ 9,392

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Industry and Geographical Segment Information

12 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Industry and Geographical Segment Information

21. INDUSTRY AND GEOGRAPHICAL SEGMENT INFORMATION

The Company has three operating segments which aggregate into one reportable segment, the interconnectivity device supply market. The Company designs, develops, manufactures and markets high performance integrated circuits and frequency control products. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by ASC No. 280, Disclosures about Segments Reporting (“ASC 280”).

For geographical reporting, the Company attributes net sales to the country where customers are located (the “bill to” location). The Company neither conducts business in nor sells to persons in Iran, Syria, Sudan, or North Korea, countries located in the referenced regions that are identified as state sponsors of terrorism by the U.S. Department of State, and are subject to U.S. economic sanctions and export controls. Long-lived assets consist of all non-monetary assets, excluding non-current deferred tax assets, goodwill and intangible assets. The Company attributes long-lived assets to the country where they are located. The following presents net sales for each of the three years in the period ended June 30, 2012; and the net book value of long-lived assets as of June 30, 2012, July 2, 2011 and July 3, 2010 by geographical segment:

	Fiscal year ended
(in thousands)	June 30, 2012		July 2, 2011		July 3, 2010
Net sales to countries:
Taiwan	$	63,301	$	75,800	$	74,905
China (including Hong Kong)		48,178		57,957		40,120
United States		7,242		10,022		11,981
Others (less than 10% each)		18,414		22,564		19,907
Total net sales	$	137,135	$	166,343	$	146,913
(in thousands)
Long-lived assets:
China (including Hong Kong)	$	37,761	$	40,112	$	27,883
Taiwan		15,005		16,459		17,519
United States		2,304		2,913		3,751
Korea		650		898		1,161
Others (less than 10% each)		382		477		446
Total long-lived assets	$	56,102	$	60,859	$	50,760

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Future minimum commitments
2013	$ 10,879
2014	8,824
2015	196
2016 and beyond	8
Total	19,907
Short-term debt [Member]
Future minimum commitments
2013	1,364
2014
2015
2016 and beyond
Total	1,364
Operating lease payments [Member]
Future minimum commitments
2013	1,546
2014	824
2015	196
2016 and beyond	8
Total	2,574
Capital equipment purchase commitments [Member]
Future minimum commitments
2013	969
2014
2015
2016 and beyond
Total	969
Yangzhou capital injection [Member]
Future minimum commitments
2013	7,000
2014	8,000
2015
2016 and beyond
Total	$ 15,000

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Goodwill And Intangible Assets (Tables)

12 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

	As of
(in thousands)	June 30, 2012			July 2, 2011
Goodwill
Beginning balance	$	16,669		$	1,681
Acquisition of PTI, net		—			14,218
Other adjustments		(239	)		(96	)
Cumulative translation adjustments		367			866
Ending balance	$	16,797		$	16,669

Summary of components of other intangible assets and related accumulated amortization as part of business combinations

	As of the year ended
	June 30, 2012							July 2, 2011
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	5,906	$	(1,888	)	$	4,018	$	5,777	$	(909	)	$	4,868
eCERA trade name		44		(43	)		1		45		(38	)		7
Core developed technology		13,110		(4,698	)		8,412		12,040		(2,648	)		9,392
SaRonix supplier relationship		—		—			—		398		(273	)		125
Total amortizable purchased intangible assets		19,060		(6,629	)		12,431		18,260		(3,868	)		14,392
IPRD		—		—			—		883		—			883
SaRonix trade name		400		—			400		415		—			415
Total purchased intangible assets	$	19,460	$	(6,629	)	$	12,831	$	19,558	$	(3,868	)	$	15,690

Summary of future amortization expense associated with intangible assets

	Fiscal Years Ending
(in thousands)	2013		2014		2015		2016		2017 and beyond		Total
Expected Amortization
Customer relationships	$	965	$	965	$	965	$	965	$	158	$	4,018
eCERA trade name		1		—		—		—		—		1
Core developed technology		2,120		1,945		1,866		1,866		615		8,412
	$	3,086	$	2,910	$	2,831	$	2,831	$	773	$	12,43

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Industrial Development Subsidy

12 Months Ended

Jun. 30, 2012

Industrial Development Subsidy [Abstract]

Industrial Development Subsidy

14. INDUSTRIAL DEVELOPMENT SUBSIDY

As of June 30, 2012, industrial development subsidies in the amount of $12.5 million have been earned and applied for by PSE-SD from the Jinan Hi-Tech Industries Development Zone Commission based on meeting certain pre-defined criteria. The subsidies may be used for the acquisition of assets or to cover business expenses. When a subsidy is used to acquire assets, the subsidy will be amortized over the useful life of the asset. When a subsidy is used for expenses incurred, the subsidy is regarded as earned upon the incurrence of the expenditure. The remaining balance of the subsidies at June 30, 2012 was $8.6 million, which amount is expected to be recognized over the next three to twenty years.

We recognized $1.3 million and $1.3 million of industrial development subsidy as a reduction of cost of goods sold and $180,000 and $239,000 of industrial development subsidy as a reduction of operating expenses in the consolidated statement of operations for the years ended June 30, 2012 and July 2, 2011, respectively.